UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 20-F

|(Mark One)                                                    |                                                                                               
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------------
|o                                                             | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|OR                                                           
|ý                                                             | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.         
|For the fiscal year ended December 31, 2003                  
|OR                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|For the transition period
from                             to

Commission File number 333-11044

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KAPPA HOLDING B.V.(Exact Name of Registrant as specified in its charter)

THE NETHERLANDS(Jurisdiction of incorporation or organization)

Dr. Holtroplaan 5, NL-5652 XR Eindhoven, THE NETHERLANDS(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.None

Securities registered or to be registered to Section 12(g) of the Act.None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.€370,000,000 105/8% Senior Subordinated Notes due 2009
$100,000,000 105/8% Senior Subordinated Notes due 2009
€145,000,000 121/2% Senior Subordinated Discount Notes due 2009

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Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

Not
Applicable

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. YES ý    NO o

Indicate by check mark which financial statement item the registrant has elected to
follow. ITEM 17 ý    ITEM 18 o

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a court.

Not
Applicable



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TABLE OF CONTENTS

|Certain Definitions and Presentation of Financial and Other Information |                                                                              | 1 
|----------------------------------------------------------------------- | ---------------------------------------------------------------------------- | --
|Glossary of Certain Industry Terms and Unit Conversions                 |                                                                              | 3 
|Cautionary Note Regarding Forward-Looking Statements                    |                                                                              | 4 
|PART I                                                                  |                                                                              | 5 
|Item 1.                                                                 | Identity of Directors, Senior Management and Advisers                        |   
|Item 2.                                                                 | Offer Statistics and Expected Timetable                                      |   
|Item 3.                                                                 | Key Information                                                              |   
|Item 4.                                                                 | Information on the Company                                                   |   
|Item 5.                                                                 | Operating and Financial Review and Prospects                                 |   
|Item 6.                                                                 | Directors, Senior Management and Employees                                   |   
|Item 7.                                                                 | Major Shareholders and Related Party Transactions                            |   
|Item 8.                                                                 | Financial Information                                                        |   
|Item 9.                                                                 | The Offer and Listing                                                        |   
|Item 10.                                                                | Additional Information                                                       |   
|Item 11.                                                                | Quantitative and Qualitative Disclosures About Market Risk                   |   
|Item 12.                                                                | Description of Securities Other than Equity Securities                       |   
|PART II                                                                 |                                                                              | 78
|Item 13.                                                                | Defaults, Dividend Arrearages and Delinquencies                              |   
|Item 14.                                                                | Material Modifications to the Rights of Security Holders and Use of Proceeds |   
|Item 15.                                                                | Controls and Procedures                                                      |   
|Item 16.                                                                | [Reserved]                                                                   |   
|PART III                                                                |                                                                              | 80
|Item 17.                                                                | Financial Statements                                                         |   
|Item 18.                                                                | Financial Statements                                                         |   
|Item 19.                                                                | Exhibits                                                                     |   

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Certain Definitions and Presentation of Financial and Other Information

References in this annual report to the "Company" are to Kappa Holding B.V. ("Kappa Holding") and references to "the Group", "the Kappa Packaging Group", "Kappa
Packaging", "we", "our", "ours" and "us" are to the Company and its consolidated subsidiaries. Where such business and operations at any time prior to May 31, 1998 are being described, these
expressions shall mean the paper and board production and converting businesses conducted by N.V. Koninklijke KNP BT ("KNP BT"), the previous owner of our operating subsidiaries, and its subsidiaries
at that time. References to"Benelux" are to the region comprised of Belgium, the Netherlands and Luxembourg. References to "Senior Subordinated Notes"
are to the notes issued by Kappa Beheer B.V. ("Kappa Beheer") (which, depending on the class of the note, are guaranteed either by the Company and Kappa Beheer's subsidiary, Kappa Packaging B.V.
("Kappa Packaging") or solely by Kappa Packaging). References to "Alpha" are to the containerboard and corrugated packaging businesses of AssiDomän AB that we acquired in
May 2001. References to "Cinven" are to Cinven Limited and to investment funds managed or advised by Cinven Limited and references to "CVC" are to CVC Capital Partners Limited and to investment
funds managed or advised by CVC Capital Partners Limited.

Market
data used in this annual report were obtained from our internal surveys and industry surveys and publications. Industry surveys and publications generally state that the
information contained in them has been obtained from sources believed to be reliable. Neither Kappa Packaging nor the managers have independently verified such market data. We take responsibility for
compiling and extracting market data obtained from industry surveys and publications, but we cannot assure you of the accuracy and completeness of such information and take no further responsibility
for such data. Similarly, internal surveys have not been verified by any independent sources and we cannot assure you as to their accuracy.

In
this report, unless otherwise indicated, all references to:

"British
pounds" or "GBP" are to the lawful currency of the United Kingdom;

"Czech
koruna" or "CZK" are to the lawful currency of the Czech Republic;

"Danish
krone" or "DKK" are to the lawful currency of Denmark;

"EU"
are to the European Union;

"euro"
or "€" are to the lawful currency of certain countries belonging to the European Union, including the Netherlands;

"Norwegian
kroner" or "NOK" are to the lawful currency of Norway;

"Polish
zlotys" or "PLN" are to the lawful currency of Poland;

"Slovak
koruna" or "SKK" are to the lawful currency of Slovak Republic;

"South
African rand" or "ZAR" are to the lawful currency of South Africa;

"Swedish
kronor" or "SEK" are to the lawful currency of the Kingdom of Sweden;

"United
Kingdom" or the "UK" are to the United Kingdom of Great Britain and Northern Ireland;

"United
States" or the "US" are to the United States of America; and

"US
dollars", "US$" and "$" are to the lawful currency of the United States.

Except
as otherwise stated in this annual report, we have translated Dutch guilder amounts into euros at a fixed rate of €1.00 = NLG 2.20371 and rounded to
two decimal places.

1

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We
publish our financial statements in euro. Financial statement amounts included in this annual report are presented in accordance with generally accepted accounting principles in the
Netherlands, or Dutch GAAP, which differ in significant respects from generally accepted accounting principles in the United States, or US GAAP.

Except
as otherwise stated in this report, conversions of euro to dollars have been given for convenience only and at the assumed rates stated below. These conversions should not be
considered as representations that the euro amounts actually represent the dollar amounts or could be converted into dollars at the rates indicated or at any other rates.

The
euro was introduced on January 1, 1999 at a fixed rate of €1.00 = NLG 2.20371. As of August 16, 2004, the noon buying rate in the City of New
York as announced by the Federal Reserve Bank of New York for customs purposes (the "Noon Buying Rates") for cable transfers in euro was approximately €1 = $1.2333.

The
following table sets out, for the periods and dates indicated, certain information concerning the Dutch guilder exchange rate, set forth in NLG per $1. The average rate is based on
the average of Noon Buying Rates on the last day of each month during the relevant period.

|                             |  | NLG per $1
Average
|---------------------------- |  | ------------------
|Year ended December 31, 1998 |  | 1.9832            

The
following table sets out, for the periods and dates indicated, certain information concerning the euro exchange rate, set forth in euro per dollar. The average rate is based on the
average of Noon Buying Rates on the last day of each month during the relevant period.

|Year                         |  | Average
|---------------------------- |  | -------
|Year ended December 31, 2000 |  | 1.0861 
|Year ended December 31, 2001 |  | 1.1225 
|Year ended December 31, 2002 |  | 0.9454 
|Year ended December 31, 2003 |  | 1.1411 

|Month                                 |  | High   |  | Low   
|------------------------------------- |  | ------ |  | ------
|December 2003                         |  | 1.2653 |  | 1.1936
|January 2004                          |  | 1.2900 |  | 1.2333
|February 2004                         |  | 1.2929 |  | 1.2372
|March 2004                            |  | 1.2542 |  | 1.2048
|April 2004                            |  | 1.2391 |  | 1.1761
|May 2004                              |  | 1.2298 |  | 1.1774
|June 2004                             |  | 1.2353 |  | 1.1954
|July 2004                             |  | 1.2463 |  | 1.1992
|August 2004 (through August 16, 2004) |  | 1.2384 |  | 1.1970

We
make no representation that the amounts referred to above could have been or could be converted into the foregoing currencies at any particular rate or at all.

2

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Glossary of Certain Industry Terms and Unit Conversions

|"Alpha"                    |  | term used to indicate the acquired containerboard and corrugated packaging businesses from AssiDomän                                                                                                                                                                 
|-------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|"containerboard"           |  | the general term forlinerboardandfluting(which are the paper and board materials used in the production ofcorrugated board); synonymous with corrugated case material (or CCM)                                                                                       
|"corrugated board"         |  | board manufactured by gluing together a corrugated layer offlutingbetween two flatlinerboards(or multiple layers
thereof)                                                                                                                                            
|"fresh fiber"              |  | fiber derived directly from wood pulp                                                                                                                                                                                                                                
|"fluting"                  |  | paper used for the middle layer ofcorrugated board                                                                                                                                                                                                                   
|"graphic board"            |  | solid boardproduced for applications with high graphic specifications such as book covers, binders and board games                                                                                                                                                   
|"kraftliner"               |  | linerboardwhich is manufactured mainly fromfresh fiber-based pulp                                                                                                                                                                                                    
|"linerboard"               |  | fiber-based material used for the outer layers ofcorrugated boardwhich falls into two categories:kraftlinerandtestliner                                                                                                                                              
|"mixed waste paper"        |  | waste paper from households containing various grades                                                                                                                                                                                                                
|"OCC"                      |  | Old Corrugated Containers                                                                                                                                                                                                                                            
|"recovered paper"          |  | the industry terminology for used paper items which are collected for recycling                                                                                                                                                                                      
|"recycled fiber"           |  | fiber derived from recovered paper                                                                                                                                                                                                                                   
|"semi-chemical fluting"    |  | flutingmanufactured mainly fromfresh fiber-based pulp                                                                                                                                                                                                                
|"sheet-feeder"             |  | specialized production unit, equipped with corrugating machines only, that produces corrugated sheets. These sheets are made according to thickness and format specifications, are supplied on short notice to sheet plants
that convert them into packaging products
|"sheet plant"              |  | a small, highly flexible, market orientated unit that procures sheets of corrugated board and converts these into packaging products. Sheet plants are less dependant on large production runs                                                                       
|"solid board"              |  | board manufactured primarily fromrecycled fiberand used for a range of packaging andspecialty boardandgraphic boardapplications                                                                                                                                      
|"specialty board"          |  | solid boardproduced for applications such as luxury gift boxes, game boxes and special stationery                                                                                                                                                                    
|"testliner"                |  | linerboardwhich is manufactured fromrecycled fiber                                                                                                                                                                                                                   
|"wellenstoff"              |  | recycled fiber-basedfluting                                                                                                                                                                                                                                          
|"white surfaced"           |  | white-top,white mottled, and fully bleachedliner                                                                                                                                                                                                                     
|"white-top kraftliner"     |  | linerboard with surface layer of bleached sulphate (kraft) pulp which improves printability                                                                                                                                                                          
|"white mottled kraftliner" |  | kraftliner with unbleached softwood kraft pulp in top layer                                                                                                                                                                                                          

Unit Conversions

|1 Tonne (metric) |  | = |  | 2,204.6224 Pounds   |  | 1 Kilometer |  | = |  | 0.6214 Miles
|---------------- |  | - |  | ------------------- |  | ----------- |  | - |  | ------------
|1 Tonne (metric) |  | = |  | 1.1023 Tons (short) |  | 1 Kilotonne |  | = |  | 1,000 Tonnes
|1 Meter          |  | = |  | 3.2808 Feet         |  | M2          |  | = |  | square meter

3

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Cautionary Note Regarding Forward-Looking Statements

This annual report includes forward-looking statements (as such term is defined in the US Private Securities Litigation Reform Act of 1995) that reflect our
intentions, beliefs or current expectations and projections about our future results of operations, financial condition, liquidity, performance, prospects, growth, strategies, opportunities as well as
the industry in which we operate. Forward-looking statements include all matters that are not historical facts.

These
forward-looking statements can be identified by the use of forward-looking terminology, including the terms "may", "will", "should", "expect", "intend", "estimate", "anticipate",
"project", "believe", "plan", "seek" and "continue" or other variations or comparable terminology or, in each case, their negative. Forward-looking statements may be found throughout this annual
report and, in particular, in the sections entitled "Item 3.D. Risk Factors", "Item 4.B. Business Overview" and "Item 5. Operating and Financial Review and Prospects".

These
forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause our actual results of operations, financial condition,
liquidity, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or suggested by, these forward-looking
statements. Important factors that could cause those differences include, but are not limited to:



In
light of these risks, uncertainties, assumptions or other factors, the forward-looking statements described in this annual report may not be representative of future events.
Additional risks that we may currently deem immaterial or that are not presently known to us could also cause the forward-looking statements discussed in this annual report not to be representative of
future events. We undertake no obligation to update publicly or revise publicly any forward-looking statements, whether as a result of new information, future events, changed circumstances or any
other reason after the date of this annual report.

4

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PART I.

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A.    Selected Financial Data

The following tables present summary historical consolidated financial data of Kappa Holding and its subsidiaries (the "Kappa Packaging Group") for the years
ended December 31, 1999, 2000, 2001, 2002 and 2003, which have been derived from the Consolidated Financial Statements included in this document in "Item 17. Financial Statements" and our
previous Annual Reports on Form 20-F as restated.

We
have prepared our financial information in accordance with Dutch GAAP, which differs in certain significant respects from US GAAP as described in Note 28 to the Consolidated
Financial Statements, included in this document in "Item 17. Financial Statements".

5

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You
should read these tables in conjunction with "Item 5. Operating and Financial Review and Prospects" and the Consolidated Financial Statements contained in "Item 17. Financial
Statements" and the related notes of the Kappa Packaging Group.

|                                                    |  | Year ended
December 31,
1999 |   | Year ended
December 31,
2000 |   | Year ended
December 31,
2001 |   | Year ended
December 31,
2002 |   | Year ended
December 31,
2003 |  
|--------------------------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- | - | ---------------------------- | - | ---------------------------- | -
|
|Income Statement Data                               |  |                              |   |                              |   |                              |   |                              |   |                              |  
|Amounts in accordance with Dutch GAAP               |  |                              |   |                              |   |                              |   |                              |   |                              |  
|Net sales(1)                                        |  | 1,314.9                      |   | 1,672.4                      |   | 2,472.3                      |   | 2,937.6                      |   | 2,831.7                      |  
|Operating income(2)(7)                              |  | 130.6                        |   | 140.0                        |   | 246.1                        |   | 222.5                        |   | 207.0                        |  
|Net income/(loss)                                   |  | 5.2                          |   | (15.7                        | ) | 11.2                         |   | (9.9                         | ) | (24.0                        | )
|Amounts in accordance with US GAAP                  |  | (restated (8)                | ) | (restated (8)                | ) | (restated (8)                | ) | (restated (8)                | ) |                              |  
|Operating income(2)(3)                              |  | 120.9                        |   | 122.5                        |   | 189.7                        |   | 222.0                        |   | 210.5                        |  
|Net income/(loss)                                   |  | (5.6                         | ) | (18.3                        | ) | (38.3                        | ) | (17.4                        | ) | (27.7                        | )
|Balance Sheet Data (at end of period)               |  |                              |   |                              |   |                              |   |                              |   |                              |  
|Amounts in accordance with Dutch GAAP               |  |                              |   |                              |   |                              |   |                              |   |                              |  
|Cash and cash equivalents                           |  | 112.1                        |   | 76.7                         |   | 217.6                        |   | 233.6                        |   | 240.7                        |  
|Net working capital(4)                              |  | 84.3                         |   | 105.5                        |   | 311.9                        |   | 272.2                        |   | 216.7                        |  
|Tangible fixed assets                               |  | 826.9                        |   | 875.0                        |   | 1,671.3                      |   | 1,654.7                      |   | 1,604.5                      |  
|Total assets                                        |  | 2,031.9                      |   | 2,114.3                      |   | 3,709.2                      |   | 3,643.3                      |   | 3,525.7                      |  
|Total long-term liabilities                         |  | 1,112.3                      |   | 1,153.6                      |   | 2,083.1                      |   | 2,001.8                      |   | 1,868.5                      |  
|Shareholders' loans(5)                              |  | 226.7                        |   | 247.4                        |   | 581.8                        |   | 628.0                        |   | 678.3                        |  
|Shareholders' equity                                |  | 158.1                        |   | 141.3                        |   | 143.7                        |   | 124.0                        |   | 79.1                         |  
|Amounts in accordance with US GAAP                  |  | (restated (8)                | ) | (restated (8)                | ) | (restated (8)                | ) | (restated (8)                | ) |                              |  
|Total assets                                        |  | 1,980.0                      |   | 2,066.1                      |   | 3,635.6                      |   | 3,579.3                      |   | 3,451.7                      |  
|Shareholders' equity:                               |  |                              |   |                              |   |                              |   |                              |   |                              |  
|Permanent shareholders' deficit                    |  | (25.6                        | ) | (54.7                        | ) | (111.7                       | ) | (191.5                       | ) | (250.5                       | )
|Temporary shareholders' equity (preference shares) |  | 161.6                        |   | 171.3                        |   | 181.6                        |   | 192.5                        |   | 204.0                        |  

6

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|                                        |  | Year ended
December 31,
1999 |   | Year ended
December 31,
2000 |   | Year ended
December 31,
2001 |   | Year ended
December 31,
2002 |   | Year ended
December 31,
2003 |  
|--------------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- | - | ---------------------------- | - | ---------------------------- | -
|
|Other Financial Data                    |  |                              |   |                              |   |                              |   |                              |   |                              |  
|Amounts in accordance with Dutch GAAP   |  |                              |   |                              |   |                              |   |                              |   |                              |  
|Cash flow from operations               |  | 165.8                        |   | 127.7                        |   | 235.9                        |   | 273.5                        |   | 279.5                        |  
|Cash flow from financing                |  | (50.2                        | ) | 21.0                         |   | 1,218.4                      |   | (99.7                        | ) | (122.7                       | )
|Cash flow from investing                |  | (80.5                        | ) | (189.9                       | ) | (1,361.9                     | ) | (161.8                       | ) | (146.0                       | )
|EBITDA(6)(7)                            |  | 249.0                        |   | 269.9                        |   | 422.1                        |   | 441.0                        |   | 417.3                        |  
|Depreciation                            |  | 100.1                        |   | 111.2                        |   | 152.4                        |   | 167.8                        |   | 181.1                        |  
|Depreciation and impairment charges     |  | 100.1                        |   | 111.2                        |   | 152.4                        |   | 187.8                        |   | 181.1                        |  
|Amortization of intangible fixed assets |  | 18.3                         |   | 18.7                         |   | 23.6                         |   | 30.7                         |   | 29.2                         |  
|Capital expenditures                    |  | 80.5                         |   | 102.5                        |   | 154.6                        |   | 162.1                        |   | 141.4                        |  
|Amounts in accordance with US GAAP      |  | (restated (8)                | ) | (restated (8)                | ) | (restated (8)                | ) |                              |   |                              |  
|Amortization of goodwill                |  | 17.1                         |   | 18.0                         |   | 20.6                         |   |                             |   |                             |  

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|                                               |  | Year ended
December 31, 2001
(restated (8)) |   | Year ended
December 31, 2002
(restated (8)) |   | Year ended
December 31, 2003 |  
|---------------------------------------------- |  | ------------------------------------------- | - | ------------------------------------------- | - | ---------------------------- | -
|
|Operating income in accordance with Dutch GAAP |  | 246.1                                       |   | 222.5                                       |   | 207.0                        |  
|US GAAP adjustments:                           |  |                                             |   |                                             |   |                              |  
|Impairment long-lived assets                   |  |                                            |   | (5.7                                        | ) | 0.9                          |  
|Restructuring and other provisions             |  | (51.6                                       | ) | (15.8                                       | ) | (20.8                        | )
|Amortization of goodwill                       |  | 1.5                                         |   | 24.7                                        |   | 24.7                         |  
|Other intangible assets                        |  | (0.5                                        | ) | 0.1                                         |   | 2.6                          |  
|Financial instruments                          |  | (2.0                                        | ) | 2.3                                         |   | 0.2                          |  
|Pension costs                                  |  | (3.8                                        | ) | (6.1                                        | ) | (4.1                         | )
|                                               |  |                                             |   |                                             |   |                              |  
|Operating income in accordance with US GAAP    |  | 189.7                                       |   | 222.0                                       |   | 210.5                        |  
|                                               |  |                                             |   |                                             |   |                              |  

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7

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The
following table gives a reconciliation of net income to EBITDA:

|                                                  |  | Year ended December 31, 1999 |   | Year ended December 31, 2000 |   | Year ended December 31, 2001 |  | Year ended December 31, 2002 |   | Year ended December 31, 2003 |  
|------------------------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- |  | ---------------------------- | - | ---------------------------- | -
|
|Net income                                        |  | 5.2                          |   | (15.7                        | ) | 11.2                         |  | (9.9                         | ) | (24.0                        | )
|Extraordinary items, net of taxation              |  | (9.7                         | ) | 3.4                          |   | 13.1                         |  |                             |   |                             |  
|Income from participations and minority interests |  | (0.6                         | ) | (0.7                         | ) |                             |  | (0.4                         | ) | (0.3                         | )
|Income taxes                                      |  | 8.8                          |   | 13.8                         |   | 19.1                         |  | (5.4                         | ) | (6.5                         | )
|Interest expense                                  |  | 126.9                        |   | 139.2                        |   | 202.7                        |  | 238.2                        |   | 237.8                        |  
|                                                  |  |                              |   |                              |   |                              |  |                              |   |                              |  
|Operating income                                  |  | 130.6                        |   | 140.0                        |   | 246.1                        |  | 222.5                        |   | 207.0                        |  
|Depreciation, amortization and impairment charges |  | 118.4                        |   | 129.9                        |   | 176.0                        |  | 218.5                        |   | 210.3                        |  
|                                                  |  |                              |   |                              |   |                              |  |                              |   |                              |  
|EBITDA                                            |  | 249.0                        |   | 269.9                        |   | 442.1                        |  | 441.0                        |   | 417.3                        |  
|                                                  |  |                              |   |                              |   |                              |  |                              |   |                              |  

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8

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B.    Capitalization and Indebtedness

Not applicable.

C.    Reason for the Offer and Use of Proceeds

Not applicable.

D.    Risk Factors

Below is a discussion of certain risks relating to the business of the Kappa Packaging Group and the outstanding Senior Subordinated
Notes. Additional risks not presently known to us or that we currently deem immaterial, may also impair our business operations. Our business, future prospects, financial condition or results of
operations could be materially adversely affected by any of these risks. You should read this section in light of and in conjunction with the other information set forth in this Annual
Report.

Risks Associated With our Industry

Changes in supply and demand within our industry could adversely impact our financial results.

Containerboard
and solid board prices are vulnerable to changes in industry supply and demand given their commodity nature.

Changes
in containerboard and solid board supply result from capacity additions or reductions, as well as changes in inventory levels. Several projects have been announced which, if
completed, would increase the total European industry supply of containerboard, and we can make no assurances that other similar projects will not be completed.

Containerboard
and solid board demand is largely dependent on demand for corrugated and solid board packaging, which in turn closely corresponds to changes in general industrial
production and export activity. The capital intensive and high fixed cost nature of the industry in which we operate tends to result in continued production (especially by smaller, privately held
competitors) in periods of lower demand so long as prices are sufficient to meet marginal costs. Partly as a result of this continued production, a small change in demand can cause a relatively large
change in price, contributing to substantial price competition and volatility.

As
an integrated producer, fluctuations in the margins of our Paper & Board segment are often offset by fluctuations in the margins of our Packaging segment. However, there are
periodic margin and cash flow implications due to delays or difficulties in our ability to adjust prices in our Paper & Board and Packaging segments to perfectly match changes in input costs.

We operate in a highly competitive industry.

The
markets for containerboard and solid board and packaging products are highly competitive with many participants. The containerboard and corrugated packaging sectors in particular are
among the more fragmented sectors within the paper and board industry in Europe. Competition in our markets is based principally on quality, product specifications and overall product performance,
service and price. Containerboard products are largely a commodity and subject to substantial price competition, which can lead to lower prices.

9

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Although
our primary competition in containerboard production and packaging operations comes from other large integrated pan-European businesses like ourselves, we also
compete with many smaller, local producers. The highly competitive nature of our industry, combined with the factors discussed above under "Changes in supply and demand within our industry could
adversely impact our financial results" means that these smaller, privately held competitors may not react to market conditions in the same way as larger companies, thereby having a potentially
greater impact on the market than is reflective of their size. In addition, competitors can add new capacity across all of our business segments by either constructing new machines, converting
existing machines or operating additional production shifts.

A
trend towards consolidation in the markets in which we operate has led to the creation of larger companies. Some of these large competitors may be less leveraged, have greater
financial and other resources and may benefit from greater economies of scale than us, allowing them to withstand better the adverse nature of the business cycle and to take better advantage of
industry developments.

In
addition to competition from other manufacturers of fiber-based packaging, we also face competition from producers of alternative packaging materials, such as plastic, glass and
metal. If the use of such alternative materials increases for certain applications at the expense of fiber-based products, or if we are unable to compete successfully with producers of these
competitive products, our financial position and results of operations would be adversely affected.

An unexpected increase in the cost of recovered paper or wood or lack of continued access to recovered paper or wood would increase our costs and make us less
competitive.

Currently,
our containerboard production is approximately 62% recycled fiber-based and approximately 38% fresh fiber-based and our solid board production fully recycled fiber-based.
Historically, the prices of recovered paper and wood have fluctuated significantly, particularly that of recovered paper. While in the past we have generally been able to pass along increased
recovered paper costs in our containerboard and solid board and packaging prices, there are periodic margin and cash flow implications due to delays or difficulties in our ability to raise prices to
perfectly match increased recovered paper prices. Any future increase in the cost of recovered paper or wood could have a material adverse effect on our financial position and results of operations.

While
we believe that our recovered paper business, which satisfies a portion of our recovered paper requirements, provides some protection against any shortage of supply, there can be
no assurances that we will be able to secure all of our recovered paper requirements. Our containerboard facilities acquired as part of the Alpha acquisition are primarily fresh fiber-based, and thus
require a supply of wood. While we believe that our wood and wood chip supply contract that we entered into with the forestry division of AssiDomän (now owned by Sveaskog) provides some
protection against any shortage of supply, there can be no assurances that we will be able to secure all of our fresh fiber requirements. Any failure by us to secure our recovered paper and wood
supply may result in loss of production at our plants, which could have a material adverse effect on our financial position and results of operations.

Environmental laws will require us to incur capital costs to maintain compliance and could impose liability to remedy the effects of hazardous substance
contamination.

Compliance
with environmental requirements is a significant factor in our operations, and at times we may be required to commit substantial resources to maintaining environmental
compliance and managing environmental risk. We are subject to, and must comply with, a variety of environmental laws, particularly those relating to air and water quality, waste minimization, energy
consumption and waste disposal and the clean-up of contaminated soil and ground water. Because environmental regulations are constantly evolving and environmental standards are becoming
more stringent, we have incurred, and will continue to incur, significant costs to maintain compliance with those laws.

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We
are involved in the assessment and remediation of a number of our sites. We cannot assure you that our past activities on other sites will not also expose us to contamination and
remediation liabilities in the future. While we maintain certain reserves for environmental remediation liability, and we currently believe those reserves are adequate, we could, particularly in light
of the retroactive nature of some environmental laws, incur unanticipated environmental liabilities in the future and those liabilities could be material. As a result, we cannot assure you that our
reserves will be adequate to cover future remediation liability.

In
addition, if we violate these environmental laws and regulations, we may be prevented from conducting our business. For example, this would occur in the event that a permit or an
exemption to conduct a certain activity was repealed with the consequence that the exempted activity would have to be temporarily suspended.

In
addition, the relevant authorities can enforce environmental laws by using sanctions such as performance notes. The amount of any future performance notes cannot be predicted, as any
amount would be determined on a case-by-case basis.

Please
see the section "Item 5. Operating and Financial Review and ProspectsEnvironmental Regulation".

National and European regulation influence our business and may influence demand for our products.

Our
business is influenced by national and European Union legislation, including environmental regulation and regulation intended to reduce the amount of material used in packaging.
Changes to legislation and/or regulation could reduce the level of demand for packaging products or otherwise impact our products and may have a material adverse effect on our financial position and
the result of our operations.

Risks Associated With our Business and our Securities

We cannot be certain that we will be successful in identifying, acquiring or integrating additional businesses into ours, or that we will realize the benefits we anticipate
from any acquisition.

We
will continue to consider strategic acquisitions and investments that involve primarily containerboard and solid board and fiber-based packaging companies located in Europe, but we
may not be successful in identifying and consummating any such acquisitions. Acquisitions present numerous integration challenges, including maintaining good relationships with employees, customers,
suppliers and vendors as we simultaneously attempt to reorganize and optimize the acquired operations. We may have to operate companies in countries where we have no experience. In addition, such
acquisitions and investments could divert our resources and management time. While we have successfully integrated acquisitions in the past, we cannot assure you that, with respect to future
acquisitions, we will realize any anticipated benefits, successfully integrate the businesses with our operations, or manage such integration without adversely affecting our existing operations.
Additionally, we may incur substantial additional indebtedness in connection with the consummation of an acquisition, thereby increasing our leverage. Conversely, we may be unable to raise the capital
necessary to complete or attempt acquisitions.

Our business may be adversely impacted as a result of our substantial leverage, which requires the use of a substantial portion of our cashflow and may limit access to
additional capital.

We
incurred significant indebtedness in connection with the investors and management buy-out in 1998 and with the acquisition of Alpha in 2001. Our substantial indebtedness
could have important consequences for our security holders.

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For
example, it is likely to:



Certain
of the instruments governing our indebtedness, in particular our senior credit agreement and Senior Subordinated Note indentures impose restrictions on our ability, among other
things, to:



In
addition, we must maintain minimum debt service and certain interest cover and maximum leverage ratios under the senior credit agreement. A failure to comply with the restrictions
contained in the senior credit agreement and the Senior Subordinated Notes could lead to an event of default under such agreements, which could result in acceleration of such indebtedness as well as
other of our indebtedness that contain cross-default or cross-acceleration provisions. In such event we may not be able to repay such indebtedness. Our inability to comply with the foregoing
restrictive covenants could have a material adverse effect on our financial position and results of operations and adversely affect the trading price of our Senior Subordinated Notes.

At
December 31, 2003, the combined total indebtedness of Kappa Beheer B.V. was €2,686.2 million. As of December 31, 2003, the combined total
indebtedness, excluding €683.6 million of the loans made to Kappa Beheer B.V. by Kappa Holding B.V., would have been €2,002.6 million.

At
December 31, 2003, the aggregate of all our senior indebtedness and all senior indebtedness of our subsidiaries was €1,311.5 million. We must pay this
indebtedness before making any payments of principal on the Senior Subordinated Notes. We may enter into certain currency hedging transactions with respect to the Senior Subordinated Notes denominated
in US dollars. Any net exposures under such hedging transactions will constitute senior indebtedness of Kappa Beheer B.V.

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Despite our current levels of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further intensify the risks described above.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of our outstanding Senior Subordinated Notes do not
fully prohibit us or our subsidiaries from doing so. As at March 31, 2004, the senior credit agreement permitted additional borrowings of up to €220 million. If new debt
is added to our and our subsidiaries' current debt levels through our senior credit agreement or through other borrowings, the related risks that we now face as described above could intensify.

We are subject to currency-related risks.

Fluctuations
in the value of the euro against other currencies have had in the past, and may have in the future, a material effect on the results of our operations. Our operations are
conducted in several non-euro countries. The results of these operations are reported in the relevant foreign currencies and then translated into euros at the applicable exchange rates for
inclusion in our Consolidated Financial Statements. We also face translation risk with respect to earnings in non-euro currencies, principally British pounds, Swedish kronor, Slovakian
koruna and Czech koruna. In addition, we are exposed to currency risk on export sales in currencies other than the euro.

We
face competition from some manufacturers whose costs are incurred primarily in currencies other than the euro. Any appreciation in the value of the euro against those currencies could
benefit those competitors to our disadvantage, which could in turn have a material adverse effect on our financial position or results of operations.

To
the extent that we incur operating expenses in a currency other than that in which we have obtained financing, we will encounter currency exchange risk. Although we have entered into
a swap agreement to hedge some of the risk of exchange rate fluctuations related to debt service and corporate expenses, we cannot assure you that this hedging transaction or any other hedging
transaction we might enter into will be successful and that shifts in the currency exchange rates will not have a material adverse effect on us.

A loss of key personnel could have a material adverse effect on our business.

Our
success is largely dependent on the skills, experience, business contacts and efforts of our senior management, particularly our President, Frits Beurskens and our key senior
management: Han Wagter, Torbjörn Pettersson and Berry Wiersum. The loss of services of one or more of these members of our senior management team could have a material adverse effect on
our ability to operate our business and implement our strategies effectively. We have employment contracts with the officers named above which are for an indefinite period of time, except for
Mr. Pettersson, who is on a contract that expires March 1, 2006. Please see "Item 6. Directors, Senior Management and Employees".

All
contracts are subject to our ability to terminate the contract with six months' notice and the officer's ability to terminate the contract with three months' notice, except for
Mr. Pettersson, which contract is subject to our ability to terminate the contract with twelve months' notice and the officer's ability to terminate the contract with six months' notice. Please
see "Item 6. Directors, Senior Management and Employees".

It is critical to our financial results of operations that the Piteå kraftliner mill operates smoothly and without interruptions.

Our
kraftliner mill in Piteå, Sweden, is responsible for a substantial amount of our net sales and all of our kraftliner production. It is, therefore, a critical part of
our business. If operations at the Piteå mill were interrupted for any significant length of time, either because of natural disaster (such as flooding), man-made
disruptions (such as labor strikes), failure to obtain raw materials, or any other reason, it would adversely affect our financial position and results of operations.

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To make payments on our outstanding notes and service our other indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors
beyond our control.

Our ability to make payments on and to refinance our indebtedness, including our outstanding Senior Subordinated Notes, fund planned capital expenditures and
product development efforts, make acquisitions and carry out our day-to-day business will depend on our ability to generate cash in the future.

Based
on our current level of operations and anticipated cost savings and operating improvements, we believe our cash flow from operations, available cash and available borrowings under
the senior credit agreement will be adequate to meet our liquidity needs for the foreseeable future.

We
cannot assure, however, that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on
schedule or at all or that future borrowings will be available to us under the senior credit agreement in amounts sufficient to enable us to repay our indebtedness, including the Senior Subordinated
Notes, or to fund our other liquidity needs.

A conflict may arise between the interests of holders of our outstanding debt securities and those of Cinven and CVC.

Cinven
and CVC ultimately control the voting stock of all the companies that together conduct our business. Together, they have the power to elect a majority of the Supervisory Board of
Kappa Holding and, among other things, to change our and our subsidiaries' management, to approve any changes to our and our subsidiaries' constitutional documents and to approve any mergers. As a
result, Cinven's and CVC's actions can affect our legal and capital structure and our day-to-day operations. We cannot assure you that Cinven's or CVC's interests will be
aligned with those of the holders of our outstanding debt securities. Please see "Item 7. Major Shareholders and Related Party Transactions".

The right of holders of our outstanding Senior Subordinated Notes to receive cash payments on the notes and the note guarantees is effectively junior to all other indebtedness
of the Kappa Packaging Group other than certain limited indebtedness of Kappa Beheer and the guarantors.

The
issuer and guarantors of our outstanding Senior Subordinated Notes are mainly holding companies and conduct all operations through subsidiaries and joint ventures. Consequently,
these companies hold no significant assets other than their investments in and advances to their subsidiaries and affiliated joint ventures. These companies depend upon the receipt of sufficient funds
from their subsidiaries and affiliated joint ventures to meet their obligations. We cannot assure you that these funds will always be available. Generally, claims of creditors of a subsidiary company
will have priority in a distribution on winding up of the company over the claims of the creditors of its parent company. Accordingly, upon any distribution to any of our subsidiaries' creditors in a
bankruptcy, liquidation or reorganization or similar proceeding relating to them or their property, their creditors will be entitled to be paid in full before any payment may be made to holders of the
notes or under the note guarantees. In addition, Kappa Holding has filed a declaration under Article 2:403 of the Dutch Civil Code in respect of all of its wholly owned Dutch subsidiaries. The
effect of this declaration is that Kappa Holding will be jointly and severally liable for any liabilities arising from legal acts ("rechtshandelingen")
of these subsidiaries.

Kappa
Beheer's outstanding Senior Subordinated Notes are, therefore, effectively subordinated to all existing and future claims of creditors of any subsidiaries, including creditors
under the senior credit agreement and trade creditors. As of December 31, 2003, excluding the Senior Subordinated Notes issued in 1999 and 2003 (€691.1 million),
excluding provisions (€259.1 million), our subsidiaries had approximately €523.3 million of liabilities in addition to their obligations under the senior
credit agreement.

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Upon
any distribution to creditors of the issuer or the guarantors of the Senior Subordinated Notes in a bankruptcy, liquidation or reorganization or similar proceeding relating to such
companies or their property, the holders of all their senior indebtedness will be entitled to be paid in full before any payment may be made to holders of the Senior Subordinated Notes or under the
note guarantees. This is because the Senior Subordinated Notes and the note guarantees are subordinated in right of payment to the prior payment of all present and future amounts due from such
companies, except amounts due under any present or future indebtedness that expressly provides that it ranks equal with, or is subordinated in right of payment to, the Senior Subordinated Notes or the
note guarantees. In particular, the Senior Subordinated Notes and the note guarantees will be subordinated to amounts due under and to the guarantees of all amounts due in respect of bank indebtedness
and to all hedging obligations relating to such bank indebtedness, as such terms are defined in the indentures governing the Senior Subordinated Notes.

Such
indentures and the intercreditor agreement entered into by the trustee for the Senior Subordinated Notes on behalf of itself and the holders of the Senior Subordinated Notes provide
for the subordination of payments on the Senior Subordinated Notes and the note guarantees, and the intercreditor agreement restricts the ability of Kappa Beheer and the guarantors to make payments on
the Senior Subordinated Notes and the note guarantees. All payments on the Senior Subordinated Notes and the note guarantees will be blocked in the event of a payment default under the senior credit
agreement and certain other senior indebtedness and may be blocked for up to 179 days of a consecutive 360-day period in the event of non-payment defaults upon notice by
the lenders of that indebtedness.

The
intercreditor agreement permits us to pay, in the absence of a default under the senior credit agreement and, subject to restrictions in the intercreditor agreement, cash interest,
certain fees, costs, and taxes in respect of the notes. But, for so long as any bank indebtedness and any related hedging obligations remain outstanding, Kappa Beheer may not prepay, purchase or repay
the notes other than at maturity or with the prior consent of the lenders and the hedging banks under the senior credit agreement.

The
intercreditor agreement also imposes restrictions on the ability of the holders of the Senior Subordinated Notes to petition for bankruptcy against Kappa Beheer or the guarantors or
to bring other enforcement proceedings in connection with the Senior Subordinated Notes or the note guarantees.

The
senior credit agreement and the intercreditor agreement limit the payment of dividends, interest and other distributions and the repayment of loans by the issuer to the amount equal
to its cash interest payment obligations under, and certain fees, costs, and taxes in respect of, the Senior Subordinated Notes.

The
only significant assets that Kappa Beheer or the guarantors own are the shares of their respective subsidiaries. A lot of these shares have been pledged as collateral under the
senior credit agreement. Therefore, if Kappa Beheer or the guarantors are unable to pay the principal or interest on the notes, the ability of the holders of the Senior Subordinated Notes to proceed
against those shares to satisfy obligations owed to them would be subject to the prior satisfaction in full of all amounts due under the senior credit agreement. If the holders of the notes take any
action to proceed against those shares, the lenders under the senior credit agreement would be entitled to declare all amounts under the senior credit agreement to be immediately due and payable. In
addition, as secured creditors, the lenders under the senior credit agreement would control the disposition and sale of the shares after an event of default under the senior credit agreement and would
not be legally required to take into account the interests of unsecured creditors (including the holders of the Senior Subordinated Notes) with respect to any such disposition or sale. We can give no
assurance that our assets, or those of the guarantors, would be sufficient to satisfy any amounts that we may owe on the notes.

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The right of holders of our outstanding senior subordinated notes to receive payments on such notes could be adversely affected if any of our non-guarantor
subsidiaries declares bankruptcy, liquidates or reorganizes.

Kappa
Holding and Kappa Packaging guarantee the outstanding Senior Subordinated Notes issued by Kappa Beheer. None of our other subsidiaries guarantee such notes. In the event of a
bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their
claims from the assets of those subsidiaries before any assets are made available for distribution to their shareholders and thus will not be available to the issuer or the guarantors. The
non-guarantor subsidiaries generated all of our consolidated net sales in the year ended December 31, 2003 and held almost all of our consolidated assets as at December 31,
2003. Please see note 29 to "Item 17 Financial Statements."

We may not have the ability to raise the funds necessary to finance the change of control offer required by our outstanding Senior Subordinated Notes.

Upon
the occurrence of certain specific kinds of change of control events, Kappa Beheer must offer to repurchase all of its outstanding Senior Subordinated Notes at a price equal to 101%
of the principal amount thereof or the accreted value thereof, plus, in each case, accrued and unpaid interest, if any, to the repurchase date. However, it is possible that we will not have sufficient
funds at the time of the change of control to make the required repurchase of notes and to repay obligations under the senior credit agreement or that restrictions in the senior credit agreement will
prevent us from making this repurchase. In addition, the intercreditor agreement does not permit the prepayment or repurchase of the Senior Subordinated Notes without the consent of the lenders and
hedging banks under the senior credit agreement and there is no assurance that such consent would be given to permit these prepayments. If we do not obtain this consent or do not have sufficient funds
to make the required repurchase of Senior Subordinated Notes, we will not be able to repurchase such notes, which would constitute an event of default under the indentures relating to the notes. This
would in turn constitute an event of default under the senior credit agreement. If an event of default has occurred, a holder of Senior Subordinated Notes will have the right to take the actions
described in the indentures, subject to the subordination terms described therein. Such holder may have the right to accelerate payment on the Senior Subordinated Notes. However, to the extent we have
not been able to purchase the Senior Subordinated Notes pursuant to a change of control offer, we may not have funds available to make payments on such notes upon any acceleration.

The note guarantee from Kappa Packaging is subject to standstill terms and both note guarantees may, in certain circumstances, be released.

The
terms of the note guarantee provide that, for so long as any amount due under the senior credit agreement and the related hedging obligations are outstanding, payment under the note
guarantee of Kappa Packaging will not become due and holder of the notes will not be permitted to make any demand or otherwise take any action against Kappa Packaging, until the earlier of:

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Even
if these events have occurred and the security agent or any receiver or equivalent person under the senior credit agreement serves notice on the trustee for the Senior Subordinated
Notes that it is enforcing or taking formal steps to enforce security over the pledged shares of Kappa Packaging or any holding company parent of Kappa Packaging by selling those shares or any assets
of that company, payment under the note guarantee of Kappa Packaging will not become due and holders of the Senior Subordinated Notes will not be permitted to make any demand on, or otherwise take any
action against, Kappa Packaging until a separate 120-day period has elapsed from the occurrence of an event in clause 2(a) or 2(b) above but in no event shall that period exceed the
120-day standstill commencing on the payment default in clause (1) above. Kappa Beheer's €683.6 million borrowings (as at December 31, 2003) from its
shareholders have terms similar to the rights under the senior credit agreement described above.

Furthermore,
the terms of the Kappa Packaging guarantee provide that, if all the shares of Kappa Packaging are sold to a third party pursuant to the exercise of rights given by the
security for the debt due under the senior credit agreement, Kappa Packaging shall immediately upon that sale be automatically released from its guarantee.

As
a result of these restrictions and release provisions, we cannot assure you that the holders of our Senior Subordinated Notes will be able to:



Insolvency and administrative laws could negatively affect the right our holders of our outstanding Senior Subordinated Notes to enforce such notes and the note
guarantees.

If
we or one of our subsidiaries enter into insolvency or suspension of payments there is a risk that the holders of our outstanding Senior Subordinated Notes will not be able to enforce
their rights under such notes and the note guarantees will not be enforced.

The
issuer and guarantors of the Senior Subordinated Notes are all companies incorporated under the laws outside the United States of America. Accordingly, insolvency proceedings with
respect to such companies would be likely to proceed under, and be governed by the insolvency laws of the country concerned.

The
holders of our Senior Subordinated Notes could rank as unsecured or unpreferred creditors of the issuer and the guarantors in bankruptcy or suspension, depending on local laws, and
consequently rankpari passuwithallclaims of other unsecured and unpreferred creditors, unless local
law provides otherwise.

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It may not be possible for holders of our outstanding Senior Subordinated Notes to serve process on or enforce judgment against our officers and directors.

Both the issuer and the guarantors of our Senior Subordinated Notes are companies incorporated under laws outside the United States and substantially have all
their respective assets located outside the United States. In addition, all of the members of our Supervisory Board and all of the members of our Management Board are residents of, and most of our and
their assets are located in, jurisdictions outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or these persons,
or to enforce against us or these persons, judgments in US courts whether or not predicated upon the civil liability provisions of US securities laws. We have been advised by our counsel in the
Netherlands, Allen & Overy, that uncertainty exists as to whether a Dutch court would impose civil liability on us, our officers or members of our Management Board or our Supervisory Board in
an original action based solely upon US federal securities laws brought in a court of competent jurisdiction in the Netherlands. Dutch law, furthermore, does not recognize a security holder's right to
bring a derivative action on behalf of a corporation. Allen & Overy has further advised us that because there is no treaty on the reciprocal recognition and enforcement of judgments in civil
and commercial matters between the United States and the Netherlands, courts in the Netherlands will not automatically enforce a judgment rendered by a US court. In order to obtain a judgment
enforceable in the Netherlands, claimants must bring the claim before a court in the Netherlands of competent jurisdiction.

We must pay additional amounts to holders of the outstanding notes if we are required by certain laws to withhold amounts from payments on the Senior Subordinated Notes.
Payments of those additional amounts could adversely affect us.

Under
current law, we are not obliged to withhold Dutch tax with respect to payments of interest on the Senior Subordinated Notes. If we are required to withhold amounts in respect of
payments on the Senior Subordinated Notes, under certain circumstances, we must pay additional amounts to holders of Senior Subordinated Notes in respect of the amounts withheld. We may not have
sufficient cash to pay those additional amounts, the terms of the Senior Subordinated Notes may prohibit us from incurring additional debt to fund those amounts, and applicable laws and contractual
restrictions may limit the ability of our subsidiaries to make payments to us to fund those amounts. Consequently, any obligation to pay those additional amounts could have a material adverse effect
on our financial condition, results of operations, or liquidity.

On
June 3rd, 2003, the European Council of Economics and Finance Ministers adopted a Directive on the taxation of savings income under which Member States will be required, if a
number of important conditions are met and from a date not earlier than 1st January, 2005, to provide to the tax authorities of another Member State details of payments of interest (or similar income)
paid by a person within its jurisdiction to an individual resident in that other Member State, except that, for a transitional period, Belgium, Luxembourg and Austria will instead be required (unless
during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other
agreements relating to information exchange with certain other countries).

We
will not be obliged to pay any additional amounts if a withholding is required pursuant to the directive or any law implementing the same.

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Item 4. Information on the Company

A.    History and Development of the Company

Kappa Holding B.V. was incorporated under Dutch law in The Netherlands on June 26, 1998 as a private company with limited liability
(besloten vennootschap). The shares of Kappa Holding are primarily held by funds managed or advised by CVC Capital Partners and funds managed or advised
by Cinven Limited. Please see "Item 7. Major Shareholders and Related Party Transactions".

Our
predecessor was formed in 1993 out of a merger between the paper and packaging divisions of Bührmann-Tetterode and KNP (Koninklijke Nederlandse Papierfabrieken). Both
of these companies built their packaging activities in the 1970s as an addition to their core activities of paper sales, retail printing and coated-paper production. When these groups merged and
became KNP BT in 1993, their combined paper and packaging sector companies had a significant market share in the Benelux, Germany and the United Kingdom. On May 11, 1998, with effect from
May 31, 1998, we became an independent group of companies when the management of the packaging division of KNP BT purchased the packaging sector companies from KNP BT with the help of two
institutional investors, Cinven and CVC. The Company and its group companies commenced trading under the name "Kappa Packaging" as from June 1, 1998.

Since
our founding in 1993, we have grown to become a leading pan-European containerboard and solid board and packaging producer as a result of our acquisitions of additional
businesses in Western and Eastern Europe and organic growth. Consequently, we have expanded our annual containerboard and solid board production capacity from 1,500 kilotonnes in 1993 to 3,375
kilotonnes in 2003. In the same period, we have expanded our annual capacity of corrugated packaging from approximately 750 million m2 to 4,000 million m2.

Our
1994 acquisition of Expac in Poland marked our entry into the attractive and rapidly growing Eastern European market for corrugated packaging. During 1996, we further expanded our
corrugated packaging operations in Eastern Europe with the acquisitions of Drezdenko in Poland and Karton Morava in the Czech Republic. After we implemented our post-acquisition
integration and capacity extension programs for these two acquisitions, our capacity in Eastern Europe increased to 310 million m2 from only 145 million m2
when they were acquired.

We
have also successfully completed a number of acquisitions in Western Europe, beginning in 1994 with the acquisition of a corrugated packaging facility from our then joint venture with
AssiDomän. In 1996, we acquired Karton Morava, a Czech producer of corrugated packaging and recycled paper. Also in 1996 in Zülpich Germany, we built a new, state of the
art, recycled paper machine with a capacity of 275 kilotonnes. In 1997, we acquired Holfelder, a German manufacturer of corrugated packaging and testliner owned by Amcor. In 1997, we also acquired Van
Mierlo-Proost, a Belgian producer of high quality litho-laminated containerboard and folding carton.

In
March 2000, we acquired Société Cartonneries de l'Atlantique en Ondulé (SCAO/Maine Emballages), a French corrugated packaging
producer. As a result of our integration programme, SCAO's sales volumes rose by approximately 20% in its first full year under our ownership.

In
May 2001, we acquired Alpha, our largest acquisition to date. Through this acquisition, we greatly enhanced our pan-European market coverage, diversified our
containerboard product offering to include fresh fiber-based products (thereby improving our level of integration) and increased our containerboard capacity by almost 90% and our corrugated packaging
capacity by 120%. Subsequent to our acquisition of Alpha, we identified a number of cost saving and other initiatives, including operating efficiencies, internal sharing of best practices,
capitalizing on integration and networking opportunities and volume increases leading to economies of scale, of which the majority has been achieved.

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In
2003, we acquired a small Norwegian corrugated board manufacturer "Grenland Papp AS" and increased our interest in Orko-Pak B.V., a small corrugated converting plant in
the Netherlands, from 50% to 100%.

For
a description of the company's principal capital expenditures, please see "Item 5. Operating Review and Financial Prospects".

Our
registered office and principal executive office is located at:

Dr. Holtroplaan
5
5652 XR Eindhoven
The Netherlands
Telephone: +31(0) 40-214-0777

Our
registered agent in The United States is:

CT
Corporation System
1633 Broadway
New York, New York 10019
Telephone: +1 (212) 894-8600

B.    Business Overview

We are one of the largest producers by volume of containerboard, solid board, corrugated packaging and solid board packaging in Europe, with net sales of
€2,831.7 million and operating income of €207.0 million in 2003. We currently operate 16 containerboard and solid board mills in Sweden, the Netherlands,
Germany, the Slovak Republic, United Kingdom, Czech Republic and Italy and 100 packaging converting plants throughout Europe. We had output during 2003 amounting to 3,281 kilotonnes of containerboard
and solid board, 3,704 million m2 of corrugated packaging and 403 kilotonnes of solid board packaging.

We
are the largest producer in the European containerboard and solid board market and the second largest producer in the European corrugated and solid board packaging market. Within the
European containerboard market, we are the largest producer of fresh fiber-based containerboard. We also benefit from leading positions in a number of corrugated packaging markets, including number
one market positions in Benelux (with a 37% market share by volume, based on our estimates), Czech Republic and Slovak Republic (combined 36%), Poland (18%) and Germany (12%), and a number two market
position in Denmark (29%) and Sweden (28%). We achieved these leading positions partly through our acquisition of Alpha, the containerboard and corrugated packaging business of
AssiDomän, in May 2001. At the time of acquisition, Alpha was the largest producer of fresh fiber-based containerboard in Europe.

We
operate in two business segments: (1) the paper and board business ("Paper & Board"), including our recovered paper business, and (2) the corrugated and solid
board packaging business ("Packaging"). As an integrated producer, we believe that we enhance earnings stability through combining recovered paper collection, containerboard and solid board production
and packaging operations.

Our
business is not materially seasonal, as far as sales and production volumes are concerned. Volumes show a regular pattern through the quarters, although sales are approximately 5%
higher during the March-September period as a result of higher sales to the agriculture segment in that time period.

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Approximately
74% of our sales in 2003 were in the Netherlands, Germany, the United Kingdom, Italy, Spain, France and Belgium, with the remainder primarily in Nordic and Central Europe.
Please see also Note 27 to "Item 17. Financial Statements" for segmental information by reportable segment and geography.

Operations and Products

We operate two business segments: (1) the paper and board business ("Paper & Board"), including our recovered paper business, and (2) the
corrugated and solid board packaging business ("Packaging"). Our Paper & Board segment produces various qualities of containerboard and solid board, using recycled and fresh fibers, which we
sell both to our own converting plants and externally for use in the production of corrugated and solid board packaging. We also produce graphic board that is used in a variety of products, such as
puzzles and hardback book covers, and specialty board that is used in consumer packaging for premium products, such as jewelry, cosmetics and wine and spirits. Our Packaging segment converts
containerboard and solid board for packaging into corrugated and solid board packaging products designed to meet our customers' requirements for the protection, transportation, storage, display and
marketing of their products. In addition, as part of our Paper & Board segment, we operate a recovered paper sourcing and trading business primarily to provide our recycled containerboard and
solid board mills with a reliable source of raw material. In 2003, about 50% of our containerboard and solid board production was used by our Packaging segment. All intercompany sales from our
Paper & Board segment to our Packaging segment are made on an arms-length basis and are eliminated for consolidated reporting purposes. In addition, the Packaging segment purchased
about 45% of its containerboard and solid board from third-party sources.

21

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The
diagram below illustrates the material flows in our business.

GRAPHIC

Paper & Board Segment

Our Paper & Board segment produces a range of containerboard and solid board grades from fresh and recycled fiber for a variety of customer applications.
This segment encompasses two primary business areas: containerboard production, in which we are one of the three largest European producers by volume, and solid board production, in which we are the
leading European producer by volume. We operate 16 containerboard and solid board mills in seven countries. Of the 16 mills in operation, eight produce linerboard and/or fluting for conversion into
corrugated packaging and eight produce solid board. During 2003, we closed our Kappa Mennecy Paper containerboard mill in France and in April 2004 our Kappa
túrovo solid board mill in the Slovak Republic, as a result of which approximately 250 employees were made redundant. The containerboard mill of Kappa
túrovo, however, is still operating, and was not affected by the closure of the solid board mill.

In
2003, we sold approximately 3,281 kilotonnes of containerboard and solid board products, generating total sales of €1,225.8 million, of which
€624.1 million were to third parties.

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We are the third largest producer of containerboard in Europe, with an overall market share of 10%, based on 2003 production, according to our estimates. We
operate eight mills that produce containerboard located in Sweden, The Netherlands, Germany, The Slovak Republic, the United Kingdom, the Czech Republic and Italy. Our mills provide a complete
containerboard product portfolio resulting in European market shares of 15% in kraftliner, 10% in semi-chemical fluting and 12% in testliner and recycled fluting combined, according to our
estimates. In 2003, we sold approximately 2, 173 million tonnes of containerboard, generating total sales of €782.3 million, of which
€340.1 million were to third parties. Reflecting the level of demand, and to support European containerboard prices, in 2003 we took approximately 1.5% downtime (of the
containerboard production) and exported to Asia approximately 5% of our 2003 containerboard production.

We
sell our containerboard products to our own corrugated packaging plants and to external customers, including both small individual packaging plants and the large integrated packaging
companies that are our primary competitors. In 2003, approximately 58% of our containerboard production was supplied to our own corrugated packaging plants, while the remainder was sold externally.

We
believe that we are one of the most cost-efficient containerboard producers in Europe. We have realized this position through our focus on energy efficiency, optimal
recipe composition, efficient water management and waste disposal and our management expertise. All eight of our containerboard mills are ISO 9000 certified. Six of our containerboard mills are ISO
14001 certified. Details of our containerboard mills are set forth below:

|Containerboard Mill, Country   |  | Number
of Machines |  | Range of
Paper Grades |  | 2003
Production
(in kilotonnes) |  | Annual Capacity
(in kilotonnes) |    
|------------------------------ |  | ------------------ |  | --------------------- |  | ------------------------------- |  | ------------------------------- | ---
|Recovered based Paper          |  |                    |  |                       |  |                                 |  |                                 |    
|Roermond, the Netherlands      |  | 3                  |  | L/F                   |  | 467                             |  | 480                             |    
|Zülpich, Germany               |  | 2                  |  | L/F                   |  | 419                             |  | 430                             |    
|Birmingham, the United Kingdom |  | 1                  |  | L/F                   |  | 180                             |  | 190                             |    
|Wiesloch, Germany              |  | 1                  |  | L                     |  | 59                              |  | 95                              |    
|Zimrovice, Czech Republic      |  | 1                  |  | L/F                   |  | 54                              |  | 55                              |    
|Ania, Italy                    |  | 2                  |  | L/F                   |  | 164                             |  | 195                             |    
|Mennecy, France                |  | 1                  |  | L/F                   |  | 13                              |  |                                | (1)
|                               |  |                    |  |                       |  |                                 |  |                                 |    
|Sub-total                      |  | 11                 |  |                       |  | 1,356                           |  | 1,445                           |    
|                               |  |                    |  |                       |  |                                 |  |                                 |    
|Fiber based Paper              |  |                    |  |                       |  |                                 |  |                                 |    
|Piteå, Sweden                  |  | 2                  |  | L                     |  | 654                             |  | 700                             |    
|túrovo, Slovak Republic       |  | 1                  |  | F                     |  | 180                             |  | 180                             | (2)
|                               |  |                    |  |                       |  |                                 |  |                                 |    
|TOTAL                          |  | 14                 |  |                       |  | 2,190                           |  | 2,325                           |    
|                               |  |                    |  |                       |  |                                 |  |                                 |    

---

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Details
for our three largest mills are provided below:



Recovered
paper, wood chips and wood are the principal raw materials used in containerboard production. We source a portion of our recovered paper requirements through our recovered
paper business and obtain the remainder of our recovered paper, and all of our wood chip and wood requirements for our fresh fiber-based operations, from external suppliers. We source these materials
locally, although we seek to avoid dependence on any single supplier. We usually enter into general purchasing agreements with suppliers on an annual basis, with prices set in accordance with
prevailing market rates.

In
connection with our acquisition of Alpha, we entered into a wood supply agreement with the forestry division of AssiDomän (now owned by Sveaskog) pursuant to which it
will continue as a key supplier of wood and wood chips to our Piteå mill. Under this agreement, the Piteå mill will be supplied with raw materials at market prices until
December 31 of the year five years after notice of termination is given by either party, subject to a re-negotiation of contract terms, including volume and price, that occurs
annually and whenever there is a change of capacity. At our two fresh fiber-based facilities (Piteå and túrovo), we have integrated pulp mills that
convert the purchased wood chips and wood into pulp. These operations satisfy all of our unbleached fresh fiber-based pulp requirements and substantially all of our bleached pulp requirements. All of
our other containerboard facilities are recycled fiber-based.

Our
containerboard mills generally distribute their product throughout Europe by truck with the exception of Piteå, which is located near a deep water port, where
kraftliner is shipped by boat, rail and truck. Individual mills do not own outside warehousing facilities, although we use several third-party warehouses.



We are the largest producer of solid board on the bases of recycled fibers in Europe, with a market share of over 50%, based on 2003 production, according to our
estimates. We operate eight mills located in the Netherlands and Germany that produce various grades of solid board principally from recovered paper. We categorize solid board production into three
products: solid board for packaging, graphic board and specialty board. We are the leading European producer of both solid board for packaging and specialty board and the leading global producer of
graphic board. In 2003, we sold approximately 961 kilotonnes of solid board, generating total sales of €432.6 million, of which €267.0 million were to
third parties. The 961 kilotonnes that we sold in 2003 was comprised of 588 kilotonnes (61%) of solid board for packaging, 271 kilotonnes (28%) of graphic board and 102 kilotonnes (11%) of specialty
board.

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We
sold approximately 68% of our solid board production for packaging, representing approximately 382 kilotonnes to our Packaging segment in 2003. We sell the remainder of our solid
board for packaging to external converting plants, which are primarily smaller, independent solid board converters. We sell all of our production of graphic board and specialty board to third party
customers. We sell graphic board primarily to manufacturers of hardback book covers, ring binders, jigsaw puzzles and board games in Europe, North America and Asia. We sell our specialty board
primarily to European manufacturers of packaging for premium products, such as jewelry, cosmetics, wine and spirits.

We
believe that we are the most cost-efficient and innovative solid board producer in Europe. Our mills include the largest solid board production facilities in Europe. We
are one of the few solid board producers in Europe with in-line laminating capabilities, which we believe reduces our production cost of laminated solid board as compared to our
competitors.

Details
of our solid board mills are set forth below:

|Solid Board Mill, Country                  |  | Number
of Machines |     | Range of
Paper Grades |  | 2003
Production
(in kilotonnes) |  | Annual Capacity
(in kilotonnes) |    
|------------------------------------------ |  | ------------------ | --- | --------------------- |  | ------------------------------- |  | ------------------------------- | ---
|Graphic Board, the Netherlands (two mills) |  | 6                  | (1) | GB                    |  | 270                             |  | 300                             |    
|Triton, the Netherlands (two mills)        |  | 3                  |     | SBP                   |  | 227                             |  | 260                             |    
|Herzberger Papierfabrik, Germany           |  | 2                  |     | SBP                   |  | 225                             |  | 230                             |    
|Attica, the Netherlands (two mills)        |  | 2                  |     | SB                    |  | 101                             |  | 120                             |    
|Badenkarton, Germany                       |  | 1                  |     | SBP                   |  | 119                             |  | 140                             |    
|túrovo, Slovak Republic                   |  | 2                  |     | SB                    |  | 33                              |  |                                | (2)
|                                           |  |                    |     |                       |  |                                 |  |                                 |    
|Total                                      |  | 16                 |     |                       |  | 975                             |  | 1,050                           |    
|                                           |  |                    |     |                       |  |                                 |  |                                 |    

---

Recovered
paper is the principal raw material for the production of solid board. We source a portion of our recovered paper requirements for our solid board production operations through
our recovered paper operations. We source the remainder of our recovered paper requirements locally for each mill, although we seek to avoid dependence on any single supplier.

Our
solid board mills generally distribute their product throughout Europe by truck. We export a significant amount of graphic board overseas, which is distributed by ship.

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Through our five depots in the Benelux, Germany and the United Kingdom, we operate a business that sources, sorts and sells recovered paper. Furthermore, we are
building a depot infrastructure in Slovakia, which should be operational in the course of 2004. We operate this business on a stand-alone basis and sell recovered paper both to our own containerboard
and solid board mills on an arm's length basis and externally. In 2003, we sold 778 kilotonnes of recovered paper, generating total sales of €59.8 million, of which
€16.5 million were to third parties. The total volume of our recovered paper business represented approximately 40% of our total recovered paper needs for containerboard and
solid board production in 2003.

We
obtain our supply of recovered paper primarily from direct contracts with large retailers and municipalities, spot purchases in the recovered paper market and contracts with brokers
and waste collection agencies. We have a 50% joint venture called "AVR Rietveld" with Afval Verwerking Rijnmond, one of the largest waste processors in the Netherlands, which we entered into to
increase our supply of recovered paper from municipalities. We also own a 33% interest in EuroWaste, located in the Czech Republic, and a 14.3% interest in IL Recycling, located in Sweden.
Furthermore, we are in the process of building a waste collection infrastructure in Slovakia together with third parties through newly established joint ventures which began early 2004.

Packaging Segment

Our Packaging segment produces a range of corrugated board and solid board packaging products to meet the protection, transportation, storage, display and
marketing needs of customers throughout Europe. This segment has two business areas: corrugated packaging, in which we are the third largest European producers by volume, and solid board packaging, in
which we are the leading European producer by volume. We own and operate a pan-European network of 100 corrugated and solid board operating units in 17 European countries. In 2003, we sold
approximately 3,704 million m2 of corrugated packaging products and 403 kilotonnes of solid board packaging, generating sales of €2,218.7 million.



We are the third largest producer of corrugated packaging in Europe, with a market share of 12%, based on 2003 production, according to our estimates. We operate
92 corrugated packaging plants in 17 countries throughout Western and Eastern Europe. As well as operating a network of plants across Europe, we benefit from strong regional positions within specific
corrugated packaging markets. We believe we are the market leader in the Benelux, the Czech Republic and the Slovak Republic, Poland and Germany, and have number two market positions in Denmark and
Sweden. We are also the market leader overall in Eastern Europe. In 2003, we sold approximately 3,704 million m2 of corrugated packaging products, generating total sales of
€1,902.6 million.

Our
corrugated packaging plants provide packaging designed to satisfy the protection, transportation, storage, display and marketing requirements of our customers in an economic and
environmentally friendly manner. We place an emphasis on producing value-added and performance-based packaging as they generate higher and more stable margins than basic packaging. Performance-based
packaging optimizes the design of each corrugated package, such that it most efficiently meets the customer's strength requirements while minimizing raw material inputs. This reduces end prices for
the customer and improves our margins. In addition, a growing portion of our business is related to producing higher value-added packaging solutions, such as industrial, agricultural and high quality
print packaging.

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We
serve a broad customer base, including food and beverage packers and manufacturers of consumer and industrial goods. Packaging for food, beverages and agricultural products accounted
for approximately 50% of our total corrugated packaging sales in 2003. We believe that this helps to stabilize our production volumes since demand for food, beverages and agricultural products is
generally less cyclical than for other consumer goods. Our plants serve customers ranging from local businesses to large pan-European accounts, such as Proctor & Gamble,
MasterFoods, PepsiCo, Philips, Heineken and Unilever. In 2003, our top ten corrugated packaging customers accounted for approximately 9% of our total corrugated packaging sales, and no single customer
accounted for more than 2% of our total corrugated packaging sales.

Due
to the high relative cost of transportation, corrugated packaging plants generally can only serve a limited geographic area in a cost effective manner, typically within a distance of
up to 300 kilometers. However, higher value-added products may be economically transported over greater distances. The density of our plant network, particularly in the Benelux, allows us to
concentrate production of particular product lines into individual plants. This results in higher capacity utilization, fewer product changeovers and, consequently, greater cost efficiency. We believe
that the size of our network also affords our customers greater flexibility and security of supply.

We
believe that we are one of the most innovative and flexible corrugated packaging producers in Europe. In total, our annual capacity of corrugated packaging has risen from
approximately 750 million m2 in 1993 to 4,000 million m2 in 2003. This reflects the investment made by both Kappa Packaging and Alpha to build their European
packaging operations both organically and through acquisitions. Of our 92 corrugated packaging plants,71 are integrated plants, 5 are sheet feeder
plants and 16 are sheet plants. Integrated plants combine the production of corrugated board sheets with their conversion into corrugated packaging. Sheet feeder and sheet plants are dedicated
exclusively to corrugating and conversion activities, respectively. The production of our converting plants can be increased to meet customer demand by operating additional production shifts.

Details
of our corrugated packaging plants by region are set forth below:

|Corrugated Packaging Plants |  | Number
of Plants |  | 2003
Production
(in million m2)
|--------------------------- |  | ---------------- |  | -------------------------------
|Benelux                     |  | 14               |  | 735                            
|Germany and Switzerland     |  | 16               |  | 922                            
|France                      |  | 11               |  | 385                            
|Central Europe              |  | 11               |  | 528                            
|Nordic                      |  | 24               |  | 405                            
|United Kingdom              |  | 6                |  | 236                            
|Spain                       |  | 6                |  | 238                            
|Italy                       |  | 4                |  | 266                            
|                            |  |                  |  |                                
|Total                       |  | 92               |  | 3,715                          
|                            |  |                  |  |                                

In
2003, our total corrugated packaging production used 1.5 million tonnes of recycled fiber based containerboard and 0.7 million tonnes of fresh fiber based
containerboard. Our corrugated packaging operations source a portion of their raw material requirements internally and the remainder externally from a diverse supplier base.

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We are the largest manufacturer of solid board packaging in Europe, with a market share of approximately 40% based on 2003 production according to our estimates.
We operate eight solid board packaging plants that convert solid board into solid board packaging. In 2003, we sold 403 kilotonnes of solid board packaging products, generating total sales of
€321.5 million.

Our
solid board packaging plants produce solid board for transportation and display purposes. Solid board can offer superior characteristics in terms of moisture resistance, efficiency
of transport and handling and printability in comparison to other fiber-based packaging products. The moisture resistance makes it particularly well suited for packaging flowers, fruit, vegetables,
fresh fish, meat and dairy products. The printability makes solid board packaging ideal for value-added products where aesthetics are important. Our solid board packaging plants provide value-added
solutions suitable for each of these sectors, and we are constantly developing new applications for solid board packaging. For example, we have developed a packaging solution that significantly
extends the transit life of fresh produce by controlling the atmosphere within the container.

We
serve a large number of customers that primarily operate in the perishable agricultural sector and range from local businesses to large regional accounts.

We
believe that we are one of the most innovative, cost efficient and service-oriented solid board packaging producers in Europe.

Details
of our solid board packaging production plants by country are set forth below:

|Solid Board Packaging Plants |  | Number of Plants |  | 2003
Production
(in kilotonnes)
|---------------------------- |  | ---------------- |  | -------------------------------
|Germany                      |  | 3                |  | 175                            
|Benelux                      |  | 3                |  | 165                            
|Norway                       |  | 1                |  | 15                             
|United Kingdom               |  | 1                |  | 25                             
|                             |  |                  |  |                                
|Total                        |  | 8                |  | 380                            
|                             |  |                  |  |                                

Due
to the superior cost position and production capabilities of our own solid board mills, we fulfil substantially all of our solid board sourcing requirements internally.



As part of our total solutions philosophy, we also design and manufacture packaging systems in three centers of excellence in the United Kingdom, Sweden and
Germany. We serve agricultural tray erectors that are primarily owned by us, and machines for manufacturing applications that are primarily owned by third parties. We believe these systems further
solidify our customer relations.

Sales and Marketing

All our converting plants and our solid board mills are responsible for generating their own sales based on defined product/market combinations and each of the
facilities has a specialized sales force, which is responsible for sales and maintaining customer relations in that specific segment. Our containerboard operations have a centralized sales
organization, with sales offices in the Netherlands, Germany, France, Spain, Italy, Switzerland and the United Kingdom. In addition, we have a pan-European sales organization for our
Packaging sector. In 2003, approximately 15% of our corrugated board sales were handled by the pan-European sales organization.

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A key element of our sales strategy is to work closely with customers to understand their supply chain needs. This enables us to develop products that make the supply chain more
efficient. We believe that by appreciating how our products relate to the protection, transportation, storage, display and marketing needs of our customers, we are better able to provide value-added
packaging solutions and retain customer loyalty.

Product Development

We have strong product development capabilities that permit us to develop innovative solutions to meet the packaging needs of our customers. The sales staff at
each of our facilities and the staff of our specialized product development centers work in partnership with our customers to provide more efficient and customer-focused solutions.

One
of the main objectives of our product development efforts is to produce corrugated and solid board packaging products that meet the performance demands of our customers while
minimizing the total raw material input. In addition, we design our packaging to reduce the total cost in the supply chain for our customers from the point of customer purchase of packaging from us
through to the take-up of product by our customer's end consumers. Our recent product development efforts have led to advancements in compression strength, ease of use, appearance and
printability of our products. We have developed a number of innovative solutions to meet the packaging needs of our customers, such as high-speed solid board packaging systems that can be
installed on-site at customer locations. We believe that our product development capabilities give us a significant competitive advantage. Other value-enhancing products we have developed
in partnership with our customers include solid board packaging solutions particularly suited to the transport of fresh fish and a packaging solution that significantly extends the transit life of
fresh produce by controlling the atmosphere within the container. Examples of value added corrugated packaging include sophisticated, printed, heavy duty and industrial packaging and
point-of-sale displays.

Raw Materials

The principal inputs for our paper and board products are recovered paper, wood and energy. Raw material costs and energy costs represented approximately 40.9%
and 10.6%, respectively, of the total operating costs of the Paper & Board segment in 2003. For our packaging plants, the principal raw material cost is either corrugated case material or solid
board. Raw material costs represented approximately 55.8% of total operating costs of the Packaging segment in 2003. Each paper and board mill and packaging plant is responsible for obtaining its own
raw materials, which are sourced both from the Kappa Packaging Group and externally. Sourcing of recovered paper is co-ordinated at group-level.

Competition

All our markets are highly competitive with many participants. Competition in our markets is based principally on quality, product performance and specifications,
service and price. In particular, containerboard products are largely a commodity and subject to substantial price competition.

The
containerboard and corrugated packaging sectors are among the more fragmented sectors in the European paper industry. The top five containerboard and corrugated packaging producers
in the European market have only approximately 40% and 45%, respectively, of the total market share, based on 2003 sales volume according to our estimates. Our primary competition in containerboard
and corrugated packaging production comes from the other two large integrated businesses, SCA and Jefferson Smurfit Group.

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The
manufacture of containerboard and solid board products is capital intensive with high barriers to entry, particularly in fresh fiber-based production. We believe that capacity in the
range of 600 kilotonnes is necessary in order to cost effectively operate a new kraftliner production mill in Europe. We estimate that such a mill would require capital expenditures of at least
€700 million to build and a period of two years for planning and construction. In general, new capacity can be added through conversion of other paper machines to containerboard
or solid board production, although this happens infrequently.

In
contrast to containerboard and solid board, the corrugated and solid board packaging sectors have relatively low financial barriers to entry. Competition in corrugated and solid board
packaging is primarily regional. Proximity to the customer is an important competitive factor in order to minimize shipping costs and to ensure on-time delivery and efficient service. Our
principal competition in the corrugated packaging sector consists of the other large integrated businesses, SCA and Jefferson Smurfit Group. Our main competition in the solid board packaging sector
consists of Jefferson Smurfit Group, VPK Oudegem and other smaller enterprises.

Customers

We believe that we benefit from the stability of the end use markets of our products, with the food, beverage and agricultural sectors accounting for 47% of our
packaging revenues in 2003, compared to an industry average in Europe of approximately 42%. Our broad customer base, of both our Packaging and Paper & Board segment, also enables us to minimize
our dependence on any one customer. Our top ten Packaging segment customers accounted for only approximately 10% of that segment's total sales in 2003, with no one customer representing more than 2%.
Our top ten Paper & Board customers accounted for only about 20% of that segment's total volume in 2003, with no one customer representing more than 5%. In addition, we believe that we benefit
from strong customer loyalty, which is evidenced by the fact that our current top ten customer relationships in terms of volume have spanned over ten years on average in the Packaging segment.

Intellectual Property

We currently hold various national and European Union patents and will continue to pursue patent protection for our innovations. Kappa Packaging makes use of
trademarks, including Kappa, Kappa Colours, Kappa Eskaboard and Quama and, by license from AssiDomän, the trademark Royal.

Environmental Regulation

Our mills and plants are affected by a wide range of laws and regulations relating to environmental issues in each jurisdiction in which we are located and by EU
environmental regulations. Local and national bodies in the relevant jurisdiction enforce these regulations. Such laws affect our different operations to different degrees according to the
jurisdiction involved. By their nature, our containerboard and solid board production and, to a lesser extent, our recovered paper and packaging operations give rise to a number of environmental
issues.

We
require each of our mills and operational plants to comply with all applicable environmental laws and regulations appropriate to the jurisdiction in which they carry out their
business. We believe that our operations are substantially in compliance with all applicable environmental laws and regulations where failure to comply would materially and adversely affect our
business.

Environmental
regulations in the EU Member States are standardized or in the process of being standardized by a series of stringent directives concerning the environment. In countries
outside the EU (Norway, Russia and Switzerland) our operations are not subject to EU environmental laws but are subject to national environmental laws.

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Environmental legislation and regulations commonly require businesses whose operations may have an impact on the environment to obtain permits and authorizations
for those operations. The manufacture of pulp and paper generally requires a permit, which stipulates, for example, production conditions, limits on air emissions and wastewater discharges, noise
control and waste management requirements. Breaches of this operational permit or of other environmental laws and regulations may result in criminal sanctions, such as fines, orders to cease
operations and/or requirements to clean-up pollution. Environmental permits are also subject to modification and revocation and must be periodically updated.

The
EU Directive 96/61/EC on Integrated Pollution Prevention and Control ("IPPC") will require our paper and board operations in the European Union that impact significantly on the
environment to be authorized under a national regime. We will need to demonstrate to the relevant national regulator that we utilize best available techniques to minimize pollution and maximize energy
efficiency. All of our existing operations in EU Member States are likely to require authorization under the IPPC by 2007, which is the European Union wide deadline. However, enabling legislation is a
pre-condition to the IPPC becoming effective in each Member State, and this may occur after 2007. This directive will result in increased regulation of aspects of our production processes.
In particular, in certain jurisdictions in which we operate, a baseline contamination report will need to be submitted to the relevant regulator with an application for the new permit.



All of our operations in EU Member States are subject to the Waste Framework Directive 75/442/EEC as amended by 91/156/EC and our board production operations are
subject to the Hazardous Waste Directive 91/689/EC. These directives seek to impose a uniform system of waste management across the European Union. All our operations generate and hold waste prior to
removal elsewhere, and the directives, where nationally implemented, require that we manage waste in a way that does not involve the use of processes likely to harm the environment or cause harm to
human health. Permits are required for keeping, treating, depositing or disposing of waste, subject to certain exemptions. Failure to fulfil these requirements may lead to both criminal and civil
liability, with sanctions including fines, orders to cease breaches and clean-up orders.



All of our packaging operations in EU Member States fall under the Packaging and Packaging Waste Directive 94/62/EC. We must comply with the appropriate national
targets to re-use, recover or recycle materials and products that become waste. Failure to comply could lead to the operation being fined and the packaging produced being barred from the
EU market. We currently achieve compliance with these regulations by membership in approved compliance schemes.



We are under statutory duties in most jurisdictions in which we operate to control discharges into watercourses and sewer systems and to maintain effluent
treatment plants where appropriate. We are also subject to regulations, which impose liability for fines and other penalties and, in certain jurisdictions in which we operate, clean-up
costs, in the event of accidental spills and pollution by releases of hazardous substances into the environment.

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Environmental laws and regulations may also impose obligations to investigate, remediate or pay for the investigation or remediation of contaminated land and
groundwater and to compensate private third parties for related damages.

From
time to time we dispose of closed plants. In most jurisdictions in which we operate, plant closure programs require businesses to take steps to make safe, from an environmental
perspective, site operations and clean-up any soil and/or groundwater contamination.



Forest and environmental protection legislation places an emphasis on sustainable commercial utilization of forests and is intended to preserve natural
biodiversity. Internal procedures have been developed in order to comply with this.



We have worked and continue to work towards compliance with international standard ISO 14001. 12 out of our 16 containerboard and solid board mills and a number
of our packaging operations have implemented ISO 14001 certified environmental management systems. The aim of this standard is to reduce an organization's environmental impact and ensure continuously
improved environmental performance and compliance through internal auditing, target setting and training.

C.    Organizational Structure

The following shows our corporate structure:

GRAPHIC

Kappa
Holding B.V. holds 100% of the share capital of Kappa Beheer B.V. Kappa Beheer B.V. holds 100% of the share capital of Kappa Packaging B.V. Kappa Packaging B.V. holds shareholdings
in other holding companies of the Kappa Packaging Group and indirectly in the operating companies. None of Kappa Holding B.V., Kappa Beheer B.V. or Kappa Packaging B.V. conducts directly any
operational activities.

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For
an overview of main subsidiaries of Kappa Holding B.V. reference is made to Note 32 to the Consolidated Financial Statements, included in this document in "Item 17. Financial
Statements".

D.    Property, Plants and Equipment

We own substantially all of our production facilities. We or one of our direct or indirect wholly owned subsidiaries own all of the mills and plants referred to
in the sections above.

Item 5. Operating and Financial Review and Prospects

The following discussion addresses the financial conditions and results of operations of the Kappa Packaging Group for the years ended December 31, 2001,
2002 and 2003. This discussion should be read in conjunction with our audited Consolidated Financial Statements, the notes thereto and the other financial information included elsewhere in this
document. Our Consolidated Financial Statements are prepared in accordance with Dutch generally accepted accounting principles ("Dutch GAAP"), which differ in certain significant respects from US
generally accepted accounting principles ("US GAAP"). These differences mainly relate to the treatment of goodwill, restructuring charges, acquisition adjustments, business process reengineering
costs, valuation of swaptions, insurance provisions, financial instruments and pensions. For a discussion of how our application of Dutch GAAP differs from US GAAP and a reconciliation of our net
income and shareholders' equity from Dutch GAAP to US GAAP, see Note 28 to our audited Consolidated Financial Statements included in "Item 17. Financial Statements". The following discussion
contains forward-looking statements, which involve risks and uncertainties. In the future, our actual results may differ significantly from the results discussed in the forward-looking statements.
Factors that might cause such differences include, but are not limited to, those discussed in "Item 3.D. Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements".

Overview

We are one of the largest producers by volume of containerboard, solid board and corrugated packaging and solid board packaging in Europe. We currently operate 16
containerboard and solid board mills in Sweden, the Netherlands, Germany, the Slovak Republic, United Kingdom, the Czech Republic, and Italy and 100 packaging converting plants throughout Western and
Eastern Europe.

We
operate two business segments: Paper & Board and Packaging. Our Paper & Board segment produces various qualities of containerboard and solid board using a mix of
recycled and fresh fibers, which we sell both to our own converting plants and externally for use in the production of corrugated and solid board packaging. We also produce graphic board that is used
in a variety of products, such as puzzles and hardback book covers, and specialty board that is used in consumer packaging for premium products, such as jewelry, cosmetics and wine and spirits. Our
Packaging segment converts containerboard and solid board for packaging into corrugated and solid board packaging products designed to meet our customers' requirements for the protection,
transportation, storage, display and marketing of their products. In addition, as part of our Paper & Board segment, we operate a recovered paper sourcing and trading business primarily to
provide our containerboard and solid board mills with a reliable source of raw material.

In
2003, about 50% of our containerboard and solid board production was used by our Packaging segment. All intercompany sales from our Paper & Board segment to our Packaging
segment are made on an arms-length basis and are eliminated for consolidated reporting purposes. In addition, the Packaging segment purchased about 45% of its containerboard and solid
board from third-party sources.

33

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Containerboard
prices are sensitive to imbalances in supply and demand mainly due to containerboard's commodity characteristics. As containerboard demand is derived from the relatively
stable demand for corrugated packaging, prices are particularly vulnerable to arbitrary changes in industry capacity. In the past, the capital intensive and high fixed cost nature of the industry led
to significant price declines during periods of reduced demand as production has tended to continue so long as prices were sufficient to meet marginal costs.

Additionally,
prices for containerboard and solid board are closely related to movements in the costs of the underlying raw materials such as recovered paper and wood. Prices for these
raw materials, particularly mixed waste paper have been volatile and, as a result, it is difficult for us to forecast future price trends. For example, the market price per tonne of mixed waste paper
reached a peak of €110 per tonne in May 2000, in comparison to the six-year low point of €3 per tonne in January 1997. Recovered paper prices
then decreased in the period from August 2000, then subsequently increased to approximately €135 per tonne for Old Corrugated Containers (OCC) in June 2002. After that
peak, prices more or less decreased to approximately €52.5 per tonne for mixed waste paper and €62.5 per tonne for OCC in June 2004. In contrast, wood prices
have tended to be relatively stable.

In
general, corrugated packaging prices vary with the underlying price of the principal raw material: containerboard. As such, corrugated packaging manufacturers seek to adjust their
sales prices to maintain their margins as the price of containerboard varies. These adjustments generally reflect containerboard price changes after an initial lag of up to six months. Similar to
corrugated packaging, solid board packaging prices vary with the underlying price of its raw material, solid board.

Recycled
fiber, which is derived from recovered paper stock, is our most significant raw material. Recovered paper is a commodity that is traded on world markets. There is on average a
six-month lag between supply increasing to match demand. In addition, Europe regularly exports recovered paper to Asia, which can further drive imbalances between supply and demand. We
believe that waste paper-related legislation is gradually increasing the long-term supply of recovered paper.

In
2003, energy costs amounted to 5.24% of our sales (2002: 4.77%). We have energy contracts of a limited duration in order to maintain the flexibility to benefit from the continuing
liberalization of the European energy market.

We
tend not to have significant order backlogs at any time.

Strategic Drivers

Industry Consolidation

The acquisition in 2001 of the containerboard and corrugated packaging businesses of AssiDomän doubled the size of the Group, both in terms of
annual sales and reach. However, the corrugated packaging industry is still largely fragmented in Europe. Accordingly, we believe that there are additional opportunities for further consolidation
within the industry and we expect that this trend will help to drive our growth going forward. We plan to continue our acquisition strategy by purchasing to both increase market share and to fill in
geographic gaps.

Global Sales Strategy

A predominant driver of the consolidation trend within the worldwide office products industry is a movement toward the globalization of customers. As corporations
become increasingly global, they are looking to their suppliers for centralized international purchasing solutions that provide distribution and fulfillment on a local level. To reduce operating
expenses, customers want to make purchasing decisions from one central location for their global business, but need the inventory management, day-to-day purchasing needs, and
delivery of products and services to be fulfilled in local markets.

34

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We
believe that we now have the geographic spread and operational scale to grow profitably by capturing increased market share. We also believe that we have the ability to add low cost
capacity at a number of our plants to take advantage of future market opportunities.

Customers Seeking a Single-Source Supplier

Many customers look for a logistics chain solution. Many of our larger customers require a packaging solution that has a high degree of integration in the
logistic chain from manufacturing through packaging, warehousing, distribution and transport to reduce operating expenses. We believe that this increasing trend fits into the specific knowledge, which
we have developed in order to successfully grow our business.

Acquisitions

We have made selective acquisitions over the past several years that have increased our production capacity and expanded our business. We have integrated
16 businesses into Kappa since 1994, including the following principal acquisitions during the last three years:



Our
acquisition of Alpha in May 2001 added four containerboard and solid board mills and 64 packaging converting plants located in four and ten countries, respectively. This
acquisition increased our containerboard capacity by almost 90% and our corrugated packaging capacity by 120%. The results of Alpha are included in our Consolidated Financial Statements from
May 17, 2001, the date of closing of the acquisition. As part of the integration of Alpha into our operations, we decided in the third quarter 2001 to close down two of our corrugated packaging
converting plants, one in Hilden, Germany and one in Neufahrn, Germany. The closure of both plants was finalized in the fourth quarter of 2001. Sales and production of both companies were transferred
to our other production facilities. As another part of our Alpha integration, we rebuilt the corrugated production plant "Kappa Empee" (Eindhoven, the Netherlands) from a fully integrated plant into a
major sheetfeeder operation. We finalized this rebuilding during 2002. In 2003, we closed our containerboard production plant "Kappa Mennecy Paper" (Mennecy, France) and our small corrugated packaging
production plant "Kappa Moscow" (Moscow, Russia). In April 2004, we closed our solid board operations of "Kappa túrovo" (túrovo,
the Slovak Republic).

In
March 2000, we acquired Société Cartonneries de l'Atlantique en Ondulé (SCAO), a French corrugated packaging producer. The results
of SCAO are included in our Consolidated Financial Statements from January 1, 2000.

Post balance sheet events

In May 2004, our subsidiary Kappa Zülpich has been visited by the German "Bundes Kartellamt" in the framework of an investigation of the EU
regarding a suspicion about possible price co-ordination of recovered paper purchases by paper and board producers. Currently, management can not assess the outcome of the investigation.

35

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At
August 10, 2004, our corrugated packaging plant "Kappa Iberoamericana Almeria", located in the south of Spain, was destroyed by fire. The company sells and produces
approximately 45 million m2 of packaging. We expect our insurance cover to be sufficient to recover the financial damage. The support of our other plants in Spain will be used to
the fullest extend to maintain the business. We expect to rebuild the plant as soon as possible.

Operating Results

The table below sets forth our operating results in millions of euro and as a percentage of our sales for the periods indicated.

|                                                                      |                                                   | Year ended December 31, |       
|--------------------------------------------------------------------- | ------------------------------------------------- | ----------------------- | ------
|
|
|
|Income Statement Data                                                 |                                                   |                         |       
|Sales                                                                 |                                                   | 2,471.3                 |       
|Net change in work in progress and finished goods                     |                                                   | 1.0                     |       
|                                                                      |                                                   |                         |       
|Net sales including net change in work in progress and finished goods |                                                   | 2,472.3                 |       
|Operating expenses:                                                   |                                                   |                         |       
|                                                                      | Raw material costs                                |                         | (917.7
|                                                                      | External services(1)                              |                         | (434.7
|                                                                      | Labor costs                                       |                         | (561.9
|                                                                      | Other operating costs                             |                         | (135.9
|                                                                      | Depreciation, amortization and impairment charges |                         | (176.0
|                                                                      |                                                   |                         |       
|Total operating expenses                                              |                                                   | (2,226.2                | )     
|                                                                      |                                                   |                         |       
|Operating income                                                      |                                                   | 246.1                   |       
|Interest expense, net                                                 |                                                   | (167.8                  | )     
|Interest expense on Shareholders' loans                               |                                                   | (34.9                   | )     
|                                                                      |                                                   |                         |       
|Result before income taxes                                            |                                                   | 43.4                    |       
|Income taxes                                                          |                                                   | (19.1                   | )     
|Income from participations                                            |                                                   | 0.2                     |       
|Minority interests                                                    |                                                   | (0.2                    | )     
|                                                                      |                                                   |                         |       
|Income/(loss) before extraordinary items                              |                                                   | 24.3                    |       
|Extraordinary items, net of tax                                       |                                                   | (13.1                   | )     
|                                                                      |                                                   |                         |       
|Net income/(loss)                                                     |                                                   | 11.2                    |       
|                                                                      |                                                   |                         |       
|Other Financial Data                                                  |                                                   |                         |       
|EBITDA(2)                                                             |                                                   | 422.1                   |       
|Total assets(3)                                                       |                                                   | 3,709.2                 |       
|Assets(4)                                                             |                                                   | 2,785.2                 |       
|Net capital expenditure(5)                                            |                                                   | 154.6                   |       

---

36

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The
table below sets forth certain segment information for the period indicated.

|                 |                    | Year ended December 31, |        
|---------------- | ------------------ | ----------------------- | -------
|
|
|Sales            |                    |                         |        
|                 | Paper & Board      |                         | 1,086.5
|                 | Packaging          |                         | 1,881.5
|                 | Eliminations       |                         | (496.7 
|                 |                    |                         |        
|                 |                    | Consolidated total      |        
|                 |                    |                         |        
|Operating income |                    |                         |        
|                 | Paper & Board      |                         | 180.5  
|                 | Packaging          |                         | 103.9  
|                 | Corporate expenses |                         | (38.3  
|                 |                    |                         |        
|                 |                    | Consolidated total      |        
|                 |                    |                         |        

37

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The
table below sets forth certain financial information for our Paper & Board segment.

|                                                                      |                                                   | Year ended December 31, |       
|--------------------------------------------------------------------- | ------------------------------------------------- | ----------------------- | ------
|
|
|
|Income Statement Data                                                 |                                                   |                         |       
|Sales                                                                 |                                                   | 1,086.5                 |       
|Net changes in work in progress and finished goods                    |                                                   | 4.3                     |       
|                                                                      |                                                   |                         |       
|Net Sales including net change in work in progress and finished goods |                                                   | 1,090.8                 |       
|Operating expenses                                                    |                                                   |                         |       
|                                                                      | Raw material costs                                |                         | (368.1
|                                                                      | External services(1)                              |                         | (241.5
|                                                                      | Labor costs                                       |                         | (159.2
|                                                                      | Other operating costs                             |                         | (46.4 
|                                                                      | Depreciation, amortization and impairment charges |                         | (95.1 
|                                                                      |                                                   |                         |       
|Total operating expenses                                              |                                                   | (910.3                  | )     
|                                                                      |                                                   |                         |       
|Operating income                                                      |                                                   | 180.5                   |       
|                                                                      |                                                   |                         |       
|Other Financial Data                                                  |                                                   |                         |       
|EBITDA(2)                                                             |                                                   | 275.6                   |       
|Assets(3)                                                             |                                                   | 1,070.9                 |       
|Net capital expenditure(4)                                            |                                                   | 86.1                    |       
|Other Data                                                            |                                                   |                         |       
|Sales volumes (kilotonnes)                                            |                                                   | 2,660                   |       

---



38

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The
table below sets forth certain financial information for our Packaging segment in millions of euros and as a percentage of sales for the periods indicated.

|                                                                      |                                                   | Year ended December 31, |         
|--------------------------------------------------------------------- | ------------------------------------------------- | ----------------------- | --------
|
|
|
|Income Statement Data                                                 |                                                   |                         |         
|Sales                                                                 |                                                   | 1,881.5                 |         
|Net changes in work in progress and finished goods                    |                                                   | (4.7                    | )       
|                                                                      |                                                   |                         |         
|Net sales including net change in work in progress and finished goods |                                                   | 1,876.8                 |         
|Operating expenses                                                    |                                                   |                         |         
|                                                                      | Raw material cost                                 |                         | (1,039.4
|                                                                      | External services(1)                              |                         | (191.5  
|                                                                      | Labor costs                                       |                         | (385.3  
|                                                                      | Other operating costs, net                        |                         | (78.4   
|                                                                      | Depreciation, amortization and impairment charges |                         | (78.3   
|                                                                      |                                                   |                         |         
|Total operating expenses                                              |                                                   | (1,772.9                | )       
|                                                                      |                                                   |                         |         
|Operating income                                                      |                                                   | 103.9                   |         
|                                                                      |                                                   |                         |         
|Other Financial Data                                                  |                                                   |                         |         
|EBITDA(2)                                                             |                                                   | 182.2                   |         
|Assets(3)                                                             |                                                   | 1,463.6                 |         
|Net capital expenditure(4)                                            |                                                   | 67.5                    |         
|Other Data                                                            |                                                   |                         |         
|Sales volumes (kilotonnes)                                            |                                                   | 2,131                   |         

---

39

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Year ended December 31, 2003 compared to Year ended December 31, 2002

It should be noted that the total of amounts provided in any segment analysis below will not necessarily equal amounts shown on a
consolidated basis due to intercompany eliminations and corporate items.

Sales.Sales decreased by €82.1 million, or 2.8%, to €2,841.7 million in 2003
from €2,923.8 million in 2002. This sales decrease was mainly the result of a decrease in average sales prices for paper and board products and a slight decrease in sales
volumes and average sales prices for corrugated packaging products.

Sales
in the Paper & Board segment, decreased by €69.4 million, or 5.4%, from €1,295.2 million in 2002 to
€1,225.8 million in 2003. The decrease is mainly the result of lower average sales prices for containerboard and solid board, due to lower average prices for recovered paper.
Sales volumes in 2003 for the segment were relatively flat as compared to 2002. Containerboard sales volumes increased by 0.8%, offset by a decrease in solid board sales volumes by approximately 1.6%
mainly due to lower demand in Asia.

Sales
in the Packaging segment decreased by €39.7 million, or 1.8%, from €2,258.4 million in 2002 to
€2,218.7 million in 2003. This decrease mainly results from slightly decreased sales volumes (approximately 1.0%) and a decrease in average sales prices for corrugated packaging
products.

Raw material costs.Raw material costs decreased by €73.9 million, or 6.9%, from
€1,077.6 million in 2002 to €1,003.7 million in 2003. Raw material costs as a percentage of sales decreased to 35.3% in 2003 from 36.9% last year.

Raw
material costs in the Paper & Board segment decreased by €39.9 million, or 8.3%, from €482.4 million in 2002 to
€442.5 million in 2003. Raw material costs as a percentage of sales, decreased to 36.1% in 2003 from 37.2% in 2002. This decrease in raw material costs is mainly the result of
higher average prices for recovered paper in 2002 as a result of the sharp increase in recovered paper prices in the second quarter of 2002, as compared to a more moderate increase in recovered paper
prices in 2003.

Raw
material costs in the Packaging segment decreased by €61.6 million, or 5.0%, from €1,225.7 million in 2002 to
€1,164.1 million in 2003, mainly due to lower average prices for containerboard and solid board. Raw material costs as a percentage of sales decreased to 52.5% in 2003 from
54.3% in the previous year.

External services.Costs of external services, consisting of freight charges, energy costs and maintenance costs, increased
by €1.5 million, or 0.3%, from €523.3 million in 2002 to €524.8 million in 2003. This increase was mainly caused by increased
energy costs (€9.5 million or 6.8%) and freight charges (€2.0 million or 0.8%), partly offset by lower maintenance costs
(€10.0 million or 7.0%). The cost of external services as a percentage of sales increased from 17.9% in 2002 to 18.5% in 2003.

Costs
of external services in the Paper & Board segment increased by €6.8 million, or 2.4%, from €288.3 million in 2002 to
€295.1 million in 2003. This increase came from increased energy costs (€7.8 million or 7.3%) and freight charges (€2.5 million or
2.3%), partly offset by decreased maintenance costs (€3.5 million or 4.7%). Costs of external services as a percentage of sales increased from 22.3% in 2002 to 24.1% in 2003.

Costs
of external services in the Packaging segment decreased by €4.9 million, or 2.1%, from €234.0 million in 2002 to
€229.1 million in 2003. This increase was the result of decreased freight charges (€0.6 million or 0.4%) and maintenance costs
(€5.9 million or 8.6%), partly offset by increased energy costs (€1.6 million or 5.0%). The cost of external services as a percentage of sales decreased
slightly from 10.4% in 2002 to 10.3% in 2003.

40

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Labor costs.Labor costsincreased by €4.7 million, or
0.7%, to €702.6 million in 2003 from €697.9 million in 2002. Labor costs for the year 2003 include exceptional restructuring costs of
€20.4 million, related to management's decision to reduce the number of full time employees by 600 and to close down of Kappa Mennecy Paper and Kappa Moscow (both effectively in
2003) and Kappa túrovo Solid Board (effectively in 2004). This in addition to the exceptional restructuring charge incurred in the fourth quarter of 2002 following
management's decision to reduce the total number of full time employees by approximately 400. Excluding these exceptional restructuring costs, labor costs decreased by
€3.7 million, or 0.5%, to €682.2 million in 2003 from €685.9 million in 2002 despite general wage increases and increased pension
costs. The net decrease in personnel expenses is the ultimate result of the company wide restructuring programme. The average number of full time and temporary employees decreased by approximately 3%
from 16,626 in 2002 to 16,108 in 2003. In 2004, a further decrease of approximately 300 full time employees is planned as the final part of the restructuring programme.

Labor
costs in the Paper & Board segment, excluding exceptional restructuring costs, decreased by €1.1 million, or 0.6%, from
€185.6 million in 2002 to €184.5 million in 2003, despite general wage increases and higher pension costs. This decrease was the result of a decrease in
the average number of full time and temporary employees. The average number of full time and temporary employees decreased by approximately 4% from 4,238 in 2002 to 4,057 in 2003.

Labor
costs in the Packaging segment, excluding exceptional restructuring costs, decreased by €3.9 million, or 0.8%, from €479.2 million to
€475.3 million. The increase in labor costs was the result of general wage increases and higher pension costs, but was more than offset by a decrease in the average number of
full time and temporary employees by approximately 3% from 12,223 in 2002 to 11,888 in 2003.

Other operating costs.Other operating costs, consisting of rent, lease, office, communication, travel, insurance,
automation, other expenses and other income decreased by €14.5 million, or 7.3%, from €197.8 million in 2002 to €183.3 million in
2003, mainly as a result of various management actions taken in 2003 to reduce operating expenses, despite exceptional costs incurred of €3.6 million in 2003 related to the
close down of Kappa Mennecy Paper and Kappa Moscow (both effectively in 2003) and Kappa túrovo Solid Board (effectively in 2004).

Depreciation, amortization and impairment charges.Depreciation, amortization and impairment charges decreased by
€8.2 million, or 3.8%, to €210.3 million in 2003 from €218.5 million in 2002.

Depreciation
charges increased by €13.3 million, or 7.9%, to €181.1 million in 2003 from €167.8 million in 2002
mainly due to additional depreciation expenses of €7.8 million incurred in connection with the closing of Kappa Mennecy Paper, Kappa Moscow and Kappa Stúrovo
Solid Board.

Amortization
charges of intangible fixed assets decreased with €1.5 million, or 4.9%, to €29.2 million in 2003 from
€30.7 million in 2002, mainly as a result of lower amortization charges related to capitalized software development costs, whereas the goodwill amortization charge remained
relatively flat at €24.7 million.

Based
on an impairment test performed during 2002, an additional depreciation charge was made in 2002 against certain assets in the Packaging segment of
€20.0 million to reflect their present value, which was allocated to the various tangible fixed asset categories on a pro-rata basis. An impairment test performed at
the end of 2003 did not reveal any additional impairments. Both impairment tests were performed with a discount rate of 8.4% using the discounted cash flow method for each of the four reporting units,
being: Containerboard and Solid Board within the Paper & Board segment and Corrugated Packaging and Solid Board Packaging within the Packaging segment.

41

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Operating income.As a result of the factors discussed above, our operating income decreased by
€15.5 million, or 7.0%, to €207.0 million in 2003 from €222.5 million in 2002.

Interest expense, net.Interest expense, net including interest expense on shareholders' loans decreased slightly by
€0.4 million, or 0.2%, from €238.2 million in 2002 to €237.8 million in 2003.

Income taxes.The effective tax rate on result from ordinary operations was 21.3% in 2003, compared to 34.3% in 2002, whereas
the weighted average statutory tax rate on a consolidated basis was approximately 32.8% for 2003 compared to 31.4% for 2002. The difference between the effective tax rate and the weighted average
statutory tax rate is mainly the result of permanent differences including non-deductible goodwill, non-deductible interest and other non-tax deductible expenses.

Net income.As a result of the factors discussed above, our net income decreased by €14.1 million to
€(24.0) million in 2003 from €(9.9) million in 2002.

Year ended December 31, 2002 compared to Year ended December 31, 2001

It should be noted that the total of amounts provided in any segment analysis below will not necessarily equal amounts shown on a
consolidated basis due to intercompany eliminations and corporate items.

Sales.Sales increased by €452.5 million, or 18.3%, to €2,923.8 million in 2002
from €2,471.3 million in 2001. The sales increase was mainly the result of an increase in volumes of 18% as a result of the acquisition and consolidation of Alpha as from
May 17, 2001. Sales were also positively influenced by a slight increase in the average sales prices for containerboard and packaging products.

Sales
in the Paper & Board segment increased by €208.7 million, or 19.2%, from €1,086.5 million in 2001 to
€1,295.2 million in 2002. The increase is the net result of increased sales volumes of 17.8% resulting from the acquisition of Alpha and a slight increase in the average sales
prices for containerboard. Sales in the Paper & Board segment included €630.0 million in 2002 and €496.7 million in 2001 of sales to the Packaging
segment.

Sales
in the Packaging segment increased by €376.9 million, or 20.0%, from €1,881.5 million in 2001 to
€2,258.4 million in 2002. The increase mainly results from increased sales volumes of 17.9%, reflecting the acquisition of Alpha, and also comes from a slight increase in the
average sales prices for packaging products.

Raw material costs.Raw material costs increased by €159.9 million, or 17.4%, from
€917.7 million in 2001 to €1,077.6 million in 2002. Raw material costs in the Paper & Board segment increased to
€482.4 million, or 31.1%, and in the Packaging segment to €1,225.7 million, or 17.9%. Raw material costs as a percentage of sales increased to 37.2% in
2002 from 33.9% in 2001 for our Paper & Board segment and decreased only slightly to 54.3% from 55.2% for our Packaging segment. The increase in the raw material costs in our Paper &
Board segment mainly reflects the sharp increase in recovered paper prices in the second quarter of 2002.

External services.Costs of external services, consisting of freight charges, energy costs and maintenance costs, increased
by €88.6 million, or 20.4%, from €434.7 million in 2001 to €523.3 million in 2002. This increase of
€88.6 million was mainly due to increased freight charges (€49.7 million or 26.1%), maintenance costs (€21.8 million or 17.9%) and
energy costs (€17.1 million or 14.0%) resulting from the acquisition and consolidation of Alpha. The cost of external services as a percentage of sales increased slightly from
17.6% in 2001 to 17.9% in 2002.

42

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Costs
of external services in the Paper & Board segment increased by €46.8 million, or 19.4%, from €241.5 million in 2001 to
€288.3 million in 2002. This increase came from increased freight charges (€23.6 million or 28.4%), maintenance costs
(€10.4 million or 16.3%) and energy costs (€12.8 million or 13.5%), resulting mainly from the acquisition and consolidation of Alpha. Cost of external
services as a percentage of sales in the Paper & Board segment, therefore, increased slightly from 22.2% in 2001 to 22.3% in 2002.

Costs
of external services in the Packaging segment increased by €42.5 million, or 22.2%, from €191.5 million in 2001 to
€234.0 million in 2002. This increase was the result of increased freight charges (€26.1 million or 24.3%), maintenance costs
(€12.0 million or 21.3%) and energy costs (€4.4 million or 15.9%) mainly due to the acquisition and consolidation of Alpha. Cost of external services as a
percentage of sales in the Packaging segment increased slightly from 10.2% in 2001 to 10.4% in 2002.

Labor costs.Labor costs increased by €136.0 million, or 24.2%, to
€697.9 million in 2002 from €561.9 million in 2001, relating mainly to an increase in the number of full time employees. The average number of full time
employees increased by approximately 22% from 13,628 in 2001 to 16,626 in 2002. In addition, the decision was made in the fourth quarter of 2002 to reduce the total number of full time employees
during 2003 by approximately 400, for which a restructuring provision of €12.0 million was made in 2002.

Labor
costs in the Paper & Board segment, excluding exceptional restructuring charges of €0.4 million in 2002, increased by
€26.4 million, or 16.6%, from €159.2 million to 2001 to €185.6 million in 2002. The increase is mainly the result of general wage
increases, higher pension costs, and a net increase in the average number of full time employees by approximately 14% from 3,729 in 2001 to 4,238 in 2002, mainly due to the consolidation of Alpha.

Labor
costs in the Packaging segment, excluding exceptional restructuring charges of €11.6 million in 2002, increased by €93.9 million, or
24.3%, from €385.3 million in 2001 to €479.2 million in 2002. This was mainly the result of general wage increases, higher pension costs, and a net
increase in the average number of full time employees by approximately 25% from 9,770 in 2001 to 12,223 in 2002, due to the consolidation of Alpha.

Other operating costs.Other operating costs consisting of rent, lease, office, communication, travel, insurance, automation,
other expenses and other income increased by €61.9 million, or 45.5%, from €135.9 million in 2001 to €197.8 million in 2002,
principally relating to the consolidation of Alpha and to increased insurance costs.

Depreciation, amortization and impairment charges.Depreciation, amortization and impairment charges increased by
€42.5 million, or 24.1%, to €218.5 million in 2002 from €176.0 million in 2001.

Depreciation
charges increased by €15.4 million, or 10.1%, to €167.8 million in 2002 from €152.4 million in 2001
mainly due to the consolidation of Alpha.

Amortization
charges of intangible fixed assets increased by €7.1 million, or 30.1%, to €30.7 million in 2002 from
€23.6 million in 2001, mainly as a result of the consolidation of Alpha and the amortization of software development costs as from January 1, 2002.

Based
on an impairment test performed during 2002, an additional depreciation charge was made in 2002 against certain assets in the Packaging segment to reflect their present value. The
impairment was calculated with a discount rate of 8.4% using the discounted cash flow method for each of the four reporting units, being: Containerboard and Solid Board within the Paper & Board
segment and Corrugated Packaging and Solid Board Packaging within the Packaging segment. The impairment charge is allocated to the tangible fixed asset categories on a pro-rata basis.

43

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Operating income.As a result of the factors discussed above, our operating income decreased by
€23.6 million, or 9.6%, to €222.5 million in 2002 from €246.1 million in 2001.

Interest expense, net.Interest expense, net including interest expense on shareholders' loans increased by
€35.5 million, or 17.5%, from €202.7 million in 2001 to €238.2 million in 2002. The increase in interest expense, net was mainly
the result of additional funding obtained in 2001 for the financing of the acquisition of Alpha.

Income taxes.The effective tax rate on result from ordinary operations was 34.3% in 2002, compared to 44.2% in 2001. The
decrease of the effective tax rate in 2002 compared to 2001 is mainly the result of the recognition of operating losses carried forward from prior years. The weighted average statutory tax rate on a
consolidated basis was approximately 31.4% for 2002 and 30.9% for 2001. The difference between the effective tax rate for the year 2002 compared to the weighted average statutory tax rate is mainly
the result of permanent differences including non-deductible goodwill and other non-tax deductible expenses, together with the recognition of operating losses carried forward
from prior years.

Net income.As a result of the factors discussed above, our net income decreased by €21.1 million to
€(9.9) million in 2002 from €11.2 million in 2001.

Corporate items

Operating expense from Corporate items (unallocated overhead) before amortization and impairment charges decreased from approximately
€31.2 million in 2002 to €29.0 million in 2003 mainly due to lower consultancy fees.

Operating
expense from Corporate items (unallocated overhead) before amortization and impairment charges decreased from approximately €38.3 million in 2001 to
€31.2 million in 2002, mainly due to non-recurring and incidental costs incurred in 2001 due to the acquisition of Alpha.

Restructuring Provisions

The movements in restructuring provisions are as follows:

|                                          |  | Total |   | Plant
restructuring |   | IT
restructuring |  
|----------------------------------------- |  | ----- | - | ------------------- | - | ---------------- | -
|
|Balance at January 1, 2001                |  | 37.2  |   | 26.1                |   | 11.1             |  
|Acquisitions                              |  | 67.1  |   | 63.9                |   | 3.2              |  
|Withdrawals                               |  | (42.4 | ) | (31.1               | ) | (11.3            | )
|Additions charged to extraordinary result |  | (1.9  | ) | (1.9                | ) |                 |  
|Translation differences                   |  | (0.3  | ) | (0.3                | ) |                 |  
|                                          |  |       |   |                     |   |                  |  
|Balance at December 31, 2001              |  | 59.7  |   | 56.7                |   | 3.0              |  
|Fair value adjustments                    |  | 0.4   |   | 0.4                 |   |                 |  
|Withdrawals                               |  | (38.7 | ) | (35.7               | ) | (3.0             | )
|Additions charged to operating result     |  | 11.3  |   | 11.3                |   |                 |  
|                                          |  |       |   |                     |   |                  |  
|Balance at December 31, 2002              |  | 32.7  |   | 32.7                |   |                 |  
|Withdrawals                               |  | (29.3 | ) | (29.3               | ) |                 |  
|Additions charged to operating result     |  | 25.0  |   | 25.0                |   |                 |  
|                                          |  |       |   |                     |   |                  |  
|Balance at December 31, 2003              |  | 28.4  |   | 28.4                |   |                 |  
|                                          |  |       |   |                     |   |                  |  

44

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In
connection with the acquisition of Alpha, we recorded restructuring provisions (including Alpha's existing provisions) of €67.5 million in total after the
application of fair value adjustments of €0.4 million in 2002. These restructuring provisions related to plant restructuring (€64.3 million) and IT
restructuring (€3.2 million).

The
acquisition plant restructuring provision recorded in 2001 mainly related to:



In
April 2003, our containerboard mill Kappa Mennecy Paper (Mennecy, France) was closed down, as a result of which approximately 100 employees became redundant.

All
Alpha related restructuring provisions described above were booked against goodwill at acquisition. As such, these payments related to these restructuring provisions impact(ed) cash
flow, but not EBITDA.

Excluding
restructuring provisions related to Alpha, the restructuring provisions as at January 1, 2001 of €37.2 million in total included plant
restructuring provisions of €26.1 million and IT restructuring provisions of €11.1 million. The plant restructuring provisions as at January 1,
2001 of €26.1 million in total related mainly to the closure of our corrugated production plant Kappa Isar Wellpappe (Neufahrn, Germany), which became effective as of
September 21, 2001 and the closure of our solid board packaging plant Kappa Oberau in the South of Germany, which became effective as of April 5, 2000. The restructuring provision in
respect of the closure of Kappa Isar Wellpappe included provisions in respect of the lay-off of approximately 100 employees and the termination of real estate rental contracts.

In
the fourth quarter of 2002, the decision was made to reduce the total number of employees during 2003 by approximately 400, mainly in our Packaging segment, as a result of which
€11.3 million was added to the restructuring provisions of the €12.0 million charged against operating income.

In
2003, €25.0 million was added to the restructuring provisions against operating result mainly as a result of the decision to reduce the total number of full
time employees with 600 and to the closing of Kappa Mennecy Paper, Kappa Moscow and Kappa túrovo Solid Board.

Further
reference is made to Note 10 "Provisions" in "Item 17. Financial Statements".

45

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Critical Accounting Policies and Estimates

Our reported financial condition and results of operations are sensitive to accounting policies, assumptions and estimates that underlie preparation of our
financial statements. The profile of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in
conditions and assumptions are factors to be considered in conjunction with reviewing our Consolidated Financial Statements and the discussion in this item. Actual results could differ from estimates
under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our
financial results and condition and require management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain.

Our
Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles in the Netherlands (Dutch GAAP), which differ in certain significant
respects from generally accepted accounting principles in the United Stated (US GAAP). In areas in which our Dutch GAAP compliant accounting policies do not correspond with the required US GAAP
accounting treatment, and those differences would have a significant effect on our consolidated net income and/or shareholders' equity, we have highlighted these differences in the discussion below.

Business combinations and impairment of goodwill, other intangible fixed assets and tangible fixed assets

Accounting policies for business combinations and impairment of goodwill, other intangible fixed assets and tangible fixed assets differ between Dutch and US
GAAP.



Under Dutch GAAP, all of our business combinations are accounted for as purchases. The cost of an acquired company is assigned to the tangible fixed assets and
intangible fixed assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. Any excess of purchase price over the fair value of the tangible fixed
assets and intangible fixed assets is allocated to goodwill, which is amortized on a straight-line basis over its estimated useful life.

In
the event that the useful life of goodwill that we amortize under Dutch GAAP is determined to be less than management's original estimate, we will be subject to an increased
amortization charge in our statements of income. If this were to happen with respect to our goodwill originally amortized over a 40-year period of €849.9 million as
at December 31, 2003, this would result in an increase from the current annual charge of approximately €25 million to the following:

Revised estimated
useful life15 years

20 yearsRevised annual amortization charge (€ in millions)

85

56


As
this amortization charge is not tax deductible, the above additional charge would impact net income directly.

46

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Under
Dutch GAAP, goodwill, other intangible fixed assets and tangible fixed assets ("long-lived assets") are written down to estimated net realizable value when negative
conditions are identified. We review our long-lived assets for impairment at each balance sheet date, to determine whether there is any indication of impairment. If such an indication
exists, the recoverable amount of the assets is estimated, being the higher of the asset's net selling price and its value in use. The value in use is based on the total of the discounted future cash
flows to be derived from that asset. Our estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance and value at the asset's
eventual disposition. Our estimate of future cash flows may differ from actual cash flows due to, among other things, negative industry or economic trends, technological changes, increased competition
and/or changes in operating performance. An impairment loss is recognized when the carrying value of an asset exceeds the recoverable amount of the asset.

Based
on an impairment test performed during 2002, an additional depreciation charge was made in 2002 against certain assets in the Packaging segment of
€20.0 million to reflect their present value, which was allocated to the various tangible fixed asset categories on a pro-rata basis. The impairment test performed
during 2003 did not reveal any additional impairments. Both impairment tests were performed with a discount rate of 8.4% using the discounted cash flow method for each of the four reporting units,
being: Containerboard and Solid Board within the Paper & Board segment and Corrugated Packaging and Solid Board Packaging within the Packaging segment.

As
at December 31, 2003, we had net goodwill of €849.9 million, other intangible fixed assets of €5.4 million and tangible fixed
assets of €1,604.4 million.



Under US GAAP, all of our business combinations are accounted for as purchases. In accordance with SFAS No. 141, "Business Combinations" (ABP 16, "Business
Combinations", for transactions consummated prior to June 30, 2001), the cost of an acquired company is assigned to the tangible fixed assets and identifiable intangible fixed assets acquired
and liabilities assumed on the basis of their fair values at the date of acquisition. We did not identify any additional intangible fixed assets under US GAAP compared to Dutch GAAP related to
acquisitions. See Note 28 of the Consolidated Financial Statements included in "Item 17. Financial Statements".

For
US GAAP purposes, we adopted SFAS No. 142, "Goodwill and Other Intangible Assets". Upon adoption of SFAS 142, we ceased amortizing goodwill. All other intangible fixed
assets are amortized over their estimated useful lives. SFAS 142 requires us to evaluate our goodwill for impairment at least annually and more frequently if specific events indicate that
impairment in value may have occurred.

In
connection with the annual goodwill impairment evaluation required by SFAS 142, we determined that there was no impairment, and accordingly, no impairment loss was recorded in
both the 2002 and 2003 US GAAP income statement. This evaluation required making assumptions with respect to the identification of our reporting units. In addition, it required making certain
assumptions and estimates, including estimates of future cash flows and appropriate discount rates, in order to determine the fair value of our reporting units identified.

47

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SFAS 144,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" requires that we review our tangible and
intangible fixed assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable (a "triggering event"). The review of
recoverability requires us to estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the undiscounted future cash flows is less than
the carrying amount of the asset, an impairment loss is recognized, which is measured based on the fair value of the asset. Management is required to exercise judgment in the determination of whether
a triggering event has occurred as well as in the development of the assumptions used to estimate future cash flows and determine fair value, as needed. As under Dutch GAAP an impairment charge was
made on tangible fixed assets in our Packaging segment of €20.0 million in 2002, we reviewed the tangible fixed assets concerned for impairment under US GAAP resulting in an
additional impairment charge of €5.7 million in 2002 under US GAAP.

Inventories

We state our inventories at the lower of cost or net realizable value. We determine cost by the first-in, first-out method. We record
adjustments to the value of our inventory based upon forecasted plans to sell our inventories. If we determine that cost is less than net realizable value, then cost is used as basis for inventory
valuation. If net realizable value is less than cost, we write down the related inventory to that value. We also consider the physical condition of our inventories (e.g. age and quality) in
establishing valuation. As of December 31, 2003, we had inventories of €249.9 million in total, including a provision for obsolescence of
€12.8 million.

Pension benefits

Pension and other retirement benefits constitute a significant part of our current cost of operations but represent obligations that will not be definitively
settled until far in the future. We sponsor pension and other retirement plans in various forms covering substantially all employees who meet eligibility requirements. In general, personnel employed
are entitled to pension benefits that supplement state-provided social security benefits. We have established pension and other retirement plans in accordance with the regulations and practices of the
particular countries in which we operate. Separate pension funds or life insurance companies administer most of these plans. The benefits of the plans are based primarily on years of service and
average or final pay formula. In countries where contributions are made, the amount of the contribution takes account of increases in pension rights in line with the development of wages and
inflation, as well as the return achieved by the pension funds or insurance company in excess of the actuarial interest rate. In addition, pension provisions are recorded in the balance sheet. These
provisions are based on actuarial assumptions and certain methods customary in the country concerned.

Dutch
GAAP pension accounting differs significantly from US GAAP pension accounting.

Under
Dutch GAAP the pension expenses in the statement of income relates to the contributions the Group pays to the pension funds and insurers. Any refunds received from these funds are
off set against the pension expenses in the statement of income. In accordance with Dutch pension law for pensions the Group has a liability for any shortfalls in the pension funds.

48

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Under
US GAAP, FAS 87, the retirement benefit accounting is intended to reflect the recognition of future benefit costs over an employee's approximate service period based on the terms
of the relevant plans and the investment and funding decisions. Standardized accounting and actuarial valuations determine the accounting for the pension costs. Inherent in these valuations are key
assumptions, which include: employee turnover, mortality and retirement ages; discount rates; expected long-term returns on plan assets; and future wage increases, which are usually
updated on an annual basis at the beginning of each fiscal year. Actual circumstances may vary from these assumptions, giving rise to a different pension liability, which would be reflected as an
additional profit or expense in the statements of income.

Changes
in the related pension benefit costs may occur in the future due to changes in the assumptions. The weighted key assumptions used in developing the 2003 net pension benefit costs
were a 5.47% discount rate, a 6.79% expected return on plan assets, and a 3.28% rate of future wage increases. In 2003, the net periodic pension benefit cost was €37.8 million
compared to a €28.8 million net periodic pension cost in 2002. The net pension benefit cost is expected to remain about on the same level in 2004 as in 2003.

The
most significant assumptions are the discount rate used to value the future obligation and the expected return on plan assets. We select discount rates commensurate with current
market interest rates on high-quality, fixed-rate corporate bonds. The expected return on assets is based on the current view of the long-term returns on assets
held by the plans, which is influenced by historical averages.

Changes
in these key assumptions can have a significant impact on the projected benefit obligations, funding requirements and periodic benefit cost incurred by the company. The effect on
the periodic benefit cost of an upward or downward change from the assumptions currently used to calculate the net periodic pension cost is summarized below:

|Changes in assumptions         |  | Change in
Assumptions |  | 2003 (in € millions)
Change in net periodic pension cost
|------------------------------ |  | --------------------- |  | --------------------------------------------------------
|Discount rate                  |  | +0.25%                |  | 1.3                                                    
|Discount rate                  |  | 0.25%                |  | +1.4                                                    
|Expected return on plan assets |  | +0.25%                |  | 1.2                                                    
|Expected return on plan assets |  | 0.25%                |  | +1.2                                                    
|Price inflation                |  | +0.25%                |  | +1.3                                                    
|Price inflation                |  | 0.25%                |  | 1.3                                                    
|Wage inflation                 |  | +0.25%                |  | +1.2                                                    
|Wage inflation                 |  | 0.25%                |  | 1.2                                                    

See
Note 28 to our audited Consolidated Financial Statements as included in "Item 17. Financial Statements".

Restructuring and other provisions

As at December 31, 2003, we have included restructuring, legal, environmental, maintenance and other provisions in our financial statements in an aggregate
amount of €38.8 million under Dutch GAAP. Restructuring and other provisions are recognized when we have a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. The amount of each of the liabilities for
which we have established a provision is based on specific estimates and assumptions. Our estimates and assumptions underlying these provisions could be materially affected by factors such as our
success at negotiating termination agreements with redundant employees and relating to rental agreements, among others. While we believe that our current estimates of restructuring and other
liabilities are adequate, it is possible that future events could require us to make significant adjustments or revisions to these estimates.

49

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Income taxes

We currently have significant deferred tax assets resulting from net operating loss carry forwards and deductible temporary differences, which will reduce taxable
income in future periods. We consider future taxable income projections, historical results and ongoing tax planning strategies in assessing the recoverability of deferred tax assets. Under Dutch
GAAP, the future taxable income projections anticipate a future change in the Company's financing structure. However, adjustments could be required in the future if we determine that the amount to be
realized is less or greater than the amount we have recorded. Such adjustments, if any, may have a material impact on our results of operations.

In
valuing our deferred tax assets, we provided valuation allowances on future tax benefits of €47 million, €48 million, and
€54 million at the end of fiscal year 2003, 2002 and 2001 under Dutch GAAP, respectively.

As
US GAAP provides more specific guidance in respect of the valuation of deferred tax assets, additional valuation allowances were made under US GAAP against the deferred tax assets of
the Dutch tax group of €34 million, €14 million and €0 million at the end of fiscal year 2003, 2002 and 2001, respectively.

As
a multinational Group, we are exposed to varying degrees of uncertainty related to tax initiatives and regulatory reviews and audits. Whenever such uncertainties arise any potential
unfavorable consequences are assessed and accrued for accordingly in our financial statements.

The
above discussion is not intended to be a comprehensive list of all our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically
dictated by generally accepted accounting principles, with no need for management's judgment in their application. There are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result.

Liquidity and Capital Resources

We have generally funded our working capital and capital expenditure needs from our operations. From time to time, however, we have financed acquisitions with
loans from banks and other types of long-term debt.

Net cash from operating activities

Net cash flows in 2003 from operating activities were €279.5 million compared to €273.5 million in 2002 and
€235.9 million in 2001.

The
increase in 2003 of €6.0 million is primarily the result of a decrease in net income of €14.1 million, decreased non-cash
items (primarily non-cash accretion of interest on our shareholder loans and senior subordinated discount notes, depreciation and amortization) of €2.1 million and
an increase in the change in operating assets and liabilities of €22.2 million.

The
increase in 2002 of €37.6 million is primarily the result of a decrease in net income of €21.1 million, increased non-cash
items (primarily non-cash accretion of interest on our shareholder loans and senior subordinated discount notes, depreciation and amortization) of €62.0 million and
a decrease in the change in operating assets and liabilities of €3.3 million.

50

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Net cash used in investing activities

In 2003, cash used in investing activities amounted to €146.0 million, reflecting capital expenditures of
€141.4 million, investments in other intangible fixed assets of €2.3 million (mainly software development costs) and an increase in other
non-current assets of €0.6 million. In addition, the Group acquired a small Norwegian corrugated board manufacturer "Grenland Papp AS", and increased its interest in
Orko-Pak B.V, a small corrugated converting plant in the Netherlands, from 50% to 100%, for €1.7 million.

In
2002, cash used in investing activities amounted to €161.8 million, reflecting capital expenditures of €162.1 million and investments in
intangible fixed assets of €2.3 million (mainly software development costs), offset by a decrease in other non-current assets of
€2.3 million, mainly as a result of redemption of loans, and the proceeds from the disposal of Strojpap a.s., Slovakia, of €0.3 million.

In
2001, cash used in investing activities amounted to €1,361.9 million, reflecting our acquisitions for €1,199.4 million (including
acquisition and financing expenses), capital expenditures of €154.6 million and investments in intangible fixed assets of €7.9 million. The net investment
in intangible fixed assets in the year 2001 mainly relates to software development costs of €5.7 million and deferred charges as a result of expenditures that are expected to
increase revenue or reduce costs in the future of €2.2 million.

Capital expenditures

In 2003, our cash outflow for capital expenditures was €141.4 million compared to €162.1 million in 2002 and
€154.6 million in 2001.

Our
cash outflow for capital expenditures in 2003 was €141.4 million. Capital expenditures within our Paper & Board segment were
€58.3 million in 2003, mainly related to replacement and efficiency improvements and some capacity extensions. Capital expenditures within our Packaging segment were
€78.2 million, including investments in a new packaging plant in Spain (Kappa Totana) of €5.5 million. Furthermore, there were some significant
investments made by a number of German subsidiaries for improving quality and flexibility by investing in new printing and die cutting equipment totalling €11.0 million.

In
2002, capital expenditures mainly increased as a result of the acquisition of Alpha. The 2002 capital expenditures included capacity expansions at the acquired Kraftliner mill at
Piteå (Sweden), the acquired recycled containerboard mill at Ania (Italy) and the transformation of the acquired corrugated production plant Empee (the Netherlands) from a fully
integrated plant into a sheetfeeder operation.

In
2001, capital expenditures mainly increased as a result of the acquisition of Alpha. Excluding Alpha, our capital expenditures were €105.0 million. Capital
expenditures in connection with Alpha in 2001 mainly related to capacity expansions at our acquired Kraftliner mill in Piteå (Sweden) and recycled containerboard mills in Ania (Italy)
and túrovo (Slovakia). Capital expenditures in 2001, excluding Alpha, remained at approximately the same level as in 2000. During 2001, capacity expansions were
realized at our solid board mill Herzberger Papierfabrik (Germany) and recycled containerboard mill in Wiesloch (Germany).

We
have commitments to acquire plant and machinery amounting to €12.3 million at December 31, 2003. These commitments mainly reflect capital expenditures in
our Packaging segment.

51

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Net cash used in financing activities

Cash outflow from financing activities amounted to €122.7 million in 2003. In 2003, we issued €95.0 million Senior
Subordinated Notes. The proceeds were used to redeem the euro-denominated €100.0 million mezzanine notes issued in 2001. In addition, we made payments of
€110.2 million under our senior credit facility (including additional mandatory prepayments from excess cash flow of €8.7 million) and made repayments on
other long-term debt of €6.3 million and on short-term borrowings of €1.2 million.

Cash
outflow from financing activities amounted to €99.7 million in 2002. We made payments of €75.5 million under the senior credit facility
and short-term borrowings of €18.6 million during the year ended December 31, 2002. In addition, repayments were made on other long-term debt of
€5.6 million.

Cash
inflow from financing activities amounted to €1,218.4 million in 2001. We incurred indebtedness of €1,505.0 million under a new senior
credit facility in May 2001. Additionally, we issued €100.0 million principal amount of Senior Subordinated Notes and incurred borrowings of
€299.4 million under shareholders' loans and issued shares of €0.6 million. The proceeds from the Senior Subordinated Notes and borrowings were used in
conjunction with the acquisition of Alpha and the repayment of €637.6 million of existing bank debt. In addition, we made a repayment of €26.4 million
under the new senior credit facility in December 2001. Payments on long-term loans by certain of our subsidiaries in their local jurisdictions of
€3.4 million and short-term borrowings of €19.2 million were made during the year ended December 31, 2001.

Indebtedness

Senior credit facilities

Our senior credit facility currently consists of three term loans and a revolving credit facility, which can be specified as follows as at December 31,
2003.

|                                 |                              | Amount in millions |          | Final Maturity
|-------------------------------- | ---------------------------- | ------------------ | -------- | --------------
|Senior A Amortizing Term Loan    |                              | €547.2             |          | June 30, 2007 
|Senior B Term Loan               |                              | €372.8             |          | June 30, 2008 
|Senior C Term Loan               |                              | €372.8             |          | June 30, 2009 
|Senior Revolving Credit Facility |                              | €250.0             |          | June 30, 2009 
|                                 |                              |                    |          |               
|                                 | Total Senior Debt Facilities |                    | €1,542.8 |               
|                                 |                              |                    |          |               

All
material fixed assets, accounts receivable, inventories and cash and cash equivalents of the Group are pledged as security on the senior credit facilities. Assets acquired in the
future may be required to be included as additional security on the facilities. Our senior credit facility agreement imposes limitations on some financing and investing activities of the Group and
requires adherence to the following financial covenants: interest cover ratios of earnings before interest, income tax, depreciation and amortization ("EBITDA") to senior debt net interest and total
net cash interest; total fixed charge ratios of cash flow to senior debt service and total debt service; leverage ratio of net borrowings to EBITDA and annual capital expenditures. At
December 31, 2003, the Company was in compliance with all financial covenants.

Under
the terms of our senior credit facility, we are required to make mandatory prepayments in certain circumstances, which include debt covenant violations. In 2003, additional
mandatory prepayments from excess cash flow of €8.7 million had to be made. We are also permitted to make voluntary pre-payments on indebtedness under the senior
credit facility and the intercreditor agreements.

52

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As of December 31, 2003, we had €1,292.8 million outstanding under the term loans. The Group is required to repay the remaining debt
under the term loan facilities based on the specific repayment terms for each Term. Term A of originally €755.0 million is repayable in escalating semi-annual
instalments from the years 2001 to 2007; the outstanding balance as at December 31, 2003 amounts to €547.2 million. The outstanding balances of Term B and Term C as at
December 31, 2003, both of about €372.8 million, are repayable in full on June 30, 2008 and on June 30, 2009 respectively.

Term
A has amortization payments at the end of June and December of every year as follows:

|Repayment Date    |  | Repayment Amount
(€ in millions)
|----------------- |  | --------------------------------
|June 30, 2004     |  | 61.84                           
|December 31, 2004 |  | 67.47                           
|June 30, 2005     |  | 74.96                           
|December 31, 2005 |  | 78.71                           
|June 30, 2006     |  | 84.33                           
|December 31, 2006 |  | 86.21                           
|June 30, 2007     |  | 93.70                           

The
applicable interest rates are EURIBOR plus a maximum interest rate spread of 225 basis points on Term A, 275 basis points on Term B and 350 basis points on Term C. Based on our
interest cover ratio, the spread on Term A may be adjusted downwards. The weighted average interest rate for the term loan facilities was 6.8% at December 31, 2003 (2002: 6.6%).



This credit facility is available for general corporate purposes such as letters of credit, short-term cash advances and ancillary facilities. The
letter of credit fee assessed on issued letters of credit under the revolving credit facility is 2.125% at December 31, 2003, the interest rate on the short-term cash advances is
EURIBOR plus 2.125% and in general no fees are payable on the ancillary facilities.

The
total amount drawn under the revolving credit facility amounts to €50.3 million (2002: €45.5 million) of which
€40.4 million (2002: €37.9 million) for bank overdraft facilities and € 9.9 million (2002:
€7.6 million) for a payment guarantee. Under these bank overdraft facilities, short-term borrowings of € 0.6 million (2002:
€1.4 million) were drawn and bank guarantees were issued to third parties of €7.2 million (2002: €8.1 million). The remaining part
of these bank overdraft facilities of €32.6 million (2002: €28.4 million) is available for short-term borrowings, foreign currency hedging
activities and/or additional bank guarantees.

Senior Subordinated Notes

In May 2003, Kappa Beheer B.V. issued Senior Subordinated Notes of €95.0 million of which the proceeds were used, on June 23,
2003, to redeem the euro-denominated €100.0 million Senior Subordinated Notes issued on May 18, 2001 by Kappa Beheer B.V. The interest rate on the new Senior
Subordinated Notes has been set at 105/8% and is payable semi-annually on January 15 and July 15 of each year commencing on July 15, 2003.

In
July 1999, we issued Senior Subordinated Notes in three Terms. The notes all mature on July 15, 2009:



53

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The
cash inflow from the 1999 Senior Subordinated Notes issue was used to repay the €544.5 million mezzanine notes on July 23, 1999 that were scheduled to
originally mature on July 27, 2008. The intercreditor agreement among the Trustee under the indentures governing the Senior Subordinated Notes, Kappa Holding, Kappa Beheer, Kappa Packaging and
Barclays Bank PLC, which govern the relative priorities among our creditors and our subsidiaries' creditors, prohibit the servicing of the inter-company debt in the same circumstances as they prohibit
payments of interest on the notes. We must also comply with certain financial covenants.

Capital Resources

As of December 31, 2003 our total capital resources were €79.1 million in shareholders' equity (2002:
€124.0 million; 2001: €143.7 million) and €678.3 million in shareholders loans (2002: €628.0 million; 2001:
€581.8 million) and €2,002.6 million in total debt (2002: €2,110.6 million; 2001: €2,181.8 million). Total
indebtedness as at December 31, 2003 includes €2,546.8 million of long-term borrowings (2002: €2,629.8 million; 2001:
€2,664.9 million), and short-term debt of €134.1 million (2002: €108.8 million; 2001:
€98.7 million).

We
use currency instruments to hedge against exchange rate risks resulting from business activities and financing arrangements in foreign currencies. We do not enter into speculative
positions.

We
use currency forward contracts with terms of up to one year to fix the rate of exchange of foreign currency sales denominated in US Dollars, British Pounds, Czech Koruna, Swiss
Francs, Slovaks Koruna, Swedish Krona, Norwegian Kroner, South African Rand and Danish Krone.

In
2003, we sold currency call options maturing on July 13, 2004, to offset the currency call options we bought to hedge our currency exposure with respect to the principal amount
of our U.S. Dollar-denominated senior notes, which will mature on July 15, 2004, in order to benefit from the developments of the U.S. Dollar/Euro exchange rate. The currency call options
bought were replaced by currency forward contracts entered into to hedge the currency risk on the principal amount of our U.S. Dollar-denominated senior notes, which also will mature on
July 15, 2004. After maturity of the currency forward contracts, we expect to enter into new currency forward contracts to hedge the currency risk on the principal amount of our U.S.
Dollar-denominated senior notes.

We
have entered into currency coupon swaps to hedge the future U.S. Dollar interest payments on the U.S. Dollar-denominated senior subordinated notes.

The
Group entered into a floatingfixed interest rate swap agreement to reduce the impact of changes in interest rates on its Senior Debt, maturing on June 30, 2004.
The notional principal amount of the swap agreement was €1,004 million and was decreasing in line with the decreasing principal on the Senior Debt to
€868 million as at December 31, 2003. This agreement effectively converted the EURIBOR element of the interest on the Senior Debt from variable to a fixed rate of 4.69%.
In 2003, the Group entered into an opposite fixedfloating interest rate swap, maturing on June 30, 2004 to offset the existing floatingfixed interest rate swap
agreement. At the same time, the Group entered into a new floatingfixed interest rate swap agreement. The notional principal amount of the swap agreement is
€1,145 million and is decreasing in line with the decreasing principal on the Senior Debt and will mature on June 30, 2006. This new agreement effectively converts the
EURIBOR element of the interest on the Senior Debt from variable to a fixed rate of 3.67%.

For
more information about our hedging policies and interest rate swaps, see Item 11 "Quantitative and qualitative disclosure about market risk".

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The
Company had available €199.7 million under its revolving credit facility as at December 31, 2003. Cash and cash equivalents as at December 31,
2003 amounted to €240.7 million. We believe that our working capital is sufficient for our present requirements.

The
top holding companies of the Kappa Packaging Group, Kappa Holding B.V., Kappa Beheer B.V. and Kappa Packaging B.V. conduct their operations through their subsidiaries. Consequently
they hold no significant assets other than their investments and advances to their subsidiaries. They depend upon receipt of sufficient funds from their subsidiaries to meet their obligations. There
are currently no restrictions at the non-guarantor operating subsidiary level that would limit the payment of dividends to Kappa Packaging B.V. or Kappa Holding B.V.

Cash Obligations and Commitments

As of December 31, 2003, we had the following contractual cash obligations and other commercial commitments:

|                                           |       | Payments due by period (€ millions)
|------------------------------------------ | ----- | -----------------------------------
|
|Long-term debt(1)                          |       | 1,993.1                            
|Financial lease obligations(2)             |       | 8.9                                
|Operating lease obligations(2)             |       | 78.5                               
|Commitments for capital expenditures(3)    |       | 12.3                               
|Purchase, repurchase and other commitments |       | 3.6                                
|                                           |       |                                    
|                                           | Total |                                    
|                                           |       |                                    

---

Contingent Obligations

Under the revolving credit facility, the Group has bank guarantees issued to third parties (rental guarantees, credit guarantees, social security taxes) for a
total amount of €7.2 million as at December 31, 2003 (2002: €8.1 million).

Unless
previously purchased (in the framework of a listing or sale) and except to the extent that the statutory requirements or the terms of the Company's financing arrangements prevent
the Company from doing so, the shareholders of the Company have agreed to procure that the Company shall redeem or repurchase the cumulative preference shares issued of
€148.5 million, including accumulated dividends, in three equal tranches in 2009, 2010 and 2011. The accumulated dividend claim of the holders of the cumulative preference
shares A and B shares amounts to €55.5 million as at December 31, 2003 (2002: €44.0 million).

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In
May 2004, our subsidiary Kappa Zülpich has been visited by the German "Bundes Kartellamt" in the framework of an investigation of the EU regarding a suspicion
about possible price co-ordination of recovered paper purchases by paper and board producers. Currently, management can not assess the outcome of the investigation.

Research and Development

We incurred research and development costs of €4.4 million, €5.3 million and €4.8 million in
2003, 2002 and 2001, respectively.

Environmental Regulation

Compliance with environmental requirements is a significant factor in our business operations, and we commit substantial resources to maintaining environmental
compliance and managing environmental risk. Our mills and operational plants are affected by a wide range of laws and regulations relating to environmental issues in each jurisdiction in which we are
located and by EU environmental regulations. Our different operations are affected by such laws to different degrees according to the jurisdiction involved. By their nature, our board production and
our recovered paper operations give rise to a considerable number of environmental issues, particularly those relating to air and water quality, waste minimization and waste disposal, and the
clean-up of contaminated soil and groundwater. We believe that we are currently in material compliance with all applicable environmental law regulations and directives.

Environmental
regulations in the EU Member States are standardized or in the process of being standardized by a series of stringent directives concerning the environment, including, but
not limited to:



In
countries outside the European Union our operations are not subject to EU environmental laws but remain subject to national environmental laws. We are under statutory duties in most
jurisdictions in which we operate to control discharges into watercourses and sewer systems and to maintain effluent treatment plants where appropriate. We are also subject to regulations, which
impose liability for fines and other penalties and, in certain jurisdictions in which we operate, clean-up costs, in the event of accidental spills and pollution by releases of hazardous
substances into the environment.

We
are currently addressing potential soil and groundwater contamination at several other sites and expect that we will incur additional remedial costs from time to time in the future.
We provide for environmental remediation liabilities, which we currently believe are adequate.

Impact of Inflation

We do not believe that inflation has had a material impact on our financial position or results of operations during the past three years.

56

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Newly issued Dutch GAAP Accounting Standards

The major change in the Dutch guidelines for Annual Reporting, that will be effective as of January 1, 2005, relates to the change in accounting for
pensions. The effect of the implementation of International Accounting Standard 19, as the basis for accounting for pensions in the Netherlands, on the consolidated financial statements of the Company
will be significant, however, will broadly be comparable with our current US GAAP reporting as the FAS 87 methodology is comparable to IAS 19. Adoption of IAS 19 as at
December 31, 2003 would result in an increase of the accrued pension costs of approximately €85 million and a decrease in equity of approximately
€57 million, net of taxation. The pension costs for the year 2003 would have been approximately €6 million lower.

The
other changes in Dutch guidelines for Annual Reporting mainly relate to aligning Dutch GAAP to International Financial Reporting Standards ("IFRS"). From a presentation of financial
information point of view, the statement of comprehensive income that includes direct equity movements and opening balance sheet adjustments, will be required for the financial year starting
January 1, 2004. We already prepare such a statement as part of our US GAAP reporting.

Newly issued US GAAP Standards

In December 2003, the Staff of the Securities and Exchange Commission (SEC or the Staff) issued Staff Accounting Bulletin No. 104 ("SAB 104"),
"Revenue Recognition", which supercedes SAB 101, "Revenue Recognition in Financial Statements". SAB 104's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple
element revenue arrangements, superceded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Additionally, SAB 104 rescinds the
SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the FAQ) issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. Selected portions of
the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely
unchanged by the issuance of SAB 104. EITF 00-21 was effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003.

In
December 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46R, Consolidation of Variable Interest Entities Revised. FIN 46R modifies the
scope exceptions provided in FIN 46. Entities would be required to replace FIN 46 provisions with FIN 46R provisions for all newly created post-January 31, 2003 entities as of the
end of the first interim period or annual reporting ending after March 15, 2004. The adoption of FIN 46R had no effect on our consolidated financial statements.

In
May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150). The statement
establishes standards on how to classify and measure certain financial instruments with characteristics of both liabilities and equity and requires additional disclosures regarding alternative ways of
setting instruments and the capital structure of entities, all of whose shares are mandatory redeemable. SFAS 150 does not apply to obligations under stock based arrangements if they are
accounted for under APB 25, SFAS 123 or related guidance. The provisions of SFAS 150 were effective for all financial instruments entered into or modified after May 31, 2003, and
otherwise was effective the first interim period beginning after June 15, 2003. However, the guidance applying to mandatorily redeemable noncontrolling interests has been deferred. The adoption
of this statement had no effect on our 2003 consolidated financial statements. However, as from January 1, 2004, the preference shares, including accreted dividends, are required to be
reclassified from temporary equity to liabilities in accordance with the provisions of SFAS 150.

57

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In
April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" (SFAS 149), SFAS 149 amends and
clarifies financial accounting and reporting for derivative instruments by requiring that contracts with comparable characteristics be accounted for similarly and by clarifying when a derivative
contains a financing component that warrants special reporting in the statement of cash flows. The guidance in SFAS 149 was effective prospectively for contracts entered into or modified and
for hedging relationships designated after June 30, 2003. The adoption of this statement had no effect on our consolidated financial statements.

In
November 2002, the Emerging Issues Task Force ("EITF") reached consensus on EITF Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF
00-21"). EITF 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets.
The provisions of EITF 00-21 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of this consensus does not have a material
effect on our consolidated financial statements.

Item 6. Directors, Senior Management and Employees

A.    Directors and Senior Management

We have a two-tier system of corporate governance, comprising the Management Board and the Supervisory Board. Our day-to-day
management and policy-making is vested in the Management Board. The Supervisory Board supervises the policies pursued by our Management Board and the general course of affairs of our company and its
business. Under Dutch law, members of the Supervisory Board cannot simultaneously be members of the Managing Board of the same company. We are not subject to the rules for large Dutch companies
("structuurvennootschappen") as set out in section 268 to 274 of Book 2 of the Dutch Civil Code.

Supervisory Board and Audit Committee

Under the Articles of Association of Kappa Holding, the Supervisory Board consists of five members. The primary responsibility of the Supervisory Board is to
supervise the policies pursued by the Management Board and the general course of affairs of our company and its business. The Supervisory Board also supports the Management Board with advice. In
fulfilling their duties, the members of the Supervisory Board are required to act in the best interests of our company and its business. For further details about the powers and duties of our
Supervisory Board and the appointment, suspension and removal of members of our Supervisory Board, see "Item 10.B. Memorandum and Articles of Association".

The
following table sets out certain information with respect to the members of our Supervisory Board:

|Name                 |  | Age |  | Appointment     
|-------------------- |  | --- |  | ----------------
|Cor Brakel, Chairman |  | 67  |  | February 1, 1999
|Brent Wheeler        |  | 52  |  | July 27, 1998   
|Marcus Wood          |  | 37  |  | March 13, 2000  
|Rolly van Rappard    |  | 43  |  | July 27, 1998   
|David Milne          |  | 45  |  | March 13, 2000  

Cor Brakel.Mr. Brakel has been a member of the Supervisory Board of Kappa Holding since February 1, 1999. He
has held various positions at Shell International Petroleum Company, Elsevier, Wolters Samson Group and Wolters Kluwer N.V. He is also a member of the Supervisory Board of United Services Group N.V.,
Aalberts Industries N.V. and Athlon Groep N.V.

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Brent Wheeler.Mr. Wheeler has been a member of the Supervisory Board of Kappa Holding since July 27, 1998 as
an appointee of Cinven. He has been a Director of Cinven since 1991 and has been involved in several of their leading investments including Expro, Gardner Merchant, Generale de Santé,
Avecia, McKechnie and Klöckner Pentaplast. He is also a director of Klöckner Pentaplast S.A.R.L.

Marcus Wood.Mr. Wood has been a member of the Supervisory Board of Kappa Holding since March 13, 2000 as an
appointee of Cinven. He has been an investment director of Cinven Limited since 1997. He is also a Director of Santemedia Group Holding S.A.

Rolly van Rappard.Mr. Van Rappard has been a member of the Supervisory Board of Kappa Holding since July 27,
1998 as an appointee of CVC. He holds masters degrees from Columbia University in New York, United States and the University of Utrecht, Holland. He has previously held positions at Citicorp and is a
managing partner of CVC Capital Partners from 1989. He is also a director of CVC Capital Partners Europe Limited and a member of the Supervisory Board of Wavin B.V. and Veen Bosch & Keuning
Uitgevers N.V.

David Milne.Mr. Milne has been a member of the Supervisory Board of Kappa Holding since March 13, 2000 as an
appointee of CVC. He has been a Director of CVC Capital Partners Limited since 1995. He is also a Director of Kalle Holding GmbH and DT Holding 1 A/S.

In
2000 an Audit Committee was established. The Kappa Audit Committee currently has three members, including one financial expert. The Audit Committee has met two times in 2003 with the
external auditors. In these meetings discussions took place on control matters, such as audit scopes and fees, and on internal audit reports. In addition discussions took place on timing and adoption
of International Financial Reporting Standards and the progress in the implementation of the Sarbanes-Oxley related rules and standards.

Management Board

Our Management Board currently consists of four persons. The Management Board is entrusted with our management and is required to act in accordance with
instructions of the Supervisory Board regarding the general financial, social, economic and personnel policies pursued. For further details about the powers and duties of our Management Board and the
appointment, suspension and removal of members of our Management Board, see "Item 10.B. Memorandum and Articles of Association".

The
following table sets out certain information with respect to the members of our Management Board:

|Name                |  | Age |  | Position                           |  | Date of Appointment
|------------------- |  | --- |  | ---------------------------------- |  | -------------------
|Frits Beurskens     |  | 57  |  | President                          |  | July 27, 1997      
|Han Wagter          |  | 54  |  | Chief Financial Officer            |  | June 29, 1999      
|Torbjörn Pettersson |  | 60  |  | Managing Director of Paper & Board |  | May 18, 2001       
|Berry Wiersum       |  | 48  |  | Managing Director of Packaging     |  | July 1, 2000       

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Frits Beurskens.Mr. Beurskens has been a member of the Management Board of Kappa Holding since the acquisition by us
of the paper and board production and converting businesses of N.V. Koninklijke KNP BT, in 1998 at which time he became President of the Kappa Packaging Group. He holds a degree from Technical College
HTS Venlo and a masters degree from the Technical University Eindhoven. Mr. Beurskens joined the Dutch subsidiary of Continental Can in 1974 and from 1981 to 1986 held several managing director
positions. Between 1987 and 1990 he worked for the Union Minière subsidiaries Zinkwit and Afox where he was managing director. In 1990, Mr. Beurskens joined
Roermond-Zülpich Papier, a Kappa Packaging Group operating subsidiary, as managing director and in 1993 he became managing director of the corrugated board segment of KNP BT. In 1995,
he was appointed a member of the KNP BT Packaging executive committee and became President of KNP BT Packaging in late 1996. He is a member of the Supervisory Board of Océ
Technologies B.V.

Han Wagter.Mr. Wagter joined the Kappa Packaging Group on June 29, 1999 as Chief Financial Officer of the
Kappa Packaging Group and was elected as a member of the Management Boards of Kappa Beheer and Kappa Holding as of that date. He holds masters degrees in Economy and Accountancy from the University of
Amsterdam. From 1979 to 1986 he held a number of accounting positions at Verenigde Machinefabrieken Stork. From 1986 to 1988 he was Director of Economic Affairs at Verenigde Machinefabrieken Stork.
From 1988 until 1993 he was Chairman of the Management Board of Stork Ketels. From 1993 until 1999, he was a member of the Management Board and Chief Financial Officer of DAF Trucks N.V.

Torbjörn Pettersson.Mr. Pettersson was appointed as Managing Director of the Paper & Board
segment of the merged Kappa Packaging Group on 18 May, 2001, having held the position of Managing Director for Containerboard at AssiDomän from 1999. He holds a masters degree in
Chemistry from Technology University of Lund in Sweden. He was previously a Managing Director at Stora LELL between 1989 and 1994 and Managing Director at Stora Billerud from 1995 to 1999, where he
served on the Management Board. He also held a Managing Director position at Nobel Chemicals, a company within the Nobel Industries Group, and was a Business Unit Vice Managing Director within
Perstop.

Berry Wiersum.Mr. Wiersum became a member of the Management Board and Managing Director of the Packaging segment on
July 1, 2000. He holds a masters degree in History from St. Andrews University in Scotland. From 1979 to 1993, he held several management positions at ICI Fibres. From 1994 to 1999, he served
as President of Amoco Fabrics Europe and President of Amoco Chemicals Europe. From 1999 to 2000, he served as Directeur Général and Senior Vice President of CEBAL.

B.    Compensation

Compensation of Members of Supervisory Board

The members of the Supervisory Board, other than Mr. Brakel, do not receive any fees from the Kappa Packaging group for serving as a member. The aggregate
amount of compensation paid to all of our Supervisory Board members as a group (five persons) for the year ended December 31, 2003 was €45,378 (2002: €45,378).
There were no pension charges.

Compensation of Members of Management Board

The members of the Management Board do not receive any fees for serving as members. The aggregate amount of compensation paid to all of our Management Board
members as a group (4 persons) for the year ended December 31, 2003, including salaries, bonuses and pension charges, was €2,350,000 (2002: €2,978,000).

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Loans to Members of Supervisory Board and Management Board

At December 31, 2003, no loans were outstanding to any member of the Management Board or the Supervisory Board from any member of the Group.

Termination Benefits

We can terminate members of the Management Board and/or the Supervisory Board without having to pay termination benefits, with the exception of
Mr. Pettersson, who will receive SEK 2,214,000 for any termination upon the initiative of Kappa Packaging.

Annual Bonus Scheme

As a way of incentivising management, we operate an annual bonus scheme for members of the Management Board and other senior managers. Any bonus awarded to an
individual will be linked to the profit performance of the business unit or units with which the individual is most closely associated and our overall performance.

Bonus
schemes and targets are at the full discretion of the Supervisory Board, and are determined and reviewed on an annual basis by our Remuneration Committee, which is currently
comprised of Messrs. Brakel, Wheeler, van Rappard and Beurskens.

C.    Board Practices

See Items 6.A. and 6.B. above.

D.    Employees

For 2003, our average number of full time equivalents (including temporary staff) was 16,108 (2002: 16,626; 2001: 13,628). The decrease in average number of full
time equivalents in 2003 compared to 2002 is mainly the result of the employee reduction programmes at various plants throughout the Group and the close down of Kappa Mennecy Paper, Kappa
túrovo Solid Board and Kappa Moscow. The increase in average number of full time equivalents in 2002 compared to 2001 was mainly the result of the consolidation of
Alpha as from May 17, 2001.

We
have in place a number of collective labor agreements. These agreements customarily have a term of one or two years. We have historically enjoyed good labor relations in each of our
operating units. Since 1993, there has been no significant industrial action within the Group.

Further
reference is made to Note 21 to the Consolidated Financial Statements, included in this document in "Item 17. Financial Statements".

E.    Share Ownership

Individual share ownership of any member of senior management of the Kappa Packaging Group (currently 121 persons) is less than one percent of any class of stock
outstanding, except for Mr. Beurskens, the President, who holds 16,070 depositary receipts of Ordinary Shares A and 851 depository receipts of Preference Shares B and 5,802 depositary receipts
of Ordinary Shares C.

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Item 7. Major Shareholders and Related Party Transactions

A.    Major Shareholders

The issued share capital of the Company is divided into 910,600 Ordinary Shares A, 89,400 Ordinary Shares B, 565,346 Ordinary Shares C,
14,813 Ordinary Shares D, 321,250 Preference Shares A and 6,250 Preference Shares B. The ordinary and preference shares of the Company are beneficially owned by the Cinven
entities described below, the CVC entities described below and Stichting Senior Management Kappa and other shareholders as set out in the table below.

The
Cinven entities are entities whose funds are managed or advised by Cinven, being currently Cinven Fund No. 1 Limited Partnership, Cinven Fund US No. 1 Limited
Partnership, Second Cinven Fund Dutch No. 1 Limited Partnership, Second Cinven Fund Dutch No. 2 Limited Partnership, Second Cinven Fund Dutch No. 3 Limited Partnership, Second
Cinven Fund Dutch No. 4 Limited Partnership, Second Cinven Fund No. 1 Limited Partnership, Second Cinven Fund No. 2 Limited Partnership, Second Cinven Fund US No. 1 Limited
Partnership, Second Cinven Fund US No. 2 Limited Partnership, Second Cinven Fund US No. 3 Limited Partnership, Barclays UK Retirement Fund Venture Limited Partnership, Coal Pension
Venture Limited Partnership, Railway Pension Venture Capital Limited, Cinven Nominees Limited and Second Cinven Fund US No. 1 Co-Investment Limited Partnership.

The
CVC entities are entities whose funds are managed or advised by CVC, being currently Citicorp Capital Investors Europe Limited, Stichting Certificaathouders Kappa, Capital Ventures
Nominees Limited, CVC European Equity Partners II Limited Partnership and CVC European Equity Partners II (Jersey) Limited Partnership, Citi-Europe Co-Invest
Limited Partnership, CVC European Equity Partners III Limited Partnership, CVC European Equity Partners III Parallel Fund-A Limited Partnership, CVC European Equity
Partners III Parallel Fund-B Limited Partnership, CVC Europe Enterprise (Domestic) Limited Partnership and CVC Europe Enterprise (Cayman) Limited Partnership.

Stichting
Senior Management Kappa is a foundation established to hold the Kappa Holding shares on behalf of members of senior management of the Kappa Packaging Group (currently 121
persons). Stichting Management Kappa owns 8.4% of the voting rights of the Company.

The
following chart shows our current issued share structure.

|Name                              |  | Ordinary
Shares A |  | %      |  | Ordinary
Shares B |  | %      |  | Ordinary
Shares C |  | %      |  | Ordinary
Shares D |  | %      |  | Pref.
Shares A |  | %      |  | Pref.
Shares B |  | %      |  | Voting
%
|--------------------------------- |  | ----------------- |  | ------ |  | ----------------- |  | ------ |  | ----------------- |  | ------ |  | ----------------- |  | ------ |  | -------------- |  | ------ |  | -------------- |  | ------ |  | --------
|Cinven entities                   |  | 450,000           |  | 49.42  |  |                   |  |        |  | 213,083           |  | 37.69  |  |                   |  |        |  | 160,625        |  | 50.00  |  |                |  |        |  | 45.0    
|CVC entities                      |  | 360,600           |  | 39.60  |  | 89,400            |  | 100.00 |  | 252,060           |  | 44.59  |  | 14,813            |  | 100.00 |  | 160,625        |  | 50.00  |  |                |  |        |  | 43.7    
|Stichting Senior Management Kappa |  | 100,000           |  | 10.98  |  |                   |  |        |  | 46,413            |  | 8.21   |  |                   |  |        |  |                |  |        |  | 6,250          |  | 100.00 |  | 8.4     
|Other shareholders                |  |                   |  |        |  |                   |  |        |  | 53,790            |  | 9.51   |  |                   |  |        |  |                |  |        |  |                |  |        |  | 2.9     
|                                  |  |                   |  |        |  |                   |  |        |  |                   |  |        |  |                   |  |        |  |                |  |        |  |                |  |        |  |         
|Total                             |  | 910,600           |  | 100.00 |  | 89,400            |  | 100.00 |  | 565,346           |  | 100.00 |  | 14,813            |  | 100.00 |  | 321,250        |  | 100.00 |  | 6,250          |  | 100.00 |  | 100.00  
|                                  |  |                   |  |        |  |                   |  |        |  |                   |  |        |  |                   |  |        |  |                |  |        |  |                |  |        |  |         

The Supervisory Board of directors and the Management Board (please see "Item 6. Directors, Senior Management and Employees") hold interest in a
total of 34,314 Ordinary Shares A, 1,803 Preference Shares B and 15,152 Ordinary Shares C of the Company. These shares are held through Stichting Senior Management Kappa or
through funds managed by Cinven or CVC.

B.    Related Party Transactions



Stichting Senior Management Kappa is a foundation established to hold the Kappa Holding shares on behalf of members of senior management of the Kappa Packaging
Group (121 persons). Stichting Management Kappa owns 8.4% of the voting rights of the Company.

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Stichting
Senior Management Kappa holds 100,000 Ordinary Shares A, 6,250 Preference Shares B and 46,413 Ordinary Shares C of the Company at December 31, 2003.

Stichting
Senior Management Kappa provided €2.3 million in subordinated loan financing to Kappa Holding B.V. at December 31, 2003. The principal amount of
the loan plus interest compounded and accrued thereon is due to be repaid not before May 17, 2012, unless otherwise agreed. Interest is fixed at a rate of 7% per annum.

Kappa
Packaging Nederland Holding B.V. provided in total €858,925 to Stichting Senior Management Kappa as at December 31, 2003 (2002: €583,332)
that was used to re-purchase shares from departing management, or to finance shares kept in reserve.



Cinven Limited and CVC Capital Partners, the equity sponsors, provided €199.7 million in loan financing effective July 23, 1998. The
principal amount of the loan plus interest compounded and accrued thereon (€319.4 million at December 31, 2003) is due to be repaid on December 31, 2010. Interest
is fixed at a rate of 9% per annum.

Effective
May 17, 2001, Cinven Limited and CVC Capital Partners provided an additional €297.1 million in loan financing in connection with the acquisition
of Alpha. The principal amount of the loan plus interest compounded and accrued thereon (€356.1 million at December 31, 2003) is due to be repaid not before
May 17, 2012, unless otherwise agreed. Interest is fixed at a rate of 7% per annum.

Cinven
Limited and CVC Capital Partners receive annual management fees of €250,000 each from the Group in relation to on-going services as from May 17,
2001 onwards. The total management fee for the year 2003 amounts to €500,000 (2002: €500,000).

C.    Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A.    Consolidated Statements and Other Financial Information

See Item 17.

Legal Proceedings

We are party to various legal actions arising in the ordinary course of business. These legal actions cover a broad range of claims spanning our entire business.
We believe that the resolution of these legal actions will not, individually or in the aggregate, have a material adverse effect on our financial condition or result of operations.

Dividend Policy

The Company has currently negative retained earnings and therefore no dividends can be distributed with respect to its ordinary shares. For information regarding
dividends on its preference shares, please see Note 15 of the Consolidated Financial Statements included in "Item 17. Financial Statements".

B.    Significant Changes

Not applicable.

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Item 9. The Offer and Listing

A.    Offer and Listing Details

Not applicable.

B.    Plan of Distribution

Not applicable.

C.    Markets

The Senior Subordinated Notes issued in 1999 (all three Terms) are traded on the Luxembourg Stock Exchange. None of the Senior Subordinated Notes are traded on an
organized exchange in the United States.

For
further information, reference is made to Note 10 to the Consolidated Financial Statements included in Item 17.

D.    Selling Shareholders

Not applicable.

E.    Dilution

Not applicable.

F.     Expenses of the Issue

Not applicable.

Item 10. Additional Information

A.    Share Capital

Not applicable.

B.    Memorandum and Articles of Association

Kappa Holding B.V. has its registered office in Eindhoven (B.V. number 638.986).

Objects

The objects for which Kappa Holding B.V. is established, as set out in Article 2 of the Articles of Association, are:



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The
Company is represented by the Management Board. If there is more than one member of the Management Board, two members acting jointly shall also be authorized to represent the
Company. Members of the Management Board may represent the Company and vote on resolutions despite a conflict of interest, as a departure from the general rule stated in the Dutch Civil Code, subject
to the provision below regarding Supervisory Board approval.

The
Management Board adopts all resolutions by an absolute majority of the votes validly cast. A member may be represented at the meeting by a fellow member with written authorization.
Such authorization may only apply to the one meeting mentioned therein.

The
remuneration of the members of the Management Board, any entitlement to a bonus and the other conditions of appointment will be determined by the Supervisory Board for each member of
the Management Board separately.

The
Management Board requires the prior approval from the Supervisory Board concerning (among others) (i) any investments or other expenditure not provided for in the annual
budget and in excess of €1,000,000, (ii) borrowing monies or entering into any other financing arrangements, in excess of €2,000,000, other than drawing under
previously approved credits, (iii) entering into any unusual agreement or arrangement with a holder of depositary receipts, a shareholder, a director of the company or any of its subsidiaries
or a member of the Supervisory Board (or a person related to any of such persons).

The
General Meeting of Shareholders is authorized to amend the articles of association.

Powers and Rights of Members of the Supervisory Board

Members of the Supervisory Board are appointed, suspended and/or dismissed by the General Meeting of Shareholders by a majority representing at least 66% of the
votes attaching to all the subscribed ordinary shares A, B, C and D. The General Meeting of Shareholders will determine the number of members of the Supervisory Board. The task of the Supervisory
Board is to supervise the policies pursued by our Management Board and the general course of our company and its business and to advise the Management Board.

Powers and Rights of Members of the Management Board

Members of the Management Board are appointed and may be suspended or removed from office by the General Meeting of Shareholders by a majority representing at
least 66% of the votes attaching to all the subscribed ordinary shares A, B, C and D, and may also be suspended by the Supervisory Board. The Management Board is entrusted with the management of the
Company and shall act in accordance with instructions of the Supervisory Board regarding the general lines of the financial, social, economic and personnel policies pursued.

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Meetings of Shareholders

The General Meeting of Shareholders must be held within six months from the end of the financial year. The General Meetings of Shareholders may be held in the
Netherlands in Eindhoven as well as in the municipalities of Amsterdam, Haarlemmermeer and Rotterdam. Valid resolutions may only be adopted at general meetings of shareholders held elsewhere if the
entire subscribed capital is represented. The convocation of a general meeting of shareholders shall take place by way of notice sent to the shareholders and holders of depository receipts no later
than on the fifteenth day before that of the meeting. The notice convening the meeting will contain the items to be dealt with. Extraordinary General Meetings of Shareholders may also be held.

C.    Material Contracts

Senior credit agreement

In connection with the acquisition of the containerboard and corrugated businesses of AssiDomän on May 17, 2001, Kappa Packaging as borrower
and guarantor, and Kappa Holding, Kappa Beheer and certain of our subsidiaries as guarantors entered into a facility agreement with Barclays Capital and Deutsche Bank AG London that amended and
restated a senior credit agreement with Barclays Bank PLC and certain other banks named therein dated July 23, 1998. The senior credit agreement now provides term borrowings totaling
€1,505.0 million and a €250.0 million revolving credit facility. Term loan A in the amount of €755 million amortizes over a period
extending from December 31, 2001 to June 30, 2007; term loan B in the amount of €375 million is due June 30, 2008 and term loan C in the amount of
€375 million is due June 30, 2009. The availability of the revolving facility (which may also be borrowed in the form of letters of credit) expires on the earlier of
June 30, 2007 and the repayment in full of the term loans. We are required to make a prepayment of amounts outstanding under the senior credit agreement from excess cash flow, the proceeds of
certain sales of assets, certain insurance claims or pursuant to purchase price adjustments under the acquisition agreement with AssiDomän. We are also required to make certain
prepayments in the event of a change in control or listing of the Company, Kappa Beheer or Kappa Packaging. The senior credit agreement contains customary negative covenants limiting our ability to
buy, sell or pledge assets, incur indebtedness, make loans or declare dividends, among other things. We are also required to meet several financial covenants on an ongoing basis and the senior credit
agreement contains standard events of default and acceleration provisions.

Wood Supply Agreement

In connection with our acquisition of Alpha, we entered into a wood supply agreement with the forestry division of AssiDomän (now owned by
Sveaskog) pursuant to which it will continue as a key supplier of wood and wood chips to our Piteå mill in Sweden. Under this agreement, the Piteå mill will be supplied
with raw materials at market prices until December 31 of the year five years after notice of termination is given by either party subject to a re-negotiation of contract terms,
including volume and price, that occurs annually and whenever there is a change of capacity.

D.    Exchange Controls

The Dutch Minister of Finance or the Dutch Central Bank to issue such regulations. There are currently no other limitations under Dutch law or arising under our
articles of association affecting cash payments to holders of our senior subordinated notes not resident in the Netherlands (except in respect of residents of and certain persons associated with
certain countries or regimes in order to comply with United Nations and European Union sanctions).

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E.    Taxation

United States Federal Income Tax Considerations

The following discussion describes certain material US Federal income tax ("US tax") consequences to a US Holder, as defined below, of the ownership and
disposition of only the following notes: (i) €370,000,000 aggregate principal amount of Kappa Beheer's 105/8% Senior Subordinated Notes due 2009 (the "euro
Notes"), and (ii) $100,000,000 aggregate principal amount of Kappa Beheer's 105/8% Senior Subordinated Notes due 2009 (the "Dollar Notes") and
(iii) €145,000,000 aggregate principal amount of Kappa Beheer's 121/2% Senior Subordinated Discount Notes due 2009 (the "Discount Notes" and together with the
euro Notes and the Dollar Notes the "Notes"). The following summary does not describe the US tax consequences to a holder of the unregistered notes issued in 2001 or any additional Notes which we may
issue in the future, and such holder's US tax consequences may be different from what is set out below. This discussion applies to you only if you hold one or more Notes as capital assets (as defined
in the Internal Revenue Code of 1986, as amended (the "Code")) which, generally, are assets held for investment. This description is based on (1) the Code, (2) US Treasury regulations
issued under the Code, and (3) administrative and judicial interpretations of the Code and Treasury regulations, each as in effect on the date of this report. All of these authorities are
subject to change, possibly with retroactive effect. The Internal Revenue Service (the "IRS") could take a different view of the tax consequences of an investment in the Notes. This discussion does
not address all aspects of US federal income taxation that may be relevant to a particular holder of the Notes based on such holder's particular circumstances. For example, the following discussion
does not address the US tax consequences of the ownership and disposition of the Notes to holders: that are not US Holders, that will hold the Notes through a partnership or other
pass-through entity; that are broker-dealers, insurance companies, tax-exempt organizations, real estate investment trusts, regulated investment companies, or financial
institutions; whose functional currency is not the US dollar; or that hold the Notes as part of an integrated investment (including a "straddle") comprised of the Notes and one or more other
positions. Moreover, this discussion does not include any description of any state, local, estate or non-US tax consequences.

A
"US Holder" is a holder of a Note that for US tax purposes is a citizen or resident of the United States; a corporation created or organized in or under the laws of the United States
or any state of the United States (including the District of Columbia); an estate if its income is subject to US federal income taxation regardless of source; a trust if (1) a US court can
exercise primary supervision over its administration and (2) one or more US persons have the authority to control all of its substantial decisions; or certain foreign trusts in existence on
August 20, 1996 that elected to continue to be treated as a US trust.

You are advised to consult your own tax advisors to determine the US tax consequences of the ownership and disposition of the Notes in light of your own
particular circumstances, as well as to determine the effect of any state, local or non-US tax laws on you. No representations with respect to the tax consequences to any particular holder
of the Notes are made hereby.

Interest on the euro Notes and the Dollar Notes.If you hold a euro Note or a Dollar Note, you
generally must include interest on such note in income when you receive the payment of interest (if you use the cash method of tax accounting), or when it properly accrues (if you use the accrual
method of tax accounting).

The
foreign currency translation rules and the US tax consequences of the receipt of interest and principal are discussed below.

The
following amounts will be treated as "contingent interest" for US tax purposes.



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If,
based on such amounts, the Notes are characterized as contingent payment debt instruments, adverse US tax consequences could result so that US Holders would have to report such additional interest
as OID for US tax purposes.

However,
Treasury regulations regarding debt instruments that provide for one or more contingent payments provide that, for purposes of determining whether a debt instrument is a
contingent payment debt instrument, remote or incidental contingencies are ignored. We believe that, as of the date when the Notes were issued for US tax purposes, the likelihood of payment of the
additional amounts or the certain premiums was remote, and, accordingly, do not intend to treat the Notes as contingent payment debt instruments.

Disposition of Notes.When you sell or otherwise dispose of a Note (including in a redemption or
retirement), you will recognize gain or loss equal to the difference between (i) the amount you realize on the disposition and (ii) your adjusted tax basis in the Note. For this
calculation, you must exclude from the amount you realize the amount, if any, that is attributable to accrued but unpaid interest, which you must treat as such. Your adjusted tax basis in a Note
generally will be equal to your initial tax basis in such note, increased by (a) any OID accrued through the date of disposition and (b) any market discount you have previously taken
into income, and reduced by the amount of any amortized notes premium and any payments received with respect to the Note (other than any payments of qualified stated interest). Your initial tax basis
in a Note generally will be your purchase price for the Note.

Subject
to the discussion of market discount below, your gain or loss generally will be capital gain or loss and will be long-term capital gain or loss, respectively, if you
have held your Note for more than one year (under US federal income tax principles) at the time of disposition. Subject to limited exceptions, you cannot use capital losses to offset ordinary income.
You generally must treat any capital gain or loss that you recognize as US source gain or loss for US foreign tax credit purposes.

Special Rules Applicable to US Holders of euro Notes or Discount Notes

Interest on the euro Notes.US Holders of euro Notes will be required to determine the dollar value
of the interest paid on the euro Notes for purposes of determining the amount of interest includible in income. If you use the cash method of tax accounting, you must determine this dollar value by
using the spot rate of exchange, as defined below, of the euro in effect on the date you receive the payment. You will not realize foreign currency gain or loss when you receive such payment. However,
you may recognize foreign currency gain or loss upon your actual disposition of the euro which you received, as discussed below.

If
you use the accrual method of tax accounting, you must determine the dollar value of the amount of interest that accrues during your taxable year and include that amount in taxable
income. For interest attributable to an accrual period that begins and ends in a single tax year, your interest income is the dollar value of all the interest accruing in the accrual period. If the
interest is attributable to an accrual period that spans two tax years, your interest income is the dollar value of the amount of interest that accrues during the portion of the period within your
relevant tax year, determined by allocating all the interest attributable to the accrual period ratably to each day in the period. You may determine the dollar value of the amount of interest you are
required to accrue by:



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You
must determine the average rate of exchange for an accrual period or partial period, as applicable, by calculating the simple average of the applicable spot rates of exchange for
each business day of such period or another applicable average rate of exchange for the period that you reasonably derived and consistently apply. You make the election mentioned in clause (2)
above by filing a statement with your first return in which you want the election to be effective clearly indicating that you have made the election. If you make such an election, you must apply the
election consistently to all debt instruments from year to year and cannot change your election without the consent of the IRS.

In
addition, if you use the accrual method of tax accounting, you may recognize foreign currency gain or loss when you receive an interest payment attributable to an accrual period.
Foreign currency gain or loss will equal the difference, if any, between the dollar value of the interest that you received and the dollar value of interest you accrued for the period to which the
interest payment applies, as calculated above. To determine the dollar value of the interest that you received, you generally must translate the amount of the interest that you received in euros into
dollars at the spot rate of exchange on the date you received the euros.

To
determine the spot rate of exchange, you must use a spot rate of exchange that reflects a fair market rate of exchange available to the public for currency under a "spot contract" in
a free market and involving representative amounts. A spot contract is a contract to buy or sell a currency on or before two business days following the date of execution of the contract.

Original Issue Discount on the Discount Notes.We issued the Discount Notes with original issue
discount ("OID"). The OID on the Discount Notes is equal to the difference between the sum of all payments (including interest and payment at maturity) required to be made under the Discount Notes and
the "issue price" of the Discount Notes. The "issue price" of the Discount Notes is the first price at which a substantial amount of the Discount Notes were sold for cash, excluding sales to
underwriters, placement agents or wholesalers.

If
you hold a Discount Note that you acquired at the time of the initial issuance, you must include OID in ordinary income as it accrues regardless of when you receive such OID or your
method of tax accounting. For each taxable year (or any portion thereof) that you hold a Discount Note, the amount of OID that you must include in gross income in respect of such Discount Note will be
the sum of the daily portions of OID allocated to each day during such taxable year (or any portion thereof). The daily portion of OID to be allocated to each accrual period will be determined by
allocating to each day in an accrual period a pro rata portion of the OID allocable to that accrual period. OID allocable to any accrual period will equal the product of the "adjusted issue price" of
the Discount Notes as of the beginning of such period and the Discount Notes' yield to maturity. The "adjusted issue price" of a Discount Note as of the beginning of any accrual period will equal the
issue price of the Discount Note increased by OID you previously included in income and decreased by any payments you received on the Discount Note.

Prior
to July 15, 2004, no cash payments will be made in respect of the Discount Notes. Therefore, under the OID rules, none of the payments on the Discount Notes will be
characterized as interest for US federal income tax purposes. Instead, you will treat each payment on a Discount Note as a receipt of accrued OID to the extent thereof and then as a receipt of
principal of the Discount Note.

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In
general, the dollar value of the OID and, if applicable, market discount (provided an election is made to accrue the market discount currently see ("Market
Discount, Acquisition Premium")) on a Discount Note will be determined for any accrual period by using the average rate of exchange, as defined above, for the accrual period,
or with respect to an accrual period that spans two taxable years, using the average rate of exchange for the partial period within each taxable year. Applicable Treasury regulations allow taxpayers
to elect, in the manner described above, to translate OID (but not market discount) at the spot rate on the last day of the accrual period (and in the case of a partial accrual period, the spot rate
of exchange on the last day of the taxable year) or on the date the OID payment is received if such date is within five business days of the end of the accrual period. A US Holder that makes such an
election must apply it according to the rules discussed above.

US
Holders of the Discount Notes may recognize foreign currency gain or loss when payments on the Discount Notes are received. At the time the interest accrued in a prior period is
received, the US Holder may realize exchange gain or loss equal to the difference if any, between:



The
amount of foreign currency gain or loss with respect to such principal will equal the difference, if any, between (1) the dollar value of the euros received attributable to
such principal determined by the spot rate of exchange on the date of the receipt of the payment and (2) your tax basis in dollars in such principal, described above.

Disposition of euro Notes or Discount Notes.You will realize an amount in dollars according to the
following rules:



Regardless
of your method of tax accounting, you will determine your initial tax basis in dollars for your euro Note or Discount Note by the dollar value of the price that you paid on
the date you purchased such note. If you purchased a euro Note or a Discount Note with previously owned euros, you generally will be required to treat such euros as if you exchanged such euros for
dollars at the spot rate of exchange in effect on the date of purchase and you purchased your euro Note or Discount Note with the amount of dollars received.

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You
may recognize foreign currency gain or loss with respect to the principal of the euro Notes, or the Discount Notes (taking account of previous payments of principal on the Discount
Notes) upon the sale or other disposition (including a retirement or redemption) of the euro Notes, or the Discount Notes, respectively. The amount of foreign currency gain or loss with respect to
such principal that will be recognized upon the sale or other disposition of the euro Notes or the Discount Notes will be equal to the difference between:



However,
the sum of any foreign currency gain or loss shall be recognized only to the extent of the total gain or loss realized on the transaction.

Receipt of euros.You will have a tax basis in any euros received under your euro Notes or Discount
Notes generally equal to the dollar value of the euros determined by using the spot rate of exchange on the date you receive your payment. If you subsequently exchange your euros for dollars, you will
recognize foreign currency gain or loss equal to the difference, if any, between the amount of dollars that you received and your tax basis in the euros.

Source and Character of Foreign Currency Gain or Loss.You generally will have to treat foreign
currency gain or loss as US source ordinary income or loss.

Market Discount, Acquisition Premium

General.If a US Holder acquires a euro Note or Dollar Note for an amount that is less than its
stated redemption price at maturity, or in the case of a Discount Note, its revised issue price (generally, adjusted issue price at the time of acquisition), the amount of the difference will be
treated as "market discount", unless such difference is less than a specified de minimis amount. Under the market discount rules of the Code, a US Holder will generally be required to treat any
principal payment on, or any gain on the sale, exchange, retirement or other disposition (including gift) of, a Note as ordinary income to the extent of any accrued market discount that has not
previously been included in income. Market discount generally accrues on a straight-line basis over the remaining term of the Note, unless the US Holder elects to accrue market discount on
a constant interest method. A US Holder may not be allowed to deduct immediately all or a portion of the interest expense on any indebtedness incurred or continued to purchase or to carry such note.

A
US Holder may elect to include market discount in income currently as it accrues (either on a straight-line basis or, if the US Holder so elects, on a constant-yield
basis), in which case the interest deferral rule set forth in the preceding paragraph will not apply. Such an election will apply to all market discount notes acquired by the US Holder on or after the
first day of the first taxable year to which such election applies and may be revoked only with the consent of the IRS.

A
US Holder that acquires a Discount Note for an amount that is greater than the adjusted issue price of such note, but equal to or less than the sum of all amounts payable on such note
after the purchase date, will be considered to have purchased such note at an "acquisition premium". Under the acquisition premium rules of the Code and the OID Treasury Regulations, the daily portion
of OID which such holder must include in its gross income with respect to such note for any taxable year will be reduced by an amount equal to the OID multiplied by a fraction, the numerator of which
is the amount of such acquisition premium and the denominator of which is the OID remaining for the period from the date the Discount Note was purchased to its maturity date.

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Euro Notes or Discount Notes.A US Holder of euro Notes or Discount Notes that elects not to include market discount, if any, in income
currently as it accrues, must translate such market discount into US dollars at the spot rate on the disposition date of the euro Notes or Discount Notes. No part of such accrued market discount is
treated as exchange gain or loss. See above "Special Rules Applicable to US Holders of euro Notes or Discount Notes" for treatment of market discount
which a holder elects to include in income currently as it accrues.

Amortization of Notes Premium

General.A US Holder that purchases a Note for an amount in excess of the sum of all remaining
payments due on the Note after the purchase date (other than any payments of qualified stated interest in the case of a Discount Note) will be considered to have purchased the Note at a premium. Such
holder may elect to amortize such premium (as an offset to interest income), using a constant-yield method, over the remaining term of the Note. Such election, once made, generally applies to all debt
instruments held or subsequently acquired by the US Holder on or after the first taxable year to which the election applies and may be revoked only with the consent of the IRS. A US Holder that elects
to amortize such premium must reduce its tax basis in the Note by the amount of the premium amortized during its holding period. With respect to a US Holder that does not elect to amortize notes
premium, the amount of such premium will be included in the US Holder's tax basis for purposes of computing gain or loss in connection with a taxable disposition of the Note.

Euro Notes or Discount Notes.Amortizable notes premium in respect of a euro Note or Discount Note
will be computed in, and, if an election is made to amortize such premium, will reduce interest income in, units of foreign currency. At the time amortized notes premium offsets interest income,
exchange gain or loss, which will be taxable as ordinary income or loss, will be realized with respect to amortized notes premium on such euro Note or Discount Note based on the difference between the
spot rate of exchange on the date or dates such premium is recovered through interest payments on such euro Note or Discount Note and the spot rate of exchange on the date on which the US Holder
acquired such euro Note or Discount Note. With respect to a US Holder that does not elect to amortize notes premium, the amount of notes premium will constitute a market loss when the euro Note or
Discount Note matures.

Information Reporting and Backup Withholding on the Notes.In general, if you are a
non-corporate US Holder, you may be subject to US information reporting requirements on the payments of principal or interest (including OID) on your Notes or of the proceeds of the sale,
exchange or other disposition of your Notes paid within the US or through certain US-related financial intermediaries.

In
general, if you are a non-corporate holder, you may also be subject to US backup withholding at a rate of 28% if you do not provide a taxpayer identification number to, or
otherwise establish an exemption with, the payor of each payment regarding your Note. You may credit any amounts withheld pursuant to US backup withholding against your US tax liability and may claim
a refund for amounts withheld in excess of your tax liability, provided that you furnish the IRS with the required information.

Dutch Tax Considerations

General

The following is a summary of certain Dutch tax consequences of the acquisition, holding and disposal of the Notes. This summary does not
purport to be a comprehensive description of all Dutch tax considerations that may be relevant to a decision to acquire, to hold, and to dispose of the Notes. No conclusions may be drawn from this
summary regarding topics that are not included herein. Each prospective holder of Notes should consult a professional adviser with respect to the tax consequences of an investment in the Notes. The
discussion of certain Dutch taxes set forth below is included for general information purposes only.

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This summary is based on Dutch tax legislation, published case law, treaties, rules, regulations and similar documentation, in force as of the date of this
Country Addendum, without prejudice to any amendments introduced at a later date and implemented with retroactive effect.

This summary does not address the Dutch tax consequences of a holder of Notes who holds a substantial interest ("aanmerkelijk belang") in the Company, within the
meaning of Section 4.3 of the Dutch Income Tax Act 2001. Generally speaking, a holder of Notes holds a substantial interest in the Company, if such holder of Notes, alone or together with his
or her partner (statutory defined term) or certain other related persons, directly or indirectly, holds (i) an interest of 5 percent or more of the total issued capital of the Company or
of 5 percent or more of the issued capital of a certain class of shares of the Company, (ii) rights to acquire, directly or indirectly, such interest or (iii) certain profit
sharing rights in the Company.

Withholding Tax

No Dutch withholding tax is due upon payments on the Notes provided that the Notes are not deemed to function as equity within the meaning of
article 10(d), paragraph 1, under (d) of the Dutch Corporate Income Tax Act 1969 and none of the payments under the Notes will depend on or will be deemed to depend on profits or
the distribution of profits by the Company.

Corporate Income Tax and Individual Income Tax

Residents of the Netherlands.If the holder of Notes is subject to Dutch corporate income tax and the
Notes are attributable to its (deemed) business assets, income derived from the Notes and gains realized upon the redemption or disposal of the Notes are taxable.

If
the holder of Notes is an individual, resident or deemed to be resident of the Netherlands for Dutch tax purposes (including the individual holder of Notes who has opted to be taxed
as a resident of the Netherlands), the income derived from the Notes and the gains realized upon the redemption or disposal of the Notes are taxable at the progressive rates of the Income Tax Act
2001, only if:



If
neither condition (i) nor condition (ii) applies to the individual holder of Notes, the actual income derived from the Notes and the actual gains realized with respect
to the Notes will not be taxable. Instead, such holder of Notes will be taxed at a flat rate of 30% on deemed income from "savings and investments" ("sparen en
beleggen") within the meaning of Section 5.1 of the Income Tax Act 2001. This deemed income amounts to 4% of the average of the individual's "yield basis"
("rendementsgrondslag") within the meaning of article 5.3 of the Income Tax Act 2001 at the beginning of the calendar year and the individual's
yield basis at the end of the calendar year, insofar the average exceeds a certain threshold. The fair market value of the Notes will be included in the individual's yield basis.

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Non-residents of the Netherlands.A holder of Notes that is not a resident nor deemed to
be a resident of the Netherlands for Dutch tax purposes (nor, if such holder is an individual, has opted to be taxed as a resident of the Netherlands) is not taxable in respect of income derived from
the Notes or gains realized upon the redemption and disposal of the Notes, unless:



Gift and Inheritance Taxes Residents of the Netherlands.Generally, gift and inheritance taxes will
be due in the Netherlands in respect of the acquisition of the Notes by way of a gift by, or on the death of, a holder of Notes who is a resident or deemed to be a resident of the Netherlands for the
purposes of Dutch gift and inheritance tax at the time of the gift or his or her death.

An
individual of the Dutch nationality is deemed to be a resident of the Netherlands for the purposes of the Dutch gift and inheritance tax, if he or she has been resident in the
Netherlands during the ten years preceding the gift or his or her death. An individual of any other nationality is deemed to be a resident of the Netherlands for the purposes of the Dutch gift and
inheritance tax only if he or she has been residing in the Netherlands at any time during the twelve months preceding the time of the gift.

Non-residents of the Netherlands.No gift or inheritance taxes will arise in the
Netherlands in respect of the acquisition of the Notes by way of gift by, or as a result of the death of, a holder of Notes who is neither a resident nor deemed to be a resident of the Netherlands for
the purposes of the Dutch gift and inheritance tax, unless:



Treaties.Treaties may limit the Dutch sovereignty to levy gift and inheritance tax.

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Other Taxes and Duties.No Dutch capital tax, registration tax, customs duty, value added tax,
transfer tax, stamp duty or any other similar tax or duty other than court fees, will be due in the Netherlands by a holder of Notes in respect of or in connection with the subscription, issue,
placement, allotment or delivery of the Notes.

European Union Savings Directive in 2003.On June 3rd, 2003, the European Council of Economics
and Finance Ministers adopted a Directive on the taxation of savings income under which Member States will be required, if a number of important conditions are met and from a date not earlier than 1st
January, 2005, to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that
other Member State, except that, for a transitional period, Belgium, Luxembourg and Austria will instead be required (unless during that period they elect otherwise) to operate a withholding system in
relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries).

F.     Dividends and Paying Agents

Not applicable.

G.    Statements by Experts

Not applicable.

H.    Documents on Display

We are subject to the information requirements of the US Securities Exchange Act of 1934, as amended, and file periodic reports and other information with The
United States Securities and Exchange Commission. We will file our Annual Reports on Form 20-F and our interim reports on Form 6-K.

You
may inspect the information that we filed with the Commission at the public reference facilities maintained by the Commission at the Commission's Public Reference Room at 450 Fifth
Street, N.W. Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission also maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the
Commission.

Upon
reasonable request, documents referred to in this Annual Report on Form 20-F may be inspected at the company's head office:

Dr. Holtroplaan
5
NL5652 XR Eindhoven
P.O. Box 8714
NL5605 LS Eindhoven

|Telephone +31 (0)40 214 07 77      |  | e-mail: info@kappapackaging.com
|---------------------------------- |  | -------------------------------
|Fax            +31 (0)40 214 07 99 |  | Website: www.kappapackaging.com

I.     Subsidiary Information

Not applicable.

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Item 11. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, including adverse changes in interest rates and foreign currency exchange rates as discussed below:

Interest rate risk

To reduce our floating rate interest exposure on our debt instruments, we entered into interest rate swaps. An interest rate swap is a contract between two
parties to exchange interest payments on a specified principal amount (referred to as the notional principal) for a specified period. The swaps we entered into effectively involve the exchange of
streams of variable interest payments for fixed rate interest payments. We entered into the swaps to hedge against the risk of movements in market rates of interest on our senior debt and to manage
the Group's exposure to its variable rate borrowing. The swaps are denominated in euros. We do not enter into interest rate derivative instruments for trading or speculative purposes.

Foreign currency exchange rate risk

To reduce the US dollar currency exposure on the US dollar Term of the senior subordinated notes, we entered into a US dollar/euro coupon swap. The coupon swap
exchanges the US dollar stream of fixed interest payments into fixed rate euro payments. After maturity in July 2004, we expect to enter into a new US dollar/euro coupon swap.

To
reduce the US dollar currency exposure on the US dollar Term of the senior subordinated notes, we entered into currency forward contracts (buy US dollar, sell euro) which mature on
July 15, 2004. After maturity in July 2004, we expect to enter into new currency forward contracts (buy US dollar, sell euro)

The
majority of our revenues and costs are generated in euro. We also generate a portion of our earnings and incur a portion of costs in non-euro currencies, including
British pounds (GBP), Czech koruna (CZK), Norwegian kroner (NOK), Polish zlotys (PLN), Slovak koruna (SKK), US dollars (US$) and Swedish kronor (SEK).

We
seek to manage our currency risk by funding non-euro based operations in local currencies. In order to hedge cash receipts from firm export sales orders, we enter into
foreign currency forward contacts to sell the relevant non-euro currencies with varying maturities of no longer than one year. Our financial results reflect the hedged exchange rates on
these sales transactions.

The
table below provides information about our main foreign currency forward exchange contracts.

|Currency contracts: |  | Fair value at
December 31, 2003
(in € millions) |  
|------------------- |  | ----------------------------------------------- | -
|Receive US$/Pay €   |  | (10.8                                           | )
|Receive SEK/Pay €   |  | (0.6                                            | )
|Receive SKK/Pay €   |  | (0.1                                            | )
|Receive US$/Pay €   |  | (0.2                                            | )
|Pay GBP/Receive €   |  | 0.1                                             |  
|Pay NOK/Receive €   |  | 0.2                                             |  
|Pay US$/Receive €   |  | 1.0                                             |  
|Pay ZAR/Receive €   |  | 0.1                                             |  
|Receive SEK/Pay US$ |  | 0.1                                             |  

76

---



Fair Values

The table below provides information about our interest related derivative financial instruments and other financial instruments that are sensitive to changes in
interest rates. For our senior credit facility and our senior subordinated notes, the table below presents principal payment amounts and weighted average interest rates by contractual payment dates.
The discount notes have a non-cash interest portion that is added to the principal on a semi-annual basis. The variable rate portion of our senior credit facility is based on
EURIBOR at December 31, 2003 of 2.17%. The rates presented are not intended to project our expectations for the future. The table presents notional amounts and related interest rates for the
swap agreement. Under this swap agreement, the interest is paid semi-annually to the counterparty.

The
carrying value of the variable interest rate debt under the senior credit facilities approximates fair value. The fair value of the US$ Term of the senior subordinated notes is based
on the US dollar/euro foreign exchange spot rate as at December 31, 2003. The fair value of the interest rate swap agreement has been determined based on quoted market prices for similar
instruments and/or appropriate valuation models by the counterparty. The fair values of the loans made to us by Cinven and CVC have been determined by means of the discounted cash flow method. The
interest rate used is based on actual interest rates at year-end 2003 and 2002, including a risk mark-up determined at the date of issuance of the loans (167 basis points).

|                                                                                  |  | 2004  |  | 2005  |  | 2006  |  | 2007 |  | Thereafter |   | Total   |   | Fair value at
December 31,
2003 |  
|--------------------------------------------------------------------------------- |  | ----- |  | ----- |  | ----- |  | ---- |  | ---------- | - | ------- | - | ------------------------------- | -
|
|Long-term debt                                                                    |  |       |  |       |  |       |  |      |  |            |   |         |   |                                 |  
|Variable rate                                                                     |  |       |  |       |  |       |  |      |  |            |   |         |   |                                 |  
|Senior debt                                                                       |  | 129.3 |  | 153.7 |  | 170.5 |  | 93.7 |  | 745.6      |   | 1,292.8 |   | 1,292.8                         |  
|Fixed rate                                                                        |  |       |  |       |  |       |  |      |  |            |   |         |   |                                 |  
|Senior subordinated notes (        )                                              |  |      |  |      |  |      |  |     |  | 596.1      |   | 596.1   |   | 631.6                           |  
|Fixed average interest rate loan                                                  |  |      |  |      |  |      |  |     |  | 11.05      | % | 11.05   | % |                                 |  
|Senior subordinated notes (2003)                                                  |  |      |  |      |  |      |  |     |  | 95.0       |   | 95.0    |   | 101.9                           |  
|Fixed average interest rate loan                                                  |  |      |  |      |  |      |  |     |  | 10.625     | % | 10.625  | % |                                 |  
|Shareholders' loans                                                               |  |      |  |      |  |      |  |     |  | 678.3      |   | 678.3   |   | 744.1                           |  
|Fixed average interest rate loan                                                  |  |      |  |      |  |      |  |     |  | 7.94       | % | 7.94    | % |                                 |  
|Derivative Instruments                                                            |  |       |  |       |  |       |  |      |  |            |   |         |   |                                 |  
|Interest rate swap (notional contract 3.67% contract amount €1,145.0 million)(1)  |  |      |  |      |  |      |  |     |  |           |   |        |   |                                 |  
|Pay fixed, receive variable                                                       |  |       |  |       |  |       |  |      |  |            |   |         |   |                                 |  
|(6 months EURIBOR at 2.17% at December 31, 2003)                                  |  |       |  |       |  |       |  |      |  |            |   |         |   | (18.3                           | )
|Currency coupon swap (notional contract amount €48.7 million). Receive US$, pay € |  |      |  |      |  |      |  |     |  |           |   |        |   | (1.2                            | )

---



Further
details on the financial instruments are disclosed in Note 12 and 18 of our Consolidated Financial Statements.

77

---



Risk on recovered paper prices

Price fluctuations for our operational inputs, especially recovered paper, have an effect on our gross margins. We do not hedge these risks with financial
instruments.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

PART II.

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None; Not applicable.

Item 15. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by
this Form 20-F. Based on this evaluation, which will be used as input for further improvement actions, we concluded that our controls and procedures are effective in timely alerting
them to material information about Kappa Holding and its consolidated subsidiaries, subject to the following.

As
a result of the differences in interpretation of US GAAP, leading to the restatements of the Company's US GAAP financial information as described in Note 28(a) to the consolidated
financial statements, the Management Board concluded that the current level of corporate accounting resources will be reviewed and strengthened.

As
part of the communications by our independent auditors, PricewaterhouseCoopers Accountants N.V., to our audit committee with respect to their audit procedures for the year ended
December 31, 2003, they informed us that the restatements constituted a reportable condition as defined in standards established by the American Institute of Certified Public Accountants in our
procedures relating to the preparation of US GAAP information required by the Securities and Exchange Commission.

In
designing our controls and procedures, the Management Board recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and
procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the
Group have been detected.

There
have been no significant changes in our internal controls over financial reporting that could significantly affect those controls subsequent to the date of this evaluation.

Item 16A. Audit Committee financial expert

The Supervisory Board of Directors has determined that Mr. C. Brakel is an "audit committee financial expert" as defined in Item 16A of
Form 20-F.

78

---



Item 16B. Code of Ethics

We have formalized and adopted a code of ethics that will apply amongst others to our Chief Executive Officer, Chief Financial Officer and Director
Accounting & Control and which will be posted on our websidewww.kappapackaging.com.

Item 16C. Principal Accountant Fees and Services

PricewaterhouseCoopers Accountants N.V. has served as Kappa Packaging's independent public accountant for each of the years in the three-year period
ended December 31, 2003, for which audited financial statements are included in this annual report on Form 20-F.

The
auditor is appointed annually based on the annual approval of scopes and related audit fees by both the Management Board and Audit Committee/Supervisory Board. We expect
PricewaterhouseCoopers Accountants N.V. to be appointed as the auditor for 2004.

The
following table presents the aggregate fees for professional services and other services rendered by PricewaterhouseCoopers to Kappa Packaging in 2003 and 2002:

|                      |  | Year ended
December 31, 2003 |  | Year ended
December 31, 2002
|--------------------- |  | ---------------------------- |  | ----------------------------
|
|Audit fees(1)         |  | 2,498                        |  | 2,388                       
|Audit-related fees(2) |  | 294                          |  | 545                         
|Tax fees(3)           |  | 877                          |  | 747                         
|All other fees(4)     |  | 41                           |  | 80                          
|                      |  |                              |  |                             
|Total                 |  | 3,710                        |  | 3,760                       
|                      |  |                              |  |                             

---

(4)   Audit Committee Pre-approval Policies and Procedures

The Audit Committee is a sub-committee of the Supervisory Board, whose purpose is to review and report to the Supervisory Board on the accounting and
financial reporting process, the system of internal controls and the audit process.

A
further purpose is the duty to pre-approve all audit and permissible non-audit services provided by our independent auditors for which the Audit Committee
adopted a policy ("the Policy").

79

---



Under
the Policy, proposed services either (i) may be pre-approved by the Audit Committee without consideration of specific case-by-case
services ("general pre-approval"); or (ii) require the specific pre-approval of the Audit Committee ("specific pre-approval"). The Audit Committee may
delegate either the type of pre-approval authority to one or more of its members. The Policy sets out the audit, audit-related, tax and other services that received the general
pre-approval of the Audit Committee, including those described in the footnotes to the table, above; these services are subject to annual review by the Audit Committee.

For
audit-related services, pre-approval is required for each assignment with a fee value of more then €500.000. For lower fee amounts the nature of these
assignments will be discussed annually. These discussions are to be considered as the equivalent of a pre-approval process.

For
permissible non-audit services, the Audit Committee should specifically approve the decision in advance, if the fee value of these services is above
€1 million. Otherwise pre-approval takes place at the annual meeting.

The
Audit Committee establishes budgeted fee levels annually for each of the four categories of audit and non-audit services that were pre-approved under the
Policy, namely audit, audit-related, tax and other services. Requests or applications to provide services that require specific approval by the Audit Committee are submitted to the Audit Committee by
the Chief Financial Officer. At each annual meeting of the Audit Committee, the external auditor provides a report in order for the Audit Committee to review the services that the external auditor is
providing, as well as the status and cost of those services.

During
2003, there were no services provided by PricewaterhouseCoopers Accountants to Kappa Packaging that were specifically approved by the Audit Committee pursuant to the de minimisexception to the
pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

PART III.

Item 17. Financial Statements

See pages F-1 through F-69.

Item 18. Financial Statements

See Item 17.

80

---





Item 19. Exhibits

|Exhibit No. |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                             
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1         |  | Deed of Incorporation and Articles of Association of Kappa Holding B.V. (including English translation).*                                                                                                                                                                                                                                                                                                          
|2.1         |  | Indenture dated July 23, 1999 (the "Euro Indenture") between Kappa Beheer B.V., Kappa Holding B.V., Kappa Packaging B.V. and The Bank of New York, London Branch, as trustee, with respect to €370,000,000 aggregate principal amount of
105/8% Senior Subordinated Notes due 2009 (the "euro Notes") (incorporated by reference to Exhibit 4.1 of Form F-4 (Registration No.333-11044) of Kappa Beheer B.V.).     
|2.2         |  | Supplemental Indenture dated May 17, 2001 to the Euro Indenture between Kappa Beheer B.V., Kappa Holding B.V., Kappa Packaging B.V. and The Bank of New York, London Branch, as trustee.*                                                                                                                                                                                                                          
|2.3         |  | Form of Euro Note (included as part of Exhibit 2.1).                                                                                                                                                                                                                                                                                                                                                               
|2.4         |  | Form of Guarantee of Euro Note (included as part of Exhibit 2.1).                                                                                                                                                                                                                                                                                                                                                  
|2.5         |  | Indenture dated July 23, 1999 (the "Dollar Indenture") between Kappa Beheer B.V., Kappa Holding B.V., Kappa Packaging B.V. and The Bank of New York, London Branch, as trustee, with respect to $100,000,000 aggregate principal amount of
105/8% Senior Subordinated Notes due 2009 (the "Dollar Notes") (incorporated by reference to Exhibit 4.4 of Form F-4 (Registration No. 333-11044) of Kappa Beheer B.V.).
|2.6         |  | Supplemental Indenture dated May 17, 2001 to the Dollar Indenture between Kappa Beheer B.V., Kappa Holding B.V., Kappa Packaging B.V. and The Bank of New York, London Branch, as trustee.*                                                                                                                                                                                                                        
|2.7         |  | Form of Dollar Note (included as part of Exhibit 2.5).                                                                                                                                                                                                                                                                                                                                                             
|2.8         |  | Form of Guarantee of Dollar Note (included as part of Exhibit 2.5).                                                                                                                                                                                                                                                                                                                                                
|2.9         |  | Amendment and Restatement Agreement dated May 17, 2001 relating to a Facility Agreement (Senior Credit Agreement) dated July 23, 1998, between Kappa Packaging B.V. and certain companies within the Kappa Group, Barclays Capital and Deutsche Bank AG
London, as Senior Joint Mandated Lead Arrangers, and Barclays Bank Plc as Senior Facility Agent and Security Agent.*                                       
|2.10        |  | Investors Loan Agreement dated July 23, 1998 between Kappa Holding B.V. as borrower and the CVC Investors and the Cinven Investors (both as defined therein) as lenders (incorporated by reference to Exhibit 10.4 of Form F-4 (Registration
No.333-11044) of Kappa Beheer B.V.).                                                                                                                                  
|2.11        |  | Amendment Agreement dated July 23, 1999 to the Investors Loan Agreement dated July 23, 1998 (incorporated by reference to Exhibit 10.5 of Form F-4 (Registration No.333-11044) of Kappa Beheer B.V.).                                                                                                                                                                                                              
|2.12        |  | Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, as trustee (incorporated by reference to Exhibit 25.1 of Form F-4 (Registration No.333-11-44) of Kappa Beheer B.V.).                                                                                                                                                                                     
|2.13        |  | Indenture dated May 18, 2001 between Kappa Beheer B.V., Kappa Packaging B.V. and The Bank of New York, London Branch, as trustee, with respect to €100,000.00 aggregate principal amount of 121/2% Senior Subordinated
Notes due 2009 (the "121/2% Notes").*                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                    

81

---



|2.14 |  | Form of 121/2% Note (included as part of Exhibit 2.17).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.15 |  | Form of Guarantee of 121/2% Note (included as part of Exhibit 2.17).                                                                                                                                                                                                                                                                                                                                                                                                                           
|2.16 |  | 2001 Shareholder Loan Agreement dated May 17, 2001, between Kappa Holding B.V. as borrower and the CVC Investors and the Cinven Investors (both as defined lenders under the Senior Credit Agreement, and the other party listed therein.**                                                                                                                                                                                                                                                    
|2.17 |  | Indenture dated May 16, 2003 between Kappa Beheer B.V. Kappa Holding B.V. and Kappa Packaging B.V. and The Bank of New York, London Branch, as trustee, with respect to €95,000,000 aggregate principal amount of 105/8% Notes due 2009.                                                                                                                                                                                                                                                       
|4.3  |  | Paying, Registrar and Transfer Agency Agreement dated May 18, 2001 between Kappa Beheer B.V., Kappa Packaging B.V., The Bank of New York, London Branch, as trustee, The Bank of New York, London Branch, as registrar, The Bank of New York, London
Branch, as transfer agent and The Bank of New York, London Branch as principal paying agent, with respect to the 121/2% Notes.*                                                                                                           
|4.4  |  | Kappa Holding Warrant Agreement dated May 18, 2001 between Kappa Holding B.V., Packaging Investments Limited, as warrant holder, and The Bank of New York, New York Branch, as warrant agent.*                                                                                                                                                                                                                                                                                                 
|4.5  |  | Amendment and Restatement Agreement dated May 17, 2001 relating to a Supplemental Amended and Restated Intercreditor Agreement dated July 23, 1998 between Kappa Packaging B.V., as borrower and obligor's agent, the Senior Finance Parties and Senior
Hedge Counterparties, Barclays Bank PLC, as senior facility agent and security agent and Cinven Limited and CVC Capital Partners B.V., as investor's agents.*                                                                          
|4.6  |  | Amendment and Restatement Deed dated July 23, 1999 relating to an Intercreditor Agreement dated July 23, 1998, as amended on September 3, 1998, between Kappa Holding B.V., Kappa Beheer B.V., Kappa Packaging B.V. and Barclays Bank PLC
as senior agent, mezzanine agent and security agent for the lenders under the Senior Credit Agreement, and the other parties listed therein (incorporated by reference to Exhibit 4.11 of Form F-4 (Registration No.333-11044) of Kappa Beheer
B.V.).
|4.7  |  | Wood Supply AgreementFiber Raw Material, dated May 16, 2001 between Assi Domän Packaging AB, as Purchaser, and Assi Domän Wood Supply AB, as Seller.**                                                                                                                                                                                                                                                                                                                                        
|8.1  |  | Subsidiaries of Kappa Holding B.V., Kappa Beheer B.V. and Kappa Packaging B.V. (included as Note 28 to "Item 17. Financial Statement").**                                                                                                                                                                                                                                                                                                                                                      
|12.1 |  | Certification by the President/Managing Director of Kappa Holding B.V., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                             
|12.2 |  | Certification by the Chief Financial Officer/Managing Director of Kappa Holding B.V., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                               
|13.1 |  | Certification by the President/Managing Director of Kappa Holding B.V., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                              
|13.2 |  | Certification by the Chief Financial Officer/Managing Director of Kappa Holding B.V., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                

---

82

---





Signatures

This registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

| |  | KAPPA HOLDING B.V.
| |  | ------------------
| |  | By:               
| |  | Name:             
| |  | Title:            
| |  | By:               
| |  | Name:             
| |  | Title:            

Dated
August 19, 2004

83

---





INDEX TO FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS OF THE KAPPA PACKAGING GROUP AS AT DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

|                                                        |  | Page
|------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm |  | F-2 
|Consolidated Statements of Income                       |  | F-3 
|Consolidated Balance Sheets                             |  | F-4 
|Consolidated Statements of Cash Flows                   |  | F-5 
|Consolidated Statements of Shareholders' Equity         |  | F-7 
|Notes to Consolidated Financial Statements              |  | F-8 

The
consolidated financial statements contain the financial position, results of operations and cash flows for the consolidated entities that include the non-guarantor
subsidiaries. For the financial position, results of operations and cash flows of the issuer of the Senior Subordinated Notes and its guarantors refer to Note 29.

F-1

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Kappa Holding B.V.:

We have audited the accompanying consolidated balance sheets of Kappa Holding B.V. and its subsidiaries as of December 31, 2003 and 2002 and the related
consolidated statements of operations, of cash flows and of shareholders' equity for each of the three years in the period ended December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the Netherlands and the standards of the Public Company Accounting Oversight Board (United States of
America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of shareholders' equity present fairly, in all
material respects, the financial position of Kappa Holding B.V. and its subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the Netherlands.

Accounting
principles generally accepted in the Netherlands vary in certain significant respects from accounting principles generally accepted in the United States of America.
Information relating to the nature and effect of such differences is presented in Note 28, as restated, to the consolidated financial statements.

Amsterdam,
the Netherlands
March 31, 2004, except for the effects of Note 28(a), as to which the date is August 16, 2004

PricewaterhouseCoopers
Accountants N.V.

F-2

---





KAPPA PACKAGING GROUP        CONSOLIDATED STATEMENTS OF OPERATIONSFor the years ended December 31, 2003, 2002 and 2001        (€ in
millions)

|                                                                      |  | Note |  | Year ended
December 31,
2003 |   | Year ended
December 31,
2002 |   | Year ended
December 31,
2001 |  
|--------------------------------------------------------------------- |  | ---- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- | -
|Sales                                                                 |  |      |  | 2,841.7                      |   | 2,923.8                      |   | 2,471.3                      |  
|Net change in work in progress and finished goods                     |  |      |  | (10.0                        | ) | 13.8                         |   | 1.0                          |  
|                                                                      |  |      |  |                              |   |                              |   |                              |  
|Net sales including net change in work in progress and finished goods |  |      |  | 2,831.7                      |   | 2,937.6                      |   | 2,472.3                      |  
|Raw material costs                                                    |  |      |  | (1,003.7                     | ) | (1,077.6                     | ) | (917.7                       | )
|External services                                                     |  |      |  | (524.8                       | ) | (523.3                       | ) | (434.7                       | )
|Labor costs                                                           |  | 20   |  | (702.6                       | ) | (697.9                       | ) | (561.9                       | )
|Other operating costs                                                 |  | 21   |  | (183.3                       | ) | (197.8                       | ) | (135.9                       | )
|Depreciation, amortization and impairment charges                     |  | 22   |  | (210.3                       | ) | (218.5                       | ) | (176.0                       | )
|                                                                      |  |      |  |                              |   |                              |   |                              |  
|Total operating costs and expenses                                    |  |      |  | (2,624.7                     | ) | (2,715.1                     | ) | (2,226.2                     | )
|                                                                      |  |      |  |                              |   |                              |   |                              |  
|Operating income                                                      |  |      |  | 207.0                        |   | 222.5                        |   | 246.1                        |  
|Interest expense, net                                                 |  | 23   |  | (187.6                       | ) | (192.0                       | ) | (167.8                       | )
|Interest expense on Shareholders' loans                               |  | 13   |  | (50.2                        | ) | (46.2                        | ) | (34.9                        | )
|                                                                      |  |      |  |                              |   |                              |   |                              |  
|Result before income taxes                                            |  |      |  | (30.8                        | ) | (15.7                        | ) | 43.4                         |  
|Income taxes                                                          |  | 24   |  | 6.5                          |   | 5.4                          |   | (19.1                        | )
|Income from participations                                            |  |      |  | 0.4                          |   | 0.6                          |   | 0.2                          |  
|Minority interests                                                    |  |      |  | (0.1                         | ) | (0.2                         | ) | (0.2                         | )
|                                                                      |  |      |  |                              |   |                              |   |                              |  
|Income/(loss) before extraordinary items                              |  |      |  | (24.0                        | ) | (9.9                         | ) | 24.3                         |  
|Extraordinary items, net of tax                                       |  | 25   |  |                             |   |                             |   | (13.1                        | )
|                                                                      |  |      |  |                              |   |                              |   |                              |  
|Net income/(loss)                                                     |  |      |  | (24.0                        | ) | (9.9                         | ) | 11.2                         |  
|                                                                      |  |      |  |                              |   |                              |   |                              |  

The accompanying notes are an integral part of these consolidated financial statements.

F-3

---



KAPPA PACKAGING GROUP        CONSOLIDATED BALANCE SHEETSAs at December 31, 2003 and 2002        (€ in millions)

|                                               |                             | Note |  | December 31,
2003 |         | December 31,
2002 |        
|---------------------------------------------- | --------------------------- | ---- |  | ----------------- | ------- | ----------------- | -------
|Assets                                         |                             |      |  |                   |         |                   |        
|Cash and cash equivalents                      |                             | 2    |  | 240.7             |         | 233.6             |        
|Accounts receivable                            |                             |      |  | 419.6             |         | 451.5             |        
|Other receivables                              |                             | 4    |  | 52.4              |         | 55.6              |        
|Inventories                                    |                             | 5    |  | 249.9             |         | 272.2             |        
|                                               |                             |      |  |                   |         |                   |        
|                                               | Total current assets        |      |  |                   | 962.6   |                   | 1,012.9
|Tangible fixed assets                          |                             | 6    |  | 1,604.5           |         | 1,654.7           |        
|Intangible fixed assets                        |                             | 7    |  | 855.3             |         | 882.1             |        
|Other non-current assets                       |                             | 8    |  | 103.3             |         | 93.6              |        
|                                               |                             |      |  |                   |         |                   |        
|                                               |                             |      |  | 3,525.7           |         | 3,643.3           |        
|                                               |                             |      |  |                   |         |                   |        
|Liabilities                                    |                             |      |  |                   |         |                   |        
|Bank overdrafts                                |                             | 12   |  | 0.6               |         | 1.4               |        
|Current portion of term loan facilities        |                             | 12   |  | 129.3             |         | 101.8             |        
|Current portion of other long-term liabilities |                             | 12   |  | 4.2               |         | 5.6               |        
|Other current liabilities                      |                             | 9    |  | 505.2             |         | 507.1             |        
|                                               |                             |      |  |                   |         |                   |        
|                                               | Total current liabilities   |      |  |                   | 639.3   |                   | 615.9  
|Term loan facilities                           |                             | 12   |  | 1,163.5           |         | 1,301.3           |        
|Senior subordinated notes                      |                             | 12   |  | 691.1             |         | 685.5             |        
|Other long-term liabilities                    |                             | 12   |  | 13.9              |         | 15.0              |        
|                                               |                             |      |  |                   |         |                   |        
|                                               | Total long-term liabilities |      |  |                   | 1,868.5 |                   | 2,001.8
|Provisions                                     |                             | 10   |  | 259.1             |         | 272.3             |        
|Shareholders' loans                            |                             | 13   |  | 678.3             |         | 628.0             |        
|Minority interests                             |                             | 14   |  | 1.4               |         | 1.3               |        
|Commitments and contingencies                  |                             | 16   |  |                   |         |                   |        
|Shareholders' equity                           |                             |      |  |                   |         |                   |        
|Share capital                                  |                             | 15   |  | 0.8               |         | 0.8               |        
|Additional paid-in capital                     |                             | 15   |  | 152.9             |         | 152.9             |        
|Legal reserve                                  |                             | 15   |  |                  |         |                  |        
|Retained earnings (accumulated deficit)        |                             |      |  | (29.6             | )       | (5.6              | )      
|Accumulated other comprehensive income         |                             |      |  | (45.0             | )       | (24.1             | )      
|                                               |                             |      |  |                   |         |                   |        
|Total Shareholders' equity                     |                             |      |  | 79.1              |         | 124.0             |        
|                                               |                             |      |  |                   |         |                   |        
|                                               |                             |      |  | 3,525.7           |         | 3,643.3           |        
|                                               |                             |      |  |                   |         |                   |        

The accompanying notes are an integral part of these consolidated financial statements.

F-4

---





KAPPA PACKAGING GROUP        CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2003, 2002 and 2001        (€ in
millions)

|                                                                              |                                                                | Year ended,
December 31,
2003 |       | Year ended,
December 31,
2002 |       | Year ended
December 31,
2001 |      
|----------------------------------------------------------------------------- | -------------------------------------------------------------- | ----------------------------- | ----- | ----------------------------- | ----- | ---------------------------- | -----
|Cash flows from operating activities:                                         |                                                                |                               |       |                               |       |                              |      
|Net income/(loss)                                                             |                                                                | (24.0                         | )     | (9.9                          | )     | 11.2                         |      
|Adjustments to reconcile net income to cash provided by operating activities: |                                                                |                               |       |                               |       |                              |      
|                                                                              | Depreciation of tangible fixed assets                          |                               | 181.1 |                               | 187.8 |                              | 152.4
|                                                                              | Amortization of intangible fixed assets                        |                               | 29.2  |                               | 30.7  |                              | 23.6 
|                                                                              | Amortization of finance charges                                |                               | 12.2  |                               | 11.3  |                              | 7.5  
|                                                                              | Share in result of participations                              |                               | (0.4  | )                             | (0.6  | )                            | (0.2 
|                                                                              | Minority interests                                             |                               | 0.1   |                               | 0.2   |                              | 0.2  
|                                                                              | Accretion of Shareholders' loans and senior subordinated notes |                               | 65.7  |                               | 60.0  |                              | 47.1 
|                                                                              | Addition to pension provisions                                 |                               | 10.2  |                               | 8.5   |                              | 7.0  
|                                                                              | Addition to/(release from) deferred tax liabilities            |                               | (23.3 | )                             | (7.9  | )                            | 3.9  
|                                                                              | Addition to/(release from) restructuring and other provisions  |                               | 19.6  |                               | 6.5   |                              | (7.0 
|Changes in operating assets and liabilities:                                  |                                                                |                               |       |                               |       |                              |      
|                                                                              | Inventories                                                    |                               | 19.5  |                               | (18.2 | )                            | 43.1 
|                                                                              | Accounts receivable                                            |                               | 25.3  |                               | 16.6  |                              | 41.3 
|                                                                              | Other receivables                                              |                               | 2.3   |                               | 15.6  |                              | (51.2
|                                                                              | Accounts payable                                               |                               | (6.7  | )                             | 51.8  |                              | (37.1
|                                                                              | Accrued liabilities                                            |                               | 10.2  |                               | (31.4 | )                            | 43.1 
|                                                                              | Paid from restructuring and other provisions                   |                               | (33.2 | )                             | (39.5 | )                            | (42.6
|                                                                              | Paid from pension provisions                                   |                               | (8.3  | )                             | (8.0  | )                            | (6.4 
|                                                                              |                                                                |                               |       |                               |       |                              |      
|Net cash provided by operating activities                                     |                                                                | 279.5                         |       | 273.5                         |       | 235.9                        |      
|Cash flows from investing activities:                                         |                                                                |                               |       |                               |       |                              |      
|Investments, net in tangible fixed assets                                     |                                                                | (141.4                        | )     | (162.1                        | )     | (154.6                       | )    
|Investments, net in intangible fixed assets                                   |                                                                | (2.3                          | )     | (2.3                          | )     | (7.9                         | )    
|Investments, net in other non-current assets                                  |                                                                | (0.6                          | )     | 2.3                           |       | (76.2                        | )    
|Acquisition of Group companies                                                |                                                                | (1.7                          | )     |                              |       | (1,123.2                     | )    
|Disposal of Group companies                                                   |                                                                |                              |       | 0.3                           |       |                             |      
|                                                                              |                                                                |                               |       |                               |       |                              |      
|Net cash used in investing activities                                         |                                                                | (146.0                        | )     | (161.8                        | )     | (1,361.9                     | )    
|                                                                              |                                                                |                               |       |                               |       |                              |      

F-5

---



|Cash flows from financing activities:                |  |        |   |       |   |         |  
|---------------------------------------------------- |  | ------ | - | ----- | - | ------- | -
|Issuance of term loan facilities                     |  |       |   |      |   | 1,505.0 |  
|Repayment of term loan facilities                    |  | (110.2 | ) | (75.5 | ) | (664.0  | )
|Issuance of Shareholders' loans                      |  |       |   |      |   | 299.4   |  
|Issuance of senior subordinated notes                |  | 95.0   |   |      |   | 100.0   |  
|Repayment of senior subordinated notes               |  | (100.0 | ) |      |   |        |  
|Issuance of shares                                   |  |       |   |      |   | 0.6     |  
|Short-term borrowings banks repaid                   |  | (1.2   | ) | (18.6 | ) | (19.2   | )
|Other long-term debt repaid                          |  | (6.3   | ) | (5.6  | ) | (3.4    | )
|                                                     |  |        |   |       |   |         |  
|Net cash provided by/(used in) financing activities  |  | (122.7 | ) | (99.7 | ) | 1,218.4 |  
|                                                     |  |        |   |       |   |         |  
|Net increase/(decrease) in cash and cash equivalents |  | 10.8   |   | 12.0  |   | 92.4    |  
|Cash and cash equivalents beginning of period        |  | 233.6  |   | 217.6 |   | 76.7    |  
|Cash from acquisitions                               |  | 0.3    |   |      |   | 52.7    |  
|Effect of exchange rate changes on cash              |  | (4.0   | ) | 4.0   |   | (4.2    | )
|                                                     |  |        |   |       |   |         |  
|Cash and cash equivalents end of period              |  | 240.7  |   | 233.6 |   | 217.6   |  
|                                                     |  |        |   |       |   |         |  
|Supplemental cash flow information:                  |  |        |   |       |   |         |  
|Interest paid                                        |  | 152.4  |   | 165.9 |   | 155.7   |  
|Income taxes paid/(refund)                           |  | 15.6   |   | 9.4   |   | (3.9    | )
|Non-cash investing and financing transactions:       |  |        |   |       |   |         |  
|Acquisition of assets under capital lease            |  | 2.8    |   | 8.8   |   |        |  

The accompanying notes are an integral part of these consolidated financial statements.

F-6

---



KAPPA PACKAGING GROUP        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYFor the years ended December 31, 2003, 2002 and 2001    
(€ in thousands)

|                             |  | Share
capital |   | Additional
paid-in
capital |  | Legal
reserve |   | Retained
earnings |   | Accumulated
other
comprehensive
income/(loss) |   | Total   |   | Comprehensive
income/(loss) |  
|---------------------------- |  | ------------- | - | -------------------------- |  | ------------- | - | ----------------- | - | --------------------------------------------- | - | ------- | - | --------------------------- | -
|Balance at December 31, 2000 |  | 572           |   | 152,579                    |  |              |   | (6,865            | ) | (4,953                                        | ) | 141,333 |   |                             |  
|Issuance of shares           |  | 258           |   | 322                        |  |              |   |                  |   |                                              |   | 580     |   |                             |  
|Net result for the period    |  |              |   |                           |  |              |   | 11,165            |   |                                              |   | 11,165  |   | 11,165                      |  
|Translation adjustment       |  |              |   |                           |  |              |   |                  |   | (9,388                                        | ) | (9,388  | ) | (9,388                      | )
|Transfers                    |  | (7            | ) |                           |  | 4,307         |   | (4,300            | ) |                                              |   |        |   |                             |  
|                             |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   |                             |  
|Total comprehensive income   |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   | 1,777                       |  
|                             |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   |                             |  
|Balance at December 31, 2001 |  | 823           |   | 152,901                    |  | 4,307         |   |                  |   | (14,341                                       | ) | 143,690 |   |                             |  
|Net result for the period    |  |              |   |                           |  |              |   | (9,945            | ) |                                              |   | (9,945  | ) | (9,945                      | )
|Translation adjustment       |  |              |   |                           |  |              |   |                  |   | (9,713                                        | ) | (9,713  | ) | (9,713                      | )
|Transfers                    |  |              |   |                           |  | (4,300        | ) | 4,300             |   |                                              |   |        |   |                             |  
|                             |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   |                             |  
|Total comprehensive loss     |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   | (19,658                     | )
|                             |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   |                             |  
|Balance at December 31, 2002 |  | 823           |   | 152,901                    |  | 7             |   | (5,645            | ) | (24,054                                       | ) | 124,032 |   |                             |  
|Net result for the period    |  |              |   |                           |  |              |   | (23,956           | ) |                                              |   | (23,956 | ) | (23,956                     | )
|Translation adjustment       |  |              |   |                           |  |              |   |                  |   | (20,958                                       | ) | (20,958 | ) | (20,958                     | )
|                             |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   |                             |  
|Total comprehensive loss     |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   | (44,914                     | )
|                             |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   |                             |  
|Balance at December 31, 2003 |  | 823           |   | 152,901                    |  | 7             |   | (29,601           | ) | (45,012                                       | ) | 79,118  |   |                             |  
|                             |  |               |   |                            |  |               |   |                   |   |                                               |   |         |   |                             |  

The accompanying notes are an integral part of these consolidated financial statements.

F-7

---





KAPPA PACKAGING GROUP    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Basis of presentation

Business

Kappa Holding B.V. (the "Company") and its subsidiaries in which it owns, directly or indirectly, a controlling interest ("the Kappa Packaging Group" or "the
Group"), is headquartered in the Netherlands and is engaged in the manufacturing and marketing of containerboard, solid board, corrugated packaging and solid board packaging across a wide range of
product lines to a broad base of customers. The Group effectively commenced trading under the name "Kappa Packaging" as per June 1, 1998.

On
May 17, 2001, Kappa Packaging completed the acquisition of AssiDomän's containerboard and corrugated packaging business ("Alpha"). Kappa Packaging opted to fully
integrate these businesses into the Group in order to achieve the optimal business and financial effects.

The
Group has manufacturing facilities and sales offices in the Netherlands, Germany, United Kingdom, Belgium, France, Poland, Norway, Czech Republic, the United States of America,
Spain, Italy, Sweden, Denmark, Finland, Slovakia, Russia, Hungary, Lithuania, Switzerland, Norway and South Africa. Substantially all of the Group's sales are realized in Europe. See Note 32
for a summary of subsidiaries.

2.     Summary of significant accounting policies

Basis of preparation

The accompanying consolidated financial statements are presented in euro and have been prepared in accordance with accounting principles generally accepted in the
Netherlands ("Dutch GAAP") on historical cost basis.

These
consolidated financial statements differ in certain respects from the consolidated financial statements and disclosures included in the Kappa Packaging Group Annual Report 2003
furnished to Kappa Packaging Group's shareholders. Among other things, the parent company (Kappa Holding B.V.) balance sheet and income statement and related disclosures are not included in these
consolidated financial statements. In addition, additional footnote disclosures have been added in order for these consolidated financial statements to comply with the reporting and disclosure
requirements of the US Securities and Exchange Commission.

Assets
and liabilities are stated at cost when acquired or incurred unless indicated otherwise.

Where
necessary, the value of assets has been reduced to reflect diminution in value.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the Netherlands requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the year then ending. Actual results may differ from these estimates.

F-8

---



Principles of consolidation

The consolidated financial statements include the accounts of the Company and the companies in which it has a controlling interest ("Group companies"). Group
companies are fully consolidated; minority interests in equity are shown separately.

The
results and cash flows of Group companies and participations acquired or disposed of by the Group have been reflected from respectively until the date that controlling interest
exists. The results of Alpha have been consolidated as from May 17, 2001.

Intercompany
balances, transactions and unrealised profits have been eliminated.

Foreign currenciesTransactions

All transactions in foreign currencies are recorded at the rate of exchange prevailing at the transaction date. Accounts receivable, cash and cash equivalents and
liabilities denominated in foreign currencies are translated at the exchange rates prevailing at the balance sheet date, unless these are reflected in currency forward contracts. In such cases,
valuation takes place using a currency forward rate. Foreign exchange gains and losses resulting from transactions in foreign currencies are included in the profit and loss account, except for those
transactions that are being hedged. Foreign exchange gains and losses arising on trading transactions are taken to operating result; those arising on cash and cash equivalents, current investments and
borrowings are taken to financial items.

Foreign currenciesConsolidation principles

Assets and liabilities of foreign Group companies in currencies other than euro are translated at the rates prevailing at the balance sheet date. Revenues and
expenses of those Group companies are translated at the average exchange rates for the year. Translation gains and losses are recorded directly in accumulated comprehensive income.

Translation
differences arising from long-term loans to group companies are also recorded directly in accumulated comprehensive income.

The
following translation rates against the euro have been used (main currencies only):

|Currency per € |  | December 31, 2003 |  | Average
2003 |  | December 31, 2002 |  | Average
2002 |  | December 31, 2001 |  | Average
2001
|-------------- |  | ----------------- |  | ------------ |  | ----------------- |  | ------------ |  | ----------------- |  | ------------
|SEK            |  | 9.0744            |  | 9.1628       |  | 9.1408            |  | 9.1813       |  | 9.2593            |  | 9.0842      
|GBP            |  | 0.7048            |  | 0.6794       |  | 0.6515            |  | 0.6191       |  | 0.6098            |  | 0.6237      
|USD            |  | 1.2580            |  | 1.0963       |  | 1.0438            |  | 0.9002       |  | 0.8850            |  | 0.9023      
|CZK            |  | 32.3000           |  | 31.6792      |  | 31.5956           |  | 31.2199      |  | 32.0513           |  | 34.4531     
|SKK            |  | 41.4000           |  | 41.5586      |  | 41.3223           |  | 42.6061      |  | 42.7899           |  | 43.4718     

Cash and cash equivalents

The Group considers all highly liquid instruments with maturity of three months or less to be cash and cash equivalents. At December 31, 2003 all cash and
cash equivalents of the Group represents cash held with financial institutions and is freely available to the Company. Cash and cash equivalents included a deposit in an escrow-account of
€5.0 million as at December 31, 2002, which became available to the Group on April 1, 2003. Bank overdrafts are classified under current liabilities.

Accounts receivable

Accounts receivable are stated at face value, less an allowance for bad debts of €22.2 million and €22.2 million at
December 31, 2003 and 2002 respectively. Bad debt expense during the years ended December 31, 2003, 2002 and 2001 were €6.8 million,
€6.7 million and €6.2 million respectively.

F-9

---



Inventories

Inventories are stated at the lower of cost and net realisable value with cost being determined by the first-in first-out ("FIFO") method.
Finished goods inventory and work in progress consists of the cost of raw materials and consumables, labor costs, depreciation, other direct costs and related production overhead. Inventories are
reduced by a provision for obsolescence to reflect diminution in value of €12.8 million and €12.4 million at December 31, 2003 and 2002
respectively. Obsolescence expense during the years ended December 31, 2003, 2002 and 2001 were €2.8 million, €2.9 million and
€(1.4) million respectively.

Tangible fixed assets

Tangible fixed assets are stated at acquisition cost, less accumulated depreciation. These costs include expenditures for major improvements and replacements and
interest costs associated with major construction projects.

Depreciation
is calculated on a straight-line basis, based on acquisition price less residual value and the estimated useful life of the related asset.

The
estimated useful lives are:

|                            |                    | Years
|--------------------------- | ------------------ | -----
|Buildings:                  |                    |      
|                            | Portable buildings |      
|                            | Metal buildings    |      
|                            | Brick buildings    |      
|Plant and equipment         |                    | 1020
|Other tangible fixed assets |                    | 310 

Assets
under construction (until placed in service) and land are not depreciated. When an asset is sold or otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in income (as part of other operating expenses).

Spare
parts that are specifically attributable to certain machines or installations are capitalized. All other spare parts are charged to the profit and loss account as maintenance
expense.

Tangible
fixed assets operated by the Group under financial lease agreements are capitalised, the cost of which has been determined as the lower of the fair value of the leased property
or the sum of the discounted value of future lease payments. The corresponding rental obligations, net of finance charges, are presented under liabilities with the interest element of the finance
charge being taken to income (as part of interest expense, net) over the lease period. Tangible fixed assets acquired under financial lease agreements are depreciated over the lesser of the estimated
useful life of the asset or the lease period.

Intangible fixed assets

Goodwill is recognized on acquisitions and accounted for, using the purchase method, as the excess of the purchase price over the fair value of the net assets
acquired. Goodwill is only recognized on acquisitions after December 31, 1996, when the predecessor of the Group changed its accounting policy related to the treatment of goodwill. Prior to
this date, goodwill was written off directly to equity. Goodwill is now capitalized and amortized on a straight-line basis over its estimated useful life of 40 years. The assessment
of 40 years is based upon the consideration that a permanent advantage is realized mainly because of high entry-barriers to the market.

F-10

---



Software
development costs associated with identified and unique products, which are controlled by the Group and have future economic benefits extending beyond one year, are recognized
as an intangible fixed asset. These costs are amortized using the straight-line method over their useful lives, not exceeding a period of three years.

Other
intangible fixed assets mainly relate to consultancy projects, which we believe will provide a future benefit to the Group. These costs are amortized using the
straight-line method over their estimated useful lives, not exceeding a period of five years.

Impairment of long-lived assets

The carrying values of long-lived assets are reviewed at each balance sheet date, to determine whether there is any indication of impairment. If any
such indication exists, the recoverable amount of the asset is estimated, being the higher of the asset's net selling price and its value in use. The value in use is based on the total of the
discounted cash flows to be derived from that asset. An impairment loss is recognised when the carrying value of an asset exceeds the recoverable amount.

A
previously recognised impairment loss on tangible fixed assets is reversed when there has been a change in the estimates used to determine the recoverable amount.

For
goodwill, a recognised impairment loss is not reversed unless the impairment loss was caused by a specific external event of an exceptional nature that is not expected to recur and
subsequent external events have occurred which reverse the effect of that event.

Other non-current assets

Associated companies, being those companies in which significant influence but not control is exercised over the business and financial policies, are valued to
reflect the Group's share in such companies' equity, determined in accordance with the Group's accounting principles. Other participations, being those companies in which no significant influence is
exercised, are valued at the lower of cost and net realisable value.

Other
non-current assets include participations, receivables with financing characteristics due from participations, deferred tax assets and capitalized financing costs. The
capitalized financing costs are stated at cost and are amortized over the term of the related debt.

Derivative financial instruments

The estimated fair value of derivative financial instruments is determined using quoted market prices, or market pricing models. Gains and losses on derivative
financial instruments that meet the criteria for hedge accounting, including those on terminated contracts, are deferred and included in income in the same period that the hedged transaction is
realized. Realized gains and losses and unrealized losses on instruments not meeting the criteria for hedge accounting treatment are included in income. Any differences between amounts paid or
received on interest rate swap agreements are recognized as adjustments to interest expense over the life of each swap, thereby adjusting the interest rate on the hedged obligation. In the event that
the hedged transaction terminates, the deferred gains or losses on the associated derivative will be recorded in the income statement. Option premiums paid on swaptions are recorded as an asset and
amortized over the life of the swap.

Concentration of credit risk

Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash investments, foreign currency exchange
contracts and trade accounts receivable. The Group places its cash and investments and executes its foreign currency exchange contracts with major commercial banks with investment grade ratings.

F-11

---



Concentration
of credit risk with respect to trade receivables is generally limited due to the large number of customers and their dispersion across geographic areas. Group companies
have to follow strict policies to mitigate the risk of non-performance by customers, including retrieving information about the customer's financial position and credit limits from various
credit rating agencies.

Pension provisions

In general, personnel employed are entitled to pension benefits that supplement state-provided social security benefits. Pension or other retirement plans have
been established in accordance with regulations and practices of the countries in which the plans are located. Most plans are administered by separate pension funds or life insurance companies.

The
benefits of the plans are based primarily on years of service and average or final pay formula. In countries where contributions are made, the amount of the contribution takes
account of increases in pension rights in line with the development of wages and inflation, as well as of the return achieved by the pension funds in excess of the actuarial interest rate.

The
Group operates major pension plans in the Netherlands, United Kingdom, Germany and Sweden. In the Netherlands and United Kingdom mainly defined benefit plans are administered by
separate pension funds, covering substantially all employees in those two countries. The retirement plans in Germany are mainly defined benefit plans and are provided for by the company (book
reserves). In Sweden, the Group operates defined benefit and defined contribution plans. Some of these plans are externally insured, others are provided for by the company (book reserves).

The
provisions for pensions and similar commitments (relating primarily to non-reinsured pension entitlements, past-service premiums falling due in the future and
commitments to former employees), are accrued at an actuarial-determined value.

Deferred tax assets and liabilities

Deferred tax assets and liabilities are established for temporary differences in the valuation of assets and liabilities for reporting and fiscal purposes and for
loss carry forwards.

Deferred
taxes are stated at nominal value and are determined using the local tax rates prevailing on the balance sheet date. Within tax groups, where the exercise periods permit,
deferred tax assets and liabilities are netted. Net deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which unused tax losses
can be utilized and are presented in the balance sheet under "financial fixed assets". Net deferred tax liabilities are presented under "provisions".

Restructuring provisions and other provisions

Restructuring provisions and other provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.

Other
provisions include environmental provisions, maintenance provisions and provisions for claims, disputes and legal proceedings.

Revenue recognition

Net sales represent the invoiced value of deliveries to third parties, less discounts, commissions and sales tax. Sales are recognized when the risk and rewards
of ownership of the product are transferred to the customer, generally meaning that sales are recorded upon shipment of goods to customers in accordance with agreed terms of sale.

F-12

---



Costs
of sales are matched with the related sales.

Other
income and expenses are recorded in the period in which they originate.

Shipping and handling costs

Shipping and handling costs are expensed as incurred. The amounts charged to expense as part of external services during the years ended December 31, 2003,
2002 and 2001 were €242.3 million, €240.3 million and €190.7 million respectively.

Advertising costs

Advertising and promotional costs are expensed as incurred. The amounts charged to expense as part of other operating costs during the years ended
December 31, 2003, 2002 and 2001 were €7.5 million, €9.0 million and €9.3 million respectively.

Research and development

Costs for research and development activities are expensed as incurred, except for software development costs. The amounts charged to operating expenses during
the years ended December 31, 2003, 2002 and 2001 were €4.4 million, €5.3 million and €4.8 million respectively.

Environmental expenditures

Environmental expenditures resulting from the remediation of an existing condition caused by past operations, and which do not contribute to current or future
revenues, are expensed as incurred. The Group provides for environmental expenditures, based on management decisions and current interpretations of environmental laws and regulations, when it is
probable that a present obligation has arisen and the amount of such liability can be reasonably estimated. Provisions are not discounted or reduced for potential recoveries from third parties.

Income from participations

Income from participations include the Group's proportionate share in the results of joint ventures and companies deemed to be associated companies together with
dividends received from other participations.

Income taxes

The amount of income tax included in the statements of income is based upon income before tax in accordance with the prevailing regulations and tax rates, taking
into account timing differences and permanent differences between income for book purposes and for fiscal purposes. Deferred tax assets and liabilities arising from temporary differences between the
value of assets and liabilities for reporting and fiscal purposes are calculated with current income tax rates. Deferred tax assets are also recognized on tax loss carry forwards.

Valuation
allowances are established on deferred tax assets when management estimates that it is more likely than not that the related benefit will not be realized.

Extraordinary income and expense

Extraordinary income and expense include gains and losses that are not related to normal business operations of the Group.

F-13

---



Cash flow statement

The cash flow statement has been prepared applying the indirect method. The cash and cash equivalents in the cash flow statement comprise the balance sheet item
cash and cash equivalents. Cash flows in foreign currencies have been translated at average exchange rates. Exchange differences affecting cash items are shown separately in the cash flow statement.
Income and expenses in respect of interest and taxation on profits are included in the net cash flow from operating activities. The cash flow statement is prepared in compliance with Dutch GAAP.

3.     Acquisitions

In 2003, the Group acquired a small Norwegian corrugated board manufacturer "Grenland Papp AS" and increased its interest in Orko-Pak B.V., a small
corrugated converting plant in the Netherlands, from 50% to 100% for €1.7 million in total, including acquisition expenses, of which the amount allocated to goodwill was
€0.8 million.

In
2001 the Group acquired Alpha, the containerboard and corrugated packaging businesses of AssiDomän. The results of operations of these businesses are included in the
statement of income as from May 17, 2001.

The
acquisition was accounted for using the purchase method of accounting. Accordingly, the cost of the acquisition was allocated to identifiable assets and liabilities based on their
estimated fair values. Total purchase price of the acquisition of Alpha was €1,120.9 million, including acquisition expenses, of which the amount allocated to goodwill was
€218.8 million, after the application of adjustments to the fair market value of €13.5 million in 2002, as a result of which the fair market value
increased from €387.7 million to €401.2 million. Goodwill from the acquisition is amortized on a straight-line basis over 40 years.

In
addition, in 2001 the Group increased its participation in Kappa túrovo a.s., Slovakia, from 94.5% to 98.5% for €2.3 million.

The
allocation of the total purchase price for the acquisitions was as follows:

|                                                      |  | (€ in millions) |  
|----------------------------------------------------- |  | --------------- | -
|Total purchase price                                  |  | 1,116.4         |  
|Acquisition expenses                                  |  | 6.8             |  
|                                                      |  |                 |  
|Total purchase price, including acquisition expenses  |  | 1,123.2         |  
|Less: Liabilities acquired                            |  | (503.2          | )
|                                                      |  |                 |  
|Total purchase price, net of acquired liabilities     |  | 620.0           |  
|Less: Fair market value                               |  | (401.2          | )
|                                                      |  |                 |  
|Excess of total purchase price over fair market value |  | 218.8           |  
|                                                      |  |                 |  
|Goodwill                                              |  | 218.8           |  
|                                                      |  |                 |  

In
order to finance the acquisition of Alpha, the Group raised €1,505.0 million under new Senior Credit Facilities by issuance of Senior Debt,
€100.0 million by issuance of Senior Subordinated Notes, €299.4 million by issuance of Shareholders' loans and €0.6 million by
issuance of ordinary shares.

F-14

---



4.     Other receivables

|                                   |  | December 31, 2003 |  | December 31, 2002
|---------------------------------- |  | ----------------- |  | -----------------
|
|Prepayments and accrued income     |  | 16.6              |  | 19.2             
|Corporate income tax               |  | 3.8               |  | 3.9              
|Other taxation and social security |  | 18.5              |  | 17.9             
|Other                              |  | 13.5              |  | 14.6             
|                                   |  |                   |  |                  
|                                   |  | 52.4              |  | 55.6             
|                                   |  |                   |  |                  

5.     Inventories

|                           |  | December 31, 2003 |  | December 31, 2002
|-------------------------- |  | ----------------- |  | -----------------
|
|Raw materials              |  | 94.3              |  | 105.8            
|Work in progress           |  | 16.4              |  | 18.1             
|Finished goods             |  | 136.9             |  | 144.0            
|Prepayments on inventories |  | 2.3               |  | 4.3              
|                           |  |                   |  |                  
|                           |  | 249.9             |  | 272.2            
|                           |  |                   |  |                  

See
Note 30 for the related inventory obsolescence reserve.

F-15

---



6.     Tangible fixed assets

|                                    |                        | Land  |      | Buildings |       | Plant,
equipment
and other |        | Total   |       
|----------------------------------- | ---------------------- | ----- | ---- | --------- | ----- | -------------------------- | ------ | ------- | ------
|
|At December 31, 2001:               |                        |       |      |           |       |                            |        |         |       
|Cost                                |                        | 154.6 |      | 475.1     |       | 1,408.4                    |        | 2,038.1 |       
|Accumulated depreciation            |                        |      |      | (54.7     | )     | (312.1                     | )      | (366.8  | )     
|                                    |                        |       |      |           |       |                            |        |         |       
|Net book value at December 31, 2001 |                        | 154.6 |      | 420.4     |       | 1,096.3                    |        | 1,671.3 |       
|Changes in net book value:          |                        |       |      |           |       |                            |        |         |       
|                                    | Fair value adjustments |       |     |           | 3.2   |                            |       |         | 3.2   
|                                    | Net investment         |       | 2.3  |           | 6.6   |                            | 153.2  |         | 162.1 
|                                    | Financial leases       |       |     |           | 0.3   |                            | 8.5    |         | 8.8   
|                                    | Transfers              |       |     |           | 18.9  |                            | (13.1  | )       | 5.8   
|                                    | Depreciation           |       |     |           | (27.6 | )                          | (140.2 | )       | (167.8
|                                    | Impairment charges     |       | (1.5 | )         | (6.2  | )                          | (12.3  | )       | (20.0 
|                                    | Translation            |       | 0.1  |           | (5.8  | )                          | (3.0   | )       | (8.7  
|                                    |                        |       |      |           |       |                            |        |         |       
|Net changes                         |                        | 0.9   |      | (10.6     | )     | (6.9                       | )      | (16.6   | )     
|At December 31, 2002:               |                        |       |      |           |       |                            |        |         |       
|Cost                                |                        | 157.0 |      | 492.6     |       | 1,515.6                    |        | 2,165.2 |       
|Accumulated depreciation            |                        | (1.5  | )    | (82.8     | )     | (426.2                     | )      | (510.5  | )     
|                                    |                        |       |      |           |       |                            |        |         |       
|Net book value at December 31, 2002 |                        | 155.5 |      | 409.8     |       | 1,089.4                    |        | 1,654.7 |       
|Changes in net book value:          |                        |       |      |           |       |                            |        |         |       
|                                    | Acquisitions           |       |     |           | 0.1   |                            | 1.3    |         | 1.4   
|                                    | Net investment         |       | 2.7  |           | 9.8   |                            | 128.9  |         | 141.4 
|                                    | Financial leases       |       |     |           |      |                            | 2.8    |         | 2.8   
|                                    | Transfers              |       |     |           | 9.1   |                            | (9.1   | )       |      
|                                    | Depreciation           |       | (0.2 | )         | (32.6 | )                          | (148.3 | )       | (181.1
|                                    | Translation            |       | (1.1 | )         | (5.7  | )                          | (7.9   | )       | (14.7 
|                                    |                        |       |      |           |       |                            |        |         |       
|Net changes                         |                        | 1.4   |      | (19.3     | )     | (32.3                      | )      | (50.2   | )     
|At December 31, 2003:               |                        |       |      |           |       |                            |        |         |       
|Cost                                |                        | 158.7 |      | 502.1     |       | 1,601.8                    |        | 2,262.6 |       
|Accumulated depreciation            |                        | (1.8  | )    | (111.6    | )     | (544.7                     | )      | (658.1  | )     
|                                    |                        |       |      |           |       |                            |        |         |       
|Net book value at December 31, 2003 |                        | 156.9 |      | 390.5     |       | 1,057.1                    |        | 1,604.5 |       
|                                    |                        |       |      |           |       |                            |        |         |       

The
book value of tangible fixed assets held under finance lease amounts to €9.8 million as at December 31, 2003 (2002:
€8.4 million).

F-16

---



7.     Intangible fixed assets

|                                    |                         | Goodwill |       | Software
development
costs |      | Other |      | Total  |      
|----------------------------------- | ----------------------- | -------- | ----- | -------------------------- | ---- | ----- | ---- | ------ | -----
|
|At December 31, 2000:               |                         |          |       |                            |      |       |      |        |      
|Cost                                |                         | 750.9    |       | 1.9                        |      | 5.4   |      | 758.2  |      
|Accumulated amortization            |                         | (48.1    | )     |                           |      | (2.1  | )    | (50.2  | )    
|                                    |                         |          |       |                            |      |       |      |        |      
|Net book value at December 31, 2000 |                         | 702.8    |       | 1.9                        |      | 3.3   |      | 708.0  |      
|Changes in net book value:          |                         |          |       |                            |      |       |      |        |      
|                                    | Additions               |          | 232.3 |                            | 5.7  |       | 2.2  |        | 240.2
|                                    | Amortization            |          | (22.1 | )                          |     |       | (1.5 | )      | (23.6
|                                    | Translation differences |          | 0.2   |                            |     |       |     |        | 0.2  
|                                    |                         |          |       |                            |      |       |      |        |      
|Net changes                         |                         | 210.4    |       | 5.7                        |      | 0.7   |      | 216.8  |      
|At December 31, 2001:               |                         |          |       |                            |      |       |      |        |      
|Cost                                |                         | 983.4    |       | 7.6                        |      | 7.6   |      | 998.6  |      
|Accumulated amortization            |                         | (70.2    | )     |                           |      | (3.6  | )    | (73.8  | )    
|                                    |                         |          |       |                            |      |       |      |        |      
|Net book value at December 31, 2001 |                         | 913.2    |       | 7.6                        |      | 4.0   |      | 924.8  |      
|Changes in net book value:          |                         |          |       |                            |      |       |      |        |      
|                                    | Additions               |          |      |                            | 2.1  |       | 0.2  |        | 2.3  
|                                    | Fair value adjustments  |          | (13.5 | )                          |     |       |     |        | (13.5
|                                    | Amortization            |          | (24.7 | )                          | (3.3 | )     | (2.7 | )      | (30.7
|                                    | Translation differences |          | (0.8  | )                          |     |       |     |        | (0.8 
|                                    |                         |          |       |                            |      |       |      |        |      
|Net changes                         |                         | (39.0    | )     | (1.2                       | )    | (2.5  | )    | (42.7  | )    
|At December 31, 2002:               |                         |          |       |                            |      |       |      |        |      
|Cost                                |                         | 969.1    |       | 9.7                        |      | 2.4   |      | 981.2  |      
|Accumulated amortization            |                         | (94.9    | )     | (3.3                       | )    | (0.9  | )    | (99.1  | )    
|                                    |                         |          |       |                            |      |       |      |        |      
|Net book value at December 31, 2002 |                         | 874.2    |       | 6.4                        |      | 1.5   |      | 882.1  |      
|Changes in net book value:          |                         |          |       |                            |      |       |      |        |      
|                                    | Additions               |          | 1.1   |                            | 1.9  |       | 0.4  |        | 3.4  
|                                    | Disposals               |          |      |                            |     |       | (0.3 | )      | (0.3 
|                                    | Amortization            |          | (24.7 | )                          | (4.0 | )     | (0.5 | )      | (29.2
|                                    | Translation differences |          | (0.7  | )                          |     |       |     |        | (0.7 
|                                    |                         |          |       |                            |      |       |      |        |      
|Net changes                         |                         | (24.3    | )     | (2.1                       | )    | (0.4  | )    | (26.8  | )    
|At December 31, 2003:               |                         |          |       |                            |      |       |      |        |      
|Cost                                |                         | 969.5    |       | 11.5                       |      | 2.4   |      | 983.4  |      
|Accumulated amortization            |                         | (119.6   | )     | (7.2                       | )    | (1.3  | )    | (128.1 | )    
|                                    |                         |          |       |                            |      |       |      |        |      
|Net book value at December 31, 2003 |                         | 849.9    |       | 4.3                        |      | 1.1   |      | 855.3  |      
|                                    |                         |          |       |                            |      |       |      |        |      

F-17

---



The
goodwill movements per reportable segment can be specified as follows:

|                                    |  | Total |   | Paper & Board |   | Packaging |  
|----------------------------------- |  | ----- | - | ------------- | - | --------- | -
|
|Balance at December 31, 2001        |  | 913.2 |   | 772.4         |   | 140.8     |  
|Fair value adjustments acquisitions |  | (13.5 | ) | (3.2          | ) | (10.3     | )
|Amortization                        |  | (24.7 | ) | (21.1         | ) | (3.6      | )
|Translation                         |  | (0.8  | ) | (0.8          | ) |          |  
|                                    |  |       |   |               |   |           |  
|Balance at December 31, 2002        |  | 874.2 |   | 747.3         |   | 126.9     |  
|Acquisitions                        |  | 1.1   |   | 0.3           |   | 0.8       |  
|Amortization                        |  | (24.7 | ) | (21.1         | ) | (3.6      | )
|Translation                         |  | (0.7  | ) | (0.7          | ) |          |  
|                                    |  |       |   |               |   |           |  
|Balance at December 31, 2003        |  | 849.9 |   | 725.8         |   | 124.1     |  
|                                    |  |       |   |               |   |           |  

In
2003, the Group acquired a small Norwegian corrugated board manufacturer "Grenland Papp AS" and increased its interest in Orko-Pak B.V., a small corrugated converting
plant in the Netherlands, from 50% to 100%.

Goodwill
is amortized on a straight-line basis over the estimated useful life of 40 years. Goodwill amortization charges on an annual basis will be approximately
€25 million for the coming five years.

F-18

---



8.     Other non-current assets

|                                    |                            | Financing
Costs |       | Participations |      | Receivables
from
participations |      | Deferred
tax
assets |      | Other
receivables |      | Total |      
|----------------------------------- | -------------------------- | --------------- | ----- | -------------- | ---- | ------------------------------- | ---- | ------------------- | ---- | ----------------- | ---- | ----- | -----
|
|At December 31, 2001:               |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|Cost                                |                            | 97.5            |       | 4.4            |      | 0.4                             |      | 5.7                 |      | 9.9               |      | 117.9 |      
|Accumulated amortization            |                            | (16.3           | )     |               |      |                                |      |                    |      |                  |      | (16.3 | )    
|                                    |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|Net book value at December 31, 2001 |                            | 81.2            |       | 4.4            |      | 0.4                             |      | 5.7                 |      | 9.9               |      | 101.6 |      
|Changes in net book value:          |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|                                    | Additions (cash)           |                 | 0.6   |                |     |                                 |     |                     |     |                   | 0.8  |       | 1.4  
|                                    | Additions (against result) |                 |      |                |     |                                 |     |                     | 6.3  |                   |     |       | 6.3  
|                                    | Redemptions                |                 |      |                |     |                                 |     |                     |     |                   | (3.1 | )     | (3.1 
|                                    | Share of results           |                 |      |                | 0.3  |                                 |     |                     |     |                   |     |       | 0.3  
|                                    | Dividend received          |                 |      |                | (0.5 | )                               |     |                     |     |                   |     |       | (0.5 
|                                    | Amortization               |                 | (11.3 | )              |     |                                 |     |                     |     |                   |     |       | (11.3
|                                    | Transfers                  |                 |      |                | (0.9 | )                               | (0.3 | )                   |     |                   |      |       | (1.2 
|                                    | Translation differences    |                 |      |                |     |                                 |     |                     |     |                   | 0.1  |       | 0.1  
|                                    |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|Net changes                         |                            | (10.7           | )     | (1.1           | )    | (0.3                            | )    | 6.3                 |      | (2.2              | )    | (8.0  | )    
|At December 31, 2002:               |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|Cost                                |                            | 98.1            |       | 3.3            |      | 0.1                             |      | 12.0                |      | 7.7               |      | 121.2 |      
|Accumulated amortization            |                            | (27.6           | )     |               |      |                                |      |                    |      |                  |      | (27.6 | )    
|                                    |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|Net book value at December 31, 2002 |                            | 70.5            |       | 3.3            |      | 0.1                             |      | 12.0                |      | 7.7               |      | 93.6  |      
|Changes in net book value:          |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|                                    | Additions (cash)           |                 | 0.8   |                | 0.2  |                                 |     |                     |     |                   | 1.1  |       | 2.1  
|                                    | Additions (against result) |                 |      |                |     |                                 |     |                     | 21.0 |                   |     |       | 21.0 
|                                    | Acquisitions               |                 |      |                |     |                                 |     |                     |     |                   |     |       |     
|                                    | New consolidation          |                 |      |                | (0.1 | )                               |     |                     |     |                   |     |       | (0.1 
|                                    | Disposals                  |                 |      |                |     |                                 |     |                     |     |                   |     |       |     
|                                    | Redemptions                |                 |      |                |     |                                 | (0.1 | )                   |     |                   | (0.2 | )     | (0.3 
|                                    | Share of results           |                 |      |                | 0.3  |                                 |     |                     |     |                   |     |       | 0.3  
|                                    | Dividend received          |                 |      |                | (0.1 | )                               |     |                     |     |                   |     |       | (0.1 
|                                    | Amortization               |                 | (12.2 | )              |     |                                 |     |                     |     |                   |     |       | (12.2
|                                    | Transfers                  |                 |      |                |     |                                 |     |                     |     |                   | (1.0 | )     | (1.0 
|                                    | Translation differences    |                 |      |                |     |                                 |     |                     |     |                   |     |       |     
|                                    |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|Net changes                         |                            | (11.4           | )     | 0.3            |      | (0.1                            | )    | 21.0                |      | (0.1              | )    | 9.7   |      
|At December 31, 2003:               |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|Cost                                |                            | 98.9            |       | 3.6            |      |                                |      | 33.0                |      | 7.6               |      | 143.1 |      
|Accumulated amortization            |                            | (39.8           | )     |               |      |                                |      |                    |      |                  |      | (39.8 | )    
|                                    |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      
|Net book value at December 31, 2003 |                            | 59.1            |       | 3.6            |      |                                |      | 33.0                |      | 7.6               |      | 103.3 |      
|                                    |                            |                 |       |                |      |                                 |      |                     |      |                   |      |       |      

The
capitalized financing costs relate to the deferred debt issuance costs of the senior subordinated notes and senior credit facilities. During 2001,
€76.5 million of financing costs related to the issuance of new Senior Debt (€1,505.0 million) and Senior Subordinated Notes (€100.0) were
capitalized. The remaining book value as at May 17, 2001 of the capitalized financing costs related to the refinanced Senior Debt issued in 1998 of €22.0 million was
written off against extraordinary items.

F-19

---



Participations
and receivables from participations represent investments in and loans to affiliated companies of which the Group owns a 20%50% interest and are accounted for
under the equity method.

Deferred
tax assets are further detailed in Note 11.

9.     Other current liabilities

|                                 |  | December 31, 2003 |  | December 31, 2002
|-------------------------------- |  | ----------------- |  | -----------------
|
|Accounts payable                 |  | 279.7             |  | 291.3            
|Social charges and taxes payable |  | 36.2              |  | 38.0             
|Other liabilities                |  | 5.3               |  | 9.5              
|Accrued labor costs              |  | 67.5              |  | 61.4             
|Accrued interest expenses        |  | 32.9              |  | 28.8             
|Accrued external services        |  | 30.0              |  | 26.5             
|Other accrued expenses           |  | 53.6              |  | 51.6             
|                                 |  |                   |  |                  
|                                 |  | 505.2             |  | 507.1            
|                                 |  |                   |  |                  

The
amount of income tax included in social charges and taxes payable is €5.6 million as at December 31, 2003 (2002: €4.6 million).

10.   Provisions

|                                   |  | December 31, 2003 |  | December 31, 2002
|---------------------------------- |  | ----------------- |  | -----------------
|
|Accrued pensions                   |  | 115.1             |  | 113.0            
|Deferred tax liabilities           |  | 105.2             |  | 107.3            
|Restructuring and other provisions |  | 38.8              |  | 52.0             
|                                   |  |                   |  |                  
|                                   |  | 259.1             |  | 272.3            
|                                   |  |                   |  |                  

F-20

---



The
movements in provisions are as follows:

|                                    |  | Pensions |   | Deferred
taxation |   | Restructuring |   | Other |   | Total |  
|----------------------------------- |  | -------- | - | ----------------- | - | ------------- | - | ----- | - | ----- | -
|
|At December 31, 2000                |  | 69.5     |   | 64.8              |   | 37.2          |   | 18.1  |   | 189.6 |  
|Acquisitions                        |  | 42.9     |   | 51.3              |   | 67.1          |   | 15.7  |   | 177.0 |  
|Withdrawals                         |  | (6.4     | ) |                  |   | (42.4         | ) | (0.2  | ) | (49.0 | )
|Additions charged to result:        |  |          |   |                   |   |               |   |       |   |       |  
|operating result                   |  | 1.7      |   |                  |   |              |   | (5.2  | ) | (3.5  | )
|net financial items                |  | 5.3      |   |                  |   |              |   |      |   | 5.3   |  
|extraordinary result (before tax)  |  |         |   |                  |   | (1.9          | ) |      |   | (1.9  | )
|income tax                         |  |         |   | 3.9               |   |              |   |      |   | 3.9   |  
|Translation differences             |  | (0.5     | ) | (1.7              | ) | (0.3          | ) |      |   | (2.5  | )
|                                    |  |          |   |                   |   |               |   |       |   |       |  
|At December 31, 2001                |  | 112.5    |   | 118.3             |   | 59.7          |   | 28.4  |   | 318.9 |  
|Fair value adjustments acquisitions |  |         |   | (10.0             | ) | 0.4           |   | (2.6  | ) | (12.2 | )
|Withdrawals                         |  | (8.0     | ) |                  |   | (38.7         | ) | (0.8  | ) | (47.5 | )
|Additions charged to result:        |  |          |   |                   |   |               |   |       |   |       |  
|operating result                   |  | 4.2      |   |                  |   | 11.3          |   | (4.9  | ) | 10.6  |  
|net financial items                |  | 4.2      |   |                  |   |              |   |      |   | 4.2   |  
|income tax                         |  |         |   | (1.5              | ) |              |   |      |   | (1.5  | )
|Transfers to working capital        |  |         |   |                  |   |              |   | (0.8  | ) | (0.8  | )
|Translation differences             |  | 0.1      |   | 0.5               |   |              |   |      |   | 0.6   |  
|                                    |  |          |   |                   |   |               |   |       |   |       |  
|At December 31, 2002                |  | 113.0    |   | 107.3             |   | 32.7          |   | 19.3  |   | 272.3 |  
|Acquisitions                        |  | 0.2      |   |                  |   |              |   |      |   | 0.2   |  
|Withdrawals                         |  | (8.3     | ) |                  |   | (29.2         | ) | (4.0  | ) | (41.5 | )
|Additions charged to result:        |  |          |   |                   |   |               |   |       |   |       |  
|operating result                   |  | 4.5      |   |                  |   | 25.0          |   | (5.3  | ) | 24.2  |  
|net financial items                |  | 5.6      |   |                  |   |              |   |      |   | 5.6   |  
|income tax                         |  |         |   | (2.3              | ) |              |   |      |   | (2.3  | )
|Transfers to working capital        |  |         |   |                  |   |              |   | 0.5   |   | 0.5   |  
|Translation differences             |  | 0.1      |   | 0.2               |   | (0.1          | ) | (0.1  | ) | 0.1   |  
|                                    |  |          |   |                   |   |               |   |       |   |       |  
|At December 31, 2003                |  | 115.1    |   | 105.2             |   | 28.4          |   | 10.4  |   | 259.1 |  
|                                    |  |          |   |                   |   |               |   |       |   |       |  

Deferred
taxes are detailed in Note 11 hereafter.

Details
of the restructuring and other provisions are set out below:

|                         |  | December 31, 2003 |  | December 31, 2002
|------------------------ |  | ----------------- |  | -----------------
|
|Restructuring provisions |  | 28.4              |  | 32.7             
|Other provisions:        |  |                   |  |                  
|Environmental           |  | 5.0               |  | 6.3              
|Insurance               |  |                  |  | 5.0              
|Other                   |  | 5.4               |  | 8.0              
|                         |  |                   |  |                  
|                         |  | 38.8              |  | 52.0             
|                         |  |                   |  |                  

F-21

---



Payments
from restructuring and other provisions for the year ended December 31, 2003 were €33.2 million (2002: €39.5 million).
Payments in 2003 mainly related to the close down of a containerboard production plant in France in the second quarter of 2003 (Kappa Mennecy Paper) and staff reduction programs at various plants
throughout the Group.

In
2003, €25.0 million was added to the restructuring provisions against operating result mainly as a result of the decision to reduce the total number of
employees with 600 and to close down Kappa Mennecy Paper, Kappa túrovo Solid Board and Kappa Moscow. From other provisions, €5.4 million was
released against operating result in 2003 mainly as a result of the release of €5.0 million from the insurance provision against insurance costs (see below).

Included
in the restructuring and other provisions is €26.0 million and €34.8 million, which represents the current portion at
December 31, 2003 and 2002, respectively.

Restructuring

The restructuring provisions mainly relate to provisions for reductions in number of staff.

Environmental

The Group experienced certain environmental costs, which will remediate pursuant to constructive obligations.

Insurance

In 1999, three of the Group's operating plants experienced fire damage. As a result of the damage, a provision was set up in 1999 of
€18.6 million against insurance proceeds received for expected increases in insurance costs for future years related to these damages. The remaining balance as at
December 31, 2002 of €5.0 million is released in 2003.

Other

Other provisions mainly relate to legal matters (2003: €2.5 million and 2002: €5.2 million) and maintenance costs of
gas turbines, which will be incurred about once every three years (2003: €2.2 million and 2002: €2.6 million).

F-22

---



11.   Deferred taxes

Significant components of the Group's deferred tax assets and liabilities are as follows:

|                                     |  | December 31, 2003 |   | December 31, 2002 |  
|------------------------------------ |  | ----------------- | - | ----------------- | -
|
|Deferred tax assets                  |  |                   |   |                   |  
|Operating losses carried forward     |  | 142.4             |   | 119.7             |  
|Less: valuation allowances           |  | (46.9             | ) | (47.8             | )
|                                     |  |                   |   |                   |  
|Net operating losses carried forward |  | 95.5              |   | 71.9              |  
|Other temporary differences          |  | 43.3              |   | 35.0              |  
|                                     |  |                   |   |                   |  
|Total deferred tax assets            |  | 138.8             |   | 106.9             |  
|Deferred tax liabilities             |  |                   |   |                   |  
|Tangible fixed assets                |  | (157.5            | ) | (149.7            | )
|Goodwill                             |  | (21.1             | ) | (28.0             | )
|Other temporary differences          |  | (32.4             | ) | (24.5             | )
|                                     |  |                   |   |                   |  
|Total deferred tax liabilities       |  | (211.0            | ) | (202.2            | )
|                                     |  |                   |   |                   |  
|Net balance deferred taxes           |  | (72.2             | ) | (95.3             | )
|                                     |  |                   |   |                   |  

The
net deferred tax position is presented as follows:

|                           |  | December 31, 2003 |   | December 31, 2002 |  
|-------------------------- |  | ----------------- | - | ----------------- | -
|
|Financial fixed assets     |  | 33.0              |   | 12.0              |  
|Provisions                 |  | (105.2            | ) | (107.3            | )
|                           |  |                   |   |                   |  
|Net balance deferred taxes |  | (72.2             | ) | (95.3             | )
|                           |  |                   |   |                   |  

Net
deferred tax assets have been recognised as it is probable that future taxable profits will be available as a result of a change in the Company's financing structure, against which
unused tax losses can be utilised.

Valuation
allowances have been recognized against operating losses carried forward, after being offset by timing differences, mainly for a German subsidiary and the German and UK holding
companies, since it is uncertain that these net operating losses carried forward will be able to be utilized.

The
Group has operating loss carry forwards as at December 31, 2003 of €488 million (2002: €402 million).

Expiration
is as follows:

|              |  | (€ in millions)
|------------- |  | ---------------
|Limited:      |  |                
| 2004        |  | 1              
| 20052009   |  | 43             
| Beyond 2009 |  | 11             
|Unlimited:    |  | 433            
|              |  |                
|Total         |  | 488            
|              |  |                

F-23

---



12.   Borrowings and Debt

|                                                        |  | December 31, 2003 |   | December 31, 2002 |  
|------------------------------------------------------- |  | ----------------- | - | ----------------- | -
|
|Short-term:                                             |  |                   |   |                   |  
|Bank overdraft under revolving credit facility          |  | 0.6               |   | 1.4               |  
|Long-term:                                              |  |                   |   |                   |  
|Term loan facilities:                                   |  |                   |   |                   |  
|Term A                                                  |  | 547.2             |   | 653.1             |  
|Term B                                                  |  | 372.8             |   | 375.0             |  
|Term C                                                  |  | 372.8             |   | 375.0             |  
|Senior subordinated notes                               |  | 691.1             |   | 685.5             |  
|Other                                                   |  | 9.2               |   | 5.3               |  
|                                                        |  |                   |   |                   |  
|Total long-term loans                                   |  | 1,993.1           |   | 2,093.9           |  
|Other long-term liabilities                             |  | 8.9               |   | 15.3              |  
|                                                        |  |                   |   |                   |  
|Total long-term liabilities                             |  | 2,002.0           |   | 2,109.2           |  
|Current portion of long-term liabilities                |  | (133.5            | ) | (107.4            | )
|                                                        |  |                   |   |                   |  
|Total long-term liabilities (excluding current portion) |  | 1,868.5           |   | 2,001.8           |  
|                                                        |  |                   |   |                   |  

Senior Credit Facilities

The Kappa Packaging Group has senior credit facilities of €1,755.0 million (now €1,542.8 million after redemption
payments). These facilities include €1,505.0 million of term loan facilities, as well as a revolving credit facility, which provides up to an aggregate of
€250.0 million.

All
material fixed assets, accounts receivable, inventories and cash and cash equivalents of the Group are pledged as security on the senior credit facilities. Assets acquired in the
future may be required to be included as additional security on the facilities. The senior credit facility agreement imposes limitations on some financing and investing activities of the Group and
requires adherence to the following financial covenants: interest cover ratios of earnings before interest, income tax, depreciation and amortization ("EBITDA") to senior debt net interest and total
net cash interest; total fixed charge ratios of cash flow to senior debt service and total debt service; a leverage ratio of net borrowings to EBITDA and annual capital expenditures. At
December 31, 2003, the Company was in compliance with all financial covenants.

Term loan facilities ("Senior Debt")

The Group is required to repay the remaining debt of €1,292.8 million as at December 31, 2003 under the term loan facilities based
on the specific repayment terms for each Term. Term A of originally €755.0 million is repayable in escalating semi-annual installments from the years 2001 to 2007;
the outstanding balance as at December 31, 2003 amounts to €547.2 million. The outstanding balances of Term B and Term C as at December 31, 2003, both of about
€372.8 million, are repayable in full on June 30, 2008 and on June 30, 2009 respectively. Prepayments of the facilities are possible, and in certain cases
prepayments of the loans will be required. In 2003, additional mandatory prepayments from excess cash flow had to be made of €8.7 million.

The
applicable interest rates are EURIBOR plus a maximum interest rate spread of 225 basis points on Term A, 275 basis points on Term B and 350 basis points on Term C. Based on an
interest cover ratio, the spread on Term A may be adjusted downwards. The weighted average interest rate for the term loan facilities was 6.8% at December 31, 2003 (2002: 6.6%; 2001: 6.0%). The
interest charge for the year ended December 31, 2003 was €92.5 million (2002: €104.1 million; 2001: €87.6 million).

F-24

---



Revolving credit facility and bank overdrafts

This credit facility is available for general corporate purposes such as letters of credit, short-term cash advances and ancillary facilities. The
letter of credit fee assessed on issued letters of credit under the revolving credit facility is 2.125% at December 31, 2003, the interest rate on the short term cash advances is EURIBOR plus
2.125% and in general no fees are payable on the ancillary facilities.

The
total amount drawn under the revolving credit facility amounts to €50.3 million at December 31, 2003 (2002: €45.5 million) of
which €40.4 million (2002: €37.9 million) for bank overdraft facilities and €9.9 million (2002:
€7.6 million) for a payment guarantee. Under these bank overdraft facilities, short term borrowings of €0.6 million (2002:
€1.4 million) were drawn and bank guarantees were issued to third parties of €7.2 million (2002: €8.1 million). The remaining part
of these bank overdraft facilities of €32.6 million (2002: €28.4 million) is available for short-term borrowings, foreign currency hedging
activities and/or additional bank guarantees.

The
interest charge on short-term borrowings under bank overdraft facilities for the year ended December 31, 2003 was €0.5 million (2002:
€1.4 million; 2001: €4.3 million).

Senior Subordinated Notes

Senior Subordinated Notes (1999)

The Group issued senior subordinated notes on July 23, 1999 in three Terms, all maturing on July 15, 2009. The interest rates are
105/8% for the euro (€370.0 million) and US dollar-denominated senior subordinated notes (€90.3 million) and 121/2% for the
euro-denominated senior subordinated discount notes (€135.8 million). These senior subordinated notes were issued at €544.4 million and for
the accumulated period ended December 31, 2003 a principal of €56.5 million was added to the discount notes.

Interest
on the senior subordinated notes is payable semi-annually on January 15 and July 15. On the senior subordinated discount notes, non-cash
interest shall accrue until July 15, 2004. After this date, interest is payable semi-annually.

The
interest charge on the senior subordinated notes for the year ended December 31, 2003 was €61.7 million (2002: €62.8 million;
2001: €61.2 million).

The
US dollar-denominated senior subordinated discount notes have been valued at year-end, at the hedged forward rate.

Subject
to certain restrictions, the Group can redeem the notes in whole or in part prior to the date of maturity. If an event of default occurs, the holders of the notes can require the
Group to redeem the notes.

The
notes are senior subordinated unsecured indebtedness. The notes rank effectively subordinated to the Group's senior and other indebtedness and rank senior to the Company's
Shareholders' loans.

Senior Subordinated Notes (2001 and 2003)

In May 2003, the Kappa Packaging Group issued senior subordinated notes of €95.0 million of which the proceeds were used to redeem
the 2001 euro-denominated mezzanine notes of €100.0 million issued on May 18, 2001 by Kappa Beheer BV. The warrant issued together with the mezzanine notes
were cancelled.

The
premium received upon the issuance of the new senior subordinated notes of €5.7 million has been accrued as part of the accrued interest expenses, and will be
released to the profit and loss account over the term of the notes; the balance at year-end amounts to €5.1 million.

F-25

---



The
Euro-denominated senior subordinated notes, issued in 2003 of €95.0 million mature on July 15, 2009. The interest rate is
105/8% per year, payable semi-annually.

The
interest charge on the senior subordinated notes 2001 for the year ended December 31, 2003 was €8.0 million, including an early redemption (fee) charge
of €2.0 million (2002: €12.5 million). The interest charge on the senior subordinated notes issued in 2003 for the period ended December 31, 2003
was €6.1 million.

Redemption
can take place for all or part of the notes at any time after July 15, 2004. If the Group sells certain assets or is subject to specific kinds of changes of control,
the Company can be, unless certain conditions are met, required to redeem the notes.

The
notes are senior subordinated unsecured indebtedness. The notes rank effectively subordinated to the Group's senior and other indebtedness and rank senior to the Company's
Shareholders' loans.

Scheduled Maturities

Scheduled maturities of long-term liabilities for the next five years are as follows:

|                    |  | (€ in millions)
|------------------- |  | ---------------
|2004                |  | 133.5          
|2005                |  | 157.7          
|2006                |  | 173.1          
|2007                |  | 95.3           
|2008                |  | 1,065.5        
|2009 and thereafter |  | 376.9          
|                    |  |                
|Total               |  | 2,002.0        
|                    |  |                

13.   Shareholders' loans

In 1998, the Company entered into loans in the amount of €199.7 million due to the CVC entities and Cinven entities. Non-cash
interest at a rate of 9% is and will be accrued on the loan amount until maturity of the loan on December 31, 2010.

During
2001, new loans were entered into in the amount of €299.4 million with CVC, Cinven and Stichting Senior Management Kappa with an interest rate of 7.0%.
Non-cash interest is and will be accrued on the loan amount until maturity of the loan on May 17, 2012, unless agreed upon otherwise.

Interest
expense for the year ended December 31, 2003, 2002 and 2001 was €50.2 million, €46.2 and €34.9 million
respectively.

The
Shareholders' loans and interest accrued thereon are subordinated to the Senior Debt and senior subordinated notes (reference is made to Note 12).

|                       |  | Total book value |  | Accrued interest |  | Contract value
|---------------------- |  | ---------------- |  | ---------------- |  | --------------
|
|9% Shareholders' loans |  | 319.4            |  | 119.7            |  | 199.7         
|7% Shareholders' loans |  | 358.9            |  | 59.5             |  | 299.4         
|                       |  |                  |  |                  |  |               
|                       |  | 678.3            |  | 179.2            |  | 499.1         
|                       |  |                  |  |                  |  |               

14.   Minority interests

Minority interests mainly relate to the shares not owned by Kappa Packaging in Kappa túrovo a.s., Slovakia (1.5%).

F-26

---



15.   Shareholders' equity

The authorized capital of €1.5 million is divided into:

|Number of shares |  | Shares                         |  | Nominal value each
|---------------- |  | ------------------------------ |  | ------------------
|1,500,000        |  | Ordinary shares A              |  | €0.45             
|100,000          |  | Ordinary shares B              |  | €0.11             
|660,000          |  | Ordinary shares C              |  | €0.45             
|40,000           |  | Ordinary shares D              |  | €0.11             
|100,000          |  | Ordinary shares E              |  | €0.45             
|875,000          |  | Cumulative preference shares A |  | €0.45             
|100,000          |  | Cumulative preference shares B |  | €0.45             

During
2003, no shares were issued. As at December 31, 2003, the total number of shares issued and paid-in is 1,907,659, which can be specified as follows:

|Number of Ordinary Shares    |  | Total     |  | Ordinary A |  | Ordinary B |  | Ordinary C |  | Ordinary D
|---------------------------- |  | --------- |  | ---------- |  | ---------- |  | ---------- |  | ----------
|As at December 31, 2003      |  | 1,580,159 |  | 910,600    |  | 89,400     |  | 565,346    |  | 14,813    
|At a nominal value each of € |  |           |  | 0.45       |  | 0.11       |  | 0.45       |  | 0.11      
|Total nominal value (in €)   |  | 675,639   |  | 409,770    |  | 9,834      |  | 254,406    |  | 1,629     

|Number of Preference Shares  |  | Total   |  | Preference A |  | Preference B
|---------------------------- |  | ------- |  | ------------ |  | ------------
|As at December 31, 2003      |  | 327,500 |  | 321,250      |  | 6,250       
|At a nominal value each of € |  |         |  | 0.45         |  | 0.45        
|Total nominal value (in €)   |  | 147,375 |  | 144,562      |  | 2,813       

The
ordinary and preference shares of the Company are beneficially owned by funds advised or managed by Cinven and CVC and the foundation Stichting Senior Management Kappa.

The
Supervisory Board and the Management Board hold interest in a total of 30,114 Ordinary Shares A, 1,803 Preference Shares B and 15,152 Ordinary Shares C of the Company. These shares
are held through Stichting Senior Management Kappa or through funds advised or managed by Cinven or CVC.

Ordinary shares

The nominal value of the ordinary shares A is €0.45 per share and the nominal value of the ordinary shares B is €0.11 per share.
The shares were issued based upon the cash value of the ordinary shares A of €4.54 per share and of the ordinary shares B of €4.54 per share, which resulted in
additional paid-in capital of €4.1 million. Holders of the ordinary shares are entitled to ordinary dividends declared by the Company, whereby the nominal value of
each share increased with premium paid to that share is decisive.

The
nominal value of the ordinary shares C is €0.45 per share and of the nominal value of ordinary shares D is €0.11 per share. The shares were issued
based upon the cash value of the ordinary shares C of €1.00 per share and of the ordinary shares D of €1.00 per share, which resulted in additional paid-in
capital of €0.3 million. Holders of the ordinary shares are entitled to any ordinary dividends declared by the Company, whereby the nominal value of each share increased with
premium paid to that share is decisive.

Cumulative preference shares

The Company issued, for an amount of €453.78 per share, cumulative preference shares A and B of €0.45 par value, which resulted in
additional paid-in capital of €148.5 million.

F-27

---



Provided
that the Company's equity is larger than the amount of the paid-in and called-up share capital plus the reserves which are required to be maintained by
law or the articles of association, each holder of cumulative preference shares is entitled to an annual preference dividend of 6.0% of the sum of the nominal value of the shares held by him, the
premium paid on them and a possible deficit as described below.

Insofar
as the Company is not permitted to make distributions of the cumulative preference dividend referred to above, the holders of cumulative preference shares shall be paid the
following:



If
in any year the holders of any class of cumulative preference shares are not paid the full amount to which they are entitled, the deficit will still be paid to the shareholders
concerned, charged to the profit of a following year or following years, before any other distribution of profits is made to shareholders, and always in such a manner that first all holders of
cumulative preference shares A and then holders of cumulative preference shares B will be paid the amount due to them.

No
dividends have been issued to date; however, the dividends have accumulated. As at December 31, 2003, the accumulated dividend claim of the holders' of the cumulative
preference A and B shares amounts to €55.5 million (2002: €44.0 million).

Unless
previously purchased (in the framework of a listing or sale) and except to the extent that the statutory requirements or the terms of the Company's financing arrangements prevent
the Company from doing so, the shareholders of the Company have agreed to procure that the Company shall redeem or repurchase the cumulative preference shares in three equal tranches in 2009, 2010 and
2011.

Legal reserve

On December 28, 2001, the face value of all shares was denominated from NLG to EUR value. This resulted in a decrease in the issued and paid-in
share capital of €7 thousand for which a legal reserve has been made.

When
positive retained earnings are realized, a legal reserve has to be set up related to capitalized development costs in the amount of €4.2 million as per the
position at December 31, 2003 (2002: €6.4 million).

F-28

---



16.   Commitments and contingencies

Lease commitments

The Group leases certain plant facilities and equipment under non-cancelable financial and operating leases. Future minimum lease payments under all
non-cancelable financial and operating leases at December 31, 2003 are as follows:

|                    |  | Operational lease |  | Financial lease
|------------------- |  | ----------------- |  | ---------------
|
|2004                |  | 15.3              |  | 3.4            
|2005                |  | 11.8              |  | 3.0            
|2006                |  | 8.5               |  | 1.6            
|2007                |  | 6.3               |  | 0.5            
|2008                |  | 4.8               |  | 0.2            
|2009 and thereafter |  | 31.8              |  | 0.2            
|                    |  |                   |  |                
|Total               |  | 78.5              |  | 8.9            
|                    |  |                   |  |                

Lease
expenses for non-cancelable leases and other operating leases charged to the income statement during the periods ended December 31, 2003, December 31,
2002 and December 31, 2001 were €38.5 million, €34.5 million and €32.0 million respectively.

Purchase commitments

Purchase, repurchase and other commitments at December 31, 2003 are as follows:

|                                |  | (€ in millions)
|------------------------------- |  | ---------------
|Within 1 year                   |  | 1.0            
|After 1 year but within 5 years |  |               
|After 5 years                   |  | 2.6            
|                                |  |                
|Total                           |  | 3.6            
|                                |  |                

Capital expenditure commitments

The Group has commitments to acquire plant and machinery amounting to €12.3 million at December 31, 2003 (2002:
€17.0 million).

Guarantees

Under the revolving credit facility, the Group has bank guarantees issued to third parties (rental guarantees, credit guarantees, social security taxes) for a
total amount of €7.2 million at December 31, 2003 (2002: €8.1 million).

17.   Risks and uncertainties

The Group is exposed to commodity risk for recovered paper and wood. The Group provided some protection against any shortage of supply of recovered paper through
the Group's own collection centers, which satisfy about one third of the Group's overall recovered paper requirements, and by increasing strategic stock levels together with increased
long-term supply contracts. In respect of wood supply, the Group provided some protection against any shortage through the Group's wood and wood chip supply contract entered into with the
forestry division of AssiDomän (now owned by Sveaskog).

F-29

---



Management
believes it has adequately provided for the collection risk on the Group's accounts receivable by recording an allowance for doubtful accounts, which reduces such amounts to
their net realizable value.

The
Group is exposed to credit risk in the event of non-performance by counterparties to interest rate swap agreements and forward currency contracts. However, because the
Group deals only with major commercial banks with investment grade ratings, it does not anticipate non-performance by any of these counterparties. The Group has deposited its cash and cash
equivalents with reputable financial institutions and believes the risk of loss to be remote. Customers expose the Group to credit risk as well. However, group companies have to follow strict policies
to mitigate the risk of non-performance by customers, including retrieving information about the customer's financial position and credit limits from various credit rating agencies.

The
Group is exposed to market risk in the form of foreign exchange rates and interest rate risks. The Group entered into an interest rate swap in order to limit exposure to fluctuation
in interest rates.

The
Group is exposed to movements in the euro currency exchange rate against mainly the US dollar, British pound sterling, Swiss Francs, Slovak Koruna, Swedish Krona, Norwegian Kroner,
South African Rand and Danish Krone and on cash and cash equivalents, accounts receivables and accounts payables denominated in currencies other than the euro. The Group uses foreign currency forward
contracts to reduce the exposure of foreign denominated sales commitments to exchange rate movements between the date of entering into the transaction and the date the transaction is settled. The
Group is also exposed to foreign currency fluctuations on its net investments in subsidiaries in non-euro countries.

F-30

---



18.   Financial instruments

|                                               |  | December 31, 2003 |  | December 31, 2002 | 
|---------------------------------------------- |  | ----------------- |  | ----------------- | 
|
|
|Long-term debt:                                |  |                   |  |                   | 
|Variable rate debt:                            |  |                   |  |                   | 
|Term Loan Facilities (Tranche A, B and C)      |  |                  |  | 1,292.8           | 
|Fixed rate debt:                               |  |                   |  |                   | 
|Shareholders' loans                            |  |                  |  | 678.3             | 
|Senior Subordinated Notes issued 1999          |  |                  |  | 596.1             | 
|Senior Subordinated Notes issued 2001          |  |                  |  |                  | 
|Senior Subordinated Notes issued 2003          |  |                  |  | 95.0              | 
|Derivative contracts:                          |  |                   |  |                   | 
|Interest derivates:                            |  |                   |  |                   | 
|Interest rate swap                             |  | 1,145.0           |  |                  | 
|Currency contracts sales:                      |  |                   |  |                   | 
|Receive CHF, pay €                             |  | 0.7               |  |                  | 
|Receive CZK, pay €                             |  |                  |  |                  | 
|Receive NOK, pay €                             |  | 1.5               |  |                  | 
|Receive SEK, pay €                             |  | 110.6             |  |                  | 
|Receive SKK, pay €                             |  | 20.6              |  |                  | 
|Receive US$, pay €                             |  | 7.7               |  |                  | 
|Receive GBP, pay €                             |  | 1.1               |  |                  | 
|Pay CZK, receive €                             |  |                  |  |                  | 
|Pay GBP, receive €                             |  | 13.1              |  |                  | 
|Pay NOK, receive €                             |  | 8.3               |  |                  | 
|Pay PLN, receive €                             |  |                  |  |                  | 
|Pay SEK, receive €                             |  |                  |  |                  | 
|Pay US$, receive €                             |  | 20.2              |  |                  | 
|Pay CHF, receive €                             |  | 0.6               |  |                  | 
|Pay ZAR, receive €                             |  | 1.8               |  |                  | 
|Pay SKK, receive €                             |  | 1.7               |  |                  | 
|Pay SEK, receive GBP                           |  |                  |  |                  | 
|Receive SEK, pay DKK                           |  | 3.4               |  |                  | 
|Receive SEK, pay GBP                           |  | 8.8               |  |                  | 
|Receive SEK, pay NOK                           |  |                  |  |                  | 
|Receive SEK, pay US$                           |  | 2.3               |  |                  | 
|Currency contracts USD senior notes:           |  |                   |  |                   | 
|Pay €, receive US$                             |  | 90.3              |  |                  | 
|Currency options:                              |  |                   |  |                   | 
|Pay €, receive US$                             |  |                  |  |                  | 
|Capitalized option premium on currency options |  |                  |  | 0.4               | 
|Currency swaps:                                |  |                   |  |                   | 
|Pay €, receive US$                             |  | 9.7               |  |                  | 

F-31

---



Fair Values

Fair values of cash equivalents, short-term debt, and other short-term financial instruments approximate cost. The fair value of fixed
rate long-term debt is based on interest rates that are currently available to the Group for issues of debt with similar terms and remaining maturities. The fair values of the
Shareholders' loans have been determined by means of the discounted cash flow method. The interest rate used is based on actual interest rates at year-end 2003 and 2002, including a risk
mark-up determined at the date of issuance of the loans (167 basis points).

The
carrying value of variable rate debt approximates fair value. The estimated fair value of the Group's interest and currency derivatives is based upon market rates at
December 31, 2003 for similar financial instruments with like maturities.

Interest derivatives

The Group has entered into a floatingfixed interest rate swap agreement to reduce the impact of changes in interest rates on its Senior Debt,
maturing on June 30, 2004. The notional principal amount of the swap agreement was €1,004 million and was decreasing in line with the decreasing principal on the Senior
Debt to €868 million as at December 31, 2003. This agreement effectively converted the EURIBOR element of the interest on the Senior Debt from variable to a fixed rate of
4.69%. In 2003, the Group entered into an opposite fixedfloating interest rate swap, maturing on June 30, 2004 to offset the existing floatingfixed interest rate swap
agreement. At the same time, the Group entered into a new floatingfixed interest rate swap agreement. The notional principal amount of the swap agreement is
€1,145 million and is decreasing in line with the decreasing principal on the Senior Debt and will mature on June 30, 2007. This new agreement effectively converts the
EURIBOR element of the interest on the Senior Debt from variable to a fixed rate of 3.67%.

Currency contracts

Currency instruments are used to hedge against exchange rate risks resulting from business activities and financing arrangements in foreign currencies. No
speculative positions are entered into.

Currency
forward contracts with terms of up to one year are entered into to fix the rate of exchange on foreign currency sales denominated in US Dollars, British Pounds, Czech Koruna,
Swiss Francs, Slovak Koruna, Swedish Krona, Norwegian Kroner, South African Rand and Danish Krone.

In
2003, currency call options were sold, which will mature on July 13, 2004, to offset the currency call options bought to hedge the currency risk on the USD senior notes
principal, which will mature on July 15, 2004, in order to take the benefit from the developments of the US Dollar/Euro exchange rate. The currency call options bought were replaced by currency
forward contracts entered into to hedge the currency risk on the USD senior notes principal, which also will mature on July 15, 2004.

Currency
coupon swaps have been entered into to hedge the future USD interest payments on the USD senior subordinated notes.

19.   Related party transactions

Stichting Senior Management Kappa

Stichting Senior Management Kappa is a foundation established to hold the Kappa Holding B.V., shares on behalf of members of senior management of the Group.
Stichting Senior Management Kappa owns 8.4% of the voting rights of the Company.

Stichting
Senior Management holds 100,000 Ordinary Shares A, 6,250 Preference Shares B and 46,413 Ordinary Shares C of the Company at December 31, 2003.

F-32

---



Stichting
Senior Management Kappa provided €2.3 million subordinated loan financing to Kappa Holding B.V. at December 31, 2003. The principal amount of the
loan plus interest compounded and accrued thereon is due to be repaid as of May 17, 2012, unless otherwise agreed. Interest is fixed at a rate of 7% per annum.

Kappa
Packaging Nederland Holding B.V. provided in total €858,925 to Stichting Senior Management Kappa as at December 31, 2003 (2002: €583,332),
which was used to re-purchase shares from departing management, or to finance shares kept in reserve.

Cinven Limited and CVC Capital Partners

Cinven Limited and CVC Capital Partners, the equity sponsors, provided €199.7 million in loan financing effective July 23, 1998. The
principal amounts of the loan plus interest compounded and accrued thereon (€319.4 million at December 31, 2003) is due to be repaid on December 31, 2010. Interest
is fixed at a rate of 9% per annum.

Effective
May 17, 2001, Cinven Limited and CVC Capital Partners provided an additional €297.1 million in loan financing in connection with the acquisition
of Alpha. The principal amount of the loan plus interest compounded and accrued thereon (€356.1 million at December 31, 2003) is due to be repaid as of May 17,
2012, unless otherwise agreed. Interest is fixed at a rate of 7% per annum.

Cinven
Limited and CVC Capital Partners receive annual management fees of €250,000 each from the Group in relation to on-going services. The total management
fee for the year 2003 amounts to €500,000 (2002: €500,000).

20.   Personnel data

|                                   |  | Year ended December 31, 2003 |  | Year ended December 31, 2002 |  | Year ended December 31, 2001
|---------------------------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|
|Labor costs                        |  |                              |  |                              |  |                             
|Wages and salaries                 |  | 501.8                        |  | 509.8                        |  | 420.7                       
|Social charges                     |  | 98.9                         |  | 98.6                         |  | 78.3                        
|Pension expense                    |  | 33.8                         |  | 22.6                         |  | 12.1                        
|Other personnel cost               |  | 47.7                         |  | 54.9                         |  | 50.8                        
|                                   |  |                              |  |                              |  |                             
|                                   |  | 682.2                        |  | 685.9                        |  | 561.9                       
|Exceptional restructuring expenses |  | 20.4                         |  | 12.0                         |  |                            
|                                   |  |                              |  |                              |  |                             
|                                   |  | 702.6                        |  | 697.9                        |  | 561.9                       
|                                   |  |                              |  |                              |  |                             

In
the fourth quarter of 2002, a restructuring provision was set up in the amount of €12.0 million due to the decision to reduce the total number of employees by
approximately 400.

In
2003, an additional restructuring provision was set up in the amount of €20.4 million related to management's decision to reduce the number of employees by 600
close down of Kappa Mennecy Paper, Kappa túrovo Solid Board and Kappa Moscow.

F-33

---



Number
of personnel analyzed by geographical area is as follows:

|                                       |  | Year ended December 31, 2003 |  | Year ended December 31, 2002 |  | Year ended December 31, 2001
|-------------------------------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|The Netherlands                        |  | 3,483                        |  | 3,620                        |  | 3,766                       
|Germany                                |  | 2,919                        |  | 3,030                        |  | 3,060                       
|United Kingdom                         |  | 1,010                        |  | 1,063                        |  | 801                         
|Nordic & Central Europe                |  | 5,163                        |  | 5,285                        |  | 3,724                       
|Belgium                                |  | 696                          |  | 723                          |  | 392                         
|Italy & Spain                          |  | 1,200                        |  | 1,204                        |  | 733                         
|France                                 |  | 1,407                        |  | 1,467                        |  | 1,022                       
|Switzerland                            |  | 168                          |  | 180                          |  | 126                         
|Other                                  |  | 62                           |  | 54                           |  | 4                           
|                                       |  |                              |  |                              |  |                             
|Total (average, full-time equivalents) |  | 16,108                       |  | 16,626                       |  | 13,628                      
|                                       |  |                              |  |                              |  |                             

Number
of personnel analyzed by activity:

|                                       |  | Year ended December 31, 2003 |  | Year ended December 31, 2002 |  | Year ended December 31, 2001
|-------------------------------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|Paper & Board                          |  | 4,057                        |  | 4,238                        |  | 3,729                       
|Packaging                              |  | 11,888                       |  | 12,223                       |  | 9,770                       
|Corporate                              |  | 163                          |  | 165                          |  | 129                         
|                                       |  |                              |  |                              |  |                             
|Total (average, full-time equivalents) |  | 16,108                       |  | 16,626                       |  | 13,628                      
|                                       |  |                              |  |                              |  |                             

21.   Other operating costs

|                                   |  | Year ended
December 31, 2003 |  | Year ended
December 31, 2002 |  | Year ended
December 31, 2001
|---------------------------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|
|Rent and lease                     |  | 38.5                         |  | 34.5                         |  | 32.0                        
|General management expenses        |  | 71.5                         |  | 81.5                         |  | 69.9                        
|Other operating expenses           |  | 69.7                         |  | 81.8                         |  | 34.0                        
|                                   |  |                              |  |                              |  |                             
|                                   |  | 179.7                        |  | 197.8                        |  | 135.9                       
|Exceptional restructuring expenses |  | 3.6                          |  |                             |  |                            
|                                   |  |                              |  |                              |  |                             
|                                   |  | 183.3                        |  | 197.8                        |  | 135.9                       
|                                   |  |                              |  |                              |  |                             

General
management expenses include office expenses, communication costs, automation costs, travelling costs and consultancy fees.

Other
operating expenses consist of amongst others, insurance fees, advertising and promotional expenses.

In
2003, an additional restructuring provision was set up in the amount of €3.6 million related to the close down of Kappa Mennecy Paper, Kappa
túrovo Solid Board and Kappa Moscow.

F-34

---



22.   Depreciation, amortization and impairment charges

|                                                    |  | Year ended December 31, 2003 |  | Year ended December 31, 2002 |  | Year ended December 31, 2001
|--------------------------------------------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|
|Depreciation and amortization                       |  |                              |  |                              |  |                             
|Goodwill                                            |  | 24.7                         |  | 24.7                         |  | 22.1                        
|Other intangible fixed assets                       |  | 4.5                          |  | 6.0                          |  | 1.5                         
|Land and buildings                                  |  | 32.8                         |  | 27.6                         |  | 24.2                        
|Plant, equipment and other tangible fixed assets    |  | 148.3                        |  | 140.2                        |  | 128.2                       
|                                                    |  |                              |  |                              |  |                             
|                                                    |  | 210.3                        |  | 198.5                        |  | 176.0                       
|Impairment charges                                  |  |                              |  |                              |  |                             
|Land and buildings                                  |  |                             |  | 7.7                          |  |                            
|Plant and equipment and other tangible fixed assets |  |                             |  | 12.3                         |  |                            
|                                                    |  |                              |  |                              |  |                             
|                                                    |  |                             |  | 20.0                         |  |                            
|                                                    |  |                              |  |                              |  |                             
|Total                                               |  | 210.3                        |  | 218.5                        |  | 176.0                       
|                                                    |  |                              |  |                              |  |                             

Additional
depreciation charges of €7.8 million were made in 2003 related to the close down of Kappa Mennecy Paper, Kappa túrovo
Solid Board and Kappa Moscow.

Based
on an impairment test performed during 2002, an impairment charge was made against certain assets in the Packaging segment to reflect their present value. The impairment was
calculated with a discount rate of 8.4% using the discounted cashflow method for each of the four reporting units, being: Containerboard and Solid Board within the Paper & Board segment and
Corrugated Packaging and Solid Board Packaging within the Packaging segment. The impairment charge has been allocated to the tangible fixed asset categories on a pro-rata basis.

23.   Interest expense, net and capitalized interest

|                                        |  | Year ended December 31, 2003 |   | Year ended December 31, 2002 |   | Year ended December 31, 2001 |  
|--------------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- | -
|
|Interest income                         |  | (5.5                         | ) | (8.0                         | ) | (10.0                        | )
|Interest expense                        |  | 180.9                        |   | 188.7                        |   | 170.4                        |  
|Amortization of deferred finance charge |  | 12.2                         |   | 11.3                         |   | 7.5                          |  
|Interest capitalized                    |  |                             |   |                             |   | (0.1                         | )
|                                        |  |                              |   |                              |   |                              |  
|Interest expense, net                   |  | 187.6                        |   | 192.0                        |   | 167.8                        |  
|                                        |  |                              |   |                              |   |                              |  

Interest
is capitalized on long-term construction projects and is included in tangible fixed assets.

F-35

---



24.   Income taxes

|                                    |  | Year ended December 31, 2003 |   | Year ended December 31, 2002 |   | Year ended December 31, 2001 |  
|----------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- | -
|
|Income before tax on:               |  |                              |   |                              |   |                              |  
|Ordinary activities                 |  | (30.8                        | ) | (15.7                        | ) | 43.4                         |  
|Extraordinary items                 |  |                             |   |                             |   | (20.1                        | )
|                                    |  |                              |   |                              |   |                              |  
|Total income before tax             |  | (30.8                        | ) | (15.7                        | ) | 23.3                         |  
|                                    |  |                              |   |                              |   |                              |  
|The Netherlands                     |  | (62.1                        | ) | (39.3                        | ) | (5.6                         | )
|Foreign                             |  | 31.3                         |   | 23.6                         |   | 28.9                         |  
|                                    |  |                              |   |                              |   |                              |  
|                                    |  | (30.8                        | ) | (15.7                        | ) | 23.3                         |  
|                                    |  |                              |   |                              |   |                              |  
|Income tax expenses/(benefits) on:  |  |                              |   |                              |   |                              |  
|Income tax from ordinary activities |  | (6.5                         | ) | (5.4                         | ) | 19.1                         |  
|Income tax from extraordinary items |  |                             |   |                             |   | (7.0                         | )
|                                    |  |                              |   |                              |   |                              |  
|Total income tax expenses           |  | (6.5                         | ) | (5.4                         | ) | 12.1                         |  
|                                    |  |                              |   |                              |   |                              |  
|The Netherlands                     |  | (21.9                        | ) | (9.4                         | ) | (2.2                         | )
|Foreign                             |  | 15.4                         |   | 4.0                          |   | 14.3                         |  
|                                    |  |                              |   |                              |   |                              |  
|                                    |  | (6.5                         | ) | (5.4                         | ) | 12.1                         |  
|                                    |  |                              |   |                              |   |                              |  
|Current                             |  | 12.3                         |   | 2.5                          |   | 7.8                          |  
|Deferred                            |  | (18.8                        | ) | (7.9                         | ) | 4.3                          |  
|                                    |  |                              |   |                              |   |                              |  
|                                    |  | (6.5                         | ) | (5.4                         | ) | 12.1                         |  
|                                    |  |                              |   |                              |   |                              |  

Taxation
is calculated in accordance with the relevant tax laws and certain agreements made between the Group and the respective tax authorities.

The
effective tax rate for the year can be specified as follows:

|                                  |  | Year ended December 31, 2003 |   | Year ended December 31, 2002 |   | Year ended December 31, 2001 |  
|--------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- | -
|Ordinary result before taxes      |  | (30.8                        | ) | (15.7                        | ) | 43.4                         |  
|Tax charge                        |  | 6.5                          |   | 5.4                          |   | (19.1                        | )
|Effective tax rate                |  | 21.3                         | % | 34.3                         | % | 44.2                         | %
|Extraordinary result before taxes |  |                             |   |                             |   | (20.1                        | )
|Tax charge                        |  |                             |   |                             |   | 7.0                          |  
|Effective tax rate                |  |                             |   |                             |   | 35.0                         | %

The
effective tax rate on result from ordinary operations was 21.3% in 2003, compared to 34.3% and 44.2% in 2002 and 2001 respectively. The weighted average statutory tax rate on a
consolidated basis was approximately 32.8% for 2003, 31.4% for 2002 and 30.9% for 2001.

The
difference between the effective tax rate and the weighted average statutory tax rate for the years 2003, 2002 and 2001 respectively is mainly the result of permanent differences
including non-deductible goodwill, non-deductable interest and other non-tax deductible expenses. In addition, income taxes in 2002 were positively influenced by
the recognition of operating losses carried forward from prior years.

F-36

---



25.   Extraordinary items

|                               |  | Year ended December 31, 2003 |  | Year ended December 31, 2002 |  | Year ended December 31, 2001 |  
|------------------------------ |  | ---------------------------- |  | ---------------------------- |  | ---------------------------- | -
|
|Extraordinary items before tax |  |                             |  |                             |  | (20.1                        | )
|Tax benefit/(charge)           |  |                             |  |                             |  | 7.0                          |  
|                               |  |                              |  |                              |  |                              |  
|                               |  |                             |  |                             |  | (13.1                        | )
|                               |  |                              |  |                              |  |                              |  

The
extraordinary loss of €13.1 million, net of taxation, in 2001, was the result of the write off of capitalized finance charges
(€14.3 million, net of taxation), related to the Senior Debt issued in 1998, which was replaced by new Senior Debt following the acquisition of Alpha and the release of
restructuring and other provisions following the implementation of changes in Dutch generally accepted accounting principles as per January 1, 2001 (€1.2 million, net of
taxation).

26.   Remuneration and loans to the Management Board and Supervisory Board

The remuneration of the members of the Management Board, including salaries, bonuses and pension charges amounted to €2,350,116 in 2003 (2002:
€2,978,000; 2001: €2,940,000 including members who resigned during 2001).

The
members of the Supervisory Board, excluding one member, do not receive any fees from the Group for serving as a member. The aggregate amount of compensation paid to all of our
Supervisory Board members as a group (five persons) for the year ended December 31, 2003 was €45,378 (2002: €45,378). There were no pension charges.

At
December 31, 2003, no loans were outstanding to any member of the Management Board or the Supervisory Board from any member of the Group.

The
Supervisory Board determines the remuneration of the members of the Management Board, any entitlement to a bonus and the other conditions of appointment for each member of the
Management Board separately.

27.   Segmentation

The operations of Kappa Packaging consist of two reportable segments: the Paper and Board segment ("Paper & Board") and the corrugated and solid board
Packaging segment ("Packaging"). The Paper & Board segment uses wood and recovered paper to produce containerboard and solid board for Packaging, as well as specialty and graphic board. The
Packaging segment uses containerboard and solid board for packaging as raw material inputs for the production and sale of corrugated containers and solid board packaging. The results of each segment
are reported to the Supervisory Board on a monthly basis.

Corporate
items are not allocated to the segments and include costs incurred by the Corporate Head Office as well as costs and assets relating to country holding companies.

F-37

---



Reportable Segments

|                                                          |  | Paper &
Board |   | Packaging |   | Total
reportable
segments |   | Eliminations |   | Corporate
Items |   | Total   |  
|--------------------------------------------------------- |  | ------------- | - | --------- | - | ------------------------- | - | ------------ | - | --------------- | - | ------- | -
|
|Year ended December 31, 2003                              |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|Sales, external                                           |  | 624.1         |   | 2,217.6   |   | 2,841.7                   |   |             |   |                |   | 2,841.7 |  
|Sales to other reportable segments                        |  | 601.7         |   | 1.1       |   | 602.8                     |   | (602.8       | ) |                |   |        |  
|                                                          |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|                                                          |  | 1,225.8       |   | 2,218.7   |   | 3,444.5                   |   | (602.8       | ) |                |   | 2,841.7 |  
|                                                          |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|Operating result                                          |  | 116.3         |   | 119.7     |   | 236.0                     |   |             |   | (29.0           | ) | 207.0   |  
|Depreciation tangible fixed assets                        |  | (92.9         | ) | (84.1     | ) | (177.0                    | ) |             |   | (4.1            | ) | (181.1  | )
|Amortization intangible fixed assets                      |  | (21.1         | ) | (8.1      | ) | (29.2                     | ) |             |   |                |   | (29.2   | )
|Goodwill                                                  |  | 725.8         |   | 124.1     |   | 849.9                     |   |             |   |                |   | 849.9   |  
|Assets(1)                                                 |  | 1,006.8       |   | 1,337.5   |   | 2,344.3                   |   |             |   | 294.6           |   | 2,638.9 |  
|Capital expenditures                                      |  | 58.3          |   | 78.2      |   | 136.5                     |   |             |   | 4.9             |   | 141.4   |  
|Year ended December 31, 2002                              |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|Sales, external                                           |  | 665.2         |   | 2,258.6   |   | 2,923.8                   |   |             |   |                |   | 2,923.8 |  
|Sales to other reportable segments                        |  | 630.0         |   | (0.2      | ) | 629.8                     |   | (629.8       | ) |                |   |        |  
|                                                          |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|                                                          |  | 1,295.2       |   | 2,258.4   |   | 3,553.6                   |   | (629.8       | ) |                |   | 2,923.8 |  
|                                                          |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|Operating result                                          |  | 176.3         |   | 77.4      |   | 253.7                     |   |             |   | (31.2           | ) | 222.5   |  
|Depreciation tangible fixed assets                        |  | (82.9         | ) | (81.7     | ) | (164.6                    | ) |             |   | (3.2            | ) | (167.8  | )
|Depreciation and impairment charges tangible fixed assets |  | (82.9         | ) | (101.7    | ) | (184.6                    | ) |             |   | (3.2            | ) | (187.8  | )
|Amortization intangible fixed assets                      |  | (21.1         | ) | (9.6      | ) | (30.7                     | ) |             |   |                |   | (30.7   | )
|Goodwill                                                  |  | 747.3         |   | 126.9     |   | 874.2                     |   |             |   |                |   | 874.2   |  
|Assets(1)                                                 |  | 1,059.4       |   | 1,397.2   |   | 2,456.6                   |   |             |   | 296.7           |   | 2,753.3 |  
|Capital expenditures                                      |  | 77.0          |   | 77.3      |   | 154.3                     |   |             |   | 7.8             |   | 162.1   |  
|Year ended December 31, 2001                              |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|Sales, external                                           |  | 589.8         |   | 1,881.5   |   | 2,471.3                   |   |             |   |                |   | 2,471.3 |  
|Sales to other reportable segments                        |  | 496.7         |   |          |   | 496.7                     |   | (496.7       | ) |                |   |        |  
|                                                          |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|                                                          |  | 1,086.5       |   | 1,881.5   |   | 2,968.0                   |   | (496.7       | ) |                |   | 2,471.3 |  
|                                                          |  |               |   |           |   |                           |   |              |   |                 |   |         |  
|Operating result                                          |  | 180.5         |   | 103.9     |   | 284.4                     |   |             |   | (38.3           | ) | 246.1   |  
|Depreciation tangible fixed assets                        |  | (76.2         | ) | (73.6     | ) | (149.8                    | ) |             |   | (2.6            | ) | (152.4  | )
|Amortization intangible fixed assets                      |  | (18.9         | ) | (4.7      | ) | (23.6                     | ) |             |   |                |   | (23.6   | )
|Goodwill                                                  |  | 772.4         |   | 140.8     |   | 913.2                     |   |             |   |                |   | 913.2   |  
|Assets(1)                                                 |  | 1,070.9       |   | 1,463.6   |   | 2,534.5                   |   |             |   | 250.7           |   | 2,785.2 |  
|Capital expenditures                                      |  | 86.1          |   | 67.5      |   | 153.6                     |   |             |   | 1.0             |   | 154.6   |  

---

F-38

---



|                                                                                   |  | Year ended
December 31, 2003 |   | Year ended
December 31, 2002 |   | Year ended
December 31, 2001 |  
|---------------------------------------------------------------------------------- |  | ---------------------------- | - | ---------------------------- | - | ---------------------------- | -
|
|Reconciliation from operating income to income before tax and extraordinary items: |  |                              |   |                              |   |                              |  
|Operating income                                                                   |  | 207.0                        |   | 222.5                        |   | 246.1                        |  
|Interest expense                                                                   |  | (237.8                       | ) | (238.2                       | ) | (202.7                       | )
|                                                                                   |  |                              |   |                              |   |                              |  
|Income before tax and extraordinary items                                          |  | (30.8                        | ) | (15.7                        | ) | 43.4                         |  
|                                                                                   |  |                              |   |                              |   |                              |  

|                             |  | Year ended
December 31, 2003 |  | Year ended
December 31, 2002 |  | Year ended
December 31,
2001
|---------------------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|
|Enterprise wide disclosures: |  |                              |  |                              |  |                             
|Sales by destination         |  |                              |  |                              |  |                             
|The Netherlands              |  | 438.2                        |  | 426.7                        |  | 382.2                       
|Rest of European Union       |  |                              |  |                              |  |                             
|United Kingdom               |  | 282.7                        |  | 300.7                        |  | 257.7                       
|France                       |  | 287.8                        |  | 296.0                        |  | 262.1                       
|Germany                      |  | 608.3                        |  | 611.7                        |  | 554.9                       
|Italy and Spain              |  | 356.8                        |  | 361.8                        |  | 284.1                       
|Nordic and Central Europe    |  | 282.8                        |  | 285.7                        |  | 230.1                       
|Belgium                      |  | 135.4                        |  | 168.4                        |  | 120.3                       
|Others European Union        |  | 40.6                         |  | 38.8                         |  | 32.9                        
|Rest of Europe               |  |                              |  |                              |  |                             
|Nordic and Central Europe    |  | 255.8                        |  | 228.2                        |  | 218.9                       
|Switzerland                  |  | 41.7                         |  | 41.6                         |  | 32.8                        
|Others                       |  | 12.0                         |  | 8.3                          |  |                            
|Rest of World                |  | 99.6                         |  | 155.9                        |  | 95.3                        
|Total                        |  | 2,841.7                      |  | 2,923.8                      |  | 2,471.3                     

F-39

---



|                                                |  | Year ended
December 31, 2003 |  | Year ended
December 31, 2002 |  | Year ended
December 31, 2001
|----------------------------------------------- |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|
|Enterprise wide disclosures:                    |  |                              |  |                              |  |                             
|Sales by country of origin                      |  |                              |  |                              |  |                             
|The Netherlands                                 |  | 596.4                        |  | 644.2                        |  | 768.8                       
|Rest of European Union                          |  |                              |  |                              |  |                             
|United Kingdom                                  |  | 215.7                        |  | 228.8                        |  | 181.7                       
|France                                          |  | 243.0                        |  | 249.5                        |  | 213.5                       
|Germany                                         |  | 609.7                        |  | 586.9                        |  | 576.0                       
|Italy and Spain                                 |  | 321.1                        |  | 326.2                        |  | 191.3                       
|Nordic and Central Europe                       |  | 463.2                        |  | 444.4                        |  | 250.9                       
|Belgium                                         |  | 115.3                        |  | 122.8                        |  | 44.1                        
|Rest of Europe                                  |  |                              |  |                              |  |                             
|Nordic and Central Europe                       |  | 221.1                        |  | 259.2                        |  | 198.3                       
|Switzerland                                     |  | 33.0                         |  | 36.6                         |  | 22.7                        
|Rest of World                                   |  | 23.2                         |  | 25.2                         |  | 24.0                        
|Total                                           |  | 2,841.7                      |  | 2,923.8                      |  | 2,471.3                     
|Enterprise wide disclosures:
Long-lived assets* |  |                              |  |                              |  |                             
|The Netherlands                                 |  | 1,217.8                      |  | 1,247.4                      |  | 1,284.4                     
|Rest of European Union                          |  |                              |  |                              |  |                             
|United Kingdom                                  |  | 109.7                        |  | 118.1                        |  | 130.4                       
|France                                          |  | 91.0                         |  | 96.6                         |  | 104.4                       
|Germany                                         |  | 361.9                        |  | 358.9                        |  | 377.3                       
|Italy & Spain                                   |  | 139.7                        |  | 139.5                        |  | 135.4                       
|Nordic & Central Europe                         |  | 336.8                        |  | 334.2                        |  | 331.8                       
|Belgium                                         |  | 35.8                         |  | 36.5                         |  | 18.5                        
|Rest of Europe                                  |  |                              |  |                              |  |                             
|Nordic & Central Europe                         |  | 173.0                        |  | 185.1                        |  | 193.1                       
|Switzerland                                     |  | 18.0                         |  | 20.4                         |  | 20.8                        
|Rest of World                                   |  | 0.3                          |  | 0.1                          |  |                            
|Total                                           |  | 2,484.0                      |  | 2,536.8                      |  | 2,596.1                     

---

F-40

---



28.   Summary of differences between Dutch generally accepted accounting principles and US generally accepted accounting principles

The Group's financial statements have been prepared in accordance with generally accepted accounting principles in the Netherlands (Dutch GAAP), which differ in
certain significant respects from generally accepted accounting principles in the United States of America (US GAAP). The effect of the application of US GAAP on net income (loss) and shareholders'
equity, as reported under Dutch GAAP, is set out in the tables below, after giving effect to the restatements described in Note 28(a).

|                                   |    |                                       |                                                   | Year ended
December 31, 2003 |       | Year ended
December 31, 2002
(restated (a)) |       | Year ended
December 31, 2001
(restated (a)) |      
|---------------------------------- | -- | ------------------------------------- | ------------------------------------------------- | ---------------------------- | ----- | ------------------------------------------- | ----- | ------------------------------------------- | -----
|
|Net income/(loss) under Dutch GAAP |    | (24.0                                 | )                                                 | (9.9                         | )     | 11.2                                        |      
|                                   | b) |                                       | Goodwill adjustmentsamortization                 |                              | 24.7  |                                             | 24.7  |                                             | 1.5  
|                                   | c) |                                       | Tangible fixed assetsimpairment and depreciation |                              | 0.9   |                                             | (5.7  | )                                           |     
|                                   | d) |                                       | Restructuring and other provisions                |                              | (20.8 | )                                           | (15.8 | )                                           | (51.6
|                                   | e) |                                       | Other intangible assets                           |                              | 2.6   |                                             | 0.1   |                                             | (0.5 
|                                   | f) |                                       | Financial instruments                             |                              | 2.9   |                                             | (5.1  | )                                           | (25.0
|                                   | g) |                                       | Pensionspension costs                            |                              | 1.6   |                                             | (1.9  | )                                           | (1.4 
|                                   | i) |                                       | Deferred tax assets                               |                              | (19.8 | )                                           | (13.7 | )                                           |     
|                                   |    | Deferred taxes on US GAAP adjustments |                                                   | 4.2                          |       | 9.9                                         |       | 27.5                                        |      
|                                   |    |                                       |                                                   |                              |       |                                             |       |                                             |      
|Net income (loss) under US GAAP    |    | (27.7                                 | )                                                 | (17.4                        | )     | (38.3                                       | )    
|                                   |    |                                       |                                                   |                              |       |                                             |       |                                             |      

|                                      |                                       |        |                                                               | December 31, 2003 |        | December 31, 2002
(restated (a)) |       
|------------------------------------- | ------------------------------------- | ------ | ------------------------------------------------------------- | ----------------- | ------ | -------------------------------- | ------
|
|Shareholders' equity under Dutch GAAP |                                       | 79.1   |                                                               | 124.0             |       
|                                      | b)                                    |        | Goodwill adjustmentsacquisitions                             |                   | (89.4  | )                                | (89.4 
|                                      | b)                                    |        | Goodwill adjustmentsamortization                             |                   | 53.8   |                                  | 29.1  
|                                      | c)                                    |        | Tangible fixed assetsimpairment and accumulated depreciation |                   | (4.8   | )                                | (5.7  
|                                      | d)                                    |        | Restructuring and other provisions                            |                   | 6.7    |                                  | 27.5  
|                                      | e)                                    |        | Other intangible assets                                       |                   | (1.0   | )                                | (3.6  
|                                      | f)                                    |        | Financial instruments                                         |                   | (17.2  | )                                | (20.1 
|                                      | g)                                    |        | Pensionsliability                                            |                   | (69.2  | )                                | (73.6 
|                                      | h)                                    |        | Preference shares                                             |                   | (204.0 | )                                | (192.5
|                                      | i)                                    |        | Deferred tax assets                                           |                   | (33.5  | )                                | (13.7 
|                                      | Deferred taxes on US GAAP adjustments |        | 29.0                                                          |                   | 26.5   |                                 
|                                      |                                       |        |                                                               |                   |        |                                  |       
|Shareholders' deficit under US GAAP   |                                       | (250.5 | )                                                             | (191.5            | )     
|                                      |                                       |        |                                                               |                   |        |                                  |       

F-41

---



(a)   Restatement of US GAAP financial information

During 2003, the Group changed the amounts previously reported in the US GAAP financial information for the items presented below:

|                                                        |                           | Year ended
December 31, 2002
(restated) |       | Year ended
December 31, 2001
(restated) |    
|------------------------------------------------------- | ------------------------- | --------------------------------------- | ----- | --------------------------------------- | ---
|
|Net income (loss) under US GAAP, as previously reported |                           | (2.3                                    | )     | (39.0                                   | )  
|                                                        |                           |                                         |       |                                         |    
|Restatements (net of deferred taxes):                   |                           |                                         |       |                                         |    
|                                                        | Pensions                  |                                         | 0.3   |                                         | 0.7
|                                                        | Deferred tax assets       |                                         | (13.7 | )                                       |   
|                                                        | Purchase accountingAlpha |                                         | (1.7  | )                                       |   
|                                                        |                           |                                         |       |                                         |    
|                                                        |                           | (15.1                                   | )     | 0.7                                     |    
|                                                        |                           |                                         |       |                                         |    
|Net income (loss) under US GAAP, as restated            |                           | (17.4                                   | )     | (38.3                                   | )  
|                                                        |                           |                                         |       |                                         |    

|                                                           |                           | December 31, 2002
(restated) |       
|---------------------------------------------------------- | ------------------------- | ---------------------------- | ------
|
|Shareholders' equity under US GAAP, as previously reported |                           | 22.8                         |       
|                                                           |                           |                              |       
|Restatements (net of deferred taxes):                      |                           |                              |       
|                                                           | Pensions                  |                              | (6.4  
|                                                           | Preference shares         |                              | (192.5
|                                                           | Deferred tax assets       |                              | (13.7 
|                                                           | Purchase accountingAlpha |                              | (1.7  
|                                                           |                           |                              |       
|                                                           |                           | (214.3                       | )     
|                                                           |                           |                              |       
|Shareholders' deficit under US GAAP, as restated           |                           | (191.5                       | )     
|                                                           |                           |                              |       

Pensions

In connection with the acquisition of the Kappa Packaging Group in 1998, the liability recognized in purchase accounting for the Kappa pension plans was equal to
the book value of the liability for the Kappa plans prior to the acquisition. As a result, various unrecognized pension items (unrecognized transition cost, unrecognized prior service cost and
unrecognized actuarial gains/losses) related to the Kappa pension plans continued to be reflected in the US GAAP financial statements of the Group. Under US GAAP, the pension plan liabilities should
have been adjusted to their fair value in purchase accounting.

The
restatement for this item reflects the historical elimination of the unrecognized actuarial gains and losses against goodwill and the ongoing effects that such adjustment has on the
US GAAP accounts, such as eliminating the amortization of these items that was recognized as a component of pension expense in all subsequent periods, including each of the years ended
December 31, 2002 and 2001.

F-42

---



Preference shares

As described in note 15, the Group issued cumulative preference shares for aggregate cash consideration of €453.78 per share or
€148.5 million in the aggregate. Unless previously purchased (in the framework of a listing or sale) and except to the extent that the statutory requirements or the terms of the
Company's financing arrangements prevent the Company from doing so, the shareholders of the Company have agreed to procure that the Company shall redeem or repurchase the cumulative preference shares
in three equal tranches in 2009, 2010 and 2011. In the previously-issued US GAAP financial statements, the preference shares were accounted for as a component of permanent shareholders' equity.

As
the preference shares constitute redeemable preferred shares, the preference shares are required to be classified outside of permanent equity under US GAAP, whereas Dutch GAAP does
not prescribe such a classification. Therefore, the preference shares should have been classified as temporary equity under US GAAP. In addition, cumulative dividends, whether or not declared, should
have been accreted, by a charge to retained earnings under US GAAP, such that the amount recognized in the consolidated financial statements would be equal to the redemption amount at the redemption
date.

The
restatement for this item reflects the reclassification of €192.5 million as of December 31, 2002, which consists of the face amount of
€148.5 million and cumulative dividends of €44.0 million, from permanent equity to temporary equity in the consolidated balance sheet.

Deferred taxes

In the previously issued financial statements, no valuation allowance was recorded against the deferred tax assets of the Dutch tax group of
€13.7 million at December 31, 2002 under both Dutch and US GAAP. However, as US GAAP provides, different from Dutch GAAP, more specific guidance in respect of the
valuation of deferred tax assets, a valuation allowance of €13.7 million should have been made against the deferred tax asset of the Dutch tax group at December 31, 2002
under US GAAP.

The
restatement of this item reflects the recording of a valuation allowance of €13.7 million for the amount that does not meet criteria for recognition under US
GAAP.

Purchase accountingAlpha

As described in notes 1 and 3, on May 17, 2001, Kappa acquired Alpha for aggregate consideration of €1,120.9 million. The
acquisition was accounted for by the purchase method of accounting in accordance with APB 16, "Business Combinations."

F-43

---



The
restatement of this item can be specified as follows:

|                                              |  | (€ in millions) |  
|--------------------------------------------- |  | --------------- | -
|Reduction of goodwill, as previously reported |  | (15.0           | )
|Tangible fixed assets(1)                      |  | 85.2            |  
|Deferred taxes                                |  | (26.2           | )
|Pensions                                      |  | (0.3            | )
|                                              |  |                 |  
|Reduction of goodwill, as restated            |  | (43.7           | )
|                                              |  |                 |  

---

The
restatement for this item reflects the decrease of goodwill, the increase in pension liability and the increase in tangible fixed assets (and the related depreciation adjustment of
€2.6 million for the year ended December 31, 2002) together with the related deferred tax effect that result from this revision of the purchase price allocation under US
GAAP.

(b)   Goodwill (restated)

Acquisitions

The application of US GAAP to the closing balance sheet of the acquisitions listed below resulted in a total difference in gross amount of goodwill balance upon
acquisitions under Dutch GAAP and US GAAP of €(89.4) million, which can be detailed as follows:

|                                                            |  | (€ in millions) |  
|----------------------------------------------------------- |  | --------------- | -
|Acquisition of Kappa Packaging Group on May 31, 1998        |  | (45.0           | )
|Acquisition of SCAO in 2000                                 |  | (0.7            | )
|Acquisition of Alpha on May 17, 2001                        |  | (43.7           | )
|                                                            |  |                 |  
|Reduction of goodwill, under US GAAP compared to Dutch GAAP |  | (89.4           | )
|                                                            |  |                 |  



The following table shows the adjustments to goodwill arising on acquisition:

|                                      |  | Pensions |   | Restructuring and
other provisions |   | Total |  
|------------------------------------- |  | -------- | - | ---------------------------------- | - | ----- | -
|
|1) Restructuring and other provisions |  |         |   | (38.6                              | ) | (38.6 | )
|2) Pension liability                  |  | (26.5    | ) |                                   |   | (26.5 | )
|Deferred income taxes                 |  | 7.9      |   | 13.5                               |   | 21.4  |  
|                                      |  |          |   |                                    |   |       |  
|Reduction of goodwill                 |  | (18.6    | ) | (25.1                              | ) | (43.7 | )
|                                      |  |          |   |                                    |   |       |  

F-44

---



On
purchase of Alpha, the application of US GAAP to the closing balance sheet affects the determination of goodwill as of May 17, 2001 in the following ways:

Amortization

Under Dutch GAAP, goodwill is recorded as an asset and amortized over its estimated useful life of 40 years. Under US GAAP, goodwill is recorded as an
asset and amortized over its estimated useful life of 40 years through December 31, 2001. Thereafter, goodwill recorded under US GAAP is not amortized but tested for impairment on an
annual basis. The differences in goodwill amortization between Dutch GAAP and US GAAP as a result of the above goodwill adjustments are shown in the US GAAP reconciliation through December 31,
2001. Beginning January 1, 2002, the Dutch-US GAAP differences represent the elimination of goodwill amortization recognized under Dutch GAAP.

F-45

---



(c)   Tangible fixed assetsimpairment

Under Dutch GAAP, an impairment charge of €20.0 million was recorded during 2002 in the Packaging segment as the amount that the sum of its
future discounted cash flows exceeded its carrying value. This impairment charge under Dutch GAAP indicated that certain long-lived assets of the Packaging segment might not be recoverable
under US GAAP. SFAS 144,Accounting for the Impairment or Disposal of Long-Lived Assets("SFAS 144"), requires an impairment
loss to be recognized only if the carrying amount of a long-lived asset group is not recoverable. The carrying amount is not recoverable when the undiscounted cash flows expected to be
generated from the use of a long-lived asset group and its eventual disposition are less than the carrying amount of the asset group. Under US GAAP, long-lived assets are
grouped with other assets and liabilities at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. As such, an
impairment test was performed for US GAAP at four European plants, which resulted in an additional impairment charge in the Packaging segment under US GAAP of €5.7 million. The
impairment charge was measured as the amount that the estimated discounted cash flows exceeded the carrying value of the long-lived asset group. The total impairment charge recorded under
US GAAP during 2002 in the Packaging segment was €25.7 million. The difference in impairment charge under Dutch GAAP and US GAAP resulted in lower depreciation expenses in 2003
for US GAAP purposes of €0.9 million.

(d)   Restructuring and other provisions

Restructuring provisions

Under US GAAP only costs that qualify as exit costs and therefore do not relate to the ongoing operations of the company may be provided for. In addition, a
number of specific criteria also must be met before these costs that do qualify as exit costs can be recognized as an expense. Among these is the requirement that all the significant actions to be
taken as part of the reorganization must be identified along with their expected completion dates and the exit program must be approved and communicated by the balance sheet date. Costs that do not
qualify as exit costs are expensed when the obligation exists to pay cash or otherwise sacrifice assets.

Under
Dutch GAAP provisions can be made if the main features of the plan are announced after the balance sheet date, but still before the date of finalization of the financial
statements.

During
the years 2001, 2002 and 2003, payments were made related to provisions that were unrecognized under US GAAP. Additionally, certain previously established Dutch GAAP provisions
met the requirements for recognition in accordance with US GAAP. As a result additional restructuring costs were incurred under US GAAP in the years 2001, 2002 and 2003 of
€46.4 million, €9.6 million and €10.7 million respectively. The additional restructuring costs under US GAAP for the year 2003
mainly relates to the restructuring provision set up in respect of the closure of our containerboard plant Kappa Mennecy Paper (Mennecy, France) effective as from April, 2003.

Insurance loss provision

In 1998 and 1999, three of the operating plants experienced fire damage. As a consequence, the Company expected increases in insurance premiums over the next five
years and recorded a provision for these costs.

Following
changes in Dutch GAAP as from January 1, 2001, the remaining balance of the provision of €15.1 million as at January 1, 2001 was to be
released in equal portions in 2001, 2002 and 2003. In the years 2001, 2002 and 2003, €4.9 million, €5.2 million, respectively
€5.0 million was released from the provision.

F-46

---



For
US GAAP, insurance premiums are a period expense and a provision for expected costs is not allowed. As such, this provision was reversed under US GAAP.

Other provisions

Under Dutch GAAP maintenance provisions are allowed to be built up over a period of time prior to the moment when the actual maintenance begins. Under US GAAP,
maintenance costs are expensed as incurred.

In
addition, under Dutch GAAP certain environmental provisions were established as part of the purchase accounting, which did not meet the US GAAP legal obligation criteria as of the
date of acquisition, including a provision of €3.0 million for the clean up of the ground pollution at Kappa Mennecy Paper.

As
in 2003, the Company initiated the closure of Kappa Mennecy Paper, a legal obligation arose to clean up the ground pollution. Under FAS 143, "Accounting for Asset Retirement
Obligations", the obligation to clean up qualified for treatment as an asset retirement obligation resulting in a liability to be recorded at fair value in the period in which it is incurred and an
increase in asset value for the related retirement cost. The fair value of the obligation to clean up amounts to €3.0 million. As the useful life of the asset is deemed to be
nil due to the closure of the plant, the entire obligation of €3.0 million is expensed under US GAAP.

As
a result, in the years 2001, 2002 and 2003, additional expenses were incurred related to other provisions under US GAAP of €0.3 million,
€1.0 million and €5.1 million respectively.

(e)   Other intangible assets

Under Dutch GAAP, costs incurred in connection with consultancy projects are capitalizable if future economic benefits from these assets are expected. Under US
GAAP, the costs associated with consultancy projects, whether internal or external, must be expensed as incurred.

(f)    Financial instruments

In 1999, when the Company received the proceeds on the senior subordinated notes denominated in US Dollars, currency call options were purchased maturing on
July 15, 2004 to hedge the US dollar-denominated principal of the debt against the euro.

Under
US GAAP, these call options were marked-to-market and the debt was translated at the spot rate at the date of each balance sheet; translation gains and
losses on the options and the debt were included in the statements of income.

Under
Dutch GAAP, the US dollar-denominated principal of the debt was translated at the option rate and the call option premium capitalized and amortized on a straight-line
basis over 5 years.

However,
in 2003, currency call options were sold to offset the call options purchased in 1999 and replaced by currency forward contracts maturing on July 15, 2004 to hedge the
currency risk on the US dollar-denominated principal.

Under
US GAAP, the result on the sale of the call options was directly taken to the statement of income, whereas under Dutch GAAP the value is accrued for and released on a
straight-line basis over the period ending on July 15, 2004.

All
other financial instruments, e.g. interest rate swaps, cross currency swaps and foreign currency forward contracts, under US GAAP are capitalized as from January 1, 2001 and
marked-to-market at the date of the balance sheet. Value changes are recorded against the statements of income.

F-47

---



Financial
instruments can be specified as follows:

|                                                        |  | December 31,
2003 |   | Change in
value |   | December 31,
2002 |   | Change in
value |   | December 31,
2001 |   | Change
in value |   | December 31,
2000 |  
|------------------------------------------------------- |  | ----------------- | - | --------------- | - | ----------------- | - | --------------- | - | ----------------- | - | --------------- | - | ----------------- | -
|
|Derivatives capitalized under US GAAP                   |  |                   |   |                 |   |                   |   |                 |   |                   |   |                 |   |                   |  
|Interest rate swap (fair value)                         |  | (18.3             | ) | 7.8             |   | (26.1             | ) | (9.2            | ) | (16.9             | ) | (18.4           | ) | 1.5               |  
|Currency swaps (fair value)                             |  | (1.2              | ) | (2.3            | ) | 1.1               |   | (5.5            | ) | 6.6               |   | (6.0            | ) | 12.6              |  
|Currency options (fair value)                           |  |                  |   | (6.2            | ) | 6.2               |   | (11.3           | ) | 17.5              |   | 12.1            |   | 5.4               |  
|Currency forward contracts (fair value)                 |  | (10.2             | ) | (10.6           | ) | 0.4               |   | 2.3             |   | (1.9              | ) | (2.0            | ) | 0.1               |  
|                                                        |  |                   |   |                 |   |                   |   |                 |   |                   |   |                 |   |                   |  
|(Movement in) Dutch GAAP/US GAAP valuation difference   |  | (29.7             | ) | (11.3           | ) | (18.4             | ) | (23.7           | ) | 5.3               |   | (14.3           | ) | 19.6              |  
|US dollar-denominated senior subordinated notes         |  |                   |   |                 |   |                   |   |                 |   |                   |   |                 |   |                   |  
|Under US GAAP translated at spot rate                   |  | (79.5             | ) |                 |   | (95.8             | ) |                 |   | (113.0            | ) |                 |   | (107.6            | )
|Under Dutch GAAP translated at forward rate             |  | (90.3             | ) |                 |   | (95.1             | ) |                 |   | (95.1             | ) |                 |   | (95.1             | )
|                                                        |  |                   |   |                 |   |                   |   |                 |   |                   |   |                 |   |                   |  
|(Movement in) Dutch GAAP/US GAAP valuation difference   |  | 10.8              |   | 11.5            |   | (0.7              | ) | 17.2            |   | (17.9             | ) | (5.4            | ) | (12.5             | )
|Premiums capitalized and accruals made under Dutch GAAP |  | 1.7               |   | 2.7             |   | (1.0              | ) | 1.4             |   | (2.4              | ) | (5.3            | ) | 2.9               |  
|                                                        |  |                   |   |                 |   |                   |   |                 |   |                   |   |                 |   |                   |  
|Difference in financial instruments under US GAAP       |  | (17.2             | ) | 2.9             |   | (20.1             | ) | (5.1            | ) | (15.0             | ) | (25.0           | ) | 10.0              |  
|                                                        |  |                   |   |                 |   |                   |   |                 |   |                   |   |                 |   |                   |  

(g)   Pensions (restated)

Pension plansgeneral

In general, personnel employed are entitled to pension benefits that supplement state-provided social security benefits. Pension or other retirement plans have
been established in accordance with regulations and practices of the countries in which they are located. Most of the plans are administered by separate pension funds or life insurance companies.

The
benefits of the plans are based primarily on years of service and average or final pay formula. In countries where contributions are made, the amount of the contribution takes
account of increases in pension rights in line with the development of wages and inflation, as well as of the return achieved by the pension funds in excess of the actuarial interest rate.

F-48

---



The
Group operates major pension plans in the Netherlands, United Kingdom, Germany and Sweden. In the Netherlands and United Kingdom mainly defined benefit plans are administered by
separate pension funds covering substantially all employees. The retirement plans in Germany are mainly defined benefit plans and are provided for by the company (book reserves). In Sweden, the Group
operates defined benefit and defined contribution plans. Some of these plans are externally insured, others are provided for by the company (book reserves).

Pension provisions under US GAAP (restated)

Under US GAAP, SFAS 87 requires the use of significant actuarial assumptions annually to reflect current market and economic conditions. Additionally, only those
accumulated gains or losses arising in the schemes from a difference between the actual experience of the schemes and actuarial assumptions made, falling outside ten percent of the greater of the
projected benefit obligation or the market value of the assets are being amortized.

This
method differs from the accounting policy applied by the Group under Dutch GAAP, whereby the accrual for pension costs represents the present value, based on actuarial assumptions,
of future pension contributions concerning past service cost and the costs of the unfunded pension plan of the German operations.

For
the pension provision under US GAAP, the prospective pension obligation, i.e., the Projected Benefit Obligation (PBO), was determined by using the Projected Unit Credit Method in
accordance with SFAS 87. Moreover, the Accumulated Benefit Obligation (ABO) was determined by using the Current Credit Method in accordance with SFAS 87.

Under
SFAS 87, the net periodic pension costs for the years 2003, 2002 and 2001 can be broken down into the following components:

|                                                 |  | Year ended
December 31, 2003 |   | Year ended
December 31, 2002
(restated (a)) |   | Year ended
December 31, 2001
(restated (a)) |  
|------------------------------------------------ |  | ---------------------------- | - | ------------------------------------------- | - | ------------------------------------------- | -
|
|Net periodic pension cost                        |  |                              |   |                                             |   |                                             |  
|Service cost                                     |  | (17.6                        | ) | (20.0                                       | ) | (16.3                                       | )
|Interest cost                                    |  | (33.9                        | ) | (33.5                                       | ) | (28.7                                       | )
|Expected return on plan assets                   |  | 29.8                         |   | 37.2                                        |   | 31.0                                        |  
|Net amortization and deferral and other expenses |  | (10.4                        | ) | (5.8                                        | ) |                                            |  
|Other costs and countries                        |  | (5.7                         | ) | (6.7                                        | ) | (1.9                                        | )
|                                                 |  |                              |   |                                             |   |                                             |  
|Net periodic pension costs under US GAAP         |  | (37.8                        | ) | (28.8                                       | ) | (15.9                                       | )
|Net periodic pension costs under Dutch GAAP      |  | (39.4                        | ) | (26.9                                       | ) | (14.5                                       | )
|Difference in pension costs under US GAAP        |  | 1.6                          |   | (1.9                                        | ) | (1.4                                        | )

The
Dutch GAAP pension charge in 2003 includes an interest charge of €5.7 million (2002: €4.2 million and 2001:
€2.4 million), which is included under interest expense.

F-49

---



The
balance sheet position as of December 31, 2003 and December 31, 2002 under SFAS 87 (funded status), and the changes in the projected benefit obligation and plan assets
for the years then ended were as follows:

|                                               |  | December 31,
2003 |   | December 31,
2002
(restated) |  
|---------------------------------------------- |  | ----------------- | - | ---------------------------- | -
|Accumulated benefit obligations                |  | 606.4             |   | 571.4                        |  
|                                               |  |                   |   |                              |  
|Change in projected benefit obligation         |  |                   |   |                              |  
|Benefit obligation at beginning of year        |  | (626.4            | ) | (578.8                       | )
|Acquisition of Alpha                           |  |                  |   | (2.3                         | )
|Service cost                                   |  | (17.6             | ) | (20.0                        | )
|Interest cost                                  |  | (33.9             | ) | (33.5                        | )
|Plan participants' contributions               |  | (3.1              | ) | (3.1                         | )
|Changes in plan                                |  | 0.5               |   | (2.3                         | )
|Actuarial gain/(loss)                          |  | (24.3             | ) | (17.9                        | )
|Benefits paid                                  |  | 21.9              |   | 18.8                         |  
|Translation adjustments                        |  | 16.8              |   | 12.7                         |  
|                                               |  |                   |   |                              |  
|Projected benefit obligation at end of year    |  | (666.1            | ) | (626.4                       | )
|Change in plan assets                          |  |                   |   |                              |  
|Fair value of plan assets at beginning of year |  | 435.3             |   | 488.9                        |  
|Acquisition of Alpha                           |  |                  |   | 2.3                          |  
|Actual return on plan assets                   |  | 48.2              |   | (43.6                        | )
|Employer contribution                          |  | 16.9              |   | 9.7                          |  
|Plan participants' contributions               |  | 3.1               |   | 3.1                          |  
|Benefits paid                                  |  | (14.8             | ) | (11.8                        | )
|Translation adjustments                        |  | (12.6             | ) | (13.3                        | )
|                                               |  |                   |   |                              |  
|Fair value of plan assets at end of year       |  | 476.1             |   | 435.3                        |  
|                                               |  |                   |   |                              |  
|Funded Status                                  |  | (190.0            | ) | (191.1                       | )
|Unrecognized transition cost                   |  |                  |   |                             |  
|Unrecognized prior service cost                |  | (0.5              | ) |                             |  
|Unrecognized net actuarial loss                |  | 76.4              |   | 82.9                         |  
|Other costs and countries                      |  | (12.3             | ) | (12.2                        | )
|                                               |  |                   |   |                              |  
|Net pension liability                          |  | (126.4            | ) | (120.4                       | )
|                                               |  |                   |   |                              |  

The
difference in net pension liability under Dutch GAAP and US GAAP as of December 31, 2003 and December 31, 2002 can be specified as follows:

|                                           |  | December 31, 2003 |   | December 31, 2002
(restated (a)) |  
|------------------------------------------ |  | ----------------- | - | -------------------------------- | -
|Net pension liability under US GAAP        |  | (126.4            | ) | (120.4                           | )
|Additional minimum liability under US GAAP |  | (61.0             | ) | (66.0                            | )
|Net pension liability under Dutch GAAP:    |  |                   |   |                                  |  
|Pension provisions                        |  | (115.1            | ) | (113.0                           | )
|Pension accruals                          |  | (3.1              | ) | 0.2                              |  
|                                           |  |                   |   |                                  |  
|Additional pension liability under US GAAP |  | (69.2             | ) | (73.6                            | )
|                                           |  |                   |   |                                  |  

F-50

---



The
assumptions used in this calculation are the following:

|                               |  | December 31, 2003 |   | December 31, 2002 |   | December 31, 2001 |  
|------------------------------ |  | ----------------- | - | ----------------- | - | ----------------- | -
|Weighted average assumptions   |  |                   |   |                   |   |                   |  
|Discount rate                  |  | 5.4               | % | 5.5               | % | 5.7               | %
|Expected return on plan assets |  | 6.9               | % | 6.8               | % | 7.5               | %
|Rate of compensation increase  |  | 3.1               | % | 3.3               | % | 3.3               | %
|Increase of state pension      |  | 2.2               | % | 2.2               | % | 2.3               | %
|Pension increases              |  | 2.2               | % | 2.2               | % | 2.3               | %

Domestic pension plansgeneral

In accordance with SFAS 132R. "Employers Disclosure about Pensions and Other Postretirement Benefits Revised", which was issued in December 2003,
additional information is disclosed in the paragraph below regarding the assets, obligations, cash flows and net periodic benefit costs of the Group's domestic pension plans.

Domestic pension plansthe Netherlands

The main Dutch pension plan, which is externally funded in the foundation "Stichting Pensioenfonds Kappa Packaging Nederland", covers the majority of all Dutch
employees. The basic pension plan is a defined benefit, average pay plan with a retirement age of 65 for salaries up to €79,900. Furthermore, a temporary pension is accrued for to
cover the last three years before the pension age is reached. For salaries above €79,900 a defined contribution plan is applicable.

Only
the employer contributes to the pension fund until 2006. The contribution is based on actuarial assumptions. The total contribution to the pension fund amounted to
€13.9 million in 2003. The contribution is estimated to be about €18.0 million in 2004. The pension benefit payments amounted to
€7.9 million in 2003.

The
accumulated benefit obligation for the domestic plans at December 31, 2003 was €272.6 million (2002: €255.5 million).

The
"Stichting Pensioenfonds Kappa Packaging Nederland" manages the investment portfolio for pensions. The pension fund has its own investment policy, which is based on a regular
asset-liability review, and decided on by the board of the pension fund in consultation with investment advisors, within the guidelines given by the Regulatory Body for pension funds in the
Netherlands (Pensioen- en Verzekeringskamer, or PVK). The objective of the investment activities is to maximize investment return within an accepted risk level. The investments are regularly reviewed
by the investment committee and on a quarterly basis by the board of the pension fund. When necessary the board decides on a change in the investment policy in consultation of investment advisors. The
assets are carried at market value. The investment portfolio is comprised of the following:

|                          |  | Strategic
(as from 2003) |  | Current, as of
December 2003 |  | Current, as of
December 2002 |  | Current, as of
December 2001
|------------------------- |  | ------------------------ |  | ---------------------------- |  | ---------------------------- |  | ----------------------------
|Equities                  |  | 40                       |  | 36                           |  | 33                           |  | 36                          
|Fixed income              |  | 60                       |  | 61                           |  | 64                           |  | 63                          
|Cash and cash equivalents |  | 0                        |  | 3                            |  | 3                            |  | 1                           
|                          |  |                          |  |                              |  |                              |  |                             
|Total                     |  | 100                      |  | 100                          |  | 100                          |  | 100                         
|                          |  |                          |  |                              |  |                              |  |                             

The
funding ratio of the pension fund (being the ratio of investments to pension liabilities) amounts to 108.0% (2002: 109.6% and 2001: 126.8%) of liabilities.

F-51

---



Weighted
average assumptions used in calculation of the Domestic plan's net periodic benefit cost for years ending December 31 are as follows:

|                               |  | December 31,
2003 |   | December 31,
2002 |   | December 31,
2001 |  
|------------------------------ |  | ----------------- | - | ----------------- | - | ----------------- | -
|Weighted average assumptions   |  |                   |   |                   |   |                   |  
|Discount rate                  |  | 5.5               | % | 5.5               | % | 5.5               | %
|Expected return on plan assets |  | 7.0               | % | 7.0               | % | 8.0               | %
|Rate of compensation increase  |  | 3.0               | % | 3.0               | % | 3.0               | %
|Increase of state pension      |  | 2.3               | % | 2.3               | % | 2.5               | %
|Pension increases              |  | 2.3               | % | 2.3               | % | 2.5               | %

The
assumption for the weighted average expected return on plan assets is based on the target asset allocation. The expected returns for the various asset classes are mainly based on
asset class specific long-term historical real returns, which are assumed to be indicative of future expectations, within the limits set by the Regulatory Body for pension funds in the
Netherlands (Pensioen- en Verzekeringskamer, or PVK).

(h)   Preference shares (restated)

As described in note 15, the Group issued cumulative preference shares for aggregate cash consideration of €453.78 per share or
€148.5 million in the aggregate. All preference shares are redeemable upon the occurrence of an initial public offering or sale of the Group's operations and are redeemable in
three equal tranches in 2009, 2010 and 2011, subject to financing arrangements preventing this.

Under
Dutch GAAP, these preference shares are accounted for as a component of permanent shareholders' equity. Dividends are recognized when declared.

Under
US GAAP, these preference shares constitute redeemable preferred shares and, accordingly, are required to be classified as temporary equity (between liabilities and permanent
equity). In addition, cumulative dividends, whether or not declared, are required to be accreted, by a charge to retained earnings, such that the amount recognized in the consolidated financial
statements will be accreted up to the redemption amount at the redemption date. The aggregate adjustments to shareholders' equity of €204.0 million and
€192.5 million as of December 31, 2003 and 2002, respectively, represents the reclassification of the preference shares (including accreted dividends) out of permanent
equity to temporary equity in the consolidated balance sheet.

(i)    Deferred taxes (restated)

The Group has unexpired net operating losses generated in the Netherlands in the amount of €188 million at December 31, 2003 (2002:
€130 million). The related deferred tax asset of €64.7 million (2002: €45.0 million), by using an effective tax rate of 34.5%, were
offset by €31.2 million (2002: € 31.3 million) of deferred tax liabilities resulting in a net deferred tax asset position of
€33.5 million at December 31, 2003 (2002: €13.7 million).

No
valuation allowance against the deferred tax assets of the Dutch tax group were recorded under Dutch GAAP. However, as US GAAP provides, different from Dutch GAAP, more specific
guidance in respect of the valuation of deferred tax assets, a valuation allowance of €33.5 million was made against the deferred tax asset of the Dutch tax group at
December 31, 2003 (2002: €13.7 million).

F-52

---



(j)    Significant presentation differences between Dutch and US GAAP



The non-recurring items, which are recorded as extraordinary items under Dutch GAAP in 2001 (€20.1 million loss before
taxation) do not qualify as extraordinary items under US GAAP. The income statement presented in the US GAAP format for the year 2001 would result in a reclassification of these extraordinary items to
financial expenses (€22.0 million loss before taxation) and to a separate line between operating income and extraordinary items (€1.9 million gain before
taxation) for the year 2001.



The balance sheet presented in the US GAAP format would result in a reclassification of the Shareholders' loans to liabilities from the mezzanine level as there
are no equity characteristics of this debt as defined under US GAAP.

In
addition, as the preference shares constitute redeemable preferred shares, the preference shares, including accreted dividends, are required to be classified as temporary equity,
outside of permanent equity under US GAAP.



The statement of cash flows has been prepared on a consistent basis and is presented in accordance with Dutch GAAP and IAS 7. Under US GAAP, the deposit held in
an escrow-account of €5.0 million as at December 31, 2002 (which became available to the Group on April 1, 2003) would not qualify as cash and cash equivalents as
a result of which cash used in investing activities would have been €5.0 million higher in 2002 and €5.0 million lower in 2003 under US GAAP compared to
Dutch GAAP. In addition, cash and cash equivalents from acquisitions would be netted off against the acquisition of group companies within investing activities under US GAAP, and not separately
presented at the base of the cash flow statement. There are no further differences between the cash flow statements prepared in accordance with Dutch GAAP and IAS 7 compared to the cash flow
statements prepared in accordance with US GAAP.

Recently issued accounting pronouncements

In December 2003, the Staff of the Securities and Exchange Commission (SEC or the Staff) issued Staff Accounting Bulletin No. 104 ("SAB 104"),
"Revenue Recognition", which supercedes SAB 101, "Revenue Recognition in Financial Statements". SAB 104's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple
element revenue arrangements, superceded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Additionally, SAB 104 rescinds the
SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the FAQ) issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. Selected portions of
the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely
unchanged by the issuance of SAB 104. EITF 00-21 was effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003.

In
December 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46R, Consolidation of Variable Interest Entities Revised. FIN 46R modifies the
scope exceptions provided in FIN 46. Entities would be required to replace FIN 46 provisions with FIN 46R provisions for all newly created post-January 31, 2003 entities as of the
end of the first interim period or annual reporting ending after March 15, 2004. The adoption of FIN 46R had no effect on our consolidated financial statements.

F-53

---



In
May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150). The statement
establishes standards on how to classify and measure certain financial instruments with characteristics of both liabilities and equity and requires additional disclosures regarding alternative ways of
setting instruments and the capital structure of entities, all of whose shares are mandatory redeemable. SFAS 150 does not apply to obligations under stock based arrangements if they are
accounted for under APB 25, SFAS 123 or related guidance. The provisions of SFAS 150 were effective for all financial instruments entered into or modified after May 31, 2003, and
otherwise was effective the first interim period beginning after June 15, 2003. However, the guidance applying to mandatorily redeemable noncontrolling interests has been deferred. The adoption
of this statement had no effect on our 2003 consolidated financial statements. However, as from January 1, 2004, the preference shares, including accreted dividends, are required to be
reclassified from temporary equity to liabilities in accordance with the provisions of SFAS 150.

In
April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities' (SFAS 149), SFAS 149 amends and
clarifies financial accounting and reporting for derivative instruments by requiring that contracts with comparable characteristics be accounted for similarly and by clarifying when a derivative
contains a financing component that warrants special reporting in the statement of cash flows. The guidance in SFAS 149 was effective prospectively for contracts entered into or modified and
for hedging relationships designated after June 30, 2003. The adoption of this statement had no effect on our consolidated financial statements.

In
November 2002, the Emerging Issues Task Force ("EITF") reached consensus on EITF Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF
00-21"). EITF 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets.
The provisions of EITF 00-21 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of this consensus does not have a material
effect on our consolidated financial statements.

29.   Supplemental Guarantor Footnote

Presented below is information for Kappa Beheer B.V., the issuer of the Group's high yield debt securities under this registration statement, Kappa Holding B.V.,
Kappa Packaging B.V. and the subsidiaries of Kappa Packaging B.V. ("Kappa Packaging Subsidiaries") as of December 31, 2003 and 2002 and for each of the three years in the period ended
December 31, 2003.

Kappa
Beheer B.V., Kappa Packaging B.V. and Kappa Packaging Subsidiaries are wholly-owned subsidiaries of Kappa Holding B.V. Pursuant to the indentures and the notes, Kappa Packaging
B.V. and Kappa Holding B.V. jointly and severally, fully and unconditionally guarantee Kappa Beheer B.V.'s high yield debt securities. Kappa Holding B.V. is the parent guarantor and Kappa Packaging
B.V. is the subsidiary guarantor.

The
Group has not provided reconciliations from Dutch GAAP to US GAAP for the columns relating to the guarantor entities as such reconciliations would not materially affect an investor's
understanding of the nature of the guarantee. The majority of the reconciling items between Dutch GAAP and US GAAP relate to the (operating) activities of the non-guarantor subsidiaries
and these amounts would only affect the guarantors' investment in group companies and equity earnings of subsidiaries, except for the adjustment related to the preference shares (including accreted
dividends) issued by Kappa Holding B.V.

F-54

---





KAPPA PACKAGING GROUP  CONSOLIDATED STATEMENTS OF OPERATIONSFor the year ended December 31, 2003  (€ in millions)

|                                                                      |  | ConsolidatedKappa
Packaging
Group |   | Eliminations |  | Non-Guarantor
SubsidiariesKappa
Packaging
Subsidiaries |   | Subsidiary
GuarantorKappa
Packaging
B.V. |   | IssuerKappa
Beheer
B.V. |   | Parent
GuarantorKappa
Holding
B.V. |  
|--------------------------------------------------------------------- |  | --------------------------------- | - | ------------ |  | ------------------------------------------------------ | - | ---------------------------------------- | - | ----------------------- | - | ---------------------------------- | -
|Sales                                                                 |  | 2,841.7                           |   |             |  | 2,841.7                                                |   |                                         |   |                        |   |                                   |  
|Net change in work in progress and finished goods                     |  | (10.0                             | ) |             |  | (10.0                                                  | ) |                                         |   |                        |   |                                   |  
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Net sales including net change in work in progress and finished goods |  | 2,831.7                           |   |             |  | 2,831.7                                                |   |                                         |   |                        |   |                                   |  
|Raw material costs                                                    |  | (1,003.7                          | ) |             |  | (1,003.7                                               | ) |                                         |   |                        |   |                                   |  
|External services                                                     |  | (524.8                            | ) |             |  | (524.8                                                 | ) |                                         |   |                        |   |                                   |  
|Labor costs                                                           |  | (702.6                            | ) |             |  | (702.6                                                 | ) |                                         |   |                        |   |                                   |  
|Other operating costs                                                 |  | (183.3                            | ) |             |  | (182.3                                                 | ) | (0.3                                     | ) | (0.1                    | ) | (0.6                               | )
|Depreciation, amortization and impairment charges                     |  | (210.3                            | ) |             |  | (209.7                                                 | ) | (0.6                                     | ) |                        |   |                                   |  
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Total operating costs and expenses                                    |  | (2,624.7                          | ) |             |  | (2,623.1                                               | ) | (0.9                                     | ) | (0.1                    | ) | (0.6                               | )
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Operating income                                                      |  | 207.0                             |   |             |  | 208.6                                                  |   | (0.9                                     | ) | (0.1                    | ) | (0.6                               | )
|Interest income/(expense), net                                        |  | (187.6                            | ) |             |  | (223.9                                                 | ) | (4.4                                     | ) | 40.7                    |   |                                   |  
|Interest income/(expense) Holding/Beheer loan                         |  |                                  |   |              |  |                                                       |   |                                          |   | (51.2                   | ) | 51.2                               |  
|Interest expense Shareholders' loans                                  |  | (50.2                             | ) |             |  |                                                       |   |                                         |   |                        |   | (50.2                              | )
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Result before income taxes                                            |  | (30.8                             | ) |             |  | (15.3                                                  | ) | (5.3                                     | ) | (10.6                   | ) | 0.4                                |  
|Income taxes                                                          |  | 6.5                               |   |             |  | 5.7                                                    |   | (3.8                                     | ) | 3.7                     |   | 0.9                                |  
|Income from participations                                            |  | 0.4                               |   |             |  | 0.4                                                    |   |                                         |   |                        |   |                                   |  
|Minority interests                                                    |  | (0.1                              | ) |             |  |                                                       |   | (0.1                                     | ) |                        |   |                                   |  
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Income before equity in earnings of subsidiaries                      |  | (24.0                             | ) |             |  | (9.2                                                   | ) | (9.2                                     | ) | (6.9                    | ) | 1.3                                |  
|Equity in earnings of subsidiaries                                    |  |                                  |   | 52.9         |  |                                                       |   | (9.2                                     | ) | (18.4                   | ) | (25.3                              | )
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Net income/(loss)                                                     |  | (24.0                             | ) | 52.9         |  | (9.2                                                   | ) | (18.4                                    | ) | (25.3                   | ) | (24.0                              | )
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  

F-55

---



KAPPA PACKAGING GROUP  CONSOLIDATED STATEMENTS OF INCOMEFor the year ended December 31, 2002  (€ in millions)

|                                                                      |  | ConsolidatedKappa
Packaging
Group |   | Eliminations |  | Non-Guarantor
SubsidiariesKappa
Packaging
Subsidiaries |   | Subsidiary
GuarantorKappa
Packaging
B.V. |   | IssuerKappa
Beheer
B.V. |   | Parent
GuarantorKappa
Holding
B.V. |  
|--------------------------------------------------------------------- |  | --------------------------------- | - | ------------ |  | ------------------------------------------------------ | - | ---------------------------------------- | - | ----------------------- | - | ---------------------------------- | -
|Sales                                                                 |  | 2,923.8                           |   |             |  | 2,923.8                                                |   |                                         |   |                        |   |                                   |  
|Net change in work in progress and finished goods                     |  | 13.8                              |   |             |  | 13.8                                                   |   |                                         |   |                        |   |                                   |  
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Net sales including net change in work in progress and finished goods |  | 2,937.6                           |   |             |  | 2,937.6                                                |   |                                         |   |                        |   |                                   |  
|Raw material costs                                                    |  | (1,077.6                          | ) |             |  | (1,077.6                                               | ) |                                         |   |                        |   |                                   |  
|External services                                                     |  | (523.3                            | ) |             |  | (523.3                                                 | ) |                                         |   |                        |   |                                   |  
|Labor costs                                                           |  | (697.9                            | ) |             |  | (697.9                                                 | ) |                                         |   |                        |   |                                   |  
|Other operating costs                                                 |  | (197.8                            | ) |             |  | (197.4                                                 | ) |                                         |   |                        |   | (0.4                               | )
|Depreciation, amortization and impairment charges                     |  | (218.5                            | ) |             |  | (217.9                                                 | ) | (0.6                                     | ) |                        |   |                                   |  
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Total operating costs and expenses                                    |  | (2,715.1                          | ) |             |  | (2,714.1                                               | ) | (0.6                                     | ) |                        |   | (0.4                               | )
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Operating income                                                      |  | 222.5                             |   |             |  | 223.5                                                  |   | (0.6                                     | ) |                        |   | (0.4                               | )
|Interest income/(expense), net                                        |  | (192.0                            | ) |             |  | (220.4                                                 | ) | (11.8                                    | ) | 40.2                    |   |                                   |  
|Interest income/(expense) Holding/Beheer loan                         |  |                                  |   |             |  |                                                       |   |                                         |   | (47.4                   | ) | 47.4                               |  
|Interest expense Shareholders' loans                                  |  | (46.2                             | ) |             |  | 0.1                                                    |   |                                         |   |                        |   | (46.3                              | )
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Result before income taxes                                            |  | (15.7                             | ) |             |  | 3.2                                                    |   | (12.4                                    | ) | (7.2                    | ) | 0.7                                |  
|Income taxes                                                          |  | 5.4                               |   |             |  | 0.2                                                    |   | 1.6                                      |   | 4.9                     |   | (1.3                               | )
|Income from participations                                            |  | 0.6                               |   |             |  | 0.6                                                    |   |                                         |   |                        |   |                                   |  
|Minority interests                                                    |  | (0.2                              | ) |             |  |                                                       |   | (0.2                                     | ) |                        |   |                                   |  
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Income before equity in earnings of subsidiaries                      |  | (9.9                              | ) |             |  | 4.0                                                    |   | (11.0                                    | ) | (2.3                    | ) | (0.6                               | )
|Equity in earnings of subsidiaries                                    |  |                                  |   | 12.3         |  |                                                       |   | 4.0                                      |   | (7.0                    | ) | (9.3                               | )
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  
|Net income/(loss)                                                     |  | (9.9                              | ) | 12.3         |  | 4.0                                                    |   | (7.0                                     | ) | (9.3                    | ) | (9.9                               | )
|                                                                      |  |                                   |   |              |  |                                                        |   |                                          |   |                         |   |                                    |  

F-56

---



KAPPA PACKAGING GROUP  CONSOLIDATING STATEMENTS OF INCOMEFor the year ended December 31, 2001  (€ in millions)

|                                                                      |  | ConsolidatedKappa
Packaging
Group |   | Eliminations |   | Non-Guarantor
SubsidiariesKappa
Packaging
Subsidiaries |   | Subsidiary
GuarantorKappa
Packaging
B.V. |   | IssuerKappa
Beheer
B.V. |   | Parent
GuarantorKappa
Holding
B.V. |  
|--------------------------------------------------------------------- |  | --------------------------------- | - | ------------ | - | ------------------------------------------------------ | - | ---------------------------------------- | - | ----------------------- | - | ---------------------------------- | -
|Sales                                                                 |  | 2,471.3                           |   |             |   | 2,471.3                                                |   |                                         |   |                        |   |                                   |  
|Net change in work in progress and finished goods                     |  | 1.0                               |   |             |   | 1.0                                                    |   |                                         |   |                        |   |                                   |  
|                                                                      |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net sales including net change in work in progress and finished goods |  | 2,472.3                           |   |             |   | 2,472.3                                                |   |                                         |   |                        |   |                                   |  
|Raw material costs                                                    |  | (917.7                            | ) |             |   | (917.7                                                 | ) |                                         |   |                        |   |                                   |  
|External services                                                     |  | (434.7                            | ) |             |   | (434.7                                                 | ) |                                         |   |                        |   |                                   |  
|Labor costs                                                           |  | (561.9                            | ) |             |   | (561.4                                                 | ) |                                         |   |                        |   | (0.5                               | )
|Other operating costs                                                 |  | (135.9                            | ) |             |   | (135.9                                                 | ) |                                         |   |                        |   |                                   |  
|Depreciation, amortization and impairment charges                     |  | (176.0                            | ) |             |   | (175.6                                                 | ) | (0.4                                     | ) |                        |   |                                   |  
|                                                                      |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Total operating costs and expenses                                    |  | (2,226.2                          | ) |             |   | (2,225.3                                               | ) | (0.4                                     | ) |                        |   | (0.5                               | )
|                                                                      |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Operating income                                                      |  | 246.1                             |   |             |   | 247.0                                                  |   | (0.4                                     | ) |                        |   | (0.5                               | )
|Interest income/(expense)                                             |  | (167.8                            | ) |             |   | (185.3                                                 | ) | (20.4                                    | ) | 37.9                    |   |                                   |  
|Interest income/(expense) Holding/Beheer loan                         |  |                                  |   |             |   |                                                       |   |                                         |   | (36.8                   | ) | 36.8                               |  
|Interest expense Shareholders' loans                                  |  | (34.9                             | ) |             |   |                                                       |   |                                         |   |                        |   | (34.9                              | )
|                                                                      |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Income before income taxes and extraordinary items                    |  | 43.4                              |   |             |   | 61.7                                                   |   | (20.8                                    | ) | 1.1                     |   | 1.4                                |  
|Income taxes                                                          |  | (19.1                             | ) |             |   | (24.5                                                  | ) | 7.4                                      |   | (0.4                    | ) | (1.6                               | )
|Income from participations                                            |  | 0.2                               |   |             |   | 0.2                                                    |   |                                         |   |                        |   |                                   |  
|Minority interests                                                    |  | (0.2                              | ) |             |   |                                                       |   | (0.2                                     | ) |                        |   |                                   |  
|                                                                      |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Income before extraordinary items                                     |  | 24.3                              |   |             |   | 37.4                                                   |   | (13.6                                    | ) | 0.7                     |   | (0.2                               | )
|Extraordinary items                                                   |  | (13.1                             | ) |             |   | (13.1                                                  | ) |                                         |   |                        |   |                                   |  
|                                                                      |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Income before equity in earnings of subsidiaries                      |  | 11.2                              |   |             |   | 24.3                                                   |   | (13.6                                    | ) | 0.7                     |   | (0.2                               | )
|Equity in earnings of subsidiaries                                    |  |                                  |   | (46.4        | ) |                                                       |   | 24.3                                     |   | 10.7                    |   | 11.4                               |  
|                                                                      |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net income/(loss)                                                     |  | 11.2                              |   | (46.4        | ) | 24.3                                                   |   | 10.7                                     |   | 11.4                    |   | 11.2                               |  
|                                                                      |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  

F-57

---



KAPPA PACKAGING GROUP  CONSOLIDATED BALANCE SHEETAs at December 31, 2003  (€ in millions)

|                                               |                                           | ConsolidatedKappa
Packaging
Group |         | Eliminations |          | Non-Guarantor
SubsidiariesKappa
Packaging
Subsidiaries |         | Subsidiary
GuarantorKappa
Packaging
B.V. |         | IssuerKappa
Beheer
B.V. |         | Parent
GuarantorKappa
Holding B.V. |     
|---------------------------------------------- | ----------------------------------------- | --------------------------------- | ------- | ------------ | -------- | ------------------------------------------------------ | ------- | ---------------------------------------- | ------- | ----------------------- | ------- | ---------------------------------- | ----
|Assets                                         |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|Cash and cash equivalents                      |                                           | 240.7                             |         |             |          | 240.7                                                  |         |                                         |         |                        |         |                                   |     
|Accounts receivable                            |                                           | 419.6                             |         |             |          | 419.6                                                  |         |                                         |         |                        |         |                                   |     
|Other receivables                              |                                           | 52.4                              |         |             |          | 51.8                                                   |         | 0.1                                      |         | 0.5                     |         |                                   |     
|Inventories                                    |                                           | 249.9                             |         |             |          | 249.9                                                  |         |                                         |         |                        |         |                                   |     
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|                                               | Total current assets                      |                                   | 962.6   |              |         |                                                        | 962.0   |                                          | 0.1     |                         | 0.5     |                                    |    
|Investments in Group companies                 |                                           |                                  |         | (428.7       | )        |                                                       |         | 266.4                                    |         | 84.5                    |         | 77.8                               |     
|Loans to Group companies                       |                                           |                                  |         | (3,601.6     | )        |                                                       |         | 2,207.4                                  |         | 1,394.2                 |         |                                   |     
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|                                               | Total investments and advances affiliates |                                   |        |              | (4,030.3 | )                                                      |        |                                          | 2,437.8 |                         | 1,478.7 |                                    | 77.8
|Tangible fixed assets                          |                                           | 1,604.5                           |         |             |          | 1,604.5                                                |         |                                         |         |                        |         |                                   |     
|Intangible fixed assets                        |                                           | 855.3                             |         |             |          | 834.6                                                  |         | 20.7                                     |         |                        |         |                                   |     
|Other non-current assets                       |                                           | 103.3                             |         |             |          | 65.5                                                   |         | 30.1                                     |         | 7.7                     |         |                                   |     
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|                                               |                                           | 3,525.7                           |         | (4,030.3     | )        | 3,466.6                                                |         | 2,524.7                                  |         | 1,486.9                 |         | 77.8                               |     
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|Liabilities                                    |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|Bank overdrafts                                |                                           | 0.6                               |         |             |          | 0.6                                                    |         |                                         |         |                        |         |                                   |     
|Current portion of term loan facilities        |                                           | 129.3                             |         |             |          |                                                       |         | 129.3                                    |         |                        |         |                                   |     
|Current portion of other long-term liabilities |                                           | 4.2                               |         |             |          | 4.2                                                    |         |                                         |         |                        |         |                                   |     
|Other current liabilities                      |                                           | 505.2                             |         |             |          | 468.4                                                  |         | 2.4                                      |         | 34.4                    |         |                                   |     
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|                                               | Total current liabilities                 |                                   | 639.3   |              |         |                                                        | 473.2   |                                          | 131.7   |                         | 34.4    |                                    |    
|Long-term debt due to Group companies          |                                           |                                  |         | (3,601.6     | )        | 2,454.0                                                |         | 1,143.6                                  |         |                        |         | 4.0                                |     
|Term loan facilities                           |                                           | 1,163.5                           |         |             |          |                                                       |         | 1,163.5                                  |         |                        |         |                                   |     
|Senior subordinated notes                      |                                           | 691.1                             |         |             |          |                                                       |         |                                         |         | 691.1                   |         |                                   |     
|Other long-term debt                           |                                           | 13.9                              |         |             |          | 13.9                                                   |         |                                         |         |                        |         |                                   |     
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|                                               | Total long-term liabilities               |                                   | 1,868.5 |              | (3,601.6 | )                                                      | 2,467.9 |                                          | 2,307.1 |                         | 691.1   |                                    | 4.0 
|Provisions                                     |                                           | 259.1                             |         |             |          | 259.1                                                  |         |                                         |         |                        |         |                                   |     
|Shareholders' loans                            |                                           | 678.3                             |         |             |          |                                                       |         |                                         |         |                        |         | 678.3                              |     
|Kappa Holding/Kappa Beheer loan                |                                           |                                  |         |             |          |                                                       |         |                                         |         | 683.6                   |         | (683.6                             | )   
|Minority interests                             |                                           | 1.4                               |         |             |          |                                                       |         | 1.4                                      |         |                        |         |                                   |     
|Shareholders' equity                           |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|Share capital                                  |                                           | 0.8                               |         |             |          |                                                       |         |                                         |         |                        |         | 0.8                                |     
|Additional paid-in capital                     |                                           | 152.9                             |         | (596.4       | )        | 294.0                                                  |         | 151.2                                    |         | 151.2                   |         | 152.9                              |     
|Legal reserve                                  |                                           |                                  |         |             |          |                                                       |         |                                         |         |                        |         |                                   |     
|Retained earnings                              |                                           | (29.6                             | )       | 39.7         |          | 10.4                                                   |         | (21.7                                    | )       | (28.4                   | )       | (29.6                              | )   
|Cumulative translation adjustment              |                                           | (45.0                             | )       | 128.0        |          | (38.0                                                  | )       | (45.0                                    | )       | (45.0                   | )       | (45.0                              | )   
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|                                               | Total Shareholders' equity                |                                   | 79.1    |              | (428.7   | )                                                      | 266.4   |                                          | 84.5    |                         | 77.8    |                                    | 79.1
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     
|                                               |                                           | 3,525.7                           |         | (4,030.3     | )        | 3,466.6                                                |         | 2,524.7                                  |         | 1,486.9                 |         | 77.8                               |     
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |     

F-58

---





KAPPA PACKAGING GROUP  CONSOLIDATED BALANCE SHEETAs at December 31, 2002  (€ in millions)

|                                               |                                           | ConsolidatedKappa
Packaging
Group |         | Eliminations |          | Non-Guarantor
SubsidiariesKappa
Packaging
Subsidiaries |         | Subsidiary
GuarantorKappa
Packaging
B.V. |         | IssuerKappa
Beheer B.V. |         | Parent
GuarantorKappa
Holding
B.V. |      
|---------------------------------------------- | ----------------------------------------- | --------------------------------- | ------- | ------------ | -------- | ------------------------------------------------------ | ------- | ---------------------------------------- | ------- | ----------------------- | ------- | ---------------------------------- | -----
|Assets                                         |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|Cash and cash equivalents                      |                                           | 233.6                             |         |             |          | 233.6                                                  |         |                                         |         |                        |         |                                   |      
|Accounts receivable                            |                                           | 451.5                             |         |             |          | 451.5                                                  |         |                                         |         |                        |         |                                   |      
|Other receivables                              |                                           | 55.6                              |         |             |          | 55.1                                                   |         | 0.1                                      |         |                        |         | 0.4                                |      
|Inventories                                    |                                           | 272.2                             |         |             |          | 272.2                                                  |         |                                         |         |                        |         |                                   |      
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|                                               | Total current assets                      |                                   | 1,012.9 |              |         |                                                        | 1,012.4 |                                          | 0.1     |                         |        |                                    | 0.4  
|Investments in Group companies                 |                                           |                                  |         | (512.3       | )        |                                                       |         | 264.5                                    |         | 123.8                   |         | 124.0                              |      
|Loans to Group companies                       |                                           |                                  |         | (3,689.2     | )        |                                                       |         | 2,350.8                                  |         | 1,338.4                 |         |                                   |      
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|                                               | Total investments and advances affiliates |                                   |        |              | (4,201.5 | )                                                      |        |                                          | 2,615.3 |                         | 1,462.2 |                                    | 124.0
|Tangible fixed assets                          |                                           | 1,654.7                           |         |             |          | 1,654.7                                                |         |                                         |         |                        |         |                                   |      
|Intangible fixed assets                        |                                           | 882.1                             |         |             |          | 853.2                                                  |         | 21.2                                     |         | 7.7                     |         |                                   |      
|Other non-current assets                       |                                           | 93.6                              |         |             |          | 57.8                                                   |         | 35.8                                     |         |                        |         |                                   |      
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|                                               |                                           | 3,643.3                           |         | (4,201.5     | )        | 3,578.1                                                |         | 2,672.4                                  |         | 1,469.9                 |         | 124.4                              |      
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|Liabilities                                    |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|Bank overdrafts                                |                                           | 1.4                               |         |             |          | 1.4                                                    |         |                                         |         |                        |         |                                   |      
|Current portion of term loan facilities        |                                           | 101.8                             |         |             |          |                                                       |         | 101.8                                    |         |                        |         |                                   |      
|Current portion of other long-term liabilities |                                           | 5.6                               |         |             |          | 5.6                                                    |         |                                         |         |                        |         |                                   |      
|Other current liabilities                      |                                           | 507.1                             |         |             |          | 478.4                                                  |         | 0.6                                      |         | 28.1                    |         |                                   |      
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|                                               | Total current liabilities                 |                                   | 615.9   |              |         |                                                        | 485.4   |                                          | 102.4   |                         | 28.1    |                                    |     
|Long-term debt due to Group companies          |                                           |                                  |         | (3,689.2     | )        | 2,540.9                                                |         | 1,143.6                                  |         |                        |         | 4.7                                |      
|Term loan facilities                           |                                           | 1,301.3                           |         |             |          |                                                       |         | 1,301.3                                  |         |                        |         |                                   |      
|Senior subordinated notes                      |                                           | 685.5                             |         |             |          |                                                       |         |                                         |         | 685.5                   |         |                                   |      
|Other long-term debt                           |                                           | 15.0                              |         |             |          | 15.0                                                   |         |                                         |         |                        |         |                                   |      
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|                                               | Total long-term liabilities               |                                   | 2,001.8 |              | (3,689.2 | )                                                      | 2,555.9 |                                          | 2,444.9 |                         | 685.5   |                                    | 4.7  
|Provisions                                     |                                           | 272.3                             |         |             |          | 272.3                                                  |         |                                         |         |                        |         |                                   |      
|Shareholders' loans                            |                                           | 628.0                             |         |             |          |                                                       |         |                                         |         |                        |         | 628.0                              |      
|Kappa Holding/Kappa Beheer loan                |                                           |                                  |         |             |          |                                                       |         |                                         |         | 632.3                   |         | (632.3                             | )    
|Minority interests                             |                                           | 1.3                               |         |             |          |                                                       |         | 1.3                                      |         |                        |         |                                   |      
|Shareholders' equity                           |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|Share capital                                  |                                           | 0.8                               |         |             |          |                                                       |         |                                         |         |                        |         | 0.8                                |      
|Additional paid-in capital                     |                                           | 152.9                             |         | (558.6       | )        | 256.2                                                  |         | 151.2                                    |         | 151.2                   |         | 152.9                              |      
|Legal reserve                                  |                                           |                                  |         |             |          |                                                       |         |                                         |         |                        |         |                                   |      
|Retained earnings                              |                                           | (5.6                              | )       | (13.2        | )        | 19.6                                                   |         | (3.3                                     | )       | (3.1                    | )       | (5.6                               | )    
|Cumulative translation adjustment              |                                           | (24.1                             | )       | 59.5         |          | (11.3                                                  | )       | (24.1                                    | )       | (24.1                   | )       | (24.1                              | )    
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|Total Shareholders' equity                     |                                           | 124.0                             |         | (512.3       | )        | 264.5                                                  |         | 123.8                                    |         | 124.0                   |         | 124.0                              |      
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      
|                                               |                                           | 3,643.3                           |         | (4,201.5     | )        | 3,578.1                                                |         | 2,672.4                                  |         | 1,469.9                 |         | 124.4                              |      
|                                               |                                           |                                   |         |              |          |                                                        |         |                                          |         |                         |         |                                    |      

F-59

---



KAPPA PACKAGING GROUP  CONSOLIDATED CASH FLOW STATEMENTFor the year ended December 31, 2003  (€ in millions)

|                                                                    |  | ConsolidatedKappa
Packaging
Group |   | Eliminations |   | Non-Guarantor
SubsidiariesKappa
Packaging
Subsidiaries |   | Subsidiary
GuarantorKappa
Packaging
B.V. |   | IssuerKappa
Beheer B.V. |   | Parent
GuarantorKappa
Holding
B.V. |  
|------------------------------------------------------------------- |  | --------------------------------- | - | ------------ | - | ------------------------------------------------------ | - | ---------------------------------------- | - | ----------------------- | - | ---------------------------------- | -
|Cash flows from operating activities                                |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net income                                                          |  | (24.0                             | ) | (52.9        | ) | (9.2                                                   | ) | (18.4                                    | ) | (25.3                   | ) | (24.0                              | )
|Adjustments to reconcile net income to cash provided by operations: |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Depreciation of tangible fixed assets                               |  | 181.1                             |   |             |   | 181.1                                                  |   |                                         |   |                        |   |                                   |  
|Amortization of intangible fixed assets                             |  | 29.2                              |   |             |   | 28.6                                                   |   | 0.6                                      |   |                        |   |                                   |  
|Amortization of finance charges                                     |  | 12.2                              |   |             |   | 6.0                                                    |   | 5.6                                      |   | 0.6                     |   |                                   |  
|Share in result of participations                                   |  | (0.4                              | ) |             |   | (0.4                                                   | ) |                                         |   |                        |   |                                   |  
|Minority interests                                                  |  | 0.1                               |   |             |   |                                                       |   | 0.1                                      |   |                        |   |                                   |  
|Non-cash interest on Shareholders' loans                            |  | 50.2                              |   |             |   |                                                       |   |                                         |   |                        |   | 50.2                               |  
|Non-cash interest on senior subordinated notes                      |  | 15.5                              |   |             |   |                                                       |   |                                         |   | 15.5                    |   |                                   |  
|Non-cash interest on Kappa Holding/Kappa Beheer loan                |  |                                  |   |             |   |                                                       |   |                                         |   | 51.4                    |   | (51.4                              | )
|Addition to/(release from) pension provisions                       |  | 10.2                              |   |             |   | 10.2                                                   |   |                                         |   |                        |   |                                   |  
|Addition to/(release from) deferred tax liabilities                 |  | (23.3                             | ) |             |   | (23.3                                                  | ) |                                         |   |                        |   |                                   |  
|Addition to/(release from restructuring and other provisions        |  | 19.6                              |   |             |   | 19.6                                                   |   |                                         |   |                        |   |                                   |  
|Changes in operating assets and liabilities:                        |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Inventories                                                         |  | 19.5                              |   |             |   | 19.5                                                   |   |                                         |   |                        |   |                                   |  
|Accounts receivable                                                 |  | 25.3                              |   |             |   | 25.3                                                   |   |                                         |   |                        |   |                                   |  
|Other receivables                                                   |  | 2.3                               |   |             |   | 2.3                                                    |   |                                         |   |                        |   |                                   |  
|Accounts payable                                                    |  | (6.7                              | ) |             |   | (6.7                                                   | ) |                                         |   |                        |   |                                   |  
|Accrued liabilities                                                 |  | 10.2                              |   |             |   | 10.2                                                   |   |                                         |   |                        |   |                                   |  
|Increase/(decrease) in intercompany receivables, net                |  |                                  |   |             |   | 57.8                                                   |   | 2.9                                      |   | (60.6                   | ) | (0.1                               | )
|Paid from restructuring and other provisions                        |  | (33.2                             | ) |             |   | (33.2                                                  | ) |                                         |   |                        |   |                                   |  
|Paid from pension provision                                         |  | (8.3                              | ) |             |   | (8.3                                                   | ) |                                         |   |                        |   |                                   |  
|Equity in earnings of group companies                               |  |                                  |   | 52.9         |   |                                                       |   | 9.2                                      |   | 18.4                    |   | 25.3                               |  
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net cash flow from operating activities                             |  | 279.5                             |   |             |   | 279.5                                                  |   |                                         |   |                        |   |                                   |  
|Cash flow from investing activities                                 |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Investments, net in tangible fixed assets                           |  | (141.4                            | ) |             |   | (141.4                                                 | ) |                                         |   |                        |   |                                   |  
|Investments, net in intangible fixed assets                         |  | (2.3                              | ) |             |   | (2.3                                                   | ) |                                         |   |                        |   |                                   |  
|Investments, net in other non-current assets                        |  | (0.6                              | ) |             |   | (0.6                                                   | ) |                                         |   |                        |   |                                   |  
|Acquisition of Group companies                                      |  | (1.7                              | ) |             |   | (1.7                                                   | ) |                                         |   |                        |   |                                   |  
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net cash used in investing activities                               |  | (146.0                            | ) |             |   | (146.0                                                 | ) |                                         |   |                        |   |                                   |  
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  

F-60

---



|Cash flow from financing activities                  |  |        |   |   |  |        |   |        |   |        |   |   | 
|---------------------------------------------------- |  | ------ | - | - |  | ------ | - | ------ | - | ------ | - | - | 
|Repayment of term loan facilities                    |  | (110.2 | ) |  |  |       |   | (110.2 | ) |       |   |  | 
|Issuance of senior subordinated notes                |  | 95.0   |   |  |  |       |   |       |   | 95.0   |   |  | 
|Repayment of senior subordinated notes               |  | (100.0 | ) |  |  |       |   |       |   | (100.0 | ) |  | 
|Short-term borrowings banks repaid                   |  | (1.2   | ) |  |  | (1.2   | ) |       |   |       |   |  | 
|Other long-term debt repaid                          |  | (6.3   | ) |  |  | (6.3   | ) |       |   |       |   |  | 
|Increase/(decrease) in intercompany receivables, net |  |       |   |  |  | (115.2 | ) | 110.2  |   | 5.0    |   |   | 
|                                                     |  |        |   |   |  |        |   |        |   |        |   |   | 
|Net cash flow used in financing activities           |  | (122.7 | ) |  |  | (122.7 | ) |       |   |       |   |  | 
|                                                     |  |        |   |   |  |        |   |        |   |        |   |   | 
|Change in cash and equivalents                       |  | 10.8   |   |  |  | 10.8   |   |       |   |       |   |  | 
|Cash and cash equivalents beginning of the period    |  | 233.6  |   |  |  | 233.6  |   |       |   |       |   |  | 
|Cash from acquisitions                               |  | 0.3    |   |  |  | 0.3    |   |       |   |       |   |  | 
|Effect of exchange rate changes on cash              |  | (4.0   | ) |  |  | (4.0   | ) |       |   |       |   |  | 
|                                                     |  |        |   |   |  |        |   |        |   |        |   |   | 
|Cash and cash equivalents end of period              |  | 240.7  |   |  |  | 240.7  |   |       |   |       |   |  | 
|                                                     |  |        |   |   |  |        |   |        |   |        |   |   | 
|Supplemental cash flow information                   |  |        |   |   |  |        |   |        |   |        |   |   | 
|Interest paid                                        |  | 152.4  |   |  |  | (6.8   | ) | 95.1   |   | 64.1   |   |  | 
|Income taxes paid/(refund)                           |  | 15.6   |   |  |  | 15.6   |   |       |   |       |   |  | 

F-61

---



KAPPA PACKAGING GROUP  CONSOLIDATED CASH FLOW STATEMENTFor the year ended December 31, 2002  (€ in millions)

|                                                                    |  | ConsolidatedKappa
Packaging
Group |   | Eliminations |   | Non-Guarantor
SubsidiariesKappa
Packaging
Subsidiaries |   | Subsidiary
GuarantorKappa
Packaging
B.V. |   | IssuerKappa
Beheer B.V. |   | Parent
GuarantorKappa
Holding
B.V. |  
|------------------------------------------------------------------- |  | --------------------------------- | - | ------------ | - | ------------------------------------------------------ | - | ---------------------------------------- | - | ----------------------- | - | ---------------------------------- | -
|Cash flows from operating activities                                |  | (9.9                              | ) | 12.3         |   | 4.0                                                    |   | (7.0                                     | ) | (9.3                    | ) | (9.9                               | )
|Net income                                                          |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Adjustments to reconcile net income to cash provided by operations: |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Depreciation of tangible fixed assets                               |  | 187.8                             |   |             |   | 187.8                                                  |   |                                         |   |                        |   |                                   |  
|Amortization of intangible fixed assets                             |  | 30.7                              |   |             |   | 30.1                                                   |   | 0.6                                      |   |                        |   |                                   |  
|Amortization of finance charges                                     |  | 11.3                              |   |             |   | 5.1                                                    |   | 5.6                                      |   | 0.6                     |   |                                   |  
|Share in result of participations                                   |  | (0.6                              | ) |             |   | (0.6                                                   | ) |                                         |   |                        |   |                                   |  
|Minority interests                                                  |  | 0.2                               |   |             |   |                                                       |   | 0.2                                      |   |                        |   |                                   |  
|Non-cash interest on Shareholders' loans                            |  | 46.2                              |   |             |   |                                                       |   |                                         |   |                        |   | 46.2                               |  
|Non-cash interest on senior subordinated notes                      |  | 13.8                              |   |             |   |                                                       |   |                                         |   | 13.8                    |   |                                   |  
|Non-cash interest on Kappa Holding/Kappa Beheer loan                |  |                                  |   |             |   |                                                       |   |                                         |   | 47.4                    |   | (47.4                              | )
|Addition to/(release from) pension provisions                       |  | 8.5                               |   |             |   | 8.5                                                    |   |                                         |   |                        |   |                                   |  
|Addition to/(release from) deferred tax liabilities                 |  | (7.9                              | ) |             |   | (7.9                                                   | ) |                                         |   |                        |   |                                   |  
|Addition to/(release from restructuring and other provisions        |  | 6.5                               |   |             |   | 6.5                                                    |   |                                         |   |                        |   |                                   |  
|Changes in operating assets and liabilities:                        |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Inventories                                                         |  | (18.2                             | ) |             |   | (18.2                                                  | ) |                                         |   |                        |   |                                   |  
|Accounts receivable                                                 |  | 16.6                              |   |             |   | 16.6                                                   |   |                                         |   |                        |   |                                   |  
|Other receivables                                                   |  | 15.6                              |   |             |   | 12.4                                                   |   | 3.6                                      |   |                        |   | (0.4                               | )
|Accounts payable                                                    |  | 51.8                              |   |             |   | 51.8                                                   |   |                                         |   |                        |   |                                   |  
|Accrued liabilities                                                 |  | (31.4                             | ) |             |   | (28.8                                                  | ) | (2.0                                     | ) | (0.4                    | ) | (0.2                               | )
|Increase/(decrease) in intercompany receivables, net                |  |                                  |   |             |   | (10.7                                                  | ) | 67.4                                     |   | (59.1                   | ) | 2.4                                |  
|Paid from restructuring and other provisions                        |  | (39.5                             | ) |             |   | (39.5                                                  | ) |                                         |   |                        |   |                                   |  
|Paid from pension provision                                         |  | (8.0                              | ) |             |   | (8.0                                                   | ) |                                         |   |                        |   |                                   |  
|Equity in earnings of group companies                               |  |                                  |   | (12.3        | ) |                                                       |   | (4.0                                     | ) | 7.0                     |   | 9.3                                |  
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net cash flow from operating activities                             |  | 273.5                             |   |             |   | 209.1                                                  |   | 64.4                                     |   |                        |   |                                   |  
|Cash flow from investing activities                                 |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Investments, net in tangible fixed assets                           |  | (162.1                            | ) |             |   | (162.1                                                 | ) |                                         |   |                        |   |                                   |  
|Investments, net in intangible fixed assets                         |  | (2.3                              | ) |             |   | (2.3                                                   | ) |                                         |   |                        |   |                                   |  
|Investments, net in non-current assets                              |  | 2.3                               |   |             |   | 2.3                                                    |   |                                         |   |                        |   |                                   |  
|Disposal of Group companies                                         |  | 0.3                               |   |             |   | 0.3                                                    |   |                                         |   |                        |   |                                   |  
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net cash used in investing activities                               |  | (161.8                            | ) |             |   | (161.8                                                 | ) |                                         |   |                        |   |                                   |  
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  

F-62

---



|Cash flow from financing activities               |  |       |   |   |  |       |   |       |   |      |  |   | 
|------------------------------------------------- |  | ----- | - | - |  | ----- | - | ----- | - | ---- |  | - | 
|Repayment of term loan facilities                 |  | (75.5 | ) |  |  |      |   | (75.5 | ) |     |  |  | 
|Short-term borrowings banks repaid                |  | (18.6 | ) |  |  | (18.6 | ) |      |   |     |  |  | 
|Other long-term debt repaid                       |  | (5.6  | ) |  |  | (5.6  | ) |      |   |     |  |  | 
|                                                  |  |       |   |   |  |       |   |       |   |      |  |   | 
|Net cash flow used in financing activities        |  | (99.7 | ) |  |  | (24.2 | ) | (75.5 | ) |     |  |  | 
|                                                  |  |       |   |   |  |       |   |       |   |      |  |   | 
|Change in cash and equivalents                    |  | 12.0  |   |  |  | 23.1  |   | (11.1 | ) |     |  |  | 
|Cash and cash equivalents beginning of the period |  | 217.6 |   |  |  | 206.5 |   | 11.1  |   |     |  |  | 
|Effect of exchange rate changes on cash           |  | 4.0   |   |  |  | 4.0   |   |      |   |     |  |  | 
|                                                  |  |       |   |   |  |       |   |       |   |      |  |   | 
|Cash and cash equivalents end of period           |  | 233.6 |   |  |  | 233.6 |   |      |   |     |  |  | 
|                                                  |  |       |   |   |  |       |   |       |   |      |  |   | 
|Supplemental cash flow information                |  |       |   |   |  |       |   |       |   |      |  |   | 
|Interest paid                                     |  | 165.9 |   |  |  | (3.5  | ) | 107.8 |   | 61.6 |  |  | 
|Income taxes paid/(refund)                        |  | 9.4   |   |  |  | 9.4   |   |      |   |     |  |  | 

F-63

---



KAPPA PACKAGING GROUP  CONSOLIDATED CASH FLOW STATEMENTFor the year ended December 31, 2001  (€ in millions)

|                                                                    |  | ConsolidatedKappa
Packaging
Group |   | Eliminations |   | Non-Guarantor
SubsidiariesKappa
Packaging
Subsidiaries |   | Subsidiary
GuarantorKappa
Packaging
B.V. |   | IssuerKappa
Beheer B.V. |   | Parent
GuarantorKappa
Holding
B.V. |  
|------------------------------------------------------------------- |  | --------------------------------- | - | ------------ | - | ------------------------------------------------------ | - | ---------------------------------------- | - | ----------------------- | - | ---------------------------------- | -
|Cash flows from operating activities                                |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net income                                                          |  | 11.2                              |   | (46.4        | ) | 24.3                                                   |   | 10.7                                     |   | 11.4                    |   | 11.2                               |  
|Adjustments to reconcile net income to cash provided by operations: |  |                                  |   |             |   |                                                       |   |                                         |   |                        |   |                                   |  
|Depreciation and amortization                                       |  | 176.0                             |   |             |   | 175.6                                                  |   | 0.4                                      |   |                        |   |                                   |  
|Amortization of finance charges                                     |  | 7.5                               |   |             |   | 3.4                                                    |   | 3.5                                      |   | 0.6                     |   |                                   |  
|Share of result of participations                                   |  | (0.2                              | ) |             |   | (0.2                                                   | ) |                                         |   |                        |   |                                   |  
|Non-cash interest on Holding Shareholder Loans                      |  | 34.9                              |   |             |   |                                                       |   |                                         |   |                        |   | 34.9                               |  
|Non-cash interest on Holding/Beheer loan                            |  |                                  |   |             |   |                                                       |   |                                         |   | 36.8                    |   | (36.8                              | )
|Non-cash interest on high yield notes                               |  | 12.2                              |   |             |   |                                                       |   |                                         |   | 12.2                    |   |                                   |  
|Changes in operating assets and liabilities:                        |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Inventories                                                         |  | 43.1                              |   |             |   | 43.1                                                   |   |                                         |   |                        |   |                                   |  
|Accounts receivable                                                 |  | 41.3                              |   |             |   | 41.3                                                   |   |                                         |   |                        |   |                                   |  
|Other receivables                                                   |  | (51.2                             | ) |             |   | (51.2                                                  | ) |                                         |   |                        |   |                                   |  
|Accounts payable                                                    |  | (37.1                             | ) |             |   | (37.1                                                  | ) |                                         |   |                        |   |                                   |  
|Accrued liabilities                                                 |  | 47.1                              |   |             |   | 56.7                                                   |   | (15.4                                    | ) | 5.6                     |   | 0.2                                |  
|Increase/(decrease) in intercompany receivables, net                |  |                                  |   |             |   | 28.9                                                   |   | 25.1                                     |   | (55.9                   | ) | 1.9                                |  
|Decrease in restructuring and other provisions                      |  | (42.6                             | ) |             |   | (42.6                                                  | ) |                                         |   |                        |   |                                   |  
|Increase in pension provision                                       |  | (6.4                              | ) |             |   | (6.4                                                   | ) |                                         |   |                        |   |                                   |  
|Increase in deferred tax provision                                  |  |                                  |   |             |   |                                                       |   |                                         |   |                        |   |                                   |  
|Equity in earnings of group companies                               |  |                                  |   | 46.4         |   |                                                       |   | (24.3                                    | ) | (10.7                   | ) | (11.4                              | )
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net cash flow from operating activities                             |  | 235.8                             |   |             |   | 235.8                                                  |   |                                         |   |                        |   |                                   |  
|Cash flow from investing activities                                 |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Investments, net in tangible fixed assets                           |  | (154.6                            | ) |             |   | (154.6                                                 | ) |                                         |   |                        |   |                                   |  
|Investments, net in intangible fixed assets                         |  | (7.9                              | ) |             |   | (7.9                                                   | ) |                                         |   |                        |   |                                   |  
|Investments, net in other non-current assets                        |  | (76.2                             | ) |             |   | (31.3                                                  | ) | (44.9                                    | ) |                        |   |                                   |  
|Investments in group companies (equity/loans)                       |  | (1,123.2                          | ) | 1,529.2      |   | 71.7                                                   |   | (2,024.1                                 | ) | (400.0                  | ) | (300.0                             | )
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  
|Net cash flow used in investing activities                          |  | (1,361.9                          | ) | 1,529.2      |   | (122.1                                                 | ) | (2,069.0                                 | ) | (400.0                  | ) | (300.0                             | )
|                                                                    |  |                                   |   |              |   |                                                        |   |                                          |   |                         |   |                                    |  

F-64

---



|Cash flow from financing activities                              |  |         |   |          |   |       |   |         |   |       |  |       | 
|---------------------------------------------------------------- |  | ------- | - | -------- | - | ----- | - | ------- | - | ----- |  | ----- | 
|(Repayment)/Issuance of term loan facilities and mezzanine notes |  | 840.9   |   |         |   |      |   | 840.9   |   |      |  |      | 
|Issuance of senior subordinated notes                            |  | 100.0   |   |         |   |      |   |        |   | 100.0 |  |      | 
|Issuance of shareholders' loans                                  |  | 299.4   |   |         |   |      |   |        |   |      |  | 299.4 | 
|Issuance of shares                                               |  | 0.6     |   | (1.2     | ) |      |   | 0.6     |   | 0.6   |  | 0.6   | 
|Repayment of other long term debt                                |  | (3.3    | ) |         |   | (3.3  | ) |        |   |      |  |      | 
|Net decrease in bank overdrafts                                  |  | (19.2   | ) |         |   | (19.2 | ) |        |   |      |  |      | 
|Net change in intercompany financing                             |  |        |   | (1,528.0 | ) |      |   | 1,228.6 |   | 299.4 |  |      | 
|                                                                 |  |         |   |          |   |       |   |         |   |       |  |       | 
|Net cash flow from financing activities                          |  | 1,218.4 |   | (1,529.2 | ) | (22.5 | ) | 2,070.1 |   | 400.0 |  | 300.0 | 
|                                                                 |  |         |   |          |   |       |   |         |   |       |  |       | 
|Change in cash and equivalents                                   |  | 92.3    |   |         |   | 91.2  |   | 1.1     |   |      |  |      | 
|Cash and equivalentsbeginning of the period                     |  | 76.7    |   |         |   | 66.7  |   | 10.0    |   |      |  |      | 
|Cash from acquisitions                                           |  | 52.7    |   |         |   | 52.7  |   |        |   |      |  |      | 
|Effect of exchange rate changes on cash                          |  | (4.1    | ) |         |   | (4.1  | ) |        |   |      |  |      | 
|                                                                 |  |         |   |          |   |       |   |         |   |       |  |       | 
|Cash and equivalents end of period                               |  | 217.6   |   |         |   | 206.5 |   | 11.1    |   |      |  |      | 
|                                                                 |  |         |   |          |   |       |   |         |   |       |  |       | 
|Supplemental cash flow information                               |  |         |   |          |   |       |   |         |   |       |  |       | 
|Interest paid                                                    |  | 155.7   |   |         |   | (0.8  | ) | 105.5   |   | 51.0  |  |      | 
|Income taxes paid/(refund)                                       |  | (3.9    | ) |         |   | (1.8  | ) | (3.7    | ) | 0.2   |  | 1.4   | 

F-65

---



30.   Valuation and Qualifying Accounts under Dutch GAAP

|                                         |  | Balance at the
beginning of the
year |  | Charges to
costs and
expenses |   | Deductions |   | Acquisitions |  | Balance at
the end of
the year
|---------------------------------------- |  | ------------------------------------ |  | ----------------------------- | - | ---------- | - | ------------ |  | ------------------------------
|
|Year ended December 31, 2003             |  |                                      |  |                               |   |            |   |              |  |                               
|Allowance for doubtful accounts          |  | 22.2                                 |  | 6.8                           |   | (6.8       | ) |             |  | 22.2                          
|Year ended December 31, 2002             |  |                                      |  |                               |   |            |   |              |  |                               
|Allowance for doubtful accounts          |  | 27.1                                 |  | 6.7                           |   | (11.6      | ) |             |  | 22.2                          
|Year ended December 31, 2001             |  |                                      |  |                               |   |            |   |              |  |                               
|Allowance for doubtful accounts          |  | 7.8                                  |  | 6.2                           |   | (2.5       | ) | 15.6         |  | 27.1                          
|Year ended December 31, 2003             |  |                                      |  |                               |   |            |   |              |  |                               
|Inventory obsolescence reserve           |  | 12.4                                 |  | 2.8                           |   | (2.4       | ) |             |  | 12.8                          
|Year ended December 31, 2002             |  |                                      |  |                               |   |            |   |              |  |                               
|Inventory obsolescence reserve           |  | 9.5                                  |  | 2.9                           |   |           |   |             |  | 12.4                          
|Year ended December 31, 2001             |  |                                      |  |                               |   |            |   |              |  |                               
|Inventory obsolescence reserve           |  | 3.4                                  |  | (1.4                          | ) |           |   | 7.5          |  | 9.5                           
|Year ended December 31, 2003             |  |                                      |  |                               |   |            |   |              |  |                               
|Valuation allowances deferred tax assets |  | 47.8                                 |  | (0.8                          | ) |           |   |             |  | 47.0                          
|Year ended December 31, 2002             |  |                                      |  |                               |   |            |   |              |  |                               
|Valuation allowances deferred tax assets |  | 54.4                                 |  | (6.6                          | ) |           |   |             |  | 47.8                          
|Year ended December 31, 2001             |  |                                      |  |                               |   |            |   |              |  |                               
|Valuation allowances deferred tax assets |  | 34.5                                 |  | (2.7                          | ) |           |   | 22.6         |  | 54.4                          

31.   Subsequent events (unaudited)

In May 2004, our subsidiary Kappa Zülpich has been visited by the German "Bundes Kartellamt" in the framework of an investigation of the EU
regarding a suspicion about possible price co-ordination of recovered paper purchases by paper and board producers. Currently, management can not assess the outcome of the investigation.

At
August 10, 2004, our corrugated packaging plant "Kappa Iberoamericana Almeria", located in the south of Spain, was destroyed by fire. The company sells and produces
approximately 45 million m2 of packaging. We expect our insurance cover to be sufficient to recover the financial damage. The support of our other plants in Spain will be used to
the fullest extend to maintain the business. We expect to rebuild the plant as soon as possible.

32.   Summary of subsidiaries

All subsidiaries are 100% owned less otherwise noted.

|Corporate                                         |  |                
|------------------------------------------------- |  | ---------------
|Kappa Beheer B.V., Eindhoven                      |  | The Netherlands
|Kappa Packaging B.V., Eindhoven                   |  | The Netherlands
|Kappa Packaging Nederland Holding B.V., Eindhoven |  | The Netherlands
|Kappa Packaging Nederland B.V., Eindhoven         |  | The Netherlands
|Kappa Packaging International B.V., Eindhoven     |  | The Netherlands
|Kappa Packaging (Deutschland) GmbH, Brühl         |  | Germany        
|Kappa Packaging Czech, s.r.o., Zimrovice          |  | Czech Republic 
|Kappa Packaging UK Limited, Corby                 |  | United Kingdom 
|Kappa Packaging France SAS, Brétigny-sur-Orge     |  | France         
|Kappa Packaging Sweden AB, Stockholm              |  | Sweden         
|                                                  |  |                

F-66

---



|Kappa Packaging España SL, San Vincente del Raspeig (Alicante)             |  | Spain                
|-------------------------------------------------------------------------- |  | ---------------------
|Kappa Packaging Denmark AS, Kolding                                        |  | Denmark              
|Kappa Corrugated Finland Oy, Pirkkala                                      |  | Finland              
|Kappa Packaging Development Centre B.V., Hoogeveen                         |  | The Netherlands      
|Paper & Board                                                              |  |                      
|Recovered Paper                                                            |  |                      
|Kappa Paper Recycling B.V., Eindhoven                                      |  | The Netherlands      
|Kappa Spaarpapier N.V., Merksem Antwerpen                                  |  | Belgium              
|Kappa Levison GmbH, Mülheim a/d Ruhr                                       |  | Germany              
|AVR-Rietveld C.V., Capelle a/d Ijssel                                      |  | The Netherlands (50%)
|Kappa Paper Recycling (UK), Birmingham                                     |  | United Kingdom       
|Containerboard                                                             |  |                      
|Kappa Kraftliner AB, Piteå                                                 |  | Sweden               
|Kappa Roermond Papier B.V., Roermond                                       |  | The Netherlands      
|Kappa Zülpich Papier GmbH, Zülpich                                         |  | Germany              
|Kappa Wiesloch Papier GmbH, Wiesloch                                       |  | Germany              
|Kappa SSK Ltd., Birmingham                                                 |  | United Kingdom       
|Kappa Packaging SpA ("Kappa Ania Paper"), Ponte all'Ania                   |  | Italy                
|Kappa Packaging Czech, s.r.o. ("Kappa Morava Paper"), Zimrovice            |  | Czech Republic       
|Kappa túrovo, a.s ("Kappa túrovo Paper"), túrovo                        |  | Slovakia (98.5%)     
|Kappa Containerboard B.V., Roermond                                        |  | The Netherlands      
|Kappa Containerboard Benelux B.V., Roermond                                |  | The Netherlands      
|Kappa Containerboard Ibérica, S.L., Barcelona                              |  | Spain                
|Kappa Containerboard France SAS, Paris                                     |  | France               
|Kappa Packaging SpA ("Kappa Containerboard Italiana"), San Donato Milanese |  | Italy                
|Kappa Containerboard Deutschland GmbH, Hamburg                             |  | Germany              
|Kappa Containerboard AG, Basel                                             |  | Switzerland          
|Kappa Containerboard UK Ltd., Newmarket                                    |  | United Kingdom       
|Solid Board                                                                |  |                      
|Kappa Herzberger Papierfabrik GmbH, Herzberg am Harz                       |  | Germany              
|Kappa BADENKARTON GmbH, Gernsbach                                          |  | Germany              
|Kappa Triton B.V., Nieuweschans/Coevorden                                  |  | The Netherlands      
|Kappa Attica B.V., Oude Pekela                                             |  | The Netherlands      
|Kappa Graphic Board B.V., Sappemeer/Hoogezand                              |  | The Netherlands      
|Kappa Graphic Board S.A., Orly                                             |  | France               
|Kappa Graphic Board GmbH, Essen                                            |  | Germany              
|Kappa Graphic Board S.r.l., San Donato Milanese, Milan                     |  | Italy                
|Kappa Graphic Board S.A., Barcelona                                        |  | Spain                
|Kappa Graphic Board (UK) Ltd, Northampton                                  |  | United Kingdom       
|Kappa Graphic Board USA B.V., Chesapeake, VA                               |  | USA                  
|Packaging                                                                  |  |                      
|Packaging Benelux & UK                                                     |  |                      
|Kappa RapidCorr Eindhoven B.V., Eindhoven                                  |  | The Netherlands      
|Kappa Hermes N.V., Baarn                                                   |  | The Netherlands      
|Kappa Oudenbosch Golfkarton B.V., Etten-Leur/Oudenbosch                    |  | The Netherlands      
|Kappa TWINCORR B.V., Hoogeveen/Nieuwe Pekela                               |  | The Netherlands      
|Kappa De Zeeuw Golfkarton B.V., Eerbeek                                    |  | The Netherlands      
|Kappa Vandra Golfkarton B.V., Oosterhout                                   |  | The Netherlands      
|Kappa Van Dam Golfkarton B.V., Helmond                                     |  | The Netherlands      
|Kappa Zedek B.V., Deventer                                                 |  | The Netherlands      
|Kappa Orko-Pak B.V., Zwolle                                                |  | The Netherlands      
|                                                                           |  |                      

F-67

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|Kappa Drogenbos N.V., Drogenbos                                                          |                                             | Belgium       
|---------------------------------------------------------------------------------------- | ------------------------------------------- | --------------
|Kappa Van Mierlo N.V., Turnhout                                                          |                                             | Belgium       
|Kappa Turnhout N.V., Turnhout                                                            |                                             | Belgium       
|Kappa Boxcentre Olen N.V., Olen-Geel                                                     |                                             | Belgium       
|Kappa Corrugated UK Limited, Northampton                                                 |                                             | United Kingdom
|                                                                                         | Kappa Abercarn, Abercarn                   |               
|                                                                                         | Kappa Lokfast, Cumbernauld/Purfleet        |               
|                                                                                         | Kappa Machine Systems, Yate                |               
|                                                                                         | Kappa Northampton, Northampton             |               
|                                                                                         | Kappa Stalybridge, Stalybridge             |               
|                                                                                         | Kappa Yate, Yate                           |               
|Packaging France                                                                         |                                             |               
|Kappa Central Pac SAS, Brétigny-sur-Orge/Melun/Etampes                                   |                                             | France        
|Kappa Dore Emballage SAS, La Chapelle Agnon                                              |                                             | France        
|Kappa Maine Emballages SAS, La Suze sur Sarthe                                           |                                             | France        
|Kappa SCAO SAS, Gétigné/Braye enVal                                                      |                                             | France        
|Kappa SIEMCO SAS, Carquefou                                                              |                                             | France        
|Packaging Germany & Switzerland                                                          |                                             |               
|Kappa RapidCorr GmbH, Euskirchen                                                         |                                             | Germany       
|Kappa RapidCorr Euskirchen GmbH, Euskirchen                                              |                                             | Germany       
|Kappa Herzberger Wellpappe GmbH, Herzberg am Harz                                        |                                             | Germany       
|Kappa Kawell GmbH, Osnabrück                                                             |                                             | Germany       
|Kappa Rheinwelle GmbH, Kreuzau                                                           |                                             | Germany       
|Kappa Topwell Verpackungen GmbH, Velbert                                                 |                                             | Germany       
|Kappa Sieger GmbH:                                                                       |                                             |               
|                                                                                         | Kappa Wellpappe Brühl, Brühl               |               
|                                                                                         | Kappa Wellpappe Feucht, Feucht             |               
|                                                                                         | Kappa Wellpappe Hanau, Hanau               |               
|                                                                                         | Kappa Wellpappe Sarstedt, Sarstedt         |               
|Kappa Wellpappe Lübeck GmbH, Lübeck                                                      |                                             | Germany       
|Kappa Holfelder Werke GmbH & Co. KG:                                                     |                                             | Germany       
|                                                                                         | Kappa Wellpappe Wiesloch, St Leon-Rot      |               
|                                                                                         | Kappa Wellpappe Zwiesel, Zwiesel           |               
|Kappa Swisswell AG, Möhlin                                                               |                                             | Switzerland   
|Packaging Italy & Spain                                                                  |                                             |               
|Kappa Packaging SpA:                                                                     |                                             |               
|                                                                                         | Kappa Packaging Lunata, Lunata             |               
|                                                                                         | Kappa Packaging Badia, Badia Pozzeveri     |               
|                                                                                         | Kappa Packaging Rovigo, Martino di Venezze |               
|                                                                                         | Kappa Packaging Vignate, Vignate           |               
|Kappa Iberoamericana, S.A., San Vicente del Raspeig (Alicante)                           |                                             | Spain         
|Kappa Iberoamericana Almeria, S.A., Vicar (Almeria)                                      |                                             | Spain         
|Kappa Iberoamericana Catalunya, S.A., San Vicente dels Horts (Barcelona)                 |                                             | Spain         
|Kappa Iberoamericana Huelva, S.A., La Palma del Condado (Huelva)                         |                                             | Spain         
|Kappa Iberoamericana Totana, S.L., Totana (Murcia)                                       |                                             | Spain         
|Kappa Iberoamericana, S.A. ("Kappa Iberoamericana Canarias"), Las Palmas de Gran Canaria |                                             | Spain         
|Packaging Nordic & Central Europe                                                        |                                             |               
|Kappa Dansk Kraftemballage A/S, Kolding                                                  |                                             | Denmark       
|Kappa Borup A/S, Borup                                                                   |                                             | Denmark       
|Kappa Corrpack A/S, Vejen                                                                |                                             | Denmark       
|Kappa CorrPrint A/S, Vamdrup                                                             |                                             | Denmark       
|Kappa Ejby A/S, Ejby                                                                     |                                             | Denmark       
|                                                                                         |                                             |               

F-68

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|Kappa Emballage A/S, Herfølge                        |                             | Denmark         
|---------------------------------------------------- | --------------------------- | ----------------
|Kappa Støvring A/S, Støvring                         |                             | Denmark         
|Kappa Varde A/S, Varde                               |                             | Denmark         
|Kappa Dyboflex A/S, Vejle                            |                             | Denmark         
|Kappa DieCut A/S, Kolding                            |                             | Denmark         
|Kappa ConsumerProducts A/S, Vejen                    |                             | Denmark         
|Kappa Nordwell GmbH, Flensburg                       |                             | Germany         
|Kappa Packaging Baltic Ltd., Vilnius                 |                             | Lithuania       
|Kappa Förenade Well AB, Eslöv/Torup/Gävle            |                             | Sweden          
|Kappa Grenland AS, Porsgrunn                         |                             | Norway          
|Kappa Liquid Packaging, Eslöv                        |                             | Sweden          
|Kappa Wellpack, Eslöv                                |                             | Sweden          
|Kappa Corrugated Equipment, Eslöv                    |                             | Sweden          
|Kappa Mittpac AB, Bräcke                             |                             | Sweden          
|Kappa Mälarwell AB, Enköping                         |                             | Sweden          
|Kappa Weltillverkaren AB, Arlöv                      |                             | Sweden          
|Kappa Pakite Oy, Espoo                               |                             | Finland         
|Kappa Pirkan Pakkaus Oy, Pirkkala                    |                             | Finland         
|Kappa Seinäjoki Oy, Seinäjoki                        |                             | Finland         
|Kappa Drezdenko Sp.z o.o., Drezdenko                 |                             | Poland          
|Kappa Konin Sp.z o.o., Warsaw                        |                             | Poland          
|Kappa Gdansk Sp.z o.o., Pruszcz Gdanski              |                             | Poland          
|Kappa Warszawa Sp.z o.o., Warsaw                     |                             | Poland          
|Kappa Empack s.r.o., Olomouc                         |                             | Czech Republic  
|Kappa Packaging Czech, s.r.o.:                       |                             |                 
|                                                     | Kappa Zimrovice, Zimrovice |                 
|                                                     | Kappa Brno, Brno           |                 
|                                                     | Kappa Zebrák, Zebrák        |                 
|Kappa Obaly túrovo a.s., túrovo                    |                             | Slovakia (98.5%)
|Kappa Dunatrade Kft, Esztergon                       |                             | Hungary (98.5%) 
|Kappa St. Petersburg A/O, St. Petersburg             |                             | Russia          
|Solid Board Packaging                                |                             |                 
|Kappa "GSF" B.V., Oude Pekela                        |                             | The Netherlands 
|Kappa Trimbach B.V., Bergen op Zoom                  |                             | The Netherlands 
|Kappa Quama International B.V., Bergen op Zoom       |                             | The Netherlands 
|Kappa Solid Board SA (Pty) Ltd., Stellenbosch        |                             | South Africa    
|Kappa Interbox N.V., Hoogstraten                     |                             | Belgium         
|Kappa BADEN PACKAGING GmbH, Gernsbach                |                             | Germany         
|Kappa Herzberger Papierfabrik GmbH, Herzberg am Harz |                             | Germany         
|Kappa Verpackungswerk Neuss GmbH, Neuss              |                             | Germany         
|Kappa Corby, Corby                                   |                             | United Kingdom  
|Kappa Rena AS, Rena                                  |                             | Norway          
|Kappa Carton France S.a.r.l., Paris                  |                             | France          
|Kappa Agripack SARL, Verquières                      |                             | France          

F-69

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