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

FORM 20-F

|(Mark One)                                 
|-------------------------------------------
|o                                          
|OR                                         
|ý                                          
|For the fiscal year ended December 31, 2004
|OR                                         
|o                                          
|Commission file number 333-101456          

JSG FUNDING PLC
JSG ACQUISITIONS(Exact name of registrants as specified in their respective charters)

IRELAND(Jurisdiction of incorporation or organization)

BEECH HILL, CLONSKEAGH, DUBLIN 4, IRELAND(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 pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: 101/8% Senior Notes due 2012
95/8% Senior Notes due 2012
15.5% Subordinated Notes due 2013

Indicate the number of outstanding shares of each of the JSG Funding's classes of capital or common stock as of December 31, 2004: Ordinary Shares of
€0.001 each 40,000,000.

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.

ý Yes    o No

Indicate by check mark which financial statement item the registrant has elected to follow.

o Item
17    ý Item 18



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TABLE OF CONTENTS

|Item 1.   |  | Identity of Directors, Senior Management and Advisors                    |  | 6 
|--------- |  | ------------------------------------------------------------------------ |  | --
|Item 2.   |  | Offer Statistics and Expected Timetable                                  |  | 6 
|Item 3.   |  | Key Information                                                          |  | 6 
|Item 4.   |  | Information on the Company                                               |  | 16
|Item 5.   |  | Operating and Financial Review and Prospects                             |  | 35
|Item 6.   |  | Directors, Senior Management and Employees                               |  | 53
|Item 7.   |  | Major Shareholders and Related Party Transactions                        |  | 62
|Item 8.   |  | Financial Information                                                    |  | 67
|Item 9.   |  | The Offer and Listing                                                    |  | 69
|Item 10.  |  | Additional Information                                                   |  | 69
|Item 11.  |  | Quantitative and Qualitative Disclosures About Market Risk               |  | 92
|Item 12.  |  | Description of Securities Other Than Equity Securities                   |  | 94
|Item 13.  |  | Defaults, Dividends Arrearages and Delinquencies                         |  | 94
|Item 14.  |  | Material Modifications to Rights of Security Holders and Use of Proceeds |  | 94
|Item 15.  |  | Controls and Procedures                                                  |  | 94
|Item 16.  |  | Reserved                                                                 |  | 94
|Item 16A. |  | Audit Committee Financial Expert                                         |  | 94
|Item 16B. |  | Code of Ethics                                                           |  | 94
|Item 16C. |  | Principal Accountant Fees and Services                                   |  | 95
|Item 16D. |  | Exemptions from the Listing Standards for Audit Committees               |  | 95
|Item 16E. |  | Purchases of Equity Securities by the Issuer                             |  | 95
|Item 17.  |  | Financial Statements                                                     |  | 95
|Item 18.  |  | Financial Statements                                                     |  | 95
|Item 19.  |  | Exhibits                                                                 |  | 97

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Introduction

In this annual report, unless the context otherwise requires:



See
Item 4 "Information on the CompanyHistory and Development of the Company" for more information relating to the acquisition of JSG by JSG Acquisitions.

This
annual report on Form 20-F covers both JSG Funding and JSG Acquisitions. JSG Acquisitions is the wholly owned subsidiary of JSG Funding and guarantor of JSG
Funding's 101/8% Senior Notes due 2012 and the 95/8% Senior Notes due 2012. The operating earnings, net income and cash flows of both companies are almost identical.
Although the interest expense of both are similar, JSG Funding has a greater third party interest cost while JSG Acquisitions has a substantial inter company interest expense payable to JSG Funding.
This relates to the advance to JSG Acquisitions of the proceeds from the issuance of the senior notes and the subordinated notes by JSG Funding. The balance sheets of both companies are also
substantially the same with the exception of the composition of their debt. The third party debt of JSG Funding is greater than that of JSG Acquisitions. However, JSG Acquisitions has substantial
inter company debt due to JSG Funding relating to the advance of the proceeds of the senior notes and subordinated notes offerings.

Presentation of our Financial Information

Unless otherwise indicated, financial information in this annual report has been prepared in accordance with generally accepted accounting principles in Ireland
("Irish GAAP"). Irish GAAP differs in certain significant respects from accounting principles generally accepted in the United States
("U.S. GAAP"). For a discussion of the significant differences between Irish GAAP and U.S. GAAP as they apply to JSG Funding, see note 37
to the historical audited consolidated financial statements included elsewhere in this annual report.

The
financial statements in this annual report do not comprise "full group accounts" within the meaning of Regulation 40(1) of the European Communities (Companies: Group Accounts)
Regulations, 1992 of Ireland insofar as such group accounts would have to comply with the disclosure and other requirements of those Regulations. Full group accounts for JSL for the year ended
December 31, 2003 and for the period from September 3, 2002 through December 31, 2002, have received unqualified audit reports and have been filed as appropriate with the Irish
Registrar of Companies. Full group accounts for the year ended December 31, 2004, will be filed with the Registrar in due course.

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Exchange Rate Information

In this annual report: (1) "IR£" or "Irish
punt" refers to the former currency of Ireland; (2) "€" or
"euro" refers to the single currency of the participating Member States in the Third Stage of European Economic and Monetary Union of the Treaty
Establishing the European Community, as amended from time to time; (3) "$" or "U.S. dollars"
refers to the lawful currency of the United States of America; (4) "£" or "sterling"
refers to the lawful currency of the United Kingdom; and (5) "SEK" or "Swedish Krona" refers to
the lawful currency of Sweden.

Ireland
is a participant in the European Monetary Union. In accordance with the Maastricht Treaty, the euro was launched as the single European currency on January 1, 1999. Upon
the launch of the euro, the exchange rate for the Irish punt was irrevocably fixed at IR£0.787564 = €1.00, and on January 1, 2002, the Irish punt was replaced
by the euro. The following tables show for the period from January 1, 2000 through December 31, 2004, the period-end, average, high and low Noon Buying Rates in the City of
New York for cable transfers of euro as certified for customs purposes by the Federal Reserve Bank of New York expressed as U.S. dollars per €1.00, which we refer to as the
"Noon Buying Rate."

|                                       |  | U.S. dollar/euro Exchange Rates
|-------------------------------------- |  | -------------------------------
|
|
|Exchange rate at end of period         |  | 0.9388                         
|Average exchange rate during period(1) |  | 0.9207                         
|Highest exchange rate during period    |  | 1.0335                         
|Lowest exchange rate during period     |  | 0.8720                         

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|                                    |  | U.S. dollar/euro Exchange Rates
|----------------------------------- |  | -------------------------------
|
|
|
|Exchange rate at end of period      |  | 1.25                           
|Average exchange rate during period |  | 1.26                           
|Highest exchange rate during period |  | 1.29                           
|Lowest exchange rate during period  |  | 1.24                           

On
April 27, 2005, the Noon Buying Rate was €1.00=$1.2938.

Our
inclusion of these exchange rates is not meant to suggest that the euro amounts actually represent such U.S. dollar amounts or that such amounts could have been converted into U.S.
dollars at such rate or any other rate. In connection with the preparation of the group profit and loss account and the group cash flow statement, management uses average monthly exchange rates. In
connection with the preparation of the group balance sheet, management uses the closing exchange rate at the

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balance
sheet date. For a discussion of the impact of the exchange fluctuations on our financial condition and results of operations, see "Operating and Financial Review and Prospects."

Market, Ranking And Other Data

The data included in this annual report regarding markets and ranking, including the size of certain markets and JSG's position and the position of JSG's
competitors within these markets, are based on independent industry publications, reports from government agencies or other published industry sources and estimates based on JSG management's knowledge
and experience in the markets in which it operates. The estimates have been based on information obtained from JSG's customers, distributors, suppliers, trade and business organizations and other
contacts in the markets in which it operates. We believe these estimates to be accurate as of the date of this annual report. However, this information may prove to be inaccurate because of the method
by which some of the data was obtained or because this information cannot always be verified with complete certainty due to the limits on availability and reliability of raw data, the voluntary nature
of the data gathering process and other limitations and uncertainties inherent in a survey of market size. All references to market positions of JSG set forth herein are based on a comparison of
volumes sold.

Disclosure Regarding Forward-Looking Statements

This annual report includes forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including
the terms "believes," "estimates," "anticipates," "expects," "intends," "may," "will" or "should" or, in each case, their negative, or other variations or comparable terminology. These forward-looking
statements include all matters that are not historical facts. They appear in a number of places throughout this annual report and include
statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth strategies and the
industry in which we operate.

By
their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution
you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which
we operate may differ materially from those made in, or suggested by, the forward-looking statements contained in this annual report. In addition, even if our results of operations, financial
condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this annual report, those results or developments may
not be indicative of results or developments in subsequent periods. Important factors that could cause those differences include, but are not limited to:



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We
urge you to read the sections of this annual report entitled "Risk Factors" and "Business Overview" for a more complete discussion of the factors that could affect our future
performance and the industry in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking events described in this annual report may not occur.

We
undertake no obligation to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written
and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained
elsewhere in this annual report.

Item 1.    Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.    Offer Statistics and Expected Timetable

Not applicable.

Item 3.    Key Information

Selected Historical Financial Data

The following table sets forth our selected historical financial data. The periods prior to and including September 2, 2002 reflect data of JSG, JSG
Funding's predecessor for financial accounting purposes. The periods beginning September 3, 2002 reflect data of JSG Funding and its consolidated subsidiaries after the acquisition of JSG.
Because of the revaluation of certain assets and liabilities acquired and the increased level of debt as part of the acquisition of JSG, and their related impact on the financial data, the
consolidated financial statements of JSG, JSG Funding's predecessor for the periods prior to September 3, 2002, are not comparable to those of JSG Funding subsequent to that date. We have
derived the selected historical consolidated financial data for the period January 1, 2002 through September 2, 2002 from JSG's audited consolidated financial statements and the related
notes included elsewhere in this annual report. The selected historical consolidated financial data as of and for the fiscal years ended December 31, 2000 and 2001 have been derived from JSG's
audited consolidated financial statements for such years, which are not included in this annual report. We have derived the selected historical consolidated financial data for the period from
September 3, 2002 through December 31, 2002 and for the years ended December 31, 2003 and 2004 from JSG Funding's consolidated financial statements and the related notes included
elsewhere in this annual report. The selected historical financial data set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with the
discussion under the heading "Operating and Financial Review and Prospects," and the historical consolidated financial statements of JSG and JSG Funding and accompanying notes included elsewhere in
this annual report.

Unless
otherwise indicated, this historical financial data has been prepared in accordance with Irish GAAP. Irish GAAP differs in certain significant respects from U.S. GAAP. For a
discussion of the most significant differences between Irish GAAP and U.S. GAAP as they apply to JSG Funding and JSG,

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see
note 37 to JSG Funding's historical consolidated financial statements included elsewhere in this annual report.

|                                                     |  | Predecessor |   | Successor  |  
|---------------------------------------------------- |  | ----------- | - | ---------- | -
|
|
|Consolidated Statement of Income Data:               |  |             |   |            |  
|Irish GAAP unless stated otherwise                   |  |             |   |            |  
|Net sales                                            |  | €4,565,244  |   | €4,511,650 |  
|Cost of sales                                        |  | 3,336,671   |   | 3,243,372  |  
|Impairment of property, plant and equipment          |  |            |   | 26,642     |  
|                                                     |  |             |   |            |  
|Gross profit                                         |  | 1,228,573   |   | 1,241,636  |  
|Net operating expenses                               |  | 866,103     |   | 883,964    |  
|Reorganization and restructuring costs               |  | 20,890      |   | 23,763     |  
|                                                     |  |             |   |            |  
|Operating income subsidiaries continuing            |  | 341,580     |   | 333,909    |  
|Share of associates' operating income                |  | 403,934     |   | 242,212    |  
|Share of associates' restructuring costs             |  | (24,894     | ) | (10,895    | )
|                                                     |  |             |   |            |  
|Total operating income                               |  | 720,620     |   | 565,226    |  
|Income on sale of operations subsidiariescontinuing |  |            |   |           |  
|Share of associates' income on sale of operations    |  | 3,105       |   |           |  
|Interest income                                      |  | 20,511      |   | 23,053     |  
|Interest expense                                     |  | (120,370    | ) | (108,621   | )
|Share of associates' net interest                    |  | (181,567    | ) | (154,654   | )
|Other financial expense(1)                           |  |            |   |           |  
|                                                     |  |             |   |            |  
|Income before taxes and equity minority interests    |  | 442,299     |   | 325,004    |  
|Taxes on income                                      |  | (185,551    | ) | (137,565   | )
|                                                     |  |             |   |            |  
|Income/(loss) before equity minority interests       |  | 256,748     |   | 187,439    |  
|Equity minority interests                            |  | (30,816     | ) | (37,022    | )
|                                                     |  |             |   |            |  
|Net income/(loss)                                    |  | €225,932    |   | €150,417   |  
|                                                     |  |             |   |            |  
|Net income/(loss) in accordance with U.S. GAAP       |  | €245,670    |   | €151,921   |  
|                                                     |  |             |   |            |  
|                                                     |  |             |   |            |  

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|Other Financial Data:                                           |                                              |            |          |            |          |          |          |            |            |            |          |            |         
|--------------------------------------------------------------- | -------------------------------------------- | ---------- | -------- | ---------- | -------- | -------- | -------- | ---------- | ---------- | ---------- | -------- | ---------- | --------
|EBITDA:(2)                                                      |                                              | €576,431   |          | €572,673   |          | €385,684 |          | €215,621   |            | €597,452   |          | €591,370   |         
|Depreciation, depletion and amortization expense                |                                              | 234,851    |          | 238,764    |          | 172,354  |          | 92,661     |            | 298,014    |          | 303,126    |         
|Net cash provided by (used in):                                 |                                              |            |          |            |          |          |          |            |            |            |          |            |         
|                                                                | Operating activities                         |            | €482,298 |            | €584,492 |          | €356,514 |            | €271,698   |            | €690,964 |            | €640,929
|                                                                | Capital expenditure and financial investment |            | (116,327 | )          | (136,627 | )        | (121,206 | )          | (90,307    | )          | (161,680 | )          | (166,013
|                                                                | Acquisitions and disposals                   |            | (109,067 | )          | (42,431  | )        | (297,064 | )          | (2,516,819 | )          | (180,546 | )          | 5,619   
|                                                                | Financing activities                         |            | (19,956  | )          | (128,032 | )        | 43,502   |            | 2,561,209  |            | (7,421   | )          | (123,548
|                                                                | Capital expenditures                         |            | (147,629 | )          | (177,213 | )        | (119,620 | )          | (91,139    | )          | (207,518 | )          | (206,466
|Balance Sheet Data (at end of period):                          |                                              |            |          |            |          |          |          |            |            |            |          |            |         
|Cash at bank and in hand                                        |                                              | €427,092   |          | €440,109   |          | n/a      |          | €184,331   |            | €179,067   |          | €248,033   |         
|Property, plant and equipment                                   |                                              | 2,138,827  |          | 2,088,019  |          | n/a      |          | 2,214,254  |            | 2,435,946  |          | 2,334,858  |         
|Total assets                                                    |                                              | 5,901,002  |          | 5,936,617  |          | n/a      |          | 5,842,608  |            | 5,816,927  |          | 5,768,077  |         
|Total long term debt and other long term liabilities            |                                              | 1,337,515  |          | 1,404,432  |          | n/a      |          | 3,027,284  |            | 3,022,350  |          | 2,959,840  |         
|Shareholders' equity                                            |                                              | 2,505,175  |          | 2,525,191  |          | n/a      |          | 878,099    |            | 895,356    |          | 869,101    |         
|Restated financial information applying FRS 19 retrospectively: |                                              |            |          |            |          |          |          |            |            |            |          |            |         
|Total assets, as reported                                       |                                              | €5,901,002 |          | n/a        |          | n/a      |          | n/a        |            | n/a        |          | n/a        |         
|Unaudited deferred tax adjustment(3),(4)                        |                                              | (56,258    | )        | n/a        |          | n/a      |          | n/a        |            | n/a        |          | n/a        |         
|Unaudited and restated total assets                             |                                              | €5,844,744 |          | n/a        |          | n/a      |          | n/a        |            | n/a        |          | n/a        |         
|Shareholders' equity, as reported                               |                                              | 2,505,175  |          | n/a        |          | n/a      |          | n/a        |            | n/a        |          | n/a        |         
|Unaudited deferred tax adjustment(3),(4)                        |                                              | (118,445   | )        | n/a        |          | n/a      |          | n/a        |            | n/a        |          | n/a        |         
|Unaudited and restated shareholders' equity                     |                                              | 2,386,730  |          | n/a        |          | n/a      |          | n/a        |            | n/a        |          | n/a        |         
|U.S. GAAP:                                                      |                                              |            |          |            |          |          |          |            |            |            |          |            |         
|Total assets                                                    |                                              | €5,975,685 |          | €5,913,972 |          | n/a      |          | €6,071,534 |            | €5,965,772 |          | €5,898,108 |         
|Shareholders' equity                                            |                                              | 2,607,526  |          | 2,685,847  |          | n/a      |          | 691,685    |            | 751,402    |          | 727,549    |         

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The following is a reconciliation of net income/(loss) to EBITDA:

|                                                     |  | Predecessor |   | Successor |  
|---------------------------------------------------- |  | ----------- | - | --------- | -
|
|
|Net income/(loss) available to ordinary shareholders |  | €225,932    |   | €150,417  |  
|Equity minority interests                            |  | 30,816      |   | 37,022    |  
|Taxes on income                                      |  | 185,551     |   | 137,565   |  
|Share of associates income                           |  | (200,578    | ) | (76,663   | )
|Net interest expense                                 |  | 99,859      |   | 85,568    |  
|Depreciation, depletion and amortization expense     |  | 234,851     |   | 238,764   |  
|                                                     |  |             |   |           |  
|EBITDA                                               |  | €576,431    |   | €572,673  |  
|                                                     |  |             |   |           |  

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RISK FACTORS

You should carefully consider the risks described below that could affect our business. The risks below are not the only ones that we
facesome risks are not yet known to us and some that we do not currently believe to be material could later turn out to be material. All of these risks could significantly harm our
business, revenues, operating income, net income, net assets and liquidity and capital resources.

This annual report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in
the forward-looking statements as a result of many factors, including the risks faced by us described below and elsewhere in this annual report. You should also refer to other information in this
annual report, including the consolidated financial statements and the related notes.

Risks Relating to Our Indebtedness

Our substantial indebtedness could have a material adverse effect on our financial health and prevent us from fulfilling our outstanding obligations.

We have significant debt service obligations. As of December 31, 2004, we had outstanding long term indebtedness of approximately
€3,072 million (including the current portion of €27 million) and shareholders' equity of approximately €869 million.

Our
substantial debt could have important consequences. For example, it could:



We
are able to incur substantial additional debt in the future under the senior notes indentures and the 7.75% senior subordinated notes indentures. The addition of further debt to our
current debt levels could intensify the leverage-related risks that we now face. The senior notes indentures also permit us to incur additional debt which may be senior to the senior notes and the
guarantees and which may be secured. The 7.75% senior subordinated notes indentures also permit us to incur additional debt which may be senior to the 7.75% senior subordinated notes and which may be
secured.

In
addition, the senior notes indentures and the 7.75% senior subordinated notes indentures and the senior credit facility contain financial and other restrictive covenants that limit
our ability to engage in activities that may be in our long term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could
result in the acceleration of all of our debts.

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Our ability to make payments on and to refinance our indebtedness depends on our ability to generate sufficient cash in the future.

Our ability to make payments on and to refinance our indebtedness, and to fund planned capital and development expenditures or opportunities that may arise, such
as acquisitions of other businesses, will depend on our ability to generate sufficient cash in the future. This, to some extent, is subject to general economic, financial, competitive and other
factors that are beyond our control.

We
cannot assure you that our business will generate sufficient cash flows from operations or that future borrowing will be available to us under our senior credit facility in an amount
sufficient to enable us to pay our debt, including the notes, or to fund our other liquidity needs. If our future cash flows from operations and other capital resources are insufficient to pay our
obligations as they mature or to fund our liquidity needs, we may be forced to reduce or delay our business activities and capital expenditures, sell assets, obtain additional debt or equity capital
or restructure or refinance all or a portion of our debt. We cannot assure you that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In
addition, the terms of our existing and future indebtedness, including the senior notes, the senior credit facility and the 7.75% senior subordinated notes, may limit our ability to pursue any of
these alternatives.

Moreover,
as a result of the refinancing transactions since December 31, 2004, we have replaced our existing 15.5% subordinated notes, on which we had the option of paying
interest in the form of additional 15.5% subordinated notes, with the 7.75% senior subordinated notes, on which we are required to pay interest only in cash, increasing our annual cash-pay
obligations by approximately €29 million.

Increases in market interest rates will increase the debt service obligations of our subsidiaries.

A portion of our debt, including all of the debt we incur under the senior credit facility, bears interest at variable rates. An increase in the interest rates on
our debt will reduce our funds available to repay
our debt and to finance our operations and future business opportunities and, as a result, will intensify the consequences of our leveraged capital structure. The senior credit facility requires that
we hedge at least 50% of the floating rate interest cost on our financial indebtedness. As of December 31, 2004, €862 million of our total outstanding debt of
€2,895 million bore interest at variable rates.

Risks Relating to Our Business

We are exposed to changes in market conditions for our products, the cyclicality of the packaging industry and the resulting threat of overcapacity.

The principal factor affecting the demand for our products, both globally and regionally, is the general level of economic growth and activity. Since the markets
for paper-based packaging products in the developed world are generally mature, there is a close correlation between economic growth and demand for packaging products such as corrugated containers and
their component materials, including containerboard. Accordingly, the demand for our products is adversely affected by an economic slowdown. This occurred in 2001, 2002, 2003 and 2004.

In
addition, our operating results reflect the packaging industry's general cyclical pattern. This cyclicality arises, in part, from the capital intensity of facilities such as paper
mills, which generally results in continued production as long as prices are sufficient to cover marginal costs, the long lead time between the planning and completion of a new mill, the
commodity-like nature of a majority of our products and substantial price competition. Consequently, the industry has from time to time experienced intermittent periods of substantial
overcapacity. A number of new paper mills are under construction, and the product from these mills will be introduced to the market between 2005 and 2007. In Europe, such new construction is
expected to add approximately 1,620,000 metric tons of

11

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new
capacity. In the absence of sufficient economic growth or the closure of other capacity, these new mills could cause a period of regional overcapacity. On the other hand, approximately
700,000 metric tons of capacity was removed from the market in 2003 and 2004. Periods of overcapacity, combined with weak demand, cause the industry to take downtime periodically to
reduce inventory levels. In a period of weak corrugated container demand in Europe during the second half of 2001, our European containerboard mills took 200,000 metric tons of downtime,
representing 8% of our annual capacity. We continue to take downtime as necessary to manage our inventories, but we have not needed downtime of this magnitude since 2001. In the event we take
downtime at our mills but our competitors continue production at high levels, our sales volumes could be adversely affected without any significant offsetting benefit of improved prices in the market.
Further, these adverse effects could be exacerbated in the event U.S. producers continue production and increase their level of containerboard exports to Europe.

Our industry is highly competitive and price fluctuations could diminish our sales volumes and revenues.

The paperboard and paper-based packaging products industries are highly competitive, and no single company is dominant. Our competitors include large, vertically
integrated paperboard and packaging products companies and numerous smaller companies. The industries in which we compete are particularly sensitive to price fluctuations as well as other factors,
including innovation, design, quality and service, with varying emphasis on these factors depending on the product line. To the extent that one or more of our competitors becomes more successful with
respect to any key competitive factor, our ability to attract and retain customers could be materially adversely affected, which could diminish our sales volumes and revenues.

Price fluctuations in raw materials and energy costs could adversely affect our ability to obtain the materials needed to manufacture our products and could adversely affect
our manufacturing costs.

Wood fiber purchased from third parties and recycled wastepaper, particularly old corrugated containers, or "OCC," the principal raw materials used in the
manufacture of our products, are purchased in highly competitive, price sensitive markets. These raw materials have historically exhibited price and demand cyclicality and extreme volatility even
within a single year. The price of OCC in Europe has peaked dramatically two times in recent yearsin June 2002 and in April 2003. In each case, a relatively low level of
supply was matched with a relatively high level of demand, principally caused by increased demand from Asia. In the first case, the free-on-board price rose to over
€150 per metric ton. Within a period of three months, supply and demand conditions leveled to return the price to around €100 per metric ton. In the second case, the
spike was even more rapid with recycled waste paper prices falling back to previous levels almost immediately. Prices were more stable throughout 2004, partly as a result of flat Asian demand and
Asian buyers focusing more on the U.S. market due to the weakness of the U.S. dollar. Monthly price variations were not more than €5 to €10 per metric ton
in 2004. In particular, the supply and price of such fiber depends on a variety of factors over which we have no control, including environmental and conservation regulations, natural disasters
and weather. A decrease in the supply of such fiber has caused, and likely will continue to cause, higher fiber costs. In addition, the increase in demand for products manufactured, in whole or in
part, from OCC has caused an occasional tightness in the supply of OCC. It may also cause a significant increase in the cost of such fiber used in the manufacture of recycled containerboard and
related products. Such costs are likely to continue to fluctuate based upon demand and supply characteristics. The table below provides information about the European OCC price information per metric
ton at and for the years ended December 31, 2001, 2002, 2003 and 2004.

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Free-on-Board OCC Price per Metric Ton

|                               |  | As of and for the
Year Ended December 31,
|------------------------------ |  | -----------------------------------------
|
|
|Price at the end of the period |  | 100                                      
|Average price during period    |  | 95                                       
|Highest price during period    |  | 100                                      
|Lowest price during period     |  | 87                                       

The
cost of producing our products is also sensitive to the price of energy. Energy prices, in particular oil and natural gas, have experienced significant volatility in recent years,
with a corresponding effect on our production costs. Two significant increases occurred in the last four years. In January 2001, natural gas prices reached a high of nearly $10.00 per million
British thermal units, or "mmBtu," compared to a historical 10-year average of $2.61 per mmBtu. Natural gas prices normalized in the second half of 2001. In 2004, gas prices reached $6.00
per mmBtu in March 2004, rising to a peak of almost $10.00 in October 2004 before falling again to $6.80 per mmBtu by the end of the year. Energy prices may not remain at current rates
and may rise to higher levels, in which case our production costs, competitive position and results of operations could be adversely affected thereby.

Our ability to maximize our cash flow and profitability depends on a number of factors, including the successful implementation of our business strategy.

Our business strategy is to maximize our cash flow and strengthen our position as one of the world's leading providers of containerboard, corrugated containers
and other paper-based packaging products by implementing initiatives aimed at achieving cost savings and generating profitable growth. In order to continue to realize cost savings, we must
successfully reduce our overhead costs, improve our procurement process, realize certain operating efficiencies and rationalize our manufacturing capacity. Our ability to generate growth will depend
on our successful promotion of our products, our ability to innovate and, ultimately, customer demand for and acceptance of our products. The success of our efforts to implement our strategy and
accomplish these goals could be affected by a number of factors beyond our control, such as operating difficulties, increased operating costs, personnel turnover, competitors and customers, delays in
implementing initiatives and general economic or industry conditions. In addition, implementing our strategy requires significant management resources and may divert or strain our management's ability
to focus on other company objectives. We cannot assure you that we will be successful in achieving cost savings, generating growth or in increasing our cash flows or profitability. If we are
unsuccessful in implementing our business strategy and achieving cost savings, we may be unable to fulfill our obligations under the notes.

We are exposed to currency rate fluctuations.

With the introduction of the euro in 15 of the present 25 European Union Member States, our exposure to exchange rate fluctuation arises mainly in relation to the
U.S. dollar, sterling and the Swedish krona. In light of the use of the U.S. dollar as the functional currency of our Latin American operations, the U.S. dollar is the most
important foreign currency in which we conduct our business.

Fluctuations
in the value of the U.S. dollar have a significant effect on our operations and on our reported results in euro. A weaker U.S. dollar will decrease and,
conversely, a stronger U.S. dollar will increase, the euro figures reported in our consolidated financial statements with respect to our Latin American and U.S. operations. The depreciation in
the U.S. dollar adversely affected our reported non-euro denominated sales revenues in 2003 and 2004. During the year ended December 31, 2004, the euro strengthened by
approximately 8% against the U.S. dollar, resulting in a €40 million reduction in

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our
borrowing in foreign currencies. Borrowing in foreign currencies decreased by €152 million during the year ended December 31, 2003, principally as a result of the
relative weakness of the U.S. dollar, which declined approximately 20% during the year relative to the value of the euro. In addition, borrowing in foreign currencies decreased by
€128 million during the year ended December 31, 2002, principally as a result of the relative weakness of the U.S. dollar, which declined approximately 19% during
the year relative to the value of the euro. In addition, the relative strength or weakness of the U.S. dollar is important for the European industry because U.S. containerboard prices tend to
influence the world market. A weak U.S. dollar over a sustained period could result in lower sales into the United States by European manufacturers that ship products in corrugated containers
and, as a result, lower European demand for our containers. A weak U.S. dollar could also result in additional competition in the European market from U.S. manufacturers that have an incentive
to sell more products in Europe due to increased European demand for the relatively lower priced U.S. goods. The decline in the value of the U.S. dollar during 2003 and 2004
adversely affected European demand growth because finished goods for export to the United States were significantly less competitive relative to U.S. goods.

We are subject to numerous environmental laws and regulations.

We are subject to a wide range of environmental, health and safety laws and regulations in all the jurisdictions where we operate. These requirements are complex,
frequently changing and have tended to become more stringent over time. In particular, we are subject to the European Union's Integrated Pollution Prevention and Control, or "IPPC," program, which
requires that most of our European mills obtain IPPC permits and achieve specified pollution control measures by 2007. While we have obtained IPPC permits for many of our mills that require
them, we remain in the process of obtaining such permits for other mills. Additionally, as part of the IPPC program, we are required to conduct "baseline" environmental investigations or otherwise
provide information regarding the condition of the underlying soil and groundwater at our European mill sites. In the event we incur unforeseen significant containment and clean-up
expenses, our operating results could be adversely affected. See "BusinessEnvironmental Issues" for a more complete discussion of the environmental regulatory regimes applicable to our
operations.

We
may in the future be adversely affected by the Kyoto Protocol, by which most industrialized nations agreed to reduce their emissions of carbon dioxide and other "greenhouse gases." On
January 1, 2005, the Emissions Trading Scheme, or "ETS," came into force. As part of this regime, each member state of the EU had to adopt a National Allocation Plan under which the main
operators of thermal based
energy plants were allocated permits to release specified amounts of carbon dioxide and other gases without charge. Operators will have to purchase ETS credits if their carbon dioxide output exceeds
the free or permitted volume. Our European plants have been allocated sufficient allowances to avoid the need to purchase ETS credits for the 2005 to 2008 first stage. With the recent decision by
Russia to ratify the Kyoto Protocol, the Kyoto Protocol came into force on February 16, 2005. In anticipation of such approval, the EU had determined to adopt the Kyoto Protocol into European
law and had agreed how the overall 8% reduction would be borne by the member states.

We
cannot assure you that we have been or will be at all times in complete compliance with these or other environmental health and safety requirements or that we will not incur material
costs or liabilities in connection with such requirements in the future. We can similarly provide no assurance that we will not experience an accident or otherwise become liable for contamination that
may have occurred in the past (including such liability to buyers of properties or businesses that we have sold). Additionally, if environmental, health and safety laws and regulations change, or new
information comes to our attention regarding our compliance with such laws and regulations, we may have to make additional expenditures or incur liabilities beyond what is currently anticipated, and
such expenditures and liabilities could adversely affect our operating results and financial condition.

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We are exposed to the risk of product substitution.

Our main product, corrugated containers, competes with other forms of packaging, principally reusable plastic containers. Within Europe, this competition has been
felt mainly in the container market for fruit, vegetable, meat, poultry and dairy produce, collectively referred to as the "short shelf-life sector." This sector is estimated to account
for approximately 14% of the European corrugated market. Any significant substitution away from paper-based packaging products will adversely affect our profitability. Although we believe the
substitution of reusable plastic containers in the short shelf-life sector has now reached its limit in countries within Europe, we can provide no assurance that further substitution will
not occur in this sector or in other sectors, nor can we provide any assurance that future packaging developments and trends will not drive further substitution.

The loss of key personnel could have a material adverse effect on our business, financial condition and results of operations.

Our ability to effectively sell existing products, develop and introduce new products, and integrate certain acquired businesses will depend on the efforts and
abilities of our executive officers and key
employees. Our operations could be adversely affected if, for any reason, a number of these officers or key employees did not remain with us.

The costs and difficulties of acquiring and integrating complementary businesses and technologies could impede our future growth and adversely affect our competitiveness.

As part of our growth strategy, we intend to consider acquiring complementary businesses. Currently we do not have any commitments or agreements relating to any
material acquisitions. Future acquisitions could result in the incurrence of debt and contingent liabilities, which could have a material adverse effect upon our business, financial condition and
results of operations. Risks we could face with respect to acquisitions include:



We are engaged in a number of active litigation matters, the outcome of which could have a material adverse effect on our financial condition and results of operations.

In addition to litigation arising in the ordinary course of business, we are involved in a number of active litigation matters, the outcome of which could have a
material adverse effect on our financial condition and results of operations. See "Item 8. Financial InformationLegal Proceedings" for a more complete discussion of such legal
proceedings.

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Item 4.    Information on the Company

History and Development of the Company

History of JSG

JSG was originally incorporated in Ireland as a private company on January 15, 1934, becoming a public company on June 30, 1964. JSG was
re-registered as a public limited company on February 1, 1985. On November 18, 2002, JSG converted to a private limited company.

JSG
has grown from its original Irish base to become a major international manufacturer of containerboard, corrugated containers and other paper-based packaging products with operations
in over 20 countries. Initial expansion in Ireland in the 1960s and early 1970s was followed by a series of acquisitions in the United Kingdom, the United States, Latin America and, during the
1990s, in continental Europe. In 1998, JSG extended its operations to Canada with the acquisition of a 50% holding in Smurfit MBI, formerly MacMillan Bathurst, the remaining 50% being owned by our
former associate, SSCC.

The JSG Acquisition

JSG Funding, a public limited company, was incorporated in Ireland on June 12, 2002 to act as a financing company in connection with the acquisition of JSG
by Madison Dearborn and management. For ease of reference, we refer to this acquisition as "the JSG Acquisition." Prior to the acquisition of JSG, JSG Funding had not engaged in any business.
The registered office of JSG Funding is Beech Hill, Clonskeagh, Dublin 4, Ireland and its telephone number is +353 1 202 7000.

On
October 7, 2002, JSG Acquisitions, a wholly-owned subsidiary of JSG Funding, completed the acquisition of all of the outstanding equity interests of JSG. In
connection with the acquisition, JSG distributed to its shareholders by way of a share capital reduction its 29.3% interest in SSCC and transferred certain of its non-operating
assets and non-core operating assets to newly formed, wholly owned subsidiaries of JSL (the "newcos") in exchange for intercompany notes. The newcos borrowed
€125 million under a bank credit facility, which was non-recourse to JSG Funding and its subsidiaries. The newcos then loaned the proceeds to JSL, and
JSL used them to make a capital contribution to JSG Funding. The newcos facility was fully paid before December 31, 2003.

The
funding required to purchase all of the outstanding equity interests of JSG, to refinance certain existing indebtedness of JSG and to pay related fees and expenses of the
transactions was approximately €3,510 million. These cash costs were financed by the following transactions:



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SSCC Asset Swap Transaction

On March 31, 2003, we completed the acquisition of SSCC's European packaging assets. In this transaction which we refer to as the "SSCC Asset Swap,' JSG
Funding exchanged its 50% ownership in Smurfit MBI, Canada and approximately €185 million for SSCC's European assets. The cash consideration for the transaction was
financed by U.S. $205 million of 95/8% senior notes due 2012 issued in February 2003.

In
connection with the SSCC Asset Swap, we acquired three paper mills (located in Hoya and Viersen, Germany and Cordoba, Spain), 20 corrugated container plants (11 located in Germany,
three in Spain, four in Belgium, one in The Netherlands and one in France), one contract packaging plant in the Netherlands and five reclamation plants located in Germany. The primary products
produced in these facilities include corrugated containers, containerboard and coated recycled boxboard.

New Corporate Structure

On February 6, 2004 JSG Packaging completed an exchange offer for the existing shares of JSL for an identical number of newly issued shares of JSG
Packaging having substantially identical rights, privileges, terms and conditions. Upon completion of the exchange, JSG Packaging contributed its shares of JSL to JSG Holdings
("the exchange") in exchange for newly issued shares of JSG Holdings. JSG Holdings is a public limited company newly incorporated in Ireland. As a result, JSG Holdings became a
subsidiary of JSG Packaging and the holder of all of the outstanding capital stock of JSL. All
outstanding warrants to purchase ordinary shares of JSL were converted, without any action of the holders thereof, into the right to purchase ordinary shares of JSG Packaging in
accordance with the terms of those instruments.

Munksjö Specialties Disposal

On December 22, 2004, we announced that we had signed a definitive agreement to sell our Munksjö specialties business to The EQT III
Fund for approximately €450 million. On December 14, 2004, SCA (Svenska Cellullosa Aktiebolaget) announced that it had agreed to buy our Munksjö tissue
business for approximately €28 million. The sale of our Munksjö specialties business to The EQT III Fund was completed on March 1, 2005 and the
proceeds from the disposal have been used to pay down part of the term portion of our senior credit facility. The sale of our Munksjö tissue business is subject to customary closing
conditions. For ease of reference, we refer to the sales of the Munksjö specialty paper and tissue businesses as the "Munksjö Specialties Disposal."

The
Munksjö specialty assets comprised pulp, décor paper, and specialty paper businesses and had sales from operations for 2004 of approximately
€480 million. The Munksjö tissue assets being sold comprise a paper mill producing base paper for tissue and two tissue conversion plants, and generated sales
from operations of approximately €50 million in 2004.

We
are retaining the Munksjö containerboard and corrugated assets, located in Norway, Sweden and Poland, which comprise approximately 90,000 metric tons of
containerboard and 150,000 metric tons of corrugated capacity.

Refinancing Transactions

On January 13, 2005, JSG Funding commenced a tender offer to purchase for cash all outstanding existing 15.5% subordinated notes, which we refer to as the
"tender offer." As of January 1, 2005, $211,110,848 aggregate principal amount of our 15.5% subordinated notes due 2013 and €140,740,568 aggregate principal amount of our 15.5%
subordinated notes due 2013 were outstanding. In connection with the tender offer, we also solicited consents to amend the indentures governing the existing 15.5% subordinated notes to remove
substantially all of the restrictive covenants thereunder. The tender offer

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was
completed and the proposed amendments became operative on February 14, 2005. We intend to redeem the .01% of the 15.5% dollar subordinated notes not tendered pursuant to the tender offer in
accordance with the terms and conditions of the indenture governing the existing 15.5% dollar subordinated notes. Under this indenture, the earliest we may redeem the 15.5% subordinated notes not
tendered is October 1, 2005, at a redemption price of 108.0% of the aggregate principal amount of the existing 15.5% subordinated notes. All of the euro 15.5% subordinated notes were tendered.
In January 2005, JSG completed an offering of approximately €217.5 million of 7.75% senior subordinated notes and $200 million of 7.75% senior subordinated notes.
JSG Funding applied the net proceeds from such offering to fund the purchase of its existing 15.5% subordinated notes pursuant to the tender offer and to pay related fees and expenses.

In
January 2005, JSG Holdings completed an offering of €325 million in aggregate principal amount of 11.5% senior pay-in-kind
notes due 2015 (the "PIK notes"), substantially all of the net proceeds of which were loaned to JSG Packaging, which, in turn, paid such net proceeds to its shareholders by means of a
share capital reduction under Irish law. Neither JSG Funding nor any of its subsidiaries guarantee the PIK notes and thus the PIK notes are effectively subordinated to all debt
and other liabilities and preferred stock, if any, of JSG Funding and its subsidiaries.

Business Overview

We are the largest European-based integrated manufacturer of containerboard, corrugated containers and other paper-based packaging products, with operations
mainly in Europe and Latin America. JSG was incorporated in Ireland in 1934 as the owner of a single converting plant. It has grown to its current position, owning 45 mills, most of
which produce containerboard used to manufacture corrugated containers, 197 converting plants, most of which convert containerboard into corrugated containers, 40 reclamation facilities,
which provide some of the wastepaper requirement for our mills, and 26 other production facilities (before giving effect to the Munksjö Specialties Disposal). Our European and Latin
American operations accounted for approximately 85% and 15% respectively, of our net sales for the year ended December 31, 2004.

Consistent
with our business strategy, in December 2004 we agreed to sell the specialty paper and tissue operations of Munksjö which comprise a pulp mill, seven
specialty paper mills, the main product of which is décor base paper, a tissue mill, two tissue conversion plants and a printing facility.

We
command a leading share of the European corrugated container market and are one of Europe's largest producers of containerboard. In Latin America, we believe we are the largest
producer of corrugated containers and the second largest producer of containerboard.

Our
containerboard mills and converting operations are highly integrated, as our corrugated container plants convert much of our own containerboard production. For the year ended
December 31, 2004, we produced over 2,900,000 metric tons of containerboard in Europe, and around 2,600,000 metric tons of corrugated containers. In Latin America, we produced
approximately 700,000 metric tons of containerboard and a similar volume of corrugated containers. In addition, our mills in Europe produced approximately 800,000 metric tons of other
grades of paper, including sack kraft, which is used to make industrial grade paper sacks, boxboard, which is used in the manufacture of folding cartons, together with non packaging grades, such as
décor base paper, graphic board and printing and writing paper, while our mills in Latin America produced 300,000 metric tons of other grades of paper, including boxboard, sack
kraft and printing and writing paper. Our conversion plants in Europe produced over 200,000 metric tons of other paper based packaging products, such as paper sacks and folding cartons, while
our Latin American operations produced approximately 100,000 metric tons of these products. Our décor base paper mills were sold as part of the Munksjö Specialties
Disposal.

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Industry Overview

Corrugated containers are a safe and economical means of transporting consumer and industrial products. More goods are shipped in corrugated containers than in
any other type of packaging. Containerboard, which is a generic term used to describe various types of paperboard such as linerboard and corrugating medium, is the principal raw material used to
manufacture corrugated containers. Linerboard is used as the inner and outer facing (liner) of a corrugated container. The two main types of linerboard are kraftliner, which is produced using
primarily virgin fiber, and testliner, which is produced using primarily recycled fiber. Corrugating medium is fluted and laminated to linerboard in a corrugator plant to produce corrugated sheets.
The sheets are then printed, cut, folded and glued in corrugator plants or sheet plants to produce corrugated containers.

Recycled
fiber is obtained principally from old corrugated case material, or OCC, acquired through open market purchases or from company-owned reclamation facilities. Virgin fiber
is obtained in the
form of wood chips or pulp wood acquired through open market purchases of wood fiber or from company-owned timberland. These fibers are chemically treated and then processed through paper machines,
which consist of a paper-forming section, a press section (where water is removed by pressing the wet containerboard between rolls) and a drying section. The containerboard is then wound into rolls,
which are shipped to company-owned converting plants or outside converters.

The
dispersion of customers for corrugated containers and the high bulk, low density and low value of corrugated containers, which typically are delivered by truck, make shipping costs a
relatively high percentage of total costs. As a result, corrugator plants usually serve markets within a 250-kilometer radius of the plant and employ a local sales force to serve the
market area.

Containerboard
pricing is driven primarily by the supply/demand balance and price movements in OCC and wood pulp, while corrugated container pricing is driven significantly by
movements in containerboard pricing. Price increases at the corrugated level tend to lag behind containerboard price movements, sometimes by months. As a result, the greater the level of forward
integration, the slower generally is the rate of change in net profits resulting from containerboard price movements.

Recycled
waste paper, principally OCC, is the principal raw material used in the manufacture of our products. Recycled fiber prices can vary widely at times and are very dependent upon
mill demand. While wood prices are relatively stable, fluctuations in Asian demand and reduced collections in the United States have been the principal factors driving the price of OCC.

Historically,
the market for paper-based packaging products and paperboard has tended to be cyclical. Because of the capital intensity of the production facilities and the long lead time
between the planning and completion of a new mill, capacity cannot readily be adapted to changing demand conditions. This has resulted in significant short term imbalances when capacity has exceeded
demand, leading to significant price cuts and inventory growth. Many leading paper manufacturers have continued to react to reduced demand by taking downtime and by rationalizing high cost or
inefficient capacity.

Competitive Strengths

We believe we possess the following competitive strengths:

Leading Market Positions and Economies of Scale.The industry in which we operate remains fragmented,
and few of our competitors have comparable scales of production. We are one of Europe's largest integrated producers of containerboard and corrugated containers. We are the leading producer of
kraftliner and the second largest producer of testliner in Europe and command a leading share of the European corrugated container market. In Latin America, we believe we are the largest producer of
corrugated containers and the second largest producer of containerboard. The scale and density of our production network allows us to benefit from economies of scale in purchasing, production,

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distribution,
marketing, research and development and the application of best practices. In addition, our extensive European presence allows us to provide better service to our
pan-European customers. The financial barriers to entry into the containerboard segment and our long-standing customer relationships in the converting segment also help to
protect our leading market positions.

Highly Integrated Producer.We are a highly integrated producer of containerboard and corrugated
packaging products. We have the ability to utilize substantially all of our containerboard mills' production internally because our converting plants' volume requirements for containerboard generally
meet or exceed our mills' production. We believe we can manage our operations to achieve more stable operating performance than competitors that are not as integrated. Integration provides us with
stability, largely because fluctuations in the earnings of our mills tend to be offset by changes in the earnings of our converting operations. Moreover, our high level of integration ensures
consistent demand for our mills' containerboard production, which allows us to optimize capacity utilization, even during trough demand periods. This integration also secures containerboard supply for
our converting plants during peak demand periods. In addition, our vertical integration allows us to realize certain efficiencies throughout the production process by increasing control over the
quality of the containerboard, its particular specifications and the timing of delivery to our converting facilities.

Cost Competitive and Well-Positioned Manufacturing Base.Our containerboard mill system
benefits from a favorable cost position in the production and delivery of containerboard and thus has been consistently profitable. We believe that we incur among the lowest delivered cost to our
customers as a result of our efficient, long-lived manufacturing base and the close proximity of our mills to customers and raw material sources. In addition, we believe we operate the two
lowest delivered-cost European kraftliner mills.

Diversified Product Offerings, Geographic Markets and Customer Base.With leading positions in the
production of kraftliner, testliner and corrugated containers, an operating presence in over 20 countries and thousands of customers, our cash flows are broadly diversified across product
offerings, geography and customer type. Our management believes that this diversification reduces our dependence on any single product, economy, market or customer and helps to offset the cyclical
nature of the paper and packaging business.

Experienced Management with Substantial Equity Interest.We have an experienced senior team with an
average of approximately 20 years of experience with JSG. We are led by Gary McGann (Chief Executive Officer), Anthony Smurfit (Chief Operations Officer) and Ian Curley (Chief Financial
Officer), with Dr. Michael Smurfit as our Chairman. This senior team has invested approximately €35 million in the equity of JSG Packaging, after giving effect to
the share capital reduction. In addition, over 200 other JSG managers have invested approximately €7 million in the equity of JSG Packaging, after giving effect to
the share capital reduction. We believe that these equity stakes which, in combination with a significant equity-based compensation program, collectively represent up to 20% of the fully diluted
ownership of JSG Packaging, will provide a significant incentive to achieve financial targets.

Principal Shareholder with Proven Paper and Packaging Sector Expertise.Madison Dearborn is one of
the world's largest and most experienced private equity investment firms. Madison Dearborn invests across a broad range of industries with a principal focus on basic industrial sectors, including the
paper and packaging sector. Madison Dearborn is considered to be among the most active private equity investor in the United States in the paper and packaging industry, having previously made
investments in Boise Cascade, L.L.C., Packaging Corporation of America, Graphic Packaging Corporation (formerly known as Riverwood Holding Corp.), Buckeye Technologies, Inc. and Bay
State Paper Holding Company.

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Business Strategy

Our primary strategic objectives are to maximize cash flow and strengthen our position as one of the world's leading providers of containerboard, corrugated
containers and other paper-based packaging products. The key elements of our strategy are as follows:

Maximize Cash Flow.We intend to maximize our cash flow available for debt reduction by continuing
our disciplined capital expenditure program and the divestiture of non-core operating and non-operating assets. Management has completed implementing the cost reductions in
overhead and procurement that were identified at the time of the JSG Acquisition. Over the last five years, our capital expenditures have remained below depreciation levels, reflecting our strategy of
growing through the acquisition of well-invested assets instead of building new capacity. Since the JSG Acquisition, we have repaid the €125 million borrowed by
certain subsidiaries of JSL at the time of the JSG Acquisition through the disposal of a significant number of non-operating and non-core assets. We believe additional
non-operating and non-core assets can be sold at attractive prices in the short to medium-term. Going forward, we intend to continue to maximize our cash flow
through a disciplined capital expenditure program focused on return on invested capital in which annual expenditures remain below depreciation levels and through further asset disposals.

Pursue Continuous Operating Improvements.We intend to continue focusing on operating improvements,
including leveraging our technical design and production tools, which we believe will reduce costs and improve the value we provide to our customers. In connection with the JSG Acquisition, we
implemented a program designed to improve profits across JSG by reducing costs in areas such as raw materials, services, transportation and spare parts through the sharing of information, increased
coordination and exchange of best practices within JSG. For example, we have introduced initiatives in the area of purchasing and supply chain management. We undertake focused reviews of fixed and
variable costs, and we intend to maintain our well-positioned manufacturing base through benchmarking, improving asset utilization and realizing centralization savings.

Optimize Business Portfolio.Management continues to review its portfolio of businesses on an ongoing
basis to identify opportunities to realize value by exiting businesses that are both not critical for JSG from a strategic perspective and are capable of being sold to third parties at attractive
prices. Accordingly, we have agreed to the sale of the specialty paper and tissue operations of Munksjö, our Swedish subsidiary, while retaining its containerboard and corrugated
container operations. In addition, we believe we have historically been able to acquire strategic assets at well below their replacement cost, and we consider acquisitions a more capital-efficient and
responsible method of expanding our operations. For example, we acquired substantially all of the European assets of SSCC in exchange for JSG's 50% interest in Smurfit MBI of Canada and approximately
€185 million in cash on March 31, 2003. We plan to continue to pursue selected acquisitions if opportunities arise that meet both our stringent return on capital
requirements and our business objectives of increasing integration and otherwise strengthening our competitive position, particularly in Europe.

Operations

Our main focus is on the production of containerboard and its conversion into corrugated containers. We also produce boxboard, sack kraft paper, graphicboard and
non-packaging grades of paper, as well as converted products such as folding cartons and paper sacks.

Containerboard,
boxboard, sack kraft paper and graphicboard are all forms of paperboard. Containerboard is a form of paperboard used primarily for the production of corrugated materials.
Boxboard is used for the production of folding cartons. Sack kraft paper is used for the production of durable paper sacks. Graphicboard is used for the production of, among other things, book covers.

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We
use OCC and, to a lesser extent, wood to produce our paperboard and paper. We then use the paperboard and paper that we produce as a source of raw materials for our converted product
facilities, and we also sell some of our paperboard and paper to third parties. We outsource some
paperboard and paper from third parties as raw materials for our converted product facilities, particularly where, for reasons of geographic proximity or price, it can be more efficiently outsourced.

OCC
is the principal raw material used in our production of paperboard and is the essential component of recycled containerboard, one of the two types of containerboard we produce.
Recycled containerboard can be subdivided into testliner and fluting. Wood is the principal component used in the manufacture of the second type of containerboard we make, which is called kraftliner.
Both testliner and kraftliner serve as the outer facing component of containerboard. Fluting is the wavy inner layer of paper.

There
is significant price volatility in the market for OCC. However, the market for wood is relatively stable. Accordingly, to the extent that we are able to source wood that we convert
into virgin pulp at our own mills, we have a raw material source with greater price stability that helps protect margins. Our Latin American mills in Colombia and Venezuela primarily use wood from our
nearby forestry operations and thereby benefit from the price stability of this raw material source.

We
make a relatively higher margin on our production of kraftliner than we do on our production of recycled containerboard. Demand for kraftliner, however, is price sensitive relative to
recycled containerboard, which moderates our ability to raise prices during an upturn in the industry cycle. We believe that the market demand for recycled containerboard in Europe and in Latin
America will grow over time at a faster rate than the market demand for kraftliner, and we believe that we are well positioned in these markets to respond to this expected change in demand mix.

Our
operations are currently managed on the basis of two regions: Europe and Latin America. After the sale of the majority of our U.S subsidiaries and the completion of the SSCC Asset
Swap, we no longer conduct significant operations in the United States and Canada.

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The table below shows a regional breakdown of our production volumes in 2004.

|Product                                   |  | Europe(1) |  | Latin
America(2) |  | Total JSG
|----------------------------------------- |  | --------- |  | ---------------- |  | ---------
|
|Raw Materials:                            |  |           |  |                  |  |          
|Recycling                                 |  | 1,688     |  | 398              |  | 2,110    
|Market Pulp                               |  | 175       |  |                 |  | 175      
|                                          |  |           |  |                  |  |          
|Total raw materials                       |  | 1,863     |  | 398              |  | 2,285    
|                                          |  |           |  |                  |  |          
|Mill:                                     |  |           |  |                  |  |          
|Containerboard                            |  | 2,945     |  | 652              |  | 3,597    
|Sack kraft                                |  | 124       |  | 38               |  | 162      
|Boxboard                                  |  | 74        |  | 173              |  | 247      
|Graphicboard                              |  | 216       |  |                 |  | 216      
|Other paperboard                          |  |          |  | 40               |  | 40       
|                                          |  |           |  |                  |  |          
|Total containerboard and other paperboard |  | 3,359     |  | 903              |  | 4,262    
|Other non-packaging paper(3)              |  | 388       |  | 85               |  | 473      
|                                          |  |           |  |                  |  |          
|Total mill                                |  | 3,747     |  | 988              |  | 4,735    
|                                          |  |           |  |                  |  |          
|Conversion:                               |  |           |  |                  |  |          
|Corrugated containers                     |  | 2,594     |  | 688              |  | 3,282    
|Paper sacks                               |  | 103       |  | 39               |  | 142      
|Folding cartons                           |  | 35        |  | 41               |  | 76       
|Other                                     |  | 97        |  |                 |  | 97       
|                                          |  |           |  |                  |  |          
|Total conversion                          |  | 2,829     |  | 768              |  | 3,597    
|                                          |  |           |  |                  |  |          

---

Europe

Within Europe, our largest region, we have two segments, packaging and specialties. Our European packaging segment is comprised principally of our containerboard
mills and corrugated container plants. These operations are highly integrated, with the production of our mills exceeding the volume of the containerboard being converted into corrugated containers in
our plants. There is also a degree of third-party sales of containerboard for reasons of both product mix and logistics. Our specialties segment, prior to the Munksjö Specialties
Disposal, was principally comprised of décor base paper, other specialty papers and graphicboard production. This segment also includes some non-paper/packaging businesses such as our
Bag in Box and Print businesses.

Packaging

Paperboard.The principal paperboard product in our packaging segment is containerboard. However, our mills produce other
grades of paperboard for use in packaging products, such as sack kraft paper for use in the production of durable paper sacks, and boxboard, used in the production of folding cartons.

The
main market for containerboard is the corrugated containers market. Pricing for containerboard is principally driven by the price of its inputs, particularly OCC, the demand
conditions

23

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for
the product and the supply conditions in the industry. The demand for corrugated containers is ultimately a function of the rate of industrial growth. There have been significant additions to
capacity in Europe in recent years as well as a number of announcements of new capacity additions in the coming years. In 2003 and 2004, there were also some announcements of the closure of high cost
capacity, amounting to an aggregate of 700,000 metric tons. In 2003, a combination of the increased supply and the relatively poor economic conditions across Europe caused the pricing of recycled
containerboard to be lower than in 2002. In 2004, with slightly improved demand and no significant increase in supply, prices were more stable and on average were slightly higher than in 2003. The
same relative economic weakness, along with the growing strength of the euro against the U.S. dollar, caused pricing in kraftliner in Europe to be lower in 2003 than in 2002. Although kraft prices
increased towards the end of 2004 on average they were lower in 2004 than in 2003.

OCC
is the principal raw material for our paperboard mills. While we have our own reclamation operations in Ireland, the United Kingdom and Germany, we source most of our OCC
requirements on the open market. In addition to our recycled paperboard mills, we have three mills in Europe for which wood pulp is the primary raw material. These are our two kraftliner mills,
Facture in France and Nettingsdorfer in Austria, and our Spanish sack kraft mill, Smurfit Nervion. While Nettingsdorfer purchases its wood fiber requirements on the open market, we
co-operate with landowners to develop forest resources, primarily in the Aquitaine region of France, which facilitates the supply of wood fiber to Facture. We own a wood procurement
business in Spain, which facilitates the supply of wood to our Nervion mill.

Paper-based packaging products.The raw material for our paper-based packaging products is paperboard, primarily
containerboard. Our conversion plants convert paperboard into corrugated containers and paper-based packaging products. The predominant product of our packaging segment is corrugated containers.

Corrugated
containers are sold to a broad range of manufacturers of consumable goods and are used to ship a range of diverse consumer products, such as food and beverages, agricultural
produce, household goods and electrical appliances. Corrugated products are also used for many other applications. We provide innovative packaging solutions with an emphasis on the value-added aspects
of our corrugated containers in terms of design and presentation, including the use of multicolor graphics. Some of our value-added products and services include point-of-sale
displays, "white top," a grade of kraftliner on which graphics can be printed, and Innobook, a comprehensive product database which gives our customers the ability to customize their corrugated
containers.

Our
corrugated container plants are widely spread across the various regional and international markets that we serve. In Europe, our largest regional market, we are one of the largest
integrated producers of
corrugated containers, with an estimated aggregate market share in excess of 15% in 2004 of the European markets in which we have operations. We believe that we are the market leader in France,
Ireland and Italy and one of the leading two or three producers in Germany, the United Kingdom, Spain, The Netherlands, Belgium, Denmark and Sweden.

In
2003, the demand for corrugated containers was relatively weak as industrial growth in Europe was limited, and indeed negative in the case of certain countries. With little demand
growth and reducing raw material prices, there was no upward pressure in pricing for corrugated containers in 2003. This situation continued into 2004, where estimated market growth was around 2.3%.
However, increased competition and a lack of a cost "push" from paper pricing helped cause a decrease in corrugated pricing of approximately 2.5%.

Specialties

Our European specialties segment included our principal graphicboard mills together with our paper sack, bag-in-box and folding carton
operations and, following the acquisition of Munksjö in

24

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March 2002,
décor base, tissue and other specialty non-packaging papers. In 2004, Munksjö produced over 280,000 metric tons of these specialty
non-packaging papers. In December 2004, we entered into agreements to sell the specialty paper and tissue operations of Munksjö, leaving primarily our paper sack,
bag-in-box and folding carton operations. The sale of our Munksjö specialties business was completed on March 1, 2005 while the sale of our
Munksjö tissue business is subject to customary closing conditions.

Multi-wall
paper sacks are used in a wide range of industries including agriculture, food and cement. While the industrial products sector predominates, the use of these
durable sacks is growing in the retail or take-home sector where paper sacks provide a convenient means of carrying such goods as pet food and "do-it-yourself"
products. Our paper sack plants are based in the United Kingdom, France, Spain, Ireland, Italy, Sweden and Poland.

Latin America

In Latin America, we believe we are the largest producer of corrugated containers and the second largest producer of containerboard. Our Latin American operations
are located principally in Mexico,
Colombia, Venezuela and Argentina, with smaller operations in the Dominican Republic, Puerto Rico and Chile.

Our
Latin American operations are highly integrated, from the reclamation of wastepaper and the production of wood pulp to conversion into paper-based packaging products of a substantial
portion of the paperboard produced by our mills. Our reclamation operations, located in Venezuela, Puerto Rico, Colombia, Mexico and Argentina, processed approximately 326,000 metric tons of OCC in
2004. The OCC we recover in Venezuela and Puerto Rico is consumed entirely by our mills in Venezuela, largely satisfying their recycled fiber requirements. Likewise, the OCC we collect in Colombia is
consumed entirely by our mills in Colombia, largely satisfying Colombia's recycled fiber requirements. Our paperboard mills in Mexico purchase the major part of their recycled fiber requirements from
third parties.

We
also have forestry operations in Latin America. In Colombia and Venezuela, we own over 230,000 acres (95,000 hectares) and manage a further 10,000 acres (4,100 hectares). These
plantations provide the local mills with a significant portion of their total wood fiber needs. Because wood has more stable pricing than both the pre-processed virgin pulp that we
purchase from third parties and OCC, our mills that source from these plantations benefit from relatively greater margin protection. We also procure raw materials from third parties.

Mexico
is the largest of the four main Latin American markets in which we operate. We believe we are the second largest manufacturer of paperboard and paper-based packaging products in
Mexico. Additionally, we also believe that we are the leading producer in Colombia and Venezuela and one of the largest in Argentina.

United States and Canada

After the completion of the SSCC Asset Swap in March 2003, we no longer have significant operations in the United States or Canada. As part of the SSCC
Asset Swap, we transferred our 50% ownership interest in Smurfit MBI Canada, our principal subsidiary operation in Canada, in exchange for some of SSCC's European assets. Our principal subsidiary
operation in the United States on an historical basis was our 150,000 metric tons per year capacity recycled newsprint mill in Pomona, California. This newsprint business is no longer part of our
business as it was transferred to the newcos in the third quarter of 2002. We sold our U.S. printing and election systems businesses in early 2002. Our remaining asset in the United States is a
décor base paper mill in Fitchburg, Massachusetts, which is reported under our European Specialties segment and is part of the Munksjö Specialties Disposal.

25

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Marketing and Sales

We concentrate our marketing and sales activities in our regional and local business units in order to remain close to our customers, our competitors and local
market developments. On a worldwide basis, we predominantly sell directly to the end-user rather than through agents. Our marketing strategy is to focus on the quality of products and the
high caliber of service we offer to our customers. This strategy is geared towards maintaining margins for our products throughout the business cycle and enhancing profitability. Through continuous
communication with customers, our goal is to improve the quality of service we provide.

The
marketing strategy for our mills is to profitably match the sale of paper and paperboard to the demand requirements of both internal and external converters located within an
economically reasonable shipping distance from each mill. The strategy in the corrugated container and other converting plants focuses on both customized products tailored to fit customers' needs and
high volume sales of commodity products. Most sales of converted products are made on the basis of spot sales or short-term orders for specified volumes at market rates. These orders are
priced based on a number of factors such as currency, volume, weight and geographic area. We seek to maintain a broad customer base for each of our markets rather than concentrate on only a few
accounts for each plant.

No
single customer accounts for more than 5% of our global sales.

Patents, Licenses and Research and Development

Proprietary products do not generally characterize the paper and packaging industry and although we hold or are licensed to use certain patents, the successful
continuation of any important part of our business is not dependent upon such patents.

Accordingly,
the focus of research on papermaking is on providing the materials that will enable our converting operations and other packaging manufacturers to meet the challenges of a
changing market place. In recent years, the focus in the corrugated container industry, for example, has been on more efficiently meeting the performance characteristics required of the corrugated
container as a transport, storage and point of display medium. In addition to improved containerboard quality, research programs have provided improvements in printing processes. Furthermore, the need
to meet the changing demands of customers' automated packaging lines requires us to stay abreast of innovations in industrial processes.

Competition

The markets in which we operate are international, highly competitive and consist of many participants. While containerboard and many other paperboard and paper
grades are marketed and sold internationally, the paper-based packaging industry tends to be more regionally or locally based. Many of the largest producers have multinational operations, but there
are also many smaller regional and local operators. Some producers have fully integrated operations from forestry and waste fiber through to paperboard production and on to paper-based packaging while
others focus more narrowly on certain intermediate or end products or in certain markets.

Although
no single company is dominant, we do face significant competition in each of our businesses and the geographic markets in which we operate. Our competitors include other large
vertically integrated companies as well as numerous smaller companies. The European and Latin

26

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American
containerboard markets are more fragmented than the U.S. and Canadian markets. Our principal competitors in the geographic regions in which we operate are listed in the table below:

|Europe                                                 |  | Latin America                    
|------------------------------------------------------ |  | ---------------------------------
|DS Smith plc                                           |  | Cartonajes Estrella, S.A. de C.V.
|Kappa Packaging B.V.                                   |  | Corporacion Durango, S.A. de C.V.
|Mondi Packaging Europe                                 |  | Empresas CMPC, S.A.              
|Sociedad Anonima Industrias Celulosa Aragonesa (SAICA) |  | Klabin S.A.                      
|Svenska Cellulosa Aktiebolaget (SCA)                   |  |                                  

The level of competition in a given product market may be affected by the relative strength of the U.S. dollar against the euro and other market
factors including geographic location, general economic conditions and the operating efficiencies of competitors. Although price is an important factor because many of our products are characterized
by commodity pricing, other factors affecting competition include product quality and performance, service and product innovation. In addition, our paper-based packaging products compete with various
other packaging materials, including products made of plastic and wood.

The
markets in which we operate are large relative to the production capacity of any one company, particularly with respect to paper and paperboard. Due to the high density and
consequent easy transportability of paper and paperboard, the geographic market for kraftliner is worldwide. Because of the number and scale of recycled mills, the geographic market for testliner
tends to be regional. The geographic market for converted products, such as corrugated containers, is somewhat limited by their low density and larger required transport space, which results in higher
transportation costs.

Environmental Issues

We are subject to a wide range of environmental, health and safety laws and regulations. These requirements are complex, frequently changing and tend to become
more stringent over time. We are committed to environmental, health and safety excellence and devote substantial resources to tracking applicable requirements and monitoring compliance. Despite these
efforts, we cannot assure you that we have been or will be at all times in complete compliance with all such requirements or that we will not incur material costs or liabilities in connection with
such requirements in the future.

Compliance with Environmental Regulatory Requirements

The most significant impact from environmental, health and safety regulatory requirements on our operations relates to our mills, which constitute 45 of our 308
facilities. Our manufacturing processes result in discharges to water and emissions to air, and they can produce elevated noise levels. At the same time, most of our mills are recycle mills, and
therefore do not handle black liquor (a by-product of certain wood pulping operations) or employ chlorine bleaching, which in each case can create additional environmental challenges.
Nonetheless, we are affected by increasingly stringent environmental regulations in the countries where we operate.

Our
mill in Nervion, Spain has an internal landfill which was used between 1975 and 1985 to store waste calcium carbonate prior to its application as a neutralizing agent to farming and
forest lands. In 1985, the provincial government required us to cease the land application, and we stopped using the landfill for storage and began disposing of the material offsite. In 1998, in
response to complaints from the local municipality, we conducted a hydrogeological study to assess the potential impacts of the landfill on the Ibaizabal River. The study concluded that the material
has not adversely affected the

27

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river,
but it can affect the pH of storm water runoff. We installed a collecting drain around the material to collect and treat storm water. We are currently under no regulatory obligation to take
further action. If we elect to remove the material at some future time or if a regulatory obligation to remove the material is imposed in the future, the cost would be approximately
€5 million, which would be incurred over a period of five to ten years.

Our
mills in Europe are subject to the European Union's Integrated Pollution Prevention and Control, or "IPPC," program. The IPPC program requires member countries to ensure that
industries employ Best Available Technologies, or "BAT," for all environmental aspects of their operations, including wastewater discharges, air
emissions, noise, energy use and environmental management. Most of our European mills are required to obtain permits imposing BAT by 2007. While we have obtained IPPC permits for many of our mills
that require them, we remain in the process of obtaining such permits for other mills. Overall, we have incurred approximately €7 million in capital expenditures for
environmental controls at our facilities worldwide in fiscal year 2003 and approximately €8 million in fiscal year 2004. We anticipate that our annual environmental capital
expenditures will continue at about this level through 2007.

Our
European operations are also subject to the European Union's Directive on Packaging and Packaging Waste, which imposes mandatory targets for the recovery and recycling of packaging
wastes. Member countries were required to comply with the Directive by 2001, but implementation to date has varied greatly from country to country. We do not expect the Directive to have a material
adverse effect on our business or financial condition, primarily because the targets imposed by the Directive are not significantly higher than the existing levels of recovery and recycling in most
member countries.

Our
European mills are also subject to requirements stemming from the Kyoto Protocol, by which the European Union agreed to reduce emissions of "greenhouse gasses" by 8%, as compared
with 1990 emission levels, over the first commitment period (2008-2012). Participating countries must have made "demonstrable progress" in achieving this reduction commitment in the period
2005-2007. The European pulp and paper industry has announced its concern that the Kyoto Protocol may adversely impact the competitiveness of the industry and has called on the European
Union to consider industry-wide impacts as it decides how to implement the Kyoto Protocol. The European Union has committed itself to the Kyoto Protocol and has begun regulatory actions
necessary to achieve compliance with the Kyoto Protocol's emission reduction commitment. The impact of the Kyoto Protocol on us depends upon several factors, including: (1) how efficiently we
use energy, as compared with our competitors; (2) how well the emissions trading regime will assist us in complying with the Kyoto Protocol; and (3) the extent to which we will be able
to earn emissions credits for our forestry holdings as greenhouse gas "sinks."

On
January 1, 2005 the Emissions Trading Scheme, or "ETS," came into force. As part of this regime, each member state of the EU had to adopt a National Allocation Plan under which
the main operators of thermal based energy plants were allocated permits to release specified amounts of carbon dioxide and other gases without charge. Operators will have to purchase ETS credits if
their carbon dioxide output exceeds the free or permitted volume. Our European plants have been allocated sufficient allowances to avoid the need to purchase ETS credits for the 2005 to 2008 first
stage. With the recent decision by Russia to ratify the Kyoto Protocol, the Kyoto Protocol came into force on February 16, 2005. In anticipation of such approval, the EU had determined to adopt
the Kyoto Protocol into European law and had agreed how the overall 8% reduction would be borne by the member states.

We
presently are not involved in any environmental regulatory legal proceedings which are expected to have a material adverse effect on our business or financial condition.

28

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Environmental Contamination

We may also be held liable for releases of contaminants from our operations, or historical contamination that is discovered at our facilities or facilities that
we have divested.

The
IPPC program requires, as part of the permit process, that our European mills conduct "baseline" environmental investigations or otherwise provide the regulatory authorities
information regarding the condition of the underlying soil and groundwater at the mills. While the purpose of providing such information is not to force a facility to clean up historical contamination
that is identified, several member countries intend to review the results and, if significant contamination is detected, may issue orders to address the contamination. Thus, providing such information
may result in our having to address contamination that is currently undetected at some of our mills. The cost of addressing the contamination, if necessary, will depend upon the extent of
contamination detected and the required remedies, and therefore, cannot yet be determined at some of our mills. We may also be required to address contamination at any mills we decide to close or have
sold in the past.

In
November 2001, black liquor was released from our mill in Nervion, Spain to the local municipal waste water treatment plant in Iurreta, Spain. As a result of the waste water
treatment plant being unable to handle this additional load, the contamination reached the Ibaizabal River and caused a fish kill. An ecological group filed a complaint for an ecological crime. This
resulted in preliminary assessments, which took place during December 2001 and February 2002. A number of people, including the mill manager, have provided evidence. Two of our employees
and a third person have been accused. In October 2004, the court agreed to provisionally stay the proceedings and consequently the
three accused individuals were automatically released from the case. A report is expected to be issued regarding the provisional shelving of the case dictated by the criminal court. As of today's date
there is no evidence that this report has been issued by the Public Prosecutor.

Our
Facture, France mill is the subject of litigation arising from ruptures of sewer pipe seals that resulted in contamination in 1997 and 1987. Remedial repairs have been estimated at
€6.4 million, which will be shared between several companies. We do not expect our share of the repairs to be material.

In
November 2002, we were notified by the Spanish Environmental Enforcement Agency, Seprona, that they had become aware of an accumulation of rain water mixed with manufacturing
waste and that such concentration posed a potential environmental hazard at our Sanguesa Plant. The rain water was removed and new procedures were put in place to prevent any recurrence. Management is
currently in discussions with the local municipality regarding ongoing environmental compliance. Three of our managers have been imputed by the court for an offence against natural resources and the
environment and we intend to fully defend these proceedings.

As
part of our application for an IPPC permit for our mill in Townsend Hook, U.K., we conducted an environmental investigation in 2001. The investigation detected contamination in
portions of the property. We submitted the results of the investigation to the governmental authorities in June 2002. In 2003, we received our IPPC permit for this mill and submitted a site
closure plan for part of the site. No action has been required by the authorities since the issuance of the IPPC permit in 2003. The dismantling of an old building was approved and has been completed
with no adverse consequences.

Raw Materials

OCC is the principal raw material used in our production of paperboard and is the essential component of testliner, one of the two types of containerboard we
produce. Wood is the principal component used in the manufacture of kraftliner, the second type of containerboard we make. We source most of our OCC supply on the open market; however, at
December 31, 2004, we had

29

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40 reclamation
plants located in Europe and Latin America, the primary focus of which is sourcing fiber for our mills.

In
Europe, we generally procure virgin fiber through long-term relationships with third parties. However, we also source a significant proportion of our virgin fiber needs
from our forestry operations which are located principally in Latin America. In Colombia and Venezuela, we own over
230,000 acres (95,000 hectares) and manage a further 10,000 acres (4,100 hectares). These plantations provide our local mills with a significant portion of their total virgin fiber needs. Our two
European kraftliner mills, Facture in France and Nettingsdorfer in Austria, as well as our Spanish sack kraft mill, Smurfit Nervion, use primarily virgin fiber in their production of paperboard.

Increases
in the price of wastepaper and virgin fiber as raw materials could result from a variety of factors. The prices we pay for these raw materials tend to be cyclical, subject to
significant volatility, and vary on a regional basis.

The
price of OCC in Europe has peaked dramatically twice in recent yearsin June 2002 and in April 2003. In each case, a relatively low level of supply was
matched with a relatively high level of demand, principally caused by increased demand from Asia. In the first case, the free-on-board price rose to over €150
per metric ton. Within a period of three months, supply and demand conditions levelled to return the price to around €100 per metric ton. In the second case, the spike was even more
rapid with waste prices falling back to previous levels almost immediately. During 2004, the price per metric ton remained relatively stable.

We
believe that our available sources of virgin fiber and OCC (including from our own reclamation activities) will be adequate to supply our raw material needs for the foreseeable
future.

The
table below provides information on European OCC pricing per metric ton during and at the end of each year in the three year period from 2002 to 2004:

Free-on-Board OCC Price per Metric Ton

|                               |  | As of and for the Year Ended December 31,
|------------------------------ |  | -----------------------------------------
|
|
|Price at the end of the period |  | 119                                      
|Average price during period    |  | 124                                      
|Highest price during period    |  | 156                                      
|Lowest price during period     |  | 100                                      

Segmental Information

We have identified reportable segments primarily on a geographic basis. In Europe, we have two reportable product segments: Packaging and Specialities. The
operations in the Packaging segment are highly integrated and include a system of mills and conversion plants producing containerboard and corrugated containers. The primary products of the
Specialities segment include specialty papers, graphicboard and paper sacks. The tables below set out the total sales, including internal sales, net sales and income (before taxes and equity minority
interests), generated by our operations in each region in the last three years.

30

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Segmental Analysis of Total Sales

|Subsidiaries             |  | 2004   |  | 2003   |  | 2002  
|------------------------ |  | ------ |  | ------ |  | ------
|
|Packaging                |  | 4,314  |  | 4,030  |  | 3,376 
|Specialities             |  | 1,081  |  | 1,048  |  | 918   
|                         |  |        |  |        |  |       
|Europe                   |  | 5,395  |  | 5,078  |  | 4,294 
|United States and Canada |  |       |  | 104    |  | 556   
|Latin America            |  | 1,090  |  | 1,067  |  | 1,180 
|                         |  |        |  |        |  |       
|Total Subsidiaries       |  | €6,485 |  | €6,249 |  | €6,030
|                         |  |        |  |        |  |       

Segmental Analysis of Net Sales

|Subsidiaries             |  | 2004   |  | 2003   |  | 2002  
|------------------------ |  | ------ |  | ------ |  | ------
|
|Packaging                |  | 3,094  |  | 2,969  |  | 2,536 
|Specialities             |  | 1,008  |  | 992    |  | 868   
|                         |  |        |  |        |  |       
|Europe                   |  | 4,102  |  | 3,961  |  | 3,404 
|United States and Canada |  |       |  | 104    |  | 557   
|Latin America            |  | 703    |  | 681    |  | 749   
|                         |  |        |  |        |  |       
|Total Subsidiaries       |  | €4,805 |  | €4,746 |  | €4,710
|                         |  |        |  |        |  |       

|Associates                     |  | 2004 |  | 2003 |  | 2002  
|------------------------------ |  | ---- |  | ---- |  | ------
|
|Associates' net sales          |  | €212 |  | €209 |  | €6,382
|                               |  |      |  |      |  |       
|Share of associates' net sales |  | €81  |  | €80  |  | €1,911
|                               |  |      |  |      |  |       

31

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Segmental Analysis of Income (before taxes and equity minority interests)

|Subsidiaries                                                        |  | 2004 |   | 2003 |   | 2002 |  
|------------------------------------------------------------------- |  | ---- | - | ---- | - | ---- | -
|
|Packaging                                                           |  | 155  |   | 214  |   | 220  |  
|Specialities                                                        |  | 97   |   | 88   |   | 60   |  
|Associates                                                          |  | 10   |   | 9    |   | 24   |  
|                                                                    |  |      |   |      |   |      |  
|Europe                                                              |  | 262  |   | 311  |   | 304  |  
|                                                                    |  |      |   |      |   |      |  
|Packaging                                                           |  |     |   | 8    |   | 35   |  
|Associates                                                          |  |     |   |     |   | 92   |  
|                                                                    |  |      |   |      |   |      |  
|United States and Canada                                            |  |     |   | 8    |   | 127  |  
|                                                                    |  |      |   |      |   |      |  
|Packaging                                                           |  | 116  |   | 86   |   | 80   |  
|Associates                                                          |  | 3    |   | 1    |   | 5    |  
|                                                                    |  |      |   |      |   |      |  
|Latin America                                                       |  | 119  |   | 87   |   | 85   |  
|                                                                    |  |      |   |      |   |      |  
|Asia (Associates)                                                   |  |     |   | 2    |   | 4    |  
|                                                                    |  |      |   |      |   |      |  
|Unallocated centre costs                                            |  | (25  | ) | (22  | ) | (39  | )
|                                                                    |  |      |   |      |   |      |  
|Income before goodwill amortization, interest and exceptional items |  | 356  |   | 386  |   | 481  |  
|Goodwill amortization                                               |  | (38  | ) | (45  | ) | (16  | )
|Group net interest                                                  |  | (291 | ) | (298 | ) | (143 | )
|Share of associates' net interest                                   |  | (1   | ) | (2   | ) | (75  | )
|                                                                    |  |      |   |      |   |      |  
|Income before exceptional items                                     |  | 26   |   | 41   |   | 247  |  
|Reorganization and restructuring costs                              |  | (39  | ) | (35  | ) | (24  | )
|Impairment of property, plant and equipment                         |  |     |   |     |   |     |  
|Income on the sale of operations                                    |  | 22   |   | 6    |   | 20   |  
|Share of associates' exceptional costs                              |  |     |   |     |   | (7   | )
|                                                                    |  |      |   |      |   |      |  
|                                                                    |  | €9   |   | €12  |   | €236 |  
|                                                                    |  |      |   |      |   |      |  

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Organizational Structure

Each of JSG Packaging, JSG Holdings, JSL, JSG Funding, JSG Acquisitions and JSG are holding companies with no operations of their own.
A listing of JSG's principal subsidiaries is set out below.

|Subsidiaries                                                                                                                |  | Principal Activities                                                                                                  |  | Country of Incorporation |  | Holding %
|--------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | ---------
|Carton de Colombia, S.A.Apartado Aereo 219,
Cali, Colombia                                                                  |  | Manufacture of paperboard and packaging products                                                                      |  | Colombia                 |  | 70       
|Carton de Venezuela, S.A.Apartado Aereo 609,
Caracas, Venezuela                                                             |  | Manufacture of paperboard and packaging products                                                                      |  | Venezuela                |  | 88       
|Grupo Smurfit Mexico, S.A. de C.V.Jaime Balmes, No. 11 Torre D. 7 Piso,
Col. Los Morales Polanco 11510,
Mexico D.F., Mexico |  | Manufacture of paperboard and packaging products                                                                      |  | Mexico                   |  | 100      
|Nettingsdorfer Papierfabrik AG & Co KGA-4054 Nettingsdorf-Fabrik, Austria                                                   |  | Manufacture of containerboard and holding company for Austrian operations which manufacture corrugated board          |  | Austria                  |  | 100      
|Smurfit, S.A.Paque Saenz Pena 3088th Floor,
Buenos Aires, Argentina                                                        |  | Manufacture of paperboard and packaging products                                                                      |  | Argentina                |  | 100      
|Smurfit Capital Funding LimitedBeech Hill, Clonskeagh,
Dublin 4, Ireland                                                    |  | Finance company                                                                                                       |  | Ireland                  |  | 100      
|Smurfit Deutschland GmbH & Co KGTilsiter Strasse 144,
22047 Hamburg, Germany                                                |  | Holding company for German operations which manufacture paperboard and packaging products                             |  | Germany                  |  | 100      
|Smurfit International B.V.Fred Roeskestraat 123,
1076 EE Amsterdam,
The Netherlands                                         |  | Principal international holding company                                                                               |  | The Netherlands          |  | 100      
|Smurfit International France S.A.2 rue Goethe,
75116 Paris, France                                                          |  | Holding company for French operations whose activities are the manufacture of paperboard and packaging products       |  | France                   |  | 100      
|Smurfit Investments UK LimitedDarlington Road, West Auckland,
Bishop Auckland, Co. Durham
DL14 9PE, United Kingdom          |  | Holding company for UK operations whose principal activities are the manufacture of paperboard and packaging products |  | United Kingdom           |  | 100      
|                                                                                                                            |  |                                                                                                                       |  |                          |  |          

33

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|Smurfit Ireland LimitedBeech Hill, Clonskeagh,
Dublin 4, Ireland       |  | Manufacture of paperboard and packaging products and printing                                                                                                                                        |  | Ireland |  | 100
|---------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- |  | ---
|Smurfit Munksjö AB(1)Box 624,
SE-551 18 Jönköping, Sweden              |  | Holding company for operations in Sweden and other countries which manufacture specialty papers and packaging products                                                                               |  | Sweden  |  | 100
|Smurfit Nervion, S.A.B Arriandi s/n, 48215 lurreta,
Vizcaya, Spain     |  | Manufacture of sack paper and holding company for Spanish, Portuguese and sack converting operations whose principal activities are the manufacture of paperboard, packaging and paper sack products |  | Spain   |  | 99 
|Smurfit SISA, S.p.AStrada Serravalle 30,
15067 Novi Ligure (AL), Italy |  | Manufacture of paperboard and packaging products                                                                                                                                                     |  | Italy   |  | 90 

---

Property, Plant and Equipment

Our manufacturing facilities are mainly spread across Europe and Latin America. Our paper and paperboard mills are our main assets. We believe that our facilities
are suitable and adequate for our business purposes for the foreseeable future. At December 31, 2004, the net book value of our tangible fixed assets amounted to
€2,335 million, of which €50 million related to capitalized leased assets.

The
table below provides a regional summary of our facilities at December 31, 2004.

|Facilities            |  | Europe |  | Latin
America |  | USA &
Canada |  | Total JSG
|--------------------- |  | ------ |  | ------------- |  | ------------ |  | ---------
|Reclamation           |  | 14     |  | 26            |  |             |  | 40       
|Mills                 |  | 33     |  | 11            |  | 1            |  | 45       
|Corrugated containers |  | 133    |  | 28            |  |             |  | 161      
|Folding cartons       |  | 3      |  | 3             |  |             |  | 6        
|Paper sacks           |  | 13     |  | 4             |  |             |  | 17       
|Other conversion      |  | 12     |  | 1             |  |             |  | 13       
|Other                 |  | 23     |  | 2             |  | 1            |  | 26       
|                      |  |        |  |               |  |              |  |          
|Total facilities      |  | 231    |  | 75            |  | 2            |  | 308      
|                      |  |        |  |               |  |              |  |          

Upon
completion of the Munksjö Specialties Disposal in 2005 the number of mills will decline by nine, the number of other conversion plants will decline by two and the
number of other plants will decline by one.

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Item 5.    Operating and Financial Review and Prospects

The following discussion and analysis is based on our consolidated financial statements, which are prepared in accordance with
Irish GAAP. Our accounting policies are discussed in the notes to the consolidated financial statements. Irish GAAP differs in certain significant respects from U.S. GAAP. A
description of the principal differences as they apply to JSG and reconciliations of net income/(loss) for 2004, 2003 and 2002 and shareholders' equity at December 31, 2004
and 2003 are set forth in note 37 to the audited consolidated financial statements.

Our financial statements for periods after the JSG Acquisition and the SSCC Asset Swap vary in important respects from the consolidated historical financial
statements of JSG. In particular, as a result of the acquisition, there is a significant increase in interest expense and a significant increase in amortization of intangible assets. For more
information, see "GeneralComparability of Periods." Similarly, there is no longer any contribution from our interest in SSCC, and we no longer conduct significant operations
in the United States and Canada after the transfer of our 50% ownership interest in Smurfit MBI of Canada for substantially all of SSCC's European operations.

Certain information in the review set forth below and elsewhere in this annual report includes forward-looking statements that involve risks and uncertainties.
See "Disclosure Regarding Forward-Looking Statements" and "Risk Factors" for a discussion of important factors that could cause actual results to differ materially from the results described in the
forward-looking statements.

General

We are the largest European-based integrated manufacturer of containerboard, corrugated containers and other paper-based packaging products. JSG, which was
incorporated in Ireland in 1934 as the owner of a single converting plant, has grown to its current position with thousands of customers and operations in over 20 countries. For the year ended
December 31, 2004, we generated net sales, pre-exceptional EBITDA and a net loss of €4,805 million, €606 million and
€34 million, respectively.

We
have historically organized and managed our operations on the basis of three regions: Europe, Latin America and the United States and Canada.



35

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The
table below sets forth our actual net sales generated by our subsidiary operations in each region in the last three years:

|                         |              | Years Ended December 31,
|------------------------ | ------------ | ------------------------
|
|
|
|Europe:                  |              |                         
|                         | Packaging    |                         
|                         | Specialities |                         
|                         |              |                         
|Total Europe             |              | 4,102,522               
|Latin America            |              | 702,560                 
|United States and Canada |              |                        
|                         |              |                         
|Total                    |              | €4,805,082              
|                         |              |                         

Our
European and Latin American operations accounted for approximately 85% and 15% respectively of our net sales for the year ended December 31, 2004. We no longer conduct
significant operations in the United States and Canada.

We
conduct our business primarily through wholly owned subsidiaries. Within JSG's operations, however, there are several subsidiaries in which JSG's ownership is less than 100% and in
respect of which minority interests exist. For example, we own approximately 70% and 88% of the outstanding equity interests of our Colombian and Venezuelan subsidiaries, respectively.

In
addition to the activities of our subsidiaries, we conduct our operations through a number of associated companies in which we hold minority interests. We account for these associated
companies under the equity method of accounting. Accordingly, we include in our operating results our proportionate share (based on our ownership percentage) of the net earnings or losses of such
associates. Before the spin-off, our principal associated company was SSCC.

Overview

We generate sales principally through the production of paperboard and the conversion of paperboard into paper-based packaging products. Our paper mills sell
containerboard and other grades of paperboard primarily to JSG-owned converting operations. We also sell containerboard and other grades of paperboard to third parties.

Key
factors that impact our operating results are:



36

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Demand
for our products is generally driven by the level of economic growth and activity. Increased levels of economic growth and activity typically result in higher per capita use of
packaging materials, both with respect to transportation of goods and consumer presentation. Because the markets for containerboard and packaging products in developed economies are generally mature,
historically there has been a close correlation between general economic growth and demand for packaging products such as corrugated containers and, therefore, for their component materials such as
containerboard. In contrast, less-developed economies, including those in Latin America, generally have a lower rate of per capita consumption of packaging materials and containerboard.
Thus, we believe they offer greater opportunity for growth.

Demand
for containerboard and packaging products is affected to a lesser degree by changes in their market prices. Significant increases in the price of containerboard and corrugated
containers have, on some occasions, resulted in decreased demand as customers elect to purchase substitute products, such as returnable plastic containers, wood crates or shrink-wrap.

Historically,
prices for containerboard and packaging products have tended to be cyclical. This cyclicality has resulted from significant imbalances in supply and demand for paper. On
the one hand, paper production capacity cannot be readily adapted to reflect changing market conditions due to the capital intensity of paper production facilities and the long lead time between the
planning and completion of a new paper mill. On the other hand, significant containerboard and corrugated container price cuts and inventory growth have resulted when capacity has exceeded demand.
Many leading paper manufacturers have continued to react to reduced demand by taking downtime and by
rationalizing high cost or inefficient capacity. This has resulted in a reduced level of capacity expansion with production decisions increasingly being based more on current rather than projected
demand.

The
profitability of our mills can be affected by the different characteristics of the markets for testliner and kraftliner. Because the primary raw material for the production of
testliner is wastepaper, and wastepaper prices tend to fluctuate, our testliner mills can experience temporary increases and decreases in profits but earn a relatively stable margin over time. In
contrast, the primary raw material for the production of kraftliner is wood, the cost of which is relatively more stable. As a result, our kraftliner mills can earn relatively strong margins during
periods of high prices, but relatively lower margins when prices decline. Moreover, a majority of our kraftliner sales are made to third parties (in contrast to our testliner sales). Consequently,
changes in the profitability of kraftliner have a more immediate impact on our operating results than testliner, which we primarily sell to our converting plants.

Our
overall profitability is also affected not only by supply and demand for raw materials and our finished products, but also by the length of time it takes us to translate price
increases in raw materials to prices we charge for third-party sales of containerboard and paper-based packaging products. To the extent our containerboard is sold internally, our profitability will
only be affected by the ability to recover any price increases from third-party sales of paper-based packaging products. Price increases at the corrugated level tend to lag containerboard price
movements, sometimes by months. As a result, during periods of rising containerboard prices, our profitability is generally adversely affected. Conversely, during periods of declining containerboard
prices, our profitability is generally positively affected.

The
principal determinant of the cost of our paperboard products is wastepaper, which is used extensively in the manufacture of our paperboard products. An important driver of recycled
wastepaper prices is the balance of supply and demand for paper products in general. When the price of recycled wastepaper begins to rise, paper and containerboard manufacturers attempt to raise their
prices to

37

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preserve
profit margins, which generally narrow as a result of increased raw material costs. It generally takes approximately two months for the mills to pass along their price increases to the
paper-based packaging products manufacturers. In turn, the manufacturers of paper-based packaging products generally attempt to raise prices to recover containerboard cost increases. It generally
takes approximately four months for these manufacturers to pass through their price increases. In a down cycle, as recycled wastepaper and containerboard prices fall, manufacturers of paper and
paper-based packaging products attempt to maintain prices. From our experience, our mills are able to maintain prices for between two and three months while our paper-based packaging operations are
able to maintain prices for between four and six months. As a result, the effect of price fluctuations on our mills and converting operations will vary depending on the relevant point in the industry
cycle.

Given
the wide geographic spread of our operations, we are exposed to currency rate fluctuations. Since the introduction of the euro on January 1, 1999, our exposure to
fluctuations in exchange rates
within the European Union has been reduced. However, the United Kingdom, Sweden, Norway, Denmark and Poland have not adopted the euro as their national currency. The results of our operations in Latin
America and the United States are denominated in U.S. dollars, meaning that fluctuations in the value of the U.S. dollar may have a significant effect on our operations and on our
reported results in euro. A weaker U.S. dollar decreases and, conversely, a stronger U.S. dollar increases, the euro figures we report in our financial statements with respect to our
Latin American and U.S. operations. As a result, comparability of performance between financial periods can be significantly affected by fluctuations in the value of the U.S. dollar against the
euro. In addition, the relative strength or weakness of the U.S. dollar is important for the European industry because U.S. containerboard prices tend to influence the world market. Movements
in the U.S. dollar exchange rate may also have an effect on trading since a strong U.S. dollar tends to make U.S. exports less competitive. Conversely, a weak U.S. dollar
over a sustained period has, to some degree, resulted in lower sales into the United States by European manufacturers who ship products in corrugated containers resulting in lower European demand for
our containers. A weak U.S. dollar has, to some degree, also resulted in additional competition in the European market from U.S. manufacturers that have an incentive to sell more products in
Europe due to increased European demand for the relatively lower priced U.S. goods over higher priced European goods. Therefore, the sustained strength of the euro relative to the
U.S. dollar could adversely affect our operating results and financial condition.

Comparability of Periods

Our financial statements after the completion of the JSG Acquisition and the SSCC Asset Swap vary in important respects from JSG's historical consolidated
financial statements. The JSG Acquisition was accounted for using the purchase method of accounting. As a result, the aggregate purchase price for JSG's equity (including transaction expenses) of
approximately €2,500 million was allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values as of the date of the
acquisition. The allocation of the purchase price to the assets acquired in the acquisition resulted in a significant increase in our amortization and depreciation expense. In addition, due to the
effects of the increased borrowing to finance the acquisition, our interest expense increased significantly in the periods following the acquisition. As a result of the spin-off, our
operating results no longer include a share of the operating results of SSCC. In addition, our future operating results will reflect the completion of the SSCC Asset Swap, the sale of
Munksjö's specialty paper operations and, if completed, the sale of Munksjö's tissue operations. Period to period comparisons are also affected by the acquisition of
Munksjö in March 2002, the SSCC Asset Swap and fluctuations in foreign currency exchange rates.

38

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Results of Operations

JSG Funding and certain of its affiliates were established solely for the purpose of effecting the JSG Acquisition. Because of the revaluation of certain assets
and liabilities acquired as part of the JSG Acquisition and the related impact on cost of sales and expenses, the financial statements of JSG for periods prior to September 3, 2002 are not
comparable to those of JSG Funding subsequent to that date. The following table sets forth each category of our consolidated statement of operations data, expressed as a percentage of net sales for:



|                                                     |  | Successor |  | Successor |  | Combined(a)
|---------------------------------------------------- |  | --------- |  | --------- |  | -----------
|
|
|Consolidated Statement of Operations Data            |  |           |  |           |  |            
|Net sales                                            |  | 100.0%    |  | 100.0%    |  | 100.0%     
|Cost of sales                                        |  | 72.3%     |  | 72.1%     |  | 72.6%      
|                                                     |  |           |  |           |  |            
|Gross profit                                         |  | 27.7%     |  | 27.9%     |  | 27.4%      
|Net operating expenses                               |  | 21.0%     |  | 20.7%     |  | 20.0%      
|Reorganization and restructuring costs               |  | 0.8%      |  | 0.7%      |  | 0.5%       
|                                                     |  |           |  |           |  |            
|Operating income subsidiaries                        |  | 5.9%      |  | 6.5%      |  | 6.9%       
|Share of associates' operating income                |  | 0.2%      |  | 0.3%      |  | 2.6%       
|Share of associates' restructuring costs             |  |          |  |          |  | 0.2%       
|                                                     |  |           |  |           |  |            
|Total operating income                               |  | 6.1%      |  | 6.8%      |  | 9.4%       
|Profit on sales of operations subsidiaries           |  | 0.5%      |  | 0.1%      |  | 0.4%       
|Net interest                                         |  | 6.1%      |  | 6.3%      |  | 3.0%       
|Share of associates' net interest                    |  |          |  |          |  | 1.6%       
|Other financial expense                              |  | 0.3%      |  | 0.3%      |  | 0.2%       
|                                                     |  |           |  |           |  |            
|Income before taxes and equity minority interests    |  | 0.2%      |  | 0.3%      |  | 5.0%       
|Taxes on income                                      |  | 0.6%      |  | 1.3%      |  | 2.3%       
|                                                     |  |           |  |           |  |            
|(Loss)/income before equity minority interests       |  | (0.4)%    |  | (1.0)%    |  | 2.7%       
|Equity minority interests                            |  | 0.3%      |  | 0.4%      |  | 0.6%       
|                                                     |  |           |  |           |  |            
|Net (loss)/income available to ordinary shareholders |  | (0.7)%    |  | (1.4)%    |  | 2.1%       
|                                                     |  |           |  |           |  |            

---

Comparison of Year Ended December 31, 2004 and Year Ended December 31, 2003

Net Sales.Net sales from continuing operations for the year ended December 31, 2004 were
€4,294 million compared to €4,159 million in 2003. Including the discontinued sales of Munksjö's specialty paper and tissue businesses and,
in 2003, the sales of Smurfit MBI, total net sales for 2004 were €4,805 million compared to €4,746 million in 2003, an increase of
€59 million. Allowing for the impact of net acquisitions and currency, however, the increase was €82 million or 1.7%. While net acquisitions, primarily
the SSCC Asset Swap and Papelera Navarra, increased sales by €47 million, this increase was partially offset by currency movements of €70 million as a
result of the relatively stronger euro in 2004. In 2004, the euro appreciated by approximately 12% from an average of approximately U.S. $1.12 in 2003 to U.S. $1.24 in 2004.

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Excluding
the impact of net acquisitions, overall volumes in our European operations were higher in 2004 than in 2003. Kraftliner volumes were 6% higher in 2004 than in 2003 while
recycled containerboard volumes were 3% higher. In overall terms, corrugated volumes were 1% higher than in 2003 although market conditions varied from country to country.

In
terms of net sales, however, the benefit of higher volumes in Europe was partially offset by the impact of weaker selling prices for corrugated containers and kraftliner. Recycled
containerboard prices were broadly unchanged year-on-year. Overall, our Latin America operations benefited from a combination of higher volumes and, to a lesser extent, higher
average prices for containerboard and corrugated containers.

Net
sales from our European operations increased to €4,103 million in 2004 from €3,961 million in 2003, representing an increase of
approximately 4%. This increase arose principally as a result of the inclusion of the sales of the former European operations of SSCC and of Papelera Navarra for the full twelve months compared to
only nine months and seven months respectively in 2003. In total, acquisitions added approximately €184 million to net sales with an offset of
€34 million from the absence in 2004 of operations such as the Lestrem mill and the Noveant sack plant.

Excluding
both the former European operations of SSCC and of Papelera Navarra, net sales from our remaining packaging operations would have been lower in 2004 than in 2003 with the
negative impact of lower average prices more than offsetting the benefit of higher containerboard and corrugated container volumes. While recycled containerboard prices were marginally higher in 2004,
reflecting the recovery in the fourth quarter, average prices for kraftliner were 5% lower than in 2003, a decrease of approximately €20 per metric ton. Although the corrugated
operations benefited from the weakness of containerboard pricing and from slightly higher volumes, box prices across Europe were lower than in 2003. Despite the absence of the Lestrem mill in 2004 and
the presence of the Noveant sack plant for only part of the year, net sales from Specialties operations were higher in 2004 reflecting mainly an improved performance in Munksjö's
décor base paper and pulp operations and in bag-in-box operations.

Net
sales from our Latin American operations increased to €703 million in 2004 from €681 million in 2003, representing an increase of
approximately 3%. Reflecting the continued strength of our markets in 2004, sales growth was achieved across the region through a combination of higher volumes and average prices. Overall
containerboard and corrugated volumes were approximately 9% higher in 2004 compared to 2003 while average prices for containerboard and corrugated volumes increased by 1% and 5% respectively
year-on-year. Although the underlying increase was approximately 14% in terms of U.S. dollars, this increase was reduced when translated into euro given the substantially
weaker U.S. currency in 2004.

INCOME BEFORE INTEREST EXPENSE AND TAXES

Gross profit from subsidiaries for 2004 was €1,331.8 million, an increase of €5.3 million or 0.4% from 2003.
Although both net sales and costs of sales were higher than in 2003, the increase in cost of sales was slightly higher. Accordingly, cost of sales as a percentage of net sales in 2004 was 72.3%
compared to 72.1% in 2003. The higher percentage in 2004 resulted mainly from lower average selling prices with the impact of higher energy costs in 2004, partially offset by the benefit of lower
waste fiber costs in Europe.

Net
operating expenses, which consist of selling and administration costs as well as distribution costs, increased by 2.9% to €1,010.6 million in 2004 from
€982.3 million in 2003. The increase of €28.3 million resulted primarily from net acquisitions and the €18.2 million gain on the
sale of property at The K Club in 2003. Allowing for the impact of currency, net acquisitions and this one-off gain in 2003, net operating expenses were broadly unchanged
year-on-year. Net operating expenses represented 21.0% of third party sales compared to 21.1% (adjusting for The K Club property disposal gain) in 2003.

40

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Operating
income from subsidiaries after reorganization and restructuring costs amounted to €281.8 million in 2004 compared to
€309.1 million in 2003. Continuing operations contributed €224.1 million in 2004, with the decrease from 2003 reflecting primarily the impact of lower
average prices, while discontinued operations contributed €57.7 million.

Profit
before goodwill amortization, interest, exceptional items and taxation amounted to €356.0 million in 2004 compared to €385.6 million
in 2003. This decrease of €29.6 million, or approximately 8%, reflected a combination of difficult trading conditions in Europe in 2004 and the benefit in 2003 of the
one-off disposal gain on the sale of property at The K Club.

Profit
from our European operations was €262.4 million, a decrease of €49.0 million (€30.8 million excluding the
disposal gain) from 2003, despite the presence of both the former European operations of SSCC and Papelera Navarra for a full year in 2004. Within Europe, the results varied with an improved
performance in our specialities operations partly offsetting the shortfall in our packaging operations. Although both containerboard and corrugated container volumes were higher in 2004, partly as a
result of net acquisitions, profitability was adversely affected by generally lower average prices.

Profit
from our Latin American operations was €118.9 million, 37% higher than in 2003 reflecting a strong performance across the region, especially in Venezuela
and Mexico. The underlying increase for the region was greater in U.S. dollars, taking into account the relative weakness of the U.S. currency in 2004.

The
absence of earnings in both the United States and Canada and Asia in 2004 reflected the sale during 2003 of our Canadian subsidiary, Smurfit MBI, as part of the SSCC Asset Swap and
of our investments in Leefung Asco and Smurfit Toyo. Unallocated centre costs were €25.3 million in 2004 compared to €22.5 million in 2003, the increase
reflecting higher charges for professional services in areas such as Sarbanes-Oxley compliance and our accounts receivable securitization program.

Exceptional
items in 2004 amounted to €17.2 million and comprised reorganization and restructuring costs of €39.4 million net of disposal
gains of €22.2 million. The reorganization and restructuring costs arose mainly in the fourth quarter of 2004 with the largest charges relating to the Cordoba mill in Spain and
to the Tamworth corrugated container facility and the Witham folding cartons facility in the United Kingdom. The disposal gains related to the sale of surplus property in Europe. In 2003, exceptional
items of €29.4 million comprised reorganization and restructuring costs of €35.0 million, over €14 million of which related to the
Lestrem mill, net of disposal gains of approximately €5.6 million.

INTEREST EXPENSE AND TAXES

Group net interest of €291.0 million in 2004 was lower than in 2003, despite an accelerated debt issuance cost write-off of
€5.7 million following the accounts receivable securitization. The comparable year-on-year decrease of approximately €12 million
reflected mainly a lower level of net borrowing and the positive effect of the stronger euro. In addition, we benefited from generally lower interest rates in respect of our non-fixed rate
debt. Our share of associates' net interest was modest in 2004 as a result of the reducing scale of our associates.

After
other financial expense of €15.7 million, which represents the difference between the expected return on pension scheme assets and the interest cost of
pension scheme liabilities and is disclosed in accordance with FRS 17"Retirement Benefits," the result before taxation for the year to December 2004 was a profit of
€8.6 million (€23.2 million pre-exceptional) compared to a profit of €11.8 million
(€41.2 million pre-exceptional) in 2003.

The
accounting tax charge was €27.0 million in 2004 compared to €62.4 million in 2003 with the decrease reflecting mainly the benefit of the
€20 million credit booked in respect of tax refunded in the Netherlands under the Bosal judgement. Our overall effective accounting tax rate is adversely affected

41

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by
the presence of items not allowable for tax (such as the goodwill amortization). Against a backdrop of low profitability, these add-backs have a significant impact on our overall
effective tax rate resulting in a significant charge despite a relatively modest reported overall profit.

Comparison of Year Ended December 31, 2003 and Combined Year Ended December 31, 2002

Net Sales.Net sales from continuing operations for the year ended December 31, 2003 were
€4,159.2 million, approximately 10% higher than in 2002 reflecting primarily the impact of acquisitions, which added €530.1 million. While our principal
acquisition in 2003 was the SSCC Asset Swap, others included Papelera Navarra in Spain and certain former associates in Colombia. Excluding the contribution from acquisitions, net sales in 2003 were
4.2% lower than in 2002 reflecting generally weak demand and difficult trading conditions. Including the discontinued sales of Munksjö's specialty paper and tissue businesses and the
sales of Smurfit MBI, total net sales for 2003 amounted to €4,746.3 million compared to €4,709.7 million in 2002, an increase of
€36.6 million or 0.8%. Although net sales in 2003 were boosted by the SSCC Asset Swap, the benefit was offset by the impact of the relative strengthening of the euro against the
U.S. dollar. In 2003, the euro appreciated by approximately 19% from an average of U.S. $0.94 in 2002 to U.S. $1.12 in 2003.

Excluding
the impact of net acquisitions, overall volumes in our European operations were slightly higher in 2003. Kraftliner volumes were 5% higher in 2003, primarily because of a weak
2002, while recycled containerboard volumes were flat year-on-year. In overall terms, corrugated volumes were 1% higher than in 2002 although market conditions varied across
the region.

In
terms of net sales, however, the benefit of higher volumes in Europe was more than offset by the impact of weaker selling prices for containerboard and, to a lesser extent, corrugated
containers. In Latin America also, overall volumes were higher than in 2002 although the situation varied from country to country with trading conditions remaining weak in Mexico where overall volumes
were down on 2002.

Net
sales from our European operations were €3,960.6 million in 2003 compared to €3,404.2 million in 2002, an increase of
€556.5 million. This increase, equivalent to 16.3%, resulted primarily from the inclusion of the sales of the former European operations of SSCC and of Papelera Navarra as well
as from the presence of Munksjö for a full twelve months compared to only nine months in 2002. The benefit of the inclusion of these operations more than offset the decrease in net
sales from the continuing operations.

The
decline in net sales from the United States and Canada reflects both the SSCC Asset Swap and the disposal during 2002 of our U.S. subsidiaries. The reported sales in 2003 are solely
those of Smurfit MBI for the first quarter.

Net
sales from our Latin American operations decreased by 9% to €681.3 million in 2003 compared to €749.1 million in 2002 as a result of the
strength of the euro relative to the U.S. dollar, the reporting currency for our operations in the region. Excluding currency, there was an underlying increase in net sales of approximately 10% helped
by acquisitions.

INCOME BEFORE INTEREST EXPENSE AND TAXES

Gross profit in the twelve months to December 2003 was €1,326.5 million, 2.7% higher than in 2002. Although both net sales and costs
of sales were higher than in 2002, the increase in cost of sales was relatively modest. As a percentage of net sales, cost of sales represented 72.1% in 2003 compared to 72.6% in 2002. Although energy
costs were higher in 2003, the impact was offset by lower raw material costs, both in terms of waste fiber to the mills and paperboard to the conversion plants.

Net
operating expenses increased by 4.5% to €982.3 million in 2003 from €940.4 million in 2002. The year-on-year
increase reflects the impact of net acquisitions as offset by a combination of currency movements and one-off items such as the €18 million gain on the sale of
development property at The

42

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K
Club. Excluding one-off gains and the impact of currency and net acquisitions, the underlying move was a slight decrease in net operating expenses.

Operating
income from subsidiaries after reorganization and restructuring costs amounted to €309.1 million in 2003 compared to
€326.6 million in 2002. Continuing operations contributed €261.2 million in 2003, slightly less than in 2002
despite the benefit in 2003 of €41.6 million from acquisitions. Discontinued operations, comprising Munksjö's specialty paper and tissue businesses and Smurfit
MBI, contributed €47.9 million in 2003.

Profit
before goodwill amortization, interest, exceptional items and taxation of €385.6 million was 19.8% lower than in 2002 reflecting the underlying weak trading
conditions, particularly in Europe. Profit from our European operations at €311.4 million was 2.5% higher than in 2002, boosted by the presence of the former European operations
of SSCC and by the inclusion in Specialities of the gain of €18 million on the sale of development property at The K Club. In addition, the acquisition in 2002 and 2003
respectively of our former associates, Munksjö and Papelera Navarra, increased our reported subsidiary profits in 2003. Conversely, our profit from associates was lower in 2003.

Profit
from our Latin American operations at €86.7 million was 2.8% higher overall than in 2002 with the acquisition of certain former associates increasing
subsidiary profits while reducing the contribution from associates. The underlying increase in terms of U.S. dollars, which reflected a good performance across the region other than in Mexico, was
partly offset by currency given the relative strength of the euro.

As
a result of the SSCC Asset Swap, our profit from the United States and Canada in 2004 was solely that of Smurfit MBI for the first quarter. In 2002, we had Smurfit MBI for a full year
together with SSCC prior to the spin-off and our U.S. subsidiaries prior to their disposal.

Profit
from our associates in Asia was lower in 2003 as a result of the disposal of our investments in Leefung Asco and Smurfit Toyo during 2003. Unallocated central costs in 2003 were
€22.5 million compared to €38.6 million in 2002, the decrease reflecting a generally lower level of costs in the year.

Exceptional
items in 2003 comprised reorganization and restructuring costs of €35.0 million in respect of our European operations, as offset by disposal gains of
€5.6 million mainly in respect of the sale of property. Exceptional items in 2002 comprised reorganization and restructuring costs of €24.5 million as
offset by a profit of €20.4 million on the disposal of our printing and voting systems businesses.

INTEREST EXPENSE AND INCOME TAXES

As a result of the increased level of net debt following the acquisition of JSG in September 2002, Group net interest in 2003 at
€297.7 million was considerably higher than in 2002. Our share
of associates' net interest was €2.1 million in 2003 compared to €74.8 million, mainly relating to SSCC, in 2002. Other financial expense, the interest
element of our post retirement benefits cost, was €15.3 million in 2003 compared to €10.8 million in 2002.

Reflecting
a combination of a lower level of total operating profit and a higher interest charge, the profit before taxation in 2003 was €11.8 million compared to
€235.6 million in 2002.

Taxation
in 2003 was €62.4 million, €59.3 million of which related to our subsidiaries. The relatively high rate of tax in our subsidiaries
results from the presence of unrelieved losses and of items not allowable for tax (such as goodwill amortization) and the fact that not all of the Group interest charge is tax deductible. Adjusting
for these items and for unrelieved current year losses, the underlying tax rate in our subsidiaries was approximately 31% in 2003.

43

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Liquidity and Capital Resources

Historical Cash Flow

Summary cash flows for the years ended 2004, 2003 and 2002 are set out in the following table:

|                                      |  | JSG Funding
Year Ended
December 31, 2004 |   | JSG Funding
Year Ended
December 31, 2003 |   | JSG Funding/JSG*
Year Ended
December 31, 2002 |  
|------------------------------------- |  | ---------------------------------------- | - | ---------------------------------------- | - | --------------------------------------------- | -
|
|(Loss)/profit before taxsubsidiaries |  | (3                                       | ) | 2                                        |   | 193                                           |  
|Exceptional items                     |  | 1                                        |   | 11                                       |   | (20                                           | )
|Depreciation and depletion            |  | 263                                      |   | 253                                      |   | 249                                           |  
|Goodwill amortization                 |  | 38                                       |   | 45                                       |   | 16                                            |  
|Non cash interest expense             |  | 68                                       |   | 59                                       |   | 10                                            |  
|Working capital change                |  | 42                                       |   | 63                                       |   | 21                                            |  
|Capital expenditure                   |  | (206                                     | ) | (207                                     | ) | (209                                          | )
|Change in capital creditors           |  | 7                                        |   |                                         |   |                                              |  
|Sale of fixed assets                  |  | 34                                       |   | 12                                       |   |                                              |  
|Tax paid                              |  | (37                                      | ) | (59                                      | ) | (130                                          | )
|Dividends from associates             |  | 3                                        |   | 1                                        |   | 6                                             |  
|Other                                 |  | (23                                      | ) | (2                                       | ) | 10                                            |  
|                                      |  |                                          |   |                                          |   |                                               |  
|Free cash flow                        |  | 187                                      |   | 178                                      |   | 146                                           |  
|Investments                           |  | (6                                       | ) | (181                                     | ) | (306                                          | )
|Sale of businesses and investments    |  | 3                                        |   | 36                                       |   | 27                                            |  
|Dividends                             |  | (6                                       | ) | (7                                       | ) | (64                                           | )
|Share issues                          |  |                                         |   |                                         |   | 875                                           |  
|Debt issue costs                      |  | (6                                       | ) | (8                                       | ) | (130                                          | )
|Acquisition costs and fees            |  | (3                                       | ) | (21                                      | ) | (2,493                                        | )
|Transfer of cash from/(to) affiliates |  | 13                                       |   | (28                                      | ) | (22                                           | )
|                                      |  |                                          |   |                                          |   |                                               |  
|Net cash inflow/(outflow)             |  | 182                                      |   | (31                                      | ) | (1,967                                        | )
|Net cash acquired/disposed            |  |                                         |   | 56                                       |   | (150                                          | )
|SSCC inter-company debt repaid        |  |                                         |   | (97                                      | ) |                                              |  
|Non-cash interest accrued             |  | (45                                      | ) | (41                                      | ) | (10                                           | )
|Currency translation adjustments      |  | 40                                       |   | 152                                      |   | 128                                           |  
|                                      |  |                                          |   |                                          |   |                                               |  
|Decrease/(increase) in net borrowing  |  | €177                                     |   | €39                                      |   | €(1,999                                       | )
|                                      |  |                                          |   |                                          |   |                                               |  

---

Free cash flow for the year ended December 31, 2004 was €187 million compared to
€178 million in 2003 and €146 million in 2002. Free cash flow in 2004 mainly reflects lower tax payments in 2004 offset by a reduced working capital
inflow.

Depreciation
was higher in 2004, reflecting the acquisition of the former Smurfit-Stone European packaging operations during 2003 and the adjustments to fixed assets effected at the end
of 2003 arising from the completion of the fair value exercise. Capital expenditure at €206 million for 2004 represented 79% of depreciation compared to 82% in 2003. This is
consistent with JSG's target to control capital expenditure at or close to the 80% level. Goodwill amortization in 2004 amounted to €38 million, down from
€45 million in 2003 and €16 million in 2002. This reflects the changing structure of the Group and fair value adjustments mentioned above.

44

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The
non cash interest resulted from the issuance of the 15.5% subordinated notes issued in connection with the MDP acquisition in 2002. These notes were subsequently redeemed in 2005.

We
continued to focus on managing our working capital levels in 2004. Although the level of receivables increased, working capital decreased by €42 million in
2004. Working capital of €360 million at December 2004 represented 7.6% of annualized fourth quarter sales compared to 9.1% at December 2003. During 2003 our
working capital decreased by €63 million from 2002. Factors contributing to the 2003 inflow included a general focus on cash collection, which resulted in a significant
reduction in the level of receivables at the year-end. We have made considerable progress since privatization in reducing our working capital, despite weak product prices. On a combined
basis, our working capital inflow for 2004 and 2003 has amounted to €105 million increasing our cash flow at a time when market conditions have hampered efforts to increase the
profitability of our operations.

Capital
expenditure of €206 million for 2004 represented 79% of depreciation compared to 82% in 2003. We continue to tightly control capital expenditure at the
level which we believe is needed to maintain the current standard of our asset base. We continued to focus on generating cash flow from sales of surplus assets during 2004. Sale of fixed assets for
the year generated an inflow of €34 million, including €29 million from the sale of unused property.

Cash
tax payments in 2004, of €37 million, were lower than the €59 million paid in 2003, reflecting a Dutch tax refund and tax repayments in
certain other European countries. These credits were partly offset by higher payments in Latin America as a result of the growth in regional profits. Under the Bosal judgement, JSG received
approximately €20 million from the Dutch authorities in 2004. Cash tax payments amounted to €130 million in 2002. The reduction in the following years
results mainly from the changed structure of the Group after the MDP acquisition. Cash generation was partly offset by accelerated profit sharing payments to employees of
€13 million coupled with a one-time lease payment of €10 million, reflected in "other". Changed tax laws in France reduced the length of the deferral
period and resulted in accelerating payments to employees in respect of deferred compensation.

Financing
and investment outflows were modest in 2004 resulting in an overall net cash inflow of approximately €182 million for the year. Dividend payments,
investments and transaction costs were offset by dividend receipts, business disposal proceeds and the transfer of surplus funds from the newcos. The €182 million net cash
inflow was offset by the add-back of non-cash interest but positively impacted by a currency adjustment of €40 million. As a result, net borrowing
decreased by €177 million year-on-year.

Investments
in 2003 amounted to €181 million and included payments of €90 million for the equity of SSCC Europe,
€55 million deferred consideration for Nettingsdorfer and over €30 million in respect of Papelera Navarra. In 2002, investments amounted to
€306 million and included €274 million in respect of Munksjö. Sale of businesses and investments in 2003 included our Asian associates,
Leefung Asco and Smurfit Toyo, the proceeds from which were transferred to the newcos. The €27 million inflow in 2002 related primarily to the sale of our U.S. printing and
voting systems businesses. Including dividends to minorities and transaction related payments, the overall result for the twelve months to December 2003 was a net cash outflow of
€31 million. This compared to a net outflow of €1,967 million in 2002, which resulted primarily from the acquisition of JSG.

Reflecting
the strengthening of the euro, primarily against the U.S. dollar, the value of our non-euro denominated debt decreased in 2004 giving rise to a currency adjustment
of €40 million compared to €152 million in 2003. In both years, the euro appreciated strongly moving from approximately U.S. $1.05 at December 2002
to U.S. $1.26 at December 2003 and U.S. $1.36 at December 2004.

45

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Capital Resources

Our primary sources of liquidity are cash flow from operations and borrowings under the revolving credit facility. Our primary uses of cash are for debt service
and capital expenditures.

At
December 31, 2004, JSG Funding had outstanding €350 million 101/8% senior notes due 2012 and $750 million 95/8%
senior notes due 2012. In addition at December 31, 2004, JSG Funding had outstanding $203 million and €135 million of 15.5% subordinated notes due 2013. All of the
euro 15.5% subordinated notes and approximately 99.9% of the dollar 15.5% subordinated notes were redeemed in 2005. JSG Acquisitions and certain subsidiaries are party to the senior credit facility
which provides for three term loans in an aggregate amount of €1.2 billion and a revolving credit facility with up to €425 million in availability. The
following table provides the range of interest rates as of December 31, 2004 for each of the drawings under the term loans and the revolving credit facility.

Borrowing arrangement

Currency

Interest RateTerm Loan A

EUR

4.4000%4.4790%USD

4.5168%4.6700%GBP

7.1050%Term Loan B

EUR

4.9000%4.9260%USD

4.7950%Term Loan C

EUR

5.4000%5.4260%USD

5.295%


Borrowing
under the revolving credit facility is available to fund our working capital requirements, capital expenditures and other general corporate purposes. As of December 31,
2004, no amounts were drawn under the revolving credit facility under which €425 million was available. The Term Loan A must be repaid by installments from December 2003
through September 2009. On March 15, 2004 €15.6 million was repaid covering the second installment due on term loan A. On April 29, 2004
€62.8 million of senior credit facility was repaid of which €50.4 million, €6.3 million and €6.1 million was
allocated against tranche A, B and C respectively. During September 2004 we completed a seven year receivables securitization. Proceeds of €207.6 million were used to
repay the senior credit facility of which €175.4 million, €19.2 million and €13 million was allocated against tranche A, B and C
respectively. The Term Loan B must be repaid in September 2010. The Term Loan C must be repaid in September 2011. The revolving credit facility will terminate in September 2009.

The
instruments governing our indebtedness, including the senior credit facility and the indentures governing the senior notes and the 7.75% senior subordinated notes, contain financial
and other covenants that restrict, among other things, the ability of JSG Funding and its subsidiaries to:



These
limitations, together with the highly leveraged nature of JSG Funding, could limit corporate and operating activities.

Securitization Transactions.In September 2004, we initiated a securitization transaction where we raised
seven-year funding of €210 million, which was used to repay a portion of our term loans under

46

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our
senior credit facility. Receivables generated by certain of our operating companies in the United Kingdom, Germany and France are sold to special purpose subsidiaries and entities to support the
funding provided by a JP Morgan conduit. We are currently looking at the opportunity to expand this program into additional countries and to bring the transaction to the capital markets. The sale of
the securitized receivables is not intended to, and will not, meet the requirements for off-balance sheet treatment under Irish GAAP, with the result that the sold receivables will, as an
accounting matter, continue to be shown on our balance sheet and the notes to be issued to fund the purchase of the receivables will be shown as liabilities. The gross amount of receivables
collateralizing the receivables securitization at December 31, 2004 was €261,225,000. At December 31, 2004 cash of €12,655,000 was in securitization bank
accounts which was not available for transfer to other group subsidiaries.

Capital Expenditures and Other Contingencies

From 1996 through 2004, the level of capital expenditures on aggregate were at or below annual depreciation levels. Management expects this trend to continue for
at least the next three years. We made approximately €120 million in capital expenditures from July 2002 through year-end. We made approximately
€200 million in capital expenditures for each of the years ended December 31, 2003 and 2004. These expenditures were used primarily for cost reduction, business growth,
maintenance and environmental and other regulatory compliance. We currently estimate approximately €200 million in capital expenditures in 2005.

In
order to comply with increasingly stringent environmental requirements, we continue to incur capital expenditures to upgrade certain wastewater treatment facilities and to address air
emissions, solid waste and noise at our mills. Our mills in Europe are subject to the European Union's IPPC program. The IPPC program requires member countries to ensure that industries employ Best
Available Techniques, or "BAT," for all environmental aspects of their operation, including wastewater discharges, air emissions, noise, energy use and
environmental management. Overall, we have incurred approximately €7 million in capital expenditures for environmental controls at our facilities worldwide in fiscal year 2003
and approximately €8 million in fiscal year 2004. We anticipate that our annual environmental capital expenditures will continue at about this level through 2007. See
Item 4 "Information on the CompanyEnvironmental Issues."

We
are subject to several put arrangements and capital commitments in certain companies which are not wholly owned or in which we hold only a minority interest, namely Fustelpack S.p.A.
in Italy, Industria Cartonera Dominicana in the Dominican Republic and Cajas de Carton Sultana S.A. de C.V. in Mexico. The owner of a 12% shareholding in Fustelpack S.p.A. (of which we own 69%) has
the right every two years to put his shareholding to the other shareholders for a put price presently estimated to be approximately €1 million. The owner of almost 20% of
Industria Cartonera Dominicana (of which we own 80%) has a put option on such shareholding, with the put price presently estimated to be approximately €1 million. In addition,
we have an option expiring at the end of December 2008 to acquire the approximate 55% shareholding of Cajas de Carton Sultana S.A. de C.V. that we do not already own. The price for such option,
which will be determined by an appraiser at the time it is exercised, is currently estimated at approximately €13 million.

In
addition, we are a party to various lawsuits and are subject to various contingent liabilities for which we have not taken a reserve. In the event we are found liable in any or all of
such lawsuits, or the contingencies relating to such liabilities actually occur, our business and financial condition could be adversely affected. For more information, see Item 3 "Key
InformationRisk Factors" and Item 4 "Information on the CompanyLegal Proceedings."

JSG
Funding believes that cash generated from operations will be adequate to meet its anticipated debt service requirements, capital expenditures and working capital needs for the next
12 months, and that cash generated from operations and amounts available under the revolving credit facility will be

47

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adequate
to meet its anticipated debt service requirements, capital expenditures and working capital needs for the foreseeable future. There can be no assurance, however, that JSG Funding's business
will generate sufficient cash flow from operations or that future borrowings will be available under the senior credit facility or otherwise to enable it to service its indebtedness, including the
senior credit facility, the senior and subordinated notes, to retire or redeem the notes or to make anticipated capital expenditures. JSG Funding's future operating performance and its ability to
service or refinance the notes and to service, extend or refinance the senior credit facility will be subject to future economic conditions and to financial, business and other factors, many of which
are beyond our control.

Critical Accounting Policies and Estimates

Certain accounting issues require management estimates and judgments for the preparation of financial statements. Our most significant policies requiring the use
of estimates and judgments are listed below.

Long Lived Assets and Goodwill

We conduct impairment reviews of long-lived assets and goodwill in accordance with FRS 10 "Goodwill and Intangible Assets", FRS 11 "Impairment of
Fixed Assets and Goodwill" and SFAS No. 142 "Goodwill and Other Intangible Assets", respectively. Such reviews require us to make estimates of future cash flows and fair values. We have
performed the required reviews in 2004 and no impairment charges were recognized. Our cash flow projections include significant assumptions about economic conditions, demand and pricing for our
products and costs. Our estimates of fair value are determined using a variety of valuation techniques, including pricing of recent industry acquisitions. While significant judgment is required, we
believe that our estimates of future cash flows and fair values are reasonable. However, should our assumptions change in future years, our fair value models could indicate lower fair values for
long-lived assets and goodwill. This could result in material impairment provisions affecting the carrying value of property, plant and equipment, goodwill and results of operations.

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable on a case-by-case basis, and make adjustments to the bad debt reserve for
expected losses. We consider such things as ability to pay, bankruptcy, credit ratings and payment history. For all other accounts, we estimate reserves for bad debts based on historical experience
and past due status of the accounts. Our bad debt write-offs in 2004 and 2003 were €4 million and €10 million, respectively.

Legal and Environmental Contingencies

Accruals for legal and environmental matters are recorded when it is probable that a liability has been incurred and the amount of loss can be reasonably
estimated. Such accruals are developed based on currently available information and require judgments as to probable outcomes. Assumptions are based on historical experience and recommendations of
environmental consultants and legal counsel. Environmental estimates include assumptions and judgments about particular sites, remediation alternatives and environmental regulations. We believe our
accruals are adequate. However, due to uncertainties associated with these assumptions and judgments, as well as potential changes to governmental regulations and environmental technologies, actual
costs could differ materially from the estimated amounts.

48

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Post Retirement Benefits

From September 3, 2002 (the date of the JSG Acquisition), JSG Funding has adopted FRS 17"Retirement Benefits." FRS 17 applies to all types of
benefits that an employer provides after employees have completed their service, including pensions and other post retirement benefits. The cost of the expected increase in the present value of scheme
liabilities arising from employee service in the current or prior periods, together with the change in the present value of scheme liabilities arising from settlements and curtailments and the
expected returns on the schemes assets at the start of the period, is recognized in the statement of operations. Differences between the expected and the actual return on plan assets, together with
the effect of changes in the current or prior assumptions underlying the liabilities are recognized in the statement of recognized gains and losses. Scheme assets are valued at fair value and scheme
liabilities are measured using the projected unit method. Net scheme assets and liabilities, reduced by deferred tax amounts, are recorded on the balance sheet as a pension surplus or deficit as
appropriate.

There
are several assumptions that impact the actuarial calculation of pension obligations and, in turn, net periodic pension expense in accordance with SFAS No.87, "Employer's
Accounting for Pensions". These assumptions require various degrees of judgment. The most significant assumptions are (1) the expected return on plan assets and (2) the discount rate.
Changes in these assumptions can have a material impact on pension obligations and pension expense. For example, holding all other assumptions constant, a one percentage point decrease in our
estimated discount rate would increase the estimated 2005 pension expense by approximately €3 million. A one percentage point increase in the estimated discount rate would
decrease the estimated pension expense for 2005 by approximately €3 million. Similarly, holding other assumptions constant, a one percentage point decrease in
JSL's estimated long-term rate of return on plan assets would increase the pension expense for the year ended December 31, 2005 by approximately
€7 million. A one percentage point increase in the estimated long-term rate of return would decrease pension expense by approximately
€7 million for the same period.

Income Tax Matters

Deferred tax assets and liabilities reflect our assessment of future taxes to be paid in the jurisdictions in which we operate. These assessments involve
temporary differences resulting from differing treatment of items for tax and accounting purposes, as well as estimates of our current tax exposures. Based on our evaluation of our tax positions, we
believe we are adequately reserved for these matters at December 31, 2004.

At
December 31, 2004, we had net operating loss carryforwards of €200 million. These loss carryforwards have a tax value of
€61 million. Valuation allowances of €30 million have been established for a portion of these deferred tax assets. The realization of these deferred tax
assets is dependent on future taxable income. Based upon recent levels of taxable income, we expect that our deferred tax assets, net of valuation allowances, will be fully utilized. We frequently
face challenges from domestic and foreign tax authorities regarding the amount of taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of
income among various tax jurisdictions. To the extent we prevail in matters for which accruals have been established or are required to pay amounts in excess of our reserves, our effective tax rate in
a given financial statement period may be materially impacted. While the ultimate results cannot be predicted with certainty, we believe that the conclusion of any such challenge will not have a
material adverse effect on our consolidated financial condition or results of operations.

49

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International Financial Reporting Standards

In 2002 the European Union issued regulations requiring all companies with securities admitted to trading on a regulated market in any EEA State to prepare their
financial statements in accordance with accounting standards issued by the International Accounting Standards Board ("IASB"). For companies with equity
securities publicly traded the regulations apply for accounting periods starting on or after January 1, 2005. For companies whose debt securities only are publicly traded the regulations may be
applied for accounting periods starting on or after January 1, 2007. As we only have debt securities publicly traded we have opted to avail of the January 1, 2007 starting date.
Thereafter our financial statements will, unless otherwise exempted, be prepared in accordance with standards issued by the IASB.

Research and Development

We are committed to continuous innovation in our products and processes in order to reduce costs, improve operating efficiencies and increase profitability.
Innovation is also an important factor in meeting our customers' needs. To meet this commitment, we have a major research and innovation center in Bordeaux, France. The research and development
activities embrace all aspects of our business from the consumption of both recycled and virgin fibers by our mills and the manufacture of paper and paperboard to the conversion of paperboard into
paper-based packaging products. In 2004, 2003 and 2002, our research and development costs were approximately €4.9 million, €5.0 million and
€4.9 million respectively.

Trend Information

Europe

Volumes of our core grades of productkraftliner, recycled containerboard and corrugated containers, were up 6%, 12% and 7% respectively in 2004
compared to 2003. The increases in recycled containerboard and corrugated containers reflected mainly the acquisition of SSCC's European packaging operations in March 2003 and the acquisition
of the former Spanish associate, Papelera Navarra in June 2003. Excluding these acquisitions, recycled containerboard and corrugated container volume were up 3% and 1% respectively in 2004
compared to 2003.

Volumes
of corrugated containers closely follow increases in industrial production. In 2004, industrial production was up around 1% on aggregate through the Western European countries.
This reflected relatively weak economic conditions, particularly in the manufacturing sector and was exacerbated by a relatively strong currency, particularly when compared with the U.S. dollar. As
kraftliner and recycled containerboard are the primary raw materials used in the manufacture of corrugated containers, the growth in these products tends to closely follow that of corrugated
containers. We achieved higher growth rates in kraftliner and recycled containerboard in 2004 than in corrugated containers due to our strategy of increasing our levels of
integrationutilizing more of our own paper in our system.

Pricing
for corrugated depends on the levels of supply and demand in the marketplace as well as the cost of production, particularly the cost of kraftliner and recycled containerboard.
Kraftliner prices depend on levels of supply and demand and can also be affected by the exchange rate differential between the euro and the U.S. dollar, given that kraftliner is a worldwide commodity
and in many cases is sold in U.S. dollars. Recycled containerboard prices are affected by supply and demand conditions, as well as the cost of production, particularly the cost of OCC.

Increases
in the price of wastepaper and virgin fiber as raw materials could result from a variety of factors. The prices we pay for these materials tend to be cyclical, subject to
significant volatility, particularly in the case of wastepaper, and vary on a regional basis.

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The
price of OCC has peaked dramatically twice in recent yearsin June 2002 and in April 2003. In each case, a relatively low level of supplycaused
mainly by a combination of seasonal factors and a relatively low price in the months leading up to the spike, discouraging collectionwas matched by a relatively high level of
demandcaused principally by increased demand from Asia, which in itself tended to be a seasonal phenomenon. In the first case, the free-on-board price rose to over
€150 per metric ton. Within a period of three months, supply and demand conditions levelled to return the price to around €100 per metric ton. In 2003, the spike was
even more rapid, with waste prices increasing to around €135 per metric ton but then falling almost immediately. In 2004, there was no spike in Europe, partially due to relatively weak
Asian demand, caused by relative economic conditions but also by the weakness of the U.S. dollar, which encouraged Asian purchasers to source wastepaper in the United States rather than in Europe.
There was a slight increase in wastepaper prices in the second quarter, which was relatively quickly eroded.

The
table below provides information about the European OCC price information per metric ton at and for the years ended December 31, 2001, 2002, 2003 and 2004.

Free-on-board OCC Price per Metric Ton

At and for the Year Ended
December 31,2001

2002

2003

2004(euro)Price at the end of the period

100

119

100

97Average price during the period

95

124

112

102Highest price during the period

100

156

135

107Lowest price during the period

87

100

99

97


We
believe that our available sources of virgin fiber and OCC (including from our own reclamation facilities) will be adequate to supply our raw material needs for the foreseeable
future.

Kraftliner
and recycled containerboard prices entered 2004 on a relatively low base. With a slight movement upwards in wastepaper prices in the second quarter, there was an increase in
recycled containerboard prices in the second quarter. This was, however eroded in the third and fourth quarters in many European countries. Overall, recycled containerboard prices were up around 1% on
2003. Kraftliner prices rose during the year, through a combination of stable demand and increasing prices in the United States. However, with declines that occurred in 2003, average kraftliner prices
in 2004 were down 5% year on year for JSG.

There
was no particular trend in corrugated pricing across the European region for JSG operations, with various demand and competitive pressures on pricing, as well as relatively little
in terms of cost push from kraftliner and recycled containerboard prices. Overall, corrugated prices on average in 2004 were 3% below those of 2003.

Latin America

Pricing and volume trends for our main products in Latin America are affected by the same factors as those in Europe.

In
2004, the performances of our individual Latin American countries were not uniform. Corrugated volumes in Venezuela were up 28%, in part reflecting a poor 2003, which included a
general strike in the first six weeks of the year, but also reflecting a recovery of domestic production. Volumes in Argentina were up 16%, which again reflected growth in the industrial and
agricultural sectors of the economy. Corrugated volumes in Mexico were up 3% and in Colombia 7%, reflecting levels of growth in both of these countries. In total, corrugated growth was 9% and
containerboard

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growth
was 8%. The difference in growth rates reflects capacity constraints for containerboard in the region.

Pricing
in Latin America was relatively stable through the year with, if anything, an increasing trend. On average, containerboard prices rose 6% compared to 2003, while corrugated
prices increased 4%.

Off Balance Sheet Arrangements

JSG has not used special purpose vehicles or similar financing arrangements on a historical basis. In addition, JSG has not had off-balance sheet
arrangements with any of our affiliates. However, in connection with the JSG Acquisition, certain non-operating assets and non-core operating assets were transferred to the
newcos in exchange for intercompany notes. On October 2, 2002, the newcos borrowed €125 million under a bank credit facility, which was non-recourse to JSG
Funding. The newcos then loaned the proceeds to JSL, and JSL used them to make a capital contribution to JSG Funding. JSG Funding in turn made a capital contribution to JSG Acquisitions. JSG Funding's
debt and shareholders' equity under U.S. GAAP would reflect the consolidation of the newcos with JSG Funding for financial reporting purposes. The newcos facility was repaid in full prior to
December 31, 2003. We do not have off-balance sheet arrangements with any of our other affiliates.

Effect of Inflation

We do not believe that inflation has had any material effect on our results of operations during fiscal years 2004, 2003 and 2002.

Tabular Disclosure of Contractual Arrangements

The table below sets out our contractual arrangements without taking into account the effects of the Munksjö Specialties Disposal expected to be
completed in 2005.

|                                   |  | Payments due by period
|---------------------------------- |  | ----------------------
|
|
|Long term debt                     |  | 3,066                 
|Capital lease obligations          |  | 17                    
|Operating leases                   |  | 88                    
|                                   |  |                       
|Total contractual cash obligations |  | €3,171                
|                                   |  |                       

We
believe we have sufficient facilities available to meet our working capital requirements.

Cautionary Note Regarding Forward-Looking Statements

This annual report includes forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including
the terms "believes," "estimates," "anticipates," "expects," "intends," "may," "will" or "should" or, in each case, their negative, or other variations or comparable terminology. These forward-looking
statements include all matters that are not historical facts. They appear in a number of places throughout this annual report and include statements regarding our intentions, beliefs or current
expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth strategies and the industry in which we operate.

By
their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution
you that

52

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forward-looking
statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we
operate may differ materially from those made in, or suggested by, the forward-looking statements contained in this annual report. In addition, even if our results of operations, financial condition
and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this annual report, those results or developments may not be
indicative of results or developments in subsequent periods. Important factors that could cause those differences include, but are not limited to:



We
urge you to read the sections of this annual report entitled "Risk Factors" and "Business" for a more complete discussion of the factors that could affect our future performance and
the industry in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking events described in this annual report may not occur. We undertake no obligation to
publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements
attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this annual report.

Item 6.    Directors, Senior Management and Employees

Directors and Executive Officers

JSG Funding is owned approximately 100% by JSL, which is a wholly owned subsidiary of JSG Holdings. JSG Holdings is a wholly owned subsidiary of JSG Packaging,
whose owners include Madison Dearborn, certain co-investors and certain management investors identified herein.

Certain
members of the board of directors of JSG Funding also serve as directors of JSL, JSG Packaging and JSG Holdings, as noted below.

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The directors and executive officers of JSG Packaging, and their ages and positions, are as follows:

|Name                   |  | Age |  | Position                             
|---------------------- |  | --- |  | -------------------------------------
|Michael W.J. Smurfit   |  | 68  |  | Chairman                             
|Gary W. McGann         |  | 54  |  | Chief Executive Officer and Director 
|Anthony P.J. Smurfit   |  | 41  |  | Chief Operations Officer and Director
|Ian J. Curley          |  | 43  |  | Chief Financial Officer and Director 
|John A. Canning, Jr    |  | 60  |  | Non-executive Director               
|Christopher J. McGowan |  | 33  |  | Non-executive Director               
|Samuel M. Mencoff      |  | 48  |  | Non-executive Director               
|Thomas S. Souleles     |  | 36  |  | Non-executive Director               

Dr. Michael W.J. Smurfitserves as our Chairman and as a director of JSL, JSG Packaging and JSG Holdings. Dr. Smurfit
retired as Chief Executive Officer of JSL on November 1, 2002. He was appointed Chairman and Chief Executive Officer of JSG in 1977 prior to which he was a Deputy Chairman and Joint Managing
Director. Dr. Smurfit currently holds the position of Honorary Irish Consul to the Principality of Monaco.

Gary W. McGannserves as our Chief Executive Officer and as a director of JSG Funding, JSL, JSG Packaging and JSG Holdings. He became
Chief Executive Officer in November 2002 upon the retirement of Dr. Smurfit. He was appointed President and Chief Operations Officer of JSL on January 28, 2000. He joined JSG in
1998 as Chief Financial Officer. He had previously held a number of senior positions in both the private and public sectors over the last 20 years, including Chief Executive of Gilbeys of
Ireland Limited and Aer Lingus Group. He is also Chairman of Dublin Airport Authority plc and a director of Anglo Irish Bank Corporation plc, United Drug plc and Aon MacDonagh Boland Group Limited.

Anthony P.J. Smurfitserves as our Chief Operations Officer and as a director of JSL, JSG Packaging and JSG Holdings. He has worked in
various parts of JSG in Europe and the United States. Prior to taking up his position as Chief Executive of Smurfit Europe in October 1999 and Chief Operations Officer on November 1,
2002, he was Deputy Chief Executive of Smurfit Europe and previously Chief Executive Officer of Smurfit France. He is also a director of The Irish National Stud Company.

Ian J. Curleyserves as our Chief Financial Officer and as a director of JSG Funding, JSL, JSG Packaging and JSG Holdings. He was
appointed Chief Financial Officer of Smurfit Europe in 1997, prior to which he served as financial controller of Smurfit Continental Europe.

John A. Canning, Jr.serves as a director of JSL, JSG Packaging and JSG Holdings. Mr. Canning has been employed
principally by Madison Dearborn since 1993 and currently serves as its Chairman and Chief Executive Officer. From 1969 to 1993, Mr. Canning worked in various positions with First Chicago
Corporation, most recently as Executive Vice President of The First National Bank of Chicago and President of First Chicago Venture Capital. Mr. Canning is a member of the board of directors of
the Milwaukee Brewers Baseball Club, Norfolk Tides Baseball Club, Northwestern Memorial Hospital, Children's Inner City Educational Fund and the Federal Reserve Bank of Chicago.

Christopher J. McGowanserves as a director of JSL, JSG Packaging and JSG Holdings. Mr. McGowan has been employed principally by
Madison Dearborn since 1999 and currently serves as a Director. Prior to joining Madison Dearborn, Mr. McGowan attended Harvard Graduate School of Business Administration, where he received an
M.B.A. Mr. McGowan is a member of the board of directors of AutoTradeCenter, Inc.

Samuel M. Mencoffserves as a director of JSG Funding, JSL, JSG Packaging and JSG Holdings. Mr. Mencoff has been employed
principally by Madison Dearborn since 1993 and currently serves as a

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Co-President
and Managing Director. From 1987 until 1993, Mr. Mencoff served as Vice President of First Chicago Venture Capital. Mr. Mencoff is a member of the board of
directors of Bay State Paper Holding Company, Buckeye Technologies, Inc, Evanston Northwestern Healthcare, Great Lakes Dredge & Dock Corporation and Packaging Corporation of America, and a
member of the board of trustees of Brown University and Moses Brown School.

Thomas S. Soulelesserves as a director of JSG Funding, JSL, JSG Packaging and JSG Holdings. Mr. Souleles has been employed
principally by Madison Dearborn since 1995 and currently serves as a Managing Director. Mr. Souleles is a member of the board of directors of Bay State Paper Holding Company, Great Lakes
Dredge & Dock Corporation and Packaging Corporation of America, and a member of the board of trustees of the National Multiple Sclerosis SocietyGreater Illinois Chapter.

Justin S. Huscherresigned as a director of the board with effect from October 11, 2004.

The
mailing address for Dr. Michael Smurfit and Messrs. McGann, Anthony Smurfit and Curley is c/o Jefferson Smurfit Group Limited, Beech Hill, Clonskeagh, Dublin 4, Ireland
and the mailing address for Messrs. Canning, McGowan, Mencoff and Souleles is c/o Madison Dearborn Partners, L.L.C., Three First National Plaza, Suite 3800, Chicago, Illinois 60602, United
States.

Except
as described in this annual report, there are no arrangements or understandings between any member of the board of directors or executive officer and any other person pursuant to
which that person was elected or appointed to his position.

JSG
Packaging's board of directors has the power to appoint officers. Each officer will hold office for the term determined by JSG Packaging's board of directors and until such person's
successor is chosen and qualified or until such person's death, resignation or removal. The JSG Packaging board of directors has two committees: the Audit Committee and the Compensation Committee. The
Audit Committee is comprised of Samuel Mencoff, Thomas Souleles and Christopher McGowan. The Compensation Committee is comprised of John Canning, Samuel Mencoff and Thomas Souleles.

The
responsibilities of the Audit Committee include:



The
responsibilities of the Compensation Committee include:



Family Relationships

Mr. Anthony Smurfit is the son of Dr. Michael Smurfit.

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Compensation

None of JSG Funding's, JSL's or JSG Packaging's directors is entitled to receive any fees for serving as directors, other than Dr. Michael
Smurfit who receives fees for serving as chairman of JSL. All of the directors are reimbursed for out-of-pocket expenses related to their service as directors.

For
the year ended December 31, 2004, the aggregate compensation paid to officers of JSL and its subsidiaries, including fees, salaries, bonuses, other benefits and payments to
pension plans, was approximately €10,305,000. Of this amount, approximately €2,985,000 was set aside or accrued to provide pension, retirement or similar benefits for
officers of JSL and its subsidiaries and approximately €2,536,000 was paid or is payable to officers in the form of performance related benefits.

Management Employment Agreements

JSL, JSG Packaging and the management investors listed in the table below, which are referred to collectively as the "management
investors," have entered into certain amended and restated letter agreements, dated as of February 6, 2004, regarding the terms of employment of the management
investors, which are referred to collectively as the "management employment agreements". The terms of each management employment agreement were
originally established pursuant to arm's length negotiations between Madison Dearborn and each management investor and were amended to account for the exchange from JSL to JSG Packaging and otherwise
reaffirmed. A summary of the material terms of the management employment agreements is set forth below:

Pursuant
to the terms of the management employment agreements, the senior team of JSL consists of the following:

|Name                     |  | Position with Jefferson Smurfit Group Limited
|------------------------ |  | ---------------------------------------------
|Dr. Michael W.J. Smurfit |  | Chairman                                     
|Mr. Gary W. McGann       |  | Chief Executive Officer                      
|Mr. Anthony P.J. Smurfit |  | Chief Operations Officer                     
|Mr. Ian J. Curley        |  | Chief Financial Officer                      

Under
the terms of the management employment agreements, each management investor has been provided with a letter from JSL, pursuant to which JSL has agreed to procure his employment by
JSL and its subsidiaries upon terms described below. Each letter sets forth the management investor's title and principal duties and responsibilities from November 1, 2002.

Dr. Michael
Smurfit has a six-year term as Chairman of JSL and is entitled to a total benefit package of €2.75 million per annum from JSL and
its subsidiaries, with a one year total benefits severance package in the case of termination by JSL.

Pursuant
to the terms of the management employment agreements, the employment terms applicable to each of Messrs. Gary McGann, Anthony Smurfit and Ian Curley remained the same as
those prevailing prior to consummation of the take-over offer, subject only to salary increases previously agreed.

Each
of Messrs. Gary McGann, Anthony Smurfit and Ian Curley covenanted to JSL that he would not exercise his contractual right to leave JSG after its acquisition by JSL and
thereby trigger payment obligations from JSG thereunder and agreed not to trigger any rights that he may have had as a result
of the exchange. In consideration for this undertaking, JSG Packaging has provided each such individual a "put" letter with terms identical to those currently applicable, except that:



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In
addition, the management employment agreements provide that in the event of termination of the employment of Messrs. Gary McGann, Anthony Smurfit or Ian Curley by JSL or JSG
other than for just cause, such individual will be entitled to compensation equal to two times his prevailing annual remuneration/benefits package (including MIP, pension, etc.). Mr. Gary
McGann will retain his existing notice period of 360 days but the notice period for Messrs. Anthony Smurfit and Ian Curley will be 90 days.

In
consideration for the foregoing severance obligations, each of Messrs. Gary McGann, Anthony Smurfit and Ian Curley will enter into covenants with JSL whereby each will agree
that, provided the foregoing severance payments have been paid to them, they will not for a period of two years after their termination (i) compete with JSL and its subsidiaries in a material
part of its business, or (ii) solicit the employees, customers or suppliers of JSL and its subsidiaries.

Pursuant
to the terms of the management employment agreements and the management incentive plan, a minimum payment of 60% of salary is guaranteed under the MIP to each of
Messrs. Gary McGann, Anthony Smurfit and Ian Curley for each of the years 2003 through 2006 and the remaining 40% will be dependent upon the achievement of appropriate objectives established by
JSL's board of directors or its compensation committee.

Management Equity Agreement

Purchase of Equity.In connection with the exchange, JSG Packaging entered into the Management Equity Agreement, dated as of
February 6, 2004, which we refer to as the "management equity agreement," with each of the executives party thereto. On February 6, 2004,
the shareholders of JSL exchanged their shares of JSL for an identical number of newly issued shares of JSG Packaging having substantially identical terms. Upon completion of the exchange, JSG
Packaging and each of the executives entered into the management equity agreement, replacing the Amended and Restated Management Equity Agreement, dated as of September 5, 2002, entered into by
JSL and each of the executives that became party thereto in connection with the JSG Acquisition, which had substantially the same terms. Pursuant to the management equity agreement, JSL exchanged with
each executive such executive's holdings of ordinary shares, nominal value €0.001 per share, of JSL, for an identical number of newly issued ordinary shares of JSG Packaging having
substantially identical terms. JSL also exchanged with each executive such executive's holdings of (i) class A convertible shares, nominal value €0.001 per share, of JSL,
for an identical number of newly issued class A convertible shares of JSG Packaging having substantially identical terms, which we refer to as the "class A
convertible shares," (ii) class B convertible shares, nominal value €0.001 per share, of JSL, for an identical number of newly issued
class B convertible shares of JSG Packaging having substantially identical terms, which we refer to as the "class B convertible shares,"
and (iii) class C convertible shares, nominal value €0.001 per share, of JSL, for an identical number of newly issued class C convertible shares of JSG Packaging
having substantially identical terms, which we refer to as the "class C convertible shares," each of which is convertible into ordinary shares of
JSG Packaging. Following is a summary of the material terms of the management equity agreement.

Vesting.The class A convertible shares, class B convertible shares and class C convertible shares will
be subject to vesting.

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So
long as the executive is and has continued to be employed by or served as an officer or director for JSG Packaging and its subsidiaries, such executive's class A convertible
shares will vest as follows:

Vesting Date

Cumulative Percentage of Class A
Convertible Shares VestedDecember 31, 2005

33.3
%December 31, 2006

66.7
%December 31, 2007

100.0
%


None of an executive's class A convertible shares will become vested if such executive ceases to be employed by, or to serve as an officer
or director for, JSG Packaging or its subsidiaries prior to December 31, 2005. If an executive ceases to be employed by, or to serve as an officer or director for, JSG Packaging or its
subsidiaries on any date other than any vesting date set forth in the table above after December 31, 2005 but prior to December 31, 2007, the cumulative percentage of such executive's
class A convertible shares to become vested will be determined on a pro rata basis according to the number of days elapsed from the immediately preceding vesting date. However, upon the sale of
JSG Packaging or certain public listing events, which we refer to as an "acceleration event," all of an executive's class A convertible shares
will become vested and will convert to an equal number of class D convertible shares of JSG Packaging, nominal value €0.001 per share, which we refer to as
"class D convertible shares," unless at such time such executive is no longer employed by, or no longer serves as an officer or director for, JSG
Packaging and its subsidiaries. On each vesting date set forth in the table above, 33.3% of the aggregate number of each executive's class B convertible shares will become vested if, and only
if, the internal rate of return, or "IRR," of MDCP IV Global Investments LP, MDCP III Global Investments LP, MDSE III Global Investments LP and any
affiliate of the foregoing entities that owns or holds ordinary shares of JSG Packaging, which we refer to collectively as the "MDCP
co-investors," equals or exceeds 25%. However, if the IRR of the MDCP co-investors as of such vesting date is greater than 15% but less than 25%, the
percentage of the aggregate class B convertible shares which will become vested as of such vesting date will be the percentage determined by multiplying 3.33 by the excess of (i) the IRR
of the MDCP co-investors as of the applicable vesting date over (ii) 15%. Further, if the IRR of the MDCPco-investors as of the date of an acceleration event, which we
refer to as the "acceleration date," is equal to or greater than 25%, 100% of the class B convertible shares not previously eligible for vesting
will vest as of such acceleration date. If the IRR of the MDCP co-investors as of the acceleration date is greater than 15% but less than 25%, the percentage of class B convertible
shares not previously eligible for vesting prior to the acceleration date that will vest as of such acceleration date will be the percentage determined by multiplying 10 by the excess of
(i) the IRR of the MDCP co-investors as of the applicable vesting date over (ii) 15%. Vesting with respect to the class B convertible shares will be cumulative such
that if the IRR of the MDCP co-investors as of an acceleration date or any subsequent applicable vesting date is greater than any preceding applicable vesting date, the percentage of each
executive's entire holding of class B convertible shares vested will be recalculated to be equal to the percentage vested for
such acceleration date or subsequent applicable vesting date. No class B convertible shares will vest for any executive as of any applicable vesting date or acceleration date if the executive
holding such class B convertible shares is no longer employed by, or no longer serves as an officer or director for, JSG Packaging and its subsidiaries as of such date.

On
December 31, 2007, 100% of each executive's class C convertible shares will become vested if, and only if, the IRR of the MDCP co-investors as of such date
is equal to or greater than 30%. In the event that an acceleration event occurs prior to December 31, 2007, 100% of the class C convertible shares will become vested as of the
acceleration date if, and only if, the IRR of the MDCP co-investors as of such acceleration date is equal to or greater than 30%. No class C convertible shares will vest for any
executive as of December 31, 2007 or the acceleration date if the executive holding such class C

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convertible
shares is no longer employed by, or no longer serves as an officer or director for, JSG Packaging and its subsidiaries as of such date.

As
a condition to accelerated vesting of an executive's class A convertible shares, class B convertible shares and class C convertible shares in connection with a
sale of JSG Packaging, such executive will, if requested by the purchaser of JSG Packaging and for no additional consideration therefor, agree to continued employment for up to 12 months
following such sale so long as such executive's compensation package and job description is substantially similar immediately following such sale.

Conversion.Each class A convertible share, class B convertible share and class C convertible share will
automatically convert into one class D convertible share once it has fully vested. An executive may at any time and from time to time, upon payment in full in cash of the conversion price per
share, convert all or any portion of such executive's class D convertible shares into ordinary shares of JSG Packaging. The conversion price per share will equal the excess of the fair market
value of an ordinary share of JSG Packaging as of the date of sale of a convertible share over the subscription price for such convertible share (or, in the case of class D convertible shares,
the subscription price for the convertible share from which it was converted) as reduced, in an amount per share, in the case of convertible shares currently in issue or issued on or prior to the
third month after consummation of the payment to the shareholders of JSG Packaging, equal to a fraction the numerator of which is the sum of the amount of the share capital reduction plus interest
accrued (including through capitalization) or paid on the notes, plus fees and expenses related to the offering and the denominator of which is the number of ordinary shares of JSG Packaging plus the
number of shares of JSG Packaging issuable upon exercise of warrants, in each case determined as of the date of consummation of the share capital reduction. No convertible share issued under the
management equity agreement will be convertible after the seventh anniversary of the date of issuance of such convertible share and with respect to any class D convertible share, the date of
issuance for the class A convertible share, class B convertible share or class C convertible share from which such class D convertible share has been converted. For all
purposes of the management equity agreement, the date of issuance of a convertible share of JSL for which such convertible share of JSG Packaging was issued shall be deemed that date of issuance of
such new convertible share.

Redemption.In the event any executive ceases to be employed by, or to serve as an officer of or director for, JSG Packaging
or its subsidiaries, which we refer to as a "termination," all of such executive's ordinary shares and convertible shares issued or issuable under the
management equity agreement (except for ordinary shares of JSG Packaging exchanged for ordinary shares of JSL purchased by such executive at the closing of the transactions contemplated by the
management equity agreement on September 17, 2002) may be redeemed or purchased by, in order of priority, each of JSG Packaging and the MDCP co-investors. In the case of any
termination other than for cause, the purchase price for each class A convertible share, class B convertible share and class C convertible share will be such executive's original
cost for such share, and the purchase price for each class D convertible share and ordinary share will be the fair market value for such share. In the event of a termination for cause, the
purchase price for each convertible share and ordinary share will be the lower of (i) the fair market value of such share and (ii) the original cost for such share. Such redeemed shares
will be made available for sale by JSG Packaging and the MDCP co-investors to any member of JSG Packaging's management for the same purchase price and on the same terms as such shares were
purchased by JSG Packaging and the MDCP co-investors.

Restrictions on Transfer.The management equity agreement prohibits the executives from transferring any of their ordinary
shares or convertible shares, subject to certain exceptions.

Participation and Preemptive Rights.The executives party to the management equity agreement are granted certain
"tag-along" rights under the management equity agreement which entitle them to

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participate
in certain sales by any MDCP co-investors. In addition, if JSG Packaging proposes to issue any newly issued ordinary shares to the MDCP co-investors or any of their
affiliates or co-investors, each executive will have the right to purchase on the same terms and conditions a pro rata portion of such new issuance.

Voting.So long as the MDCP co-investors, their affiliates and co-investors collectively hold a
majority of the ordinary shares of JSG Packaging, each executive holding ordinary shares will vote all of such executive's ordinary shares and take all other necessary stockholder actions as are
requested by the holders of a majority of the shares held by such MDCP co-investors, their affiliates and co-investors, which we refer to as the
"co-investor majority," to cause the representatives to be elected as members of the board of directors of JSG Packaging as directed by the
co-investor majority.

Board Practices

Each member of JSG Packaging's board of directors was elected in accordance with the terms of the Corporate Governance Agreement. See "Major Shareholders and
Related Party TransactionsCertain Relationships and Related TransactionsCorporate Governance Agreement." In addition, each of the officers of JSL has entered into an
agreement with JSG Packaging relating to his terms of employment. See "Management Employment Agreements."

JSG
Packaging's board of directors has the power to appoint officers. Each officer will hold office for the term determined by JSG Packaging's board of directors and until such person's
successor is chosen and qualified or until such person's death, resignation or removal.

JSG
Packaging's board of directors has two committees: the Audit Committee and the Compensation Committee.

Employees

We employed an average of 30,371 people on a full time basis in 2004. The table below sets forth the average number of employees for the last three years by
region and reporting segment.

Segment/Region

2004

2003

2002Europe:Packaging

18,014

18,190

14,619Specialties

4,917

4,158

4,578Total

22,931

22,348

19,197Latin America

7,440

7,318

6,765United States & Canada



639

2,726Total

30,371

30,305

28,688


The employee make up of our European divisions have undergone considerable change since 2002. The 2002 numbers increased as a result of the
acquisition of Munksjö, with the greatest impact arising in the specialties division. In 2003 the numbers increased in packaging as a result of the acquisition of Smurfit Stone Europe,
Navarra and Sacks Polska. In 2004, there was a slight increase across the division.

In
2003 Colombia accounts for the majority of the increase which can be attributed to the acquisition of Papelsa and Packing. In 2004 the start up of the Chile operation increased
employee numbers by an average of 110.

Employee
numbers in the United States and Canada have been on the decrease since 2002 as a result of the disposal of our U.S. printing and voting equipment business. In 2003 the numbers

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decreased
further as a result of the SMBI asset swap with Smurfit Stone Europe at the end of March. By 2004, our operations in the United States and Canada have ceased.

Share Ownership

JSG Packaging is a limited company owned, in part, by the MDCP co-investors, the additional co-investors and the management investors.
JSG Funding is an indirect, wholly owned subsidiary of JSG Packaging.

The
following table sets forth certain information regarding the beneficial ownership of JSG Packaging, as of February 28, 2005 by: (i) each person or entity known to us to
own more than 5% of any class of JSG Packaging's outstanding securities and (ii) each member of JSG Packaging's board of directors, each of its named executive officers and all members of the
board of directors and executive officers as a group. 73,520,546 ordinary shares of JSG Packaging are beneficially owned. To our knowledge, each of such securityholders has sole voting and investment
power as to the ordinary shares shown unless otherwise noted. Beneficial ownership of the securities listed in the table has been determined in accordance with the applicable rules and regulations
promulgated under the U.S. Exchange Act.

|                                                                                                                               |  | Beneficial Ownership(1) | 
|------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | 
|
|Principal Securityholders:                                                                                                     |  |                         | 
|MDCP Co-investors(2)
c/o Walkers SPV Limited
Walkers House
Mary Street
P.O. Box 908GT
George Town
Grand Cayman, Cayman Islands |  | 46,682,056              | 
|MidOcean Europe GP (Jersey) Limited
22 Grenville Street
St. Helier
Jersey JB4 8PX
Channel Islands                              |  | 7,500,000               | 
|Directors and Executive Officers:                                                                                              |  |                         | 
|John A. Canning, Jr(3)                                                                                                         |  |                        | 
|Christopher J. McGowan(3)                                                                                                      |  |                        | 
|Samuel M. Mencoff(3)                                                                                                           |  |                        | 
|Thomas S. Souleles(3)                                                                                                          |  |                        | 
|Dr. Michael W.J. Smurfit(4),(5)                                                                                                |  | 5,414,788               | 
|Gary W. McGann(4)                                                                                                              |  | 150,000                 | 
|Anthony P.J. Smurfit(4)                                                                                                        |  | 400,000                 | 
|Ian J. Curley(4)                                                                                                               |  | 150,000                 | 
|All directors and executive officers as a group (8 persons)                                                                    |  | 6,114,788               | 

---

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Item 7.    Major Shareholders and Related Party Transactions

Certain Relationships and Related Transactions

Exchange and Shareholders Agreement

JSG Packaging, the MDCP co-investors and certain additional co-investors, which we refer to as the additional co-investors,
have entered into a Exchange and Shareholders Agreement, dated as of February 6, 2004, which we refer to as the "shareholders agreement." The
shareholders agreement replaces the Subscription and Shareholders Agreement, dated as of September 5, 2002, among JSL, the MDCP co-investors and certain additional
co-investors, which had substantially the same terms. The MDCP co-investors and the additional co-investors party thereto exchanged each ordinary share of JSL for
one ordinary share of JSG Packaging and agreed to certain arrangements regarding their participation in JSG Packaging. Following is a summary of the material terms of the shareholders agreement.

Transfer Obligations.Each party to the shareholders agreement agrees that if requested by the holders of a majority of the
shares held by the MDCP co-investors, which we refer to as the "MDCP majority," in connection with the financing of the offer, such party
shall transfer to any other person directed by the MDCP majority a number of ordinary shares as directed by the MDCP majority. The price per ordinary share paid to such party will not be less than the
per share price. Notwithstanding the foregoing, no party will be required to transfer a higher percentage of the ordinary shares owned by such party than the percentage of ordinary shares being
transferred by the MDCP co-investors.

Covenants.Under the terms of the shareholders agreement and until the occurrence of an acceleration event, JSG Packaging
undertakes to deliver to each party and to each other holder of at least 15% of the ordinary shares (i) monthly and quarterly unaudited consolidated statements of operations and cash flows of
JSG Packaging and its subsidiaries, (ii) annual consolidated statements of operations and cash flows of JSG Packaging and its subsidiaries, and (iii) an annual budget prepared on a
monthly basis for JSG Packaging and its subsidiaries.

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Preemptive Rights.If JSG Packaging proposes to issue any additional ordinary shares or equity securities or equity
equivalents that are convertible or exercisable into ordinary shares to the MDCP co-investors or any of their respective affiliates, which we refer to as the "new
shares," each party will have the right to purchase all or part of a portion of the new shares equal to the product of (i) the total number of new shares proposed to be
issued, multiplied by (ii) a fraction, the numerator of which is the number of class D convertible shares and ordinary shares held by such shareholder as of the date of the shareholders
agreement and the denominator of which is the total number of class D convertible shares and ordinary shares which are held by all shareholders immediately prior to the proposed issuance.

Restrictions on Transfer.The shareholders agreement prohibits any party from transferring any of its ordinary shares,
subject to certain exceptions such as pursuant to applicable laws of descent in the case of individuals and, in the case of a party which is a company or partnership, among its affiliates.

Sale of JSG Packaging.If JSG Packaging's board of directors and the MDCP majority approve a sale of JSG Packaging, which we
refer to as an "approved sale," each party will vote for and consent to such approved sale and will take all necessary and desirable actions in
connection with the consummation of the approved sale as requested by the board of directors, in each case subject to the satisfaction of certain conditions.

Participation Rights.The parties to the shareholders agreement are granted certain "tag-along" rights which
entitle them to participate in certain sales by any MDCP co-investors or their permitted transferees.

Voting.So long as the MDCP co-investors and their respective permitted transferees collectively hold a majority
of the ordinary shares, each party to the shareholders agreement will vote all of its equity securities and take all other necessary or desirable actions as are requested by the MDCP majority in order
to cause the representatives to be elected as members of JSG Packaging's board of directors as set forth in the corporate governance agreement and as otherwise directed by the MDCP majority. In
addition, each party will at all times vote such party's equity securities on all matters presented to JSG Packaging's shareholders as directed by the MDCP majority as long as such vote is not
materially adversely discriminatory to such party in a manner different from the MDCP majority. The foregoing voting provisions terminate upon the occurrence of an acceleration event.

Registration Rights Agreement

In connection with the exchange, each of the MDCP co-investors, the management investors, certain additional co-investors and JSG
Packaging entered into the Registration Rights Agreement, dated as of February 6, 2004, which we refer to as the "registration rights agreement."
The registration rights agreement replaces the Amended and Restated Registration Rights Agreement, dated as of September 5, 2002, entered into by the MDCP co-investors, the
management investors, certain additional co-investors and JSL in connection with the JSG Acquisition, which had substantially the same terms.

Demand Registrations.Under the registration rights agreement, the holders of a majority of the registrable securities held
by the MDCP co-investors and their affiliates have the right at any time (i) prior to an initial public offering of JSG Packaging's ordinary shares, to require JSG Packaging to
register any or all of such securities under the U.S. Securities Act on Form F-1 or any similar long-form registration statement, which we refer to as a
"long-form registration," at JSG Packaging's expense and (ii) after an initial public offering of JSG Packaging's ordinary shares, to
require JSG Packaging to register any or all of their securities under up to three long-form registrations and if available, an unlimited number of registrations on Forms F-2
and F-3 or similar short-form

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registrations,
which we refer to as "short-form registrations," at JSG Packaging's expense. We refer to each of these types of registrations
as "demand registrations."

JSG
Packaging is not required, however, to effect any long-form registration within 180 days after the effective date of a previous demand registration which was a
long-form registration or a registration in which the holders of the registrable securities were given piggyback rights pursuant to the registration rights agreement. In addition, JSG
Packaging may postpone for up to 180 days the filing or the effectiveness of a registration statement for a demand registration if JSG Packaging's board of directors determines that such demand
registration would reasonably be expected to have a material adverse effect on any proposal or plan by JSG Packaging or any of its subsidiaries to engage in any material acquisition of assets or any
material merger, tender offer, reorganization or similar transaction.

Piggyback Registrations.All holders of registrable securities are entitled to request the inclusion of such securities in
any registration statement at JSG Packaging's expense whenever JSG Packaging proposes to register any offering of its equity securities (other than pursuant to a registration statement on
Form F-4 or Form S-8 under the U.S. Securities Act) and the registration form to be used may be used for the registration of such registrable securities.

Corporate Governance Agreement

In connection with the exchange, each of the MDCP co-investors, the management investors, certain additional co-investors, which we
collectively refer to as the "investors," and JSG Packaging entered into a Corporate Governance Agreement, dated as of February 6, 2004, which we
refer to as the "corporate governance agreement." The corporate governance agreement replaces the Amended and Restated Corporate Governance Agreement,
dated as of September 5, 2002, entered into by the MDCP co-investors, the management investors, certain additional co-investors and JSL in connection with the JSG
Acquisition, which had substantially the same terms.

Voting.Under the terms of the corporate governance agreement, each investor undertakes to vote all of such investor's
ordinary shares and any other voting securities of JSG Packaging and to take all other reasonably necessary or desirable actions within such investor's control to ensure that, among other things:



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Any
management investor who, together with any affiliates or family members, owns (i) ordinary shares of JSG Packaging with an aggregate investment cost of not less than
€50 million (which includes the investment cost in the underlying shares of JSL which were exchanged for shares of JSG Packaging) prior to any public listing of the ordinary
shares of JSG Packaging or (ii) on or after a public listing of JSG Packaging's ordinary shares, a number of ordinary shares having an aggregate value of not less than
€50 million or a number of ordinary shares with an aggregate investment cost of not less than 50% of the aggregate investment cost of the ordinary shares held by such investor
and such investor's affiliates and family members as of the date for settlement of consideration after the offer was declared unconditional will have the collective right, together with any other
management investors satisfying such requirements, to appoint one member of the board of directors of JSG Packaging, whom we refer to as the "purchased equity
director."

However,
in the event that a purchased equity director becomes an employee of, serves as a director of or otherwise provides services for any person other than SSCC and its subsidiaries
without the board of directors' consent, such person will be removed from the board of directors of JSG Packaging upon the written request of MDCP IV Global Investments LP.

Covenants.The corporate governance agreement contains certain covenants, which, among other things, limit JSG Packaging's
ability to enter into any affiliate transactions outside the ordinary course of business or to change any accounting policy of JSG Packaging in a manner that would adversely affect the calculation of
any management incentive target or performance.

Termination.The corporate governance agreement will terminate upon the earlier of a public listing of the ordinary shares of
JSG Packaging and a sale of JSG Packaging to an independent third party pursuant to which such party acquires (i) capital stock of JSG Packaging possessing the voting power to elect a majority
of JSG Packaging's board of directors or (ii) all or substantially all of JSG Packaging's assets. However, with respect to the right of any management investor to appoint a purchased equity
director, such management investor's rights will not terminate until the earlier of a sale of JSG Packaging of the type described above or the date on which such management investor no longer
satisfies the ordinary share ownership requirements entitling such management investor to appoint a purchased equity director.

Transactions with SSCC

Spin-Off of SSCC Shares.Prior to the spin-off of our SSCC shares, Smurfit International B.V., a
wholly owned subsidiary of JSG, owned 71,638,462 shares, or approximately 29.3%, of SSCC's outstanding common stock. In connection with the spin-off by JSG to its shareholders of its SSCC
common stock, Smurfit International B.V. sold its SSCC shares to JSG. The number of shares distributed in the spin-off were then delivered to SSCC and it instructed its transfer agent to
cancel those shares and reissue the same number of shares of SSCC common stock in the names designated by JSG. The spin-off was approved by the JSG shareholders on July 29, 2002 and
confirmed by the High Court of Ireland on August 27, 2002.

SSCC Asset Swap.On March 31, 2003, certain subsidiaries of JSG completed the purchase of substantially all of the
assets that previously comprised SSCC's European operations for JSG's 50%

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ownership
interest in Smurfit MBI Canada and a cash payment of approximately €185 million. On February 14, 2003, we sold $205 million in aggregate principal amount
of our 95/8% senior notes due 2012 to fund the cash consideration for the SSCC Asset Swap.

In
connection with the SSCC Asset Swap, we acquired three paper mills (located in Hoya and Viersen, Germany and Cordoba, Spain), 20 corrugated container plants (11 located in Germany,
three in Spain, four in Belgium, one in The Netherlands and one in France), one contract packaging plant in the Netherlands and five reclamation plants located in Germany. The primary products
produced in these facilities include corrugated containers, containerboard and coated recycled boxboard.

Transactions with SSCC.In the ordinary course of business, JSG sells products to and purchases products from, and may
continue to sell products to and purchase products from, SSCC and its subsidiaries and affiliates on terms generally similar to those prevailing with unrelated parties. In addition, SSCC provides, and
may continue to provide, JSG and certain of its affiliates with general management and elective management services under separate management services agreements.

In
addition, prior to the completion of the SSCC Asset Swap, JSG and SSCC operated in Europe pursuant to a joint management arrangement that was permissible under the antitrust rules of
the European Union in light of their former affiliate status.

Board Membership.Mr. Anthony P.J. Smurfit was a director of SSCC prior to May 8, 2003, and Dr. Michael
W.J. Smurfit was SSCC's Chairman of the Board and served on its board of directors prior to May 8, 2003. Each of these individuals retired from the SSCC board of directors on May 8,
2003. Dr. Michael W.J. Smurfit and Mr. Anthony P.J. Smurfit are officers and/or directors of JSL, JSG Packaging and JSG Holdings.

For
detailed financial information relating to transactions entered into with our associates, including SSCC, please see note 25 to the audited consolidated financial statements
included elsewhere in this annual report.

Transactions with Directors and Executive Officers

No transaction material to us, on a consolidated basis, has been entered into in the last three years with any director, executive officer or member of their
respective families or with any major shareholder. There are no loans outstanding between us or our subsidiaries and any director or executive officer or member of their respective families or with
any major shareholder.

Transaction Fees

Madison Dearborn received a fee of approximately €38.0 million at the closing of the JSG Acquisition plus
out-of-pocket expenses incurred in connection with the JSG Acquisition. Madison Dearborn may be paid additional fees from time to time in the future for providing management,
consulting or advisory services and related expenses.

Effect of Capital Reduction on Certain Shareholders

In connection with the payment to shareholders of JSG Packaging of substantially all of the net proceeds of the JSG Holdings offering, certain significant
shareholders, directors and officers as shareholders of JSG Packaging received their pro rata portion of the payment. The MDP Investors, MidOcean Europe GP (Jersey) Limited, Dr. Michael W.J. Smurfit,
Mr. Anthony P.J. Smurfit, Mr. Gary W. McGann, and Mr. Ian J. Curley have received approximately €202 million, approximately €32million, approximately
€23 million, approximately €1.7 million, approximately €0.6 million, and approximately €0.6 million
respectively, as a result of the share capital reduction.

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Item 8.    Financial Information

Consolidated Statements and Other Financial Information

See "Item 18. Financial Statements."

Legal Proceedings

In addition to litigation arising in the ordinary course of business, we were involved in certain civil and criminal proceedings in Spain arising out of a past
acquisition. In November 1988, a subsidiary of JSG acquired ICSA, a Spanish incorporated company, from a subsidiary of Torras. In early 1989, JSG acquired a 35% interest in another Spanish
company, INPACSA, a former parent of ICSA. A number of individuals associated with Torras were charged by the public prosecutor in Madrid with diverting, for their own use, a substantial part of the
purchase consideration paid by JSG for ICSA. The public prosecutor, on behalf of the minority shareholders of INPACSA, also claimed that certain transactions, including the transfer of ICSA by INPACSA
which took place prior to JSG's acquisition of ICSA, caused damage to the minority shareholders of INPACSA. In 1998, the public prosecutor also charged JSG's Chairman, Dr. Michael W.J. Smurfit,
as the representative of JSG, in these proceedings with respect to the alleged damage to the minority shareholders of INPACSA and Torras. A JSG subsidiary is also one of a number of parties against
whom secondary civil liability had been claimed. JSG and Smurfit International B.V. have each indemnified Dr. Smurfit against loss or liability due to such proceedings. Bonds were posted with
the Spanish court in the amount of €47 million, which equals the amount of alleged damages, excluding interest. The maximum estimated total exposure relating to the liabilities,
including interest through December 31, 2002, was approximately €118 million, for which no reserve has been taken and which amount could accrue interest until payment of
any final judgment. Preliminary proceedings commenced in March 2003 and on April 11, 2003, the court dismissed the proceedings against Dr. Smurfit, the JSG subsidiary and others.
The bonds previously posted were released and the Spanish court has now taken a lien over certain Spanish assets pending final resolution of the case. The final decision of the court was handed down
in March 2004 and confirmed the earlier dismissal with respect to Dr. Smurfit and the JSG subsidiary. The decision is being appealed to a higher court by two private complainants but not
by the public prosecutor. We cannot assure you, however, that the consequences of any future adverse findings, if any, will not have a material adverse effect on our financial position or results of
operations.

We
are also the subject of litigation in the Dominican Republic arising from the acquisition in 1996 of a controlling interest in a small local corrugator owned by Industria Cartonera
Dominicana. The lawsuits, alleging damages in excess of $300 million, are brought by a local competitor who is claiming loss of potential profits, as a consequence of our entry to the market.
He is also alleging breach of contract. In June 2004 we received an adverse ruling in our main lawsuit, which found for the original plaintiff but which made no determination as to damages. The
damage amount has been left for yet another court to decide. We have appealed this ruling and are challenging a number of due process irregularities surrounding the ruling.

We
believe the foregoing lawsuits are without merit and are defending them vigorously.

In
July 2004, representatives of the Office of Fair Trading visited our UK operation. We understand that the investigation, which centers on the sheet-feeding business, was
prompted by consumer complaints, which were filed during the UK Competition Commission's investigation of the March 2004 acquisition proposal by David S. Smith Limited for Linpac Limited, a
competitor of our sheet feeding business. The investigation is looking into the high levels of pricing transparency which exist in the sector and
which are a function of, inter alia, vertical integration, swaps and market concentration. We are co-operating fully with the ongoing investigation.

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We are also a party to various claims and legal actions that arise in the ordinary course of business, including with respect to environmental matters. For more information, see
"Environmental Issues." We believe such claims and legal actions, individually and in the aggregate, will not have a material adverse effect on our business, financial condition and
results of operations.

Dividends

The senior notes indentures, the subordinated notes indentures and the senior credit facility contain financial and other restrictive covenants that limit our
ability to engage in activities that may be in our long term best interests. For example, these covenants significantly restrict our ability to:



In
addition, the senior credit facility requires us to comply with certain financial covenants. You should read the discussions under the heading "Description of Certain
IndebtednessSenior Credit Facility" for further information about these covenants.

Significant Changes

Munksjö Specialties Disposal

On December 22, 2004, we announced that we had signed a definitive agreement to sell our Munksjö specialties business to The EQT III Fund
for approximately €450 million. On December 14, 2004 SCA (Svenska Cellullosa Aktiebolaget) announced that it had agreed to buy our Munksjö tissue business
for approximately €28 million. The sale of our Munksjö specialties business to The EQT III Fund was completed on March 1, 2005 and the proceeds from the
disposal have been used to pay down part of the term portion of our senior credit facility. The sale of our Munksjö tissue business is subject to customary closing conditions.

The
Munksjö specialty assets comprised pulp, décor paper, and specialty paper businesses and had sales from operations for 2004 of approximately
€480 million. The Munksjö tissue assets being sold comprise two paper mills producing base paper for tissue and generated sales from operations of approximately
€50 million in 2004.

We
are retaining the Munksjö containerboard and corrugated assets, located in Norway, Sweden and Poland, which comprise approximately 90,000 metric tons of containerboard
and 150,000 metric tons of corrugated capacity.

Refinancing Transactions

On January 13, 2005, JSG Funding commenced a tender offer to purchase for cash all outstanding existing 15.5% subordinated notes, which we refer to as the
"tender offer." As of January 1, 2005, $211,110,848 aggregate principal amount of our 15.5% subordinated notes due 2013 and €140,740,568 aggregate principal amount of our 15.5%
subordinated notes due 2013 were outstanding. In connection with the tender offer, we also solicited consents to amend the indentures governing the existing 15.5% subordinated notes to remove
substantially all of the restrictive covenants thereunder. The tender offer was completed and the proposed amendments became operative on February 14, 2005. We intend to redeem the .01% of the
15.5% dollar subordinated notes not tendered pursuant to the tender offer in accordance with the terms and conditions of the indentures governing the existing 15.5% U.S. dollar subordinated notes.
Under this indenture, the earliest we may redeem the 15.5% subordinated notes

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not
tendered is October 1, 2005, at a redemption price of 108.0% of the aggregate principal amount of the existing 15.5% subordinated notes. All of the euro 15.5% subordinated notes were
tendered. In January 2005, JSG completed an offering of approximately €370 million of 7.75% senior subordinated notes. JSG Funding applied the net proceeds from such
offering to fund the purchase of its existing 15.5% subordinated notes pursuant to the tender offer and to pay related fees and expenses.

In
January 2005, JSG Holdings completed an offering of €325 million in aggregate principal amount of 11.5% senior Pay-in-kind notes due
2015 (the "PIK notes"), substantially all of the net proceeds of which were loaned to JSG Packaging, which, in turn, paid such net proceeds to its shareholders by means of a share capital reduction
under Irish law. Neither JSG Funding nor any of its subsidiaries guarantee the PIK notes and thus the PIK notes are effectively subordinated to all debt and other liabilities and preferred stock, if
any, of JSG Funding and its subsidiaries.

Item 9.    The Offer and Listing

Not applicable.

Item 10.    Additional Information

Memorandum and Articles of Association

The following is a summary of JSG Funding plc's Memorandum and Articles of Association. A copy of the Memorandum and Articles of Association of JSG Funding plc is
included as an exhibit to this annual report.

JSG
Funding plc is registered with the Companies Registration Office in Ireland and its company number is 357958.



The objects of JSG Funding, as set out more fully in clause 3 of its memorandum of association are as follows:



Directors

JSG Funding plc is managed by directors. There shall be no less than two nor more than ten directors. The directors may exercise all such powers of JSG Funding as
are not, under the Articles of Association or the Irish Companies Act, 1963 to 1990, which we refer to as the "Irish Companies Acts," required to be exercised by JSG Funding in the general meeting of
shareholders.

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The
directors may delegate any of their powers to any committee consisting of one or more directors. The directors may by power of attorney appoint any company, firm or person, whether
nominated directly or indirectly by the directors, to be the attorneys of JSG Funding and with such powers, authorities and discretions for such period and subject to such conditions as they may think
fit.



A director who is in any way, whether directly or indirectly, interested in a contract or a proposed contract with JSG Funding shall declare the nature of his
interest at a meeting of the directors in accordance with the Irish Companies Acts.

Except
as provided for in JSG Funding's Articles of Association, a director shall not vote in respect of any contract or arrangement or any other proposal in which he has any material
interest which conflicts or may conflict with the interest of JSG Funding otherwise than by virtue of his interest in shares or debentures or other securities of or otherwise in or through JSG
Funding. A director shall not be counted in the quorum present at a meeting related to such a resolution where he is not entitled to vote.



The remuneration of directors is determined by ordinary resolution of JSG Funding and is divisible among the directors as they agree, or failing agreement,
equally. However, any director who holds office for only part of the period in respect of which remuneration is payable shall be entitled only to rank in such division for portion of remuneration to
the period during which he has held office.

Any
director who is called upon to perform extra services which in the opinion of the directors are outside the scope of the ordinary duties of a director, JSG Funding may remunerate
such director either by a fixed sum or by a percentage of profits or otherwise as may be determined by resolution passed and a meeting of the directors and such remuneration may be either in addition
or in substitution for any other remuneration to which he may be entitled as a director.

The
directors may also be paid all traveling, hotel and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the
directors or general meetings of JSG Funding or in connection with the business of JSG Funding. The directors have the power to provide benefits, including pension, gratuities, or otherwise, for any
director, former director or other officer or former officer of JSG Funding.



Subject to the Companies (Amendment) Act, 1983, the directors may exercise all the powers of JSG Funding to borrow or raise money, to mortgage or charge its
undertaking, property, assets or uncalled capital, and to issue debentures, debenture stock and other securities whether outright or as collateral security for debts, liability, or obligation of JSG
Funding or any third party, without any limitation as to amount.



At every annual general meeting one-third of the directors (other than any managing director and any director holding an executive office) or if their
number is not three or a multiple of three then the number nearest one-third, shall retire from office. A retiring director is eligible for re-election. Those directors to
retire by rotation shall be the directors who have been in office the longest since the last election.

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Currently, a director is not required to hold any shares of JSG Funding in order to qualify for directorship. A shareholding qualification for directors may be
fixed by JSG Funding in general meeting.

Rights of Each Class of Shares



Each share, subject to the provisions of the Articles of Association and the Irish Companies Act, may be issued with such rights and restrictions as JSG Funding
may determine by ordinary resolution.

Subject
to the provisions of the Companies (Amendment) Act, 1983, JSG Funding may in general meeting declare dividends in accordance with the respective rights of the shareholders. No
dividend shall exceed the amount recommended by the directors. The directors may also from time to time pay interim dividends.

The
directors, before recommending any dividend, set aside out of the profits of JSG Funding such sums as they think proper as a reserve or reserves.



At a general meeting of shareholders, JSG Funding may, upon the recommendation of the directors, resolve that it is advantageous to capitalize any part of the
amount for the time being standing to the credit of any of JSG Funding's reserve accounts or to the credit of the profit and loss account.



Shareholders may exercise their votes either personally or by proxy, subject to any rights and restrictions attached to any class or classes of shares. Voting is
conducted by a show of hands and every member present in person and every proxy shall have one vote. On a poll, every member present or by proxy shall have one vote per share.

If
there are joint holders of a share, the vote of a senior shall prevail over all other joint holders. Seniority is determined by the order in which the names of the holders appear on
the register with respect to the share. If at any time the share capital is divided into different classes of shares, the rights attached to any class may be varied or abrogated with the consent in
writing of the holders of three-fourths of the nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of the
shares of the class, and may be so varied or abrogated whether or not JSG Funding is being wound-up. The quorum at any such meeting, other than the adjourned meeting, shall be two persons
holding or representing the proxy of at least one-third of the issued shares of the class. If at any adjourned meeting of such holders a quorum as defined above is not present within
thirty minutes of the time appointed for such adjourned meeting those members who are present in person or by proxy shall be a quorum.

The
rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares
of that class, be deemed to be varied by the creation or issue of further shares rankingpari passutherewith.



The directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as a reserve or reserves which
shall, at the discretion of the directors, be applicable for any purpose to which the profits of the company may be properly applied and

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pending
such application may at the like discretion either be employed in the business of the Company or be invested in such investments as the directors may lawfully determine. The directors may
also, without placing the same to reserve, carry forward any profits which they may think it prudent not to divide.



Subject to the provisions of the 1990 Act, JSG Holding may agree with any shareholder that all or part of such shareholder's shares are to be redeemed or are
liable to be redeemed at the option of JSG Holding or the shareholder on such terms and in such manner as may be determined by the directors of JSG Holding. Also, subject to the provisions of the 1990
Act, JSG Holding may issue any shares of the company which are to be redeemed or are liable to be redeemed at the option of the company or the shareholder on such terms and in such manner as may be
determined by the company in general meeting by special resolution on the recommendation of the directors.

Changing the Rights of Holders of Stock



The directors may, in their absolute discretion, when they consider it to be in the best interests of JSG Funding, give notice to the holder of any share
requiring them to notify JSG Funding of the particulars of certain matters, as follows:



Depending
on whether the person who has a beneficial interest in the share is a corporation, trust, society or any other legal entity or association of individuals, the directors may
require full and accurate information about the names and addresses of the individuals who control the shares, interest or unit of such corporation, trust, society, or other entity or association.



JSG Funding may, pursuant to an ordinary resolution of shareholders, increase its share capital. JSG Funding may also, subject to the provisions of the Articles
of Association, consolidate, subdivide, or cancel any shares. JSG Funding may, by special resolution, reduce its share capital, any capital redemption reserve fund or any share premium in any manner
and with, and subject to, any incident authorized, and consent required, by law. JSG Funding has first and senior lien on every share not being a fully paid share for all monies (whether immediately
payable or not) called or payable at a fixed time in respect of that share.



All transfers of shares may be effected by transfer in writing in any usual or common form or in any form acceptable to the directors and must be executed by or
on behalf of the transferor and, if the shares transferred are not fully paid, by or on behalf of the transferee. The transferor will be deemed to remain the holder of the shares transferred until the
name of the transferee is entered in the register of JSG Funding.

The
directors may, in their absolute discretion and without assigning any reason, refuse to register:



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The
directors may also decline to recognize any instrument of transfer unless the instrument of transfer:





When a specified event occurs shareholders' rights may be restricted. These events are:



If
any of these events occur, the directors may serve a restriction notice to the holder of the shares. This restriction notice shall prevent such holder from attending, speaking or
voting either personally or by proxy at any general meeting.



Subject to the provisions of the Irish Companies Acts and the Articles of Association, JSG Funding may purchase any of its shares (without any obligation to
purchase on any pro rata basis as between shareholders of the same class) on such terms and conditions in such manner as the directors may determine. JSG Funding may cancel any shares so purchased,
hold them as treasury shares or reissue any such shares. The manner in which shares can be purchased and held is described in Section 211 and Section 209 of the Companies Act, 1990.



Each year JSG Funding shall hold a general meeting as its annual general meeting in addition to any other meeting in that year and shall specify this in the
meeting notice. Any general meeting other than the annual general meeting shall be called an extraordinary general meeting. Directors may call general meetings, and extraordinary meetings may be
called on such requisition, or in default, in such manner as provided by the Irish Companies Acts. Subject to provision of the Irish Companies Acts, any annual general meeting and a meeting called for
passing of a special resolution shall be called upon at least 21 days' notice in writing and other meetings shall be called upon at least 14 days' notice in writing. The notice period
shall be calculated by excluding the day when notice is given or deemed to be given and the day for which it is given or on which it is to take effect. The notice shall specify the time, place and
general nature of the business to be transacted. The accidental omission to give notice of a meeting, or the non-receipt of notice of a meeting, shall not invalidate the proceedings at
that meeting.

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No
business shall be transacted at any general meeting unless there is quorum. Three members present in person or by proxy and entitled to vote shall be a quorum.

The
chairman, if any, shall preside at every general meeting, and if there is no such chairman or in his absence the directors shall elect one of them to act as chairman of the meeting.
The chairman with consent of a meeting at which quorum is present, may adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other
than business left unfinished at the meeting from which the adjournment took place.



If JSG Funding is wound up, the liquidator may, with the sanction of a special resolution of JSG Funding and any other sanction required by the Irish Companies
Acts, divide among the members in specie or kind the whole or any part of the assets of JSG Funding (whether they shall consist of property of the same kind or not) and may, for such purpose, set such
value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may,
with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as
the liquidator, with the like sanction, shall think fit, but so that no member shall be compelled to accept any shares or other securities whereon there is any liability.



JSG Funding is entitled to sell, at the best price reasonably obtainable, any share registered in the name of holder or person entitled by transmission, who
remain untraced after 12 years. This is provided that:



To
give effect to such a sale, JSG Funding may appoint any person to serve as a transferee of the proceeds. The net proceeds shall be held in a separate account which shall be a debt of
JSG Funding.

Material Contracts

Substantially all of the material contracts described below were entered into in connection with the acquisition of Jefferson Smurfit Group plc by an investor
group led by Madison Dearborn Partners and management of JSG (the "JSG Acquisition"). The JSG Acquisition was completed on October 7, 2002.

Financing Arrangements.The following contracts were entered into by the parties named below to finance the JSG Acquisition:

Senior Credit Facility.In connection with the JSG Acquisition, JSG Acquisitions as original borrower entered into the senior
credit facility on September 12, 2002, with Deutsche Bank AG London, as facility agent and security agent, Deutsche Bank AG London and Merrill Lynch International as joint arrangers and joint
bookrunners, Deutsche Bank AG London and Merrill Lynch Capital Corporation and others as original lenders, JSL, JSG Funding and JSG Acquisitions as original

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guarantors,
and a syndicate of financial institutions and institutional lenders. The senior credit facility originally provided for facilities of up to €2.525 billion as
follows:



The
revolving credit facility is being used for the working capital and general corporate purposes of JSG. The term loan A facility and the revolving credit facility may be used for
letters of credit and other documentary credits and ancillary facilities. As at December 31, 2004, term loans in an aggregate amount of €1,356 million were available
under the senior credit facility, approximately €187 million was undrawn as at December 31, 2004. The revolving credit facility will be available until
September 2009. The indebtedness under the senior credit facility and related hedging arrangements is guaranteed and secured by a first priority security interest over all of the tangible and
intangible assets of JSL, JSG Funding (other than the intercompany loan agreements) and certain exceptions. The senior credit facility contains customary covenants, including financial tests and
maintenance covenants, and events of default. All of the euro 15.5% subordinated
notes and approximately 99.9% of the dollar 15.5% subordinated notes were tendered in a tender offer and redeemed on February 14, 2005.

Senior Notes due 2012 of JSG Funding.As part of the JSG Acquisition, JSG Funding issued €350 million
in aggregate principal amount of 101/8% senior notes due 2012, pursuant to a Euro Indenture, dated as of September 30, 2002, among JSG Funding, JSG Acquisitions and Deutsche Bank
Trust Company Americas, as trustee, and $545 million in aggregate principal amount of 95/8% senior notes due 2012, pursuant to a Dollar Indenture, dated September 30,
2002, among JSG Funding, JSG Acquisitions and Deutsche Bank Trust Company Americas, as trustee. As part of the SSCC Asset Swap (as defined below), JSG Funding issued an additional $205 million
in aggregate principal amount of 95/8% senior notes due 2012 under the Dollar Indenture. The senior notes mature on October 1, 2012. The senior euro notes bear interest at a rate
equal to 101/8% per annum. The senior dollar notes bear interest at a rate equal to 95/8% per annum. Through maturity, interest on the senior notes is payable
semi-annually in arrears on April 1 and October 1 of each year. The senior notes are general, unsecured obligations of JSG Funding and rank equally with or senior in right of
payment to all current and future indebtedness of JSG Funding. Each series of the senior notes will rankpari passuwith the other and senior in right
of payment to, among other things, the subordinated notes. The senior notes effectively rank junior to all of the existing and future indebtedness of JSG Funding's subsidiaries, including those of JSG
Acquisitions and all borrowing under the senior credit facility, whether such debt is secured or unsecured. JSG Acquisitions is the guarantor of the senior notes on a senior subordinated basis. The
guarantees rank behind all current and future senior indebtedness of JSG Acquisitions, including all borrowing under the senior credit facility. The guarantees also rank behind all liabilities of JSG
Acquisitions' subsidiaries. The indentures governing the senior notes contain customary covenants and events of default.

Units Private Placement.As part of the JSG Acquisition, JSL and JSG Funding issued 100,000 euro units and 150,000 dollar
units for an aggregate of approximately €252.7 million in net proceeds (at the September 23, 2002 exchange rate of €1.00 = $0.9822). The
units were issued pursuant to a Euro Unit Agreement, dated as of October 2, 2002, among JSG Funding, JSL, Deutsche Bank AG London, as Euro Unit Agent, and Deutsche Bank Trust Company Americas,
as Euro Trustee and Warrant Agent, and a Dollar Unit Agreement, dated as of October 3, 2002, among JSG Funding, JSL, Deutsche Bank Trust Company Americas, as Dollar Unit Agent and Deutsche Bank
AG London, as Co-Warrant Agent. Each euro unit consisted of a €1,000 principal amount 15.5% subordinated note due 2013 of JSG Funding, and a warrant to subscribe for
ordinary shares of JSL. Each dollar unit consists of a $1,000 principal amount 15.5% subordinated note due 2013 of JSG Funding, and a warrant to subscribe for ordinary shares of JSL.

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15.5% Subordinated Notes due 2013 of JSG Funding.JSG Funding issued the 15.5% euro subordinated
notes in an aggregate
principal amount of €100 million under a Euro Indenture, dated October 2, 2002, between JSG Funding and Deutsche Bank Trust Company Americas, as trustee, Deutsche Bank
Luxembourg S.A., as paying agent and transfer agent, and Deutsche Bank AG London, as principal paying agent and transfer agent, and issued the 15.5% dollar subordinated notes in an aggregate principal
amount of $150 million under a Dollar Indenture, dated as of October 2, 2002, between JSG Funding and Deutsche Bank Trust Company Americas, as trustee, and Deutsche Bank Luxembourg S.A.,
as paying agent and transfer agent. The subordinated notes mature on October 1, 2013 and bear interest at a rate equal to 15.5% per annum. Through maturity, the interest on the subordinated
notes is payable quarterly in cash or in the form of additional subordinated notes, at JSG Funding's option. The subordinated notes are general unsecured obligations of JSG Funding and are
subordinated in right of payment to all existing and future senior indebtedness of JSG Funding, including the senior notes. The subordinated notes are not guaranteed by any of JSG Funding's
subsidiaries. As a result, they also effectively rank behind all current and future liabilities, including trade payables, of JSG Funding's subsidiaries. The indentures governing the subordinated
notes contain customary covenants and events of default.

Equity Warrants.Holders of the 15.5% subordinated notes received warrants to purchase, in the aggregate, 1.0% of the
outstanding ordinary shares of JSL, inclusive of the ordinary shares issuable upon the exercise of the warrants, at the price of €0.001 per ordinary shares, subject to certain
anti-dilution protections. The warrants were issued pursuant to a Warrant Agreement, dated as of October 2, 2002, by and among JSL, Deutsche Bank Trust Company Americas, as Warrant
Agent, Deutsche Bank AG London, as Co-Warrant Agent and MDCP Co-Investors (as defined therein), as amended by the First Amendment to Warrant Agreement, dated as of
March 31, 2003, among the Company, the Warrant Agent and the Co-Warrant Agent, and as supplemented by the Supplemental Warrant Agreement, dated as of February 6, 2004, among
JSL, the Warrant Agent, the Co-Warrant Agent and JSG Packaging. The warrants have separated from the 15.5% subordinated notes and will expire on October 1, 2013. In addition, the
holders of warrants are entitled to certain registration rights, tag-along rights and drag-along obligations.

2005 Refinancing Transactions.The following contract was entered into by the parties named below as part of the Refinancing
Transactions to finance the repayment of the 15.5% Subordinated Notes due 2013 of JSG Funding.

7.75% Senior Subordinated Notes due 2015 of JSG Funding.JSG Funding issued the 7.75% euro senior subordinated notes in an
aggregate principal amount of €217.5 million under a Euro Indenture, dated January 31, 2005, between JSG Funding and Deutsche Bank Trust Company Americas, as trustee,
Deutsche Bank Luxembourg S.A., as paying agent and transfer agent, and Deutsche Bank AG London, as principal paying agent and transfer agent, and issued the 7.75% dollar senior
subordinated notes in an aggregate principal amount of $200 million under a Dollar Indenture, dated as of January 31, 2005, between JSG Funding and Deutsche Bank Trust Company Americas,
as trustee, and Deutsche Bank Luxembourg S.A., as paying agent and transfer agent. The senior subordinated notes mature on April 1, 2015 and bear interest at a rate equal to 7.75% per annum.
Through maturity, the interest on the subordinated notes is payable each April 1 and October 1 in cash. The senior subordinated notes are unsecured obligations of JSG Funding and are
subordinated in right of payment to all existing and future senior indebtedness of JSG Funding. The subordinated notes are not guaranteed by any of JSG Funding's subsidiaries. As a result, they also
effectively rank behind all current and future liabilities, including trade payables, of JSG Funding's subsidiaries. The indentures governing the senior subordinated notes contain customary covenants
and events of default.

Management Arrangements.In connection with the JSG Acquisition, each of the executive officers of JSG entered into an
employment agreement and management equity agreement with JSL.

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The
management employment agreements and the management equity agreement was amended and restated in February 2004 in connection with the formation of JSG Packaging. A detailed description of
each of these contracts is set forth in this Form 20-F under Item 6 under the captions "Management Employment Agreements" and "Management Equity Agreements."

Investor Arrangements.In connection with the JSG Acquisition, substantially all of the investors in the JSG Acquisition
(including the management investors) entered into a number of agreements relating to their equity investment in JSL. Each of these agreements were amended and restated in February 2004 in
connection with the formation of JSG Packaging. A detailed description of each of these contracts is set forth in this Form 20-F under Item 6 under the captions "Subscription and
Shareholder Agreement," "Registration Rights Agreement" and "Corporate Governance Agreement."

SSCC Asset Swap.Pursuant to (i) that certain Stock Purchase Agreement, dated February 20, 2003, by and among
Smurfit-Stone Container Corporation ("SSCC"), Stone Container France S.A. ("SIF") and Smurfit International B.V. ("SIBV") (the "EC Agreement") and (ii) that certain Exchange and Sale Agreement,
dated February 20, 2003, by and among SSCC, Stone, SSCC LUX I S.A.R.L., SSCC LUX VII S.A.R.L. ("Lux VII"), SIBV, SIF and Smurfit Canada Holdings Limited (the "MBI Agreement" and together with
the EC Agreement, the "Agreements"), JSG purchased substantially all of the assets that comprised SSCC's European operations for JSG's 50% ownership interest in Smurfit MBI of Canada and a cash
payment of approximately €185 million (the "SSCC Asset Swap"). The Agreements contain standard representations and warranties as to the respective businesses involved in the
transaction and requires both parties to provide indemnification to the other against certain losses in certain circumstances. The SSCC Asset Swap was completed on March 30, 2003.

Exchange Control

There are no Irish foreign exchange control restrictions on the payment of dividends on the Ordinary Shares to holders non resident in Ireland or on the conduct
of our operations.

Taxation

United States Taxation

The following is a description of the material U.S. tax consequences of the acquisition, ownership and disposition of the notes. The statements regarding U.S. tax
laws and practices set out below, including the statements regarding U.S./Irish double taxation convention relating to income and capital gains, which we refer to as the Tax Treaty, assume that the
notes were issued, and transfers thereof and payments thereon will be made, in accordance with the applicable notes indenture. For purposes of the Tax Treaty and the U.S. Internal Revenue Code of
1986, as amended to the date hereof, which we refer to as the Code, U.S. Holders of book-entry interests will be treated as owners of the notes underlying such book-entry
interests and, except as noted below, the tax consequences of owning book-entry interests will be the same as those applicable to ownership of the notes.

Holders
of the notes are also advised to consult their own tax advisors as to the U.S. or other tax consequences of the purchase, ownership and disposition of the notes, including the
effect of any state, local, or foreign tax laws.

This
discussion deals only with investors that hold notes as capital assets. The discussion does not cover all aspects of U.S. federal taxation that may be relevant to, or the actual tax
effect that any of the matters described herein will have on, the acquisition, ownership or disposition of notes by particular investors, and does not address state, local, foreign or other tax laws.
In particular, this discussion does not address all of the tax considerations that may be relevant to certain types of investors subject to special treatment under the U.S. federal income tax laws
(such as banks, insurance companies, regulated investment companies, real estate investment trusts, investors liable for the

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alternative
minimum tax, individual retirement accounts and other tax-deferred accounts, tax-exempt organizations, dealers in securities or currencies, investors that will hold
the notes as part of a straddle or hedging, constructive sale, integrated or conversion transactions for U.S. federal tax purposes, a person that actually or constructively owns more than 10% of the
voting stock of JSL, traders in securities that have elected the mark-to-market method of accounting for their securities, or investors whose functional currency is not the
U.S. dollar).

As
used herein, the term "U.S. Holder" generally means (i) a citizen or resident of the U.S. for U.S. federal income tax purposes, (ii) a corporation, partnership or
limited liability company created or organized under the laws of the U.S. or any political subdivision thereof, (iii) a person or entity that is otherwise subject to U.S. federal income tax on
a net income basis in respect of income derived from the notes or (iv) a partnership to the extent the interest therein is owned by a person who is described in clause (i),
(ii) or (iii) of this paragraph. As used herein, the term "Non-U.S. Holder" means anyone that is not a U.S. Holder.

This
discussion assumes that, for U.S. federal income tax purposes, the notes are treated as debt. The discussion is based on the Code, its legislative history, existing and proposed
regulations thereunder, published rulings and court decisions, all as currently in effect and all subject to change at any time, perhaps with retroactive effect. If a partnership holds the notes, the
tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Partners in partnerships that hold our notes should consult their tax advisors.

The
discussion may not address your particular circumstances. You are thus urged to consult your tax advisors as to the federal, state, local, foreign and other tax consequences of
acquiring, owning and disposing of the notes to you based on your particular circumstances.

Consequences to U.S. Holders



Payment of Interest.The senior notes were not issued with original issue discount. Accordingly, a U.S. Holder will be taxed
on the interest on a senior note at ordinary income rates at the time at which such interest accrues or is received in accordance with such U.S. Holder's regular method of accounting for U.S. federal
income tax purposes.

A
U.S. Holder who uses the cash method of accounting for federal income tax purposes and who receives interest on a euro senior note, which we refer to as a "foreign currency senior
note," in a currency other than the U.S. dollar, which we refer to as "foreign currency," will be required to include in income the U.S. dollar value of such foreign currency, determined using the
spot rate in effect on the date such payment is received, regardless of whether the payment is in fact converted to U.S. dollars at that time. No currency exchange gain or loss will be recognized by
such holder on such interest payments if the foreign currency is converted into U.S. dollars on the date received at that spot rate. The U.S. federal income tax consequences to a U.S. Holder of a
foreign currency senior note of the conversion of foreign currency received in respect of the foreign currency senior note to U.S. dollars are described below. See "Exchange of Foreign
Currencies."

A
U.S. Holder who uses the accrual method of accounting for federal income tax purposes will be required to include in income the U.S. dollar value of the amount of interest income
accrued with respect to a foreign currency senior note in a taxable year in accordance with either of two methods. Under the first method, the U.S. dollar value of such accrued income will be
determined by translating such income at the average rate of exchange for the relevant interest accrual period, or with respect to an accrual period that spans two taxable years, at the average rate
for the portion of such accrual period within the taxable year. The average rate of exchange for an interest accrual period (or portion thereof) is the simple average of the spot rates for each
business day of such period (or such other

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average
that is reasonably derived and consistently applied). Under the second method, an accrual basis U.S. Holder may elect to translate such accrued interest income using the spot rate in effect on
the last day of the accrual period or, with respect to a partial accrual period, using the spot rate in effect on the last day of the taxable year. If the last day of an accrual period is within five
business days of the receipt of the accrued interest, a U.S. Holder may translate such interest using the spot rate in effect on the date of receipt. The above described election must be made in a
statement filed with the U.S. Holder's first U.S. tax return for which the election is effective and must be applied consistently to all debt obligations held by the U.S. Holder from year to year and
may not be changed without the consent of the Internal Revenue Service. Whether or not such election is made, a U.S. Holder may recognize exchange gain or loss (which will be treated as ordinary
income or loss) with respect to accrued interest income on the date such interest income is actually paid or received (including upon a sale or other disposition of such note, the receipt of proceeds
of which include amounts attributable to accrued interest previously included in income). The amount of ordinary income or loss recognized will be equal to the difference, if any, between the U.S.
dollar value of the foreign currency received (determined using the spot rate in effect on the date such payment is received) in respect of such accrued interest and the U.S. dollar value of the
interest income that accrued during such interest accrual period (as determined above). No additional exchange gain or loss will be recognized by such holder if such foreign currency is converted to
U.S. dollars on the date received at that spot rate. The U.S. federal tax consequences of the conversion of foreign currency into U.S. dollars are described below. See "Exchange of
Foreign Currencies."

Disposition of Senior Notes.Upon the sale, exchange, retirement, or other disposition of a senior note, a U.S. Holder
generally will recognize taxable gain or loss equal to the difference between the amount realized upon the sale, exchange, retirement, or other disposition (less any portion attributable to accrued
but unpaid interest or market discount (discussed below), both of which will be treated as ordinary income for U.S. federal income tax purposes) and such U.S. Holder's adjusted tax basis in a senior
note. A U.S. Holder's adjusted tax basis in a dollar senior note generally will equal the cost of the dollar senior note to such U.S. Holder, less any principal payments received by such U.S. Holder
plus any market discount previously included in income by the holder with respect the senior note. Assuming the foreign currency notes are not traded on an established securities market,
(1) the amount realized by a U.S. Holder on a sale, exchange, retirement, or other disposition of a foreign currency senior note generally will be based on the U.S. dollar value of the foreign
currency on the date of disposition, and (2) a U.S. Holder's adjusted tax basis in a foreign currency senior note will equal the U.S. dollar cost of the foreign currency senior note to such
holder on the date of purchase less any principal payments received by the U.S. Holder plus any market discount previously included in income by the holder with respect the senior note.

If
the foreign currency senior notes are traded on an established securities market, a special rule applies for the determination of the amount realized and the basis of the foreign
currency senior notes held by a cash basis taxpayer. Pursuant to this rule, units of foreign currency paid or received are translated into U.S. dollars at the spot rate on the settlement date of the
purchase or sale. In that case, no exchange gain or loss will result from currency fluctuations between the trade date and the settlement date of such a purchase or sale. An accrual basis taxpayer may
elect the same treatment required of cash basis taxpayers with respect to purchases and sales of foreign currency senior notes that are traded on an established securities market, provided the
election is applied consistently from year to year. Such election may not be changed without the consent of the Internal Revenue Service.

Except
as provided below with respect to gain or loss on a foreign currency senior note attributable to currency fluctuations, a U.S. Holder's gain or loss realized upon the sale,
exchange, retirement or other disposition of a senior note will generally be treated as U.S. source gain or loss and will be long term capital gain or loss if, at the time of the sale, exchange,
retirement or other disposition of a senior note, the U.S. Holder has held the senior note for more than one year. If a U.S.

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Holder
is an individual and the senior note being sold, exchanged, or retired is a capital asset held for more than one year, the U.S. Holder may be eligible for reduced rates of taxation on any
capital gain recognized. The ability to deduct capital losses is subject to limitations.

To
the extent that the amount realized on a sale, exchange, retirement, or other disposition of a senior note represents accrued but unpaid interest, such amount must be taken into
account as interest income, if it was not previously included in income, and exchange gain or loss may be realized as described above. See "Payment of Interest." In the case of a U.S.
Holder who acquired the senior notes with market discount (discussed below), any gain recognized upon the sale, exchange, redemption, or other disposition of the senior notes generally will be treated
as ordinary income to the extent of the market discount that accrued during the period such U.S. Holder held such senior notes, unless the U.S. Holder previously had elected to include such accrued
market discount in the U.S. Holder's income on a current basis. See "Market Discount and Bond Premium."

Gain
or loss realized by a U.S. Holder upon the sale, exchange, or retirement, or other disposition of a foreign currency senior note that is attributable to fluctuations in the rate of
exchange between the U.S. dollar and the foreign currency will be ordinary income or loss and generally will be treated as U.S. source gain or loss. Gain or loss attributable to fluctuations in
exchange rates will equal the difference between (i) the U.S. dollar value of the foreign currency principal amount of the foreign currency senior note, determined at the spot rate on the date
such payment is received or the foreign currency senior note is disposed of (or, where the foreign currency senior note is traded on an established securities market and the holder is a
cash-basis taxpayer or an electing accrual basis taxpayer, on the settlement date), and (ii) the U.S. dollar value of the principal amount of the foreign currency senior note,
determined at the spot rate on the date the U.S. Holder acquired the foreign currency senior note. Such foreign currency exchange gain or loss will be recognized only to the extent of the total gain
or loss realized by the U.S. Holder on the sale, exchange, retirement, or other disposition of the foreign currency senior note.

Market Discount and Bond Premium

A U.S. Holder who purchases a senior note at a "market discount" that exceeds a statutorily definedde minimisamount will be subject to the "market discount" rules. In general, "market discount" is the excess of a debt instrument's stated redemption price at maturity over the holder's basis in such debt
instrument immediately after its acquisition. The stated redemption price at maturity of a debt instrument is the sum of all amounts payable with respect to the debt instrument, whether denominated as
principal or interest (other than qualified stated interest payments). Qualified stated interest generally means stated interest that is unconditionally payable in cash or other property (other than
additional debt instruments of the JSG Funding) at least annually at a single fixed rate (or at certain qualifying variable rates).

Any
gain on sale of a debt instrument attributable to a U.S. Holder's unrecognized accrued market discount is generally treated as ordinary income to the U.S. Holder. The amount of
accrued market discount is calculated on a ratable basis or, at the election of the holder, on a constant yield to maturity basis. In addition, a U.S. Holder who acquires a debt instrument at a market
discount may be required to defer a portion of any interest expense that otherwise may be deductible on any indebtedness incurred or maintained to purchase or carry the debt instrument until the U.S.
Holder disposes of the debt instrument in a taxable transaction.

Instead
of recognizing any market discount upon a disposition of a senior note (and being required to defer any applicable interest expense), a U.S. Holder may elect to include market
discount in income currently as the discount accrues. Any current accruals of market discount with respect to senior notes pursuant to such election should be treated as interest on the senior notes
(as discussed above). The current income inclusion election, once made, applies to all market discount obligations

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acquired
by the electing U.S. Holder on or after the first day of the first taxable year in which the election applies, and may not be revoked without the consent of the IRS.

Accrued
market discount on a foreign currency senior note (other than market discount that a U.S. Holder has elected to currently include in income) will be translated into U.S. dollars
at the spot rate on the date the foreign currency senior note is sold, exchanged, redeemed, or otherwise disposed of. No part of such accrued market discount is treated as exchange gain or loss.
Accrued market discount that a U.S. Holder has elected to currently include in income will be translated into U.S. dollars at the average exchange rate for the accrual period. Such U.S. Holder may
recognize exchange gain or loss (which will be treated as ordinary income or loss) with respect to market discount on the date such market discount is actually received (including upon a sale or other
disposition of such note, the receipt of the proceeds of which include amounts attributable to accrued market discount previously included in income). The amount of ordinary income or loss recognized
will be equal to the difference, if any, between the U.S. dollar value of the foreign currency received (determined using the spot rate in effect
on the date such payment is received) in respect of such accrued market discount and the U.S. dollar value of the market discount that accrued during such accrual period. No additional exchange gain
or loss will be recognized by such holder if such foreign currency is converted to U.S. dollars on the date received at that spot rate. The U.S. federal tax consequences of the conversion of foreign
currency into U.S. dollars are described below. See "Exchange of Foreign Currencies."

In
the event that a senior note is purchased at a premium, i.e., for an amount in excess of the amount payable at maturity, a U.S. Holder generally may elect to offset payments of
qualified stated interest on such senior note by an allocable portion of the premium (which will result in a corresponding reduction in such U.S. Holder's tax basis in the senior note). The portion of
the premium allocable to each interest payment generally is calculated based on the U.S. Holder's yield to maturity for the senior note. If a U.S. Holder elects to amortize bond premium with respect
to the senior note, such election will also apply to all other debt instruments held by such U.S. Holder during the year in which the election is made and to all debt instruments acquired after that
year. The election may not be revoked without the consent of the IRS.

A
U.S. Holder of foreign currency senior notes who has elected to offset payment of qualified stated interest on such foreign currency notes with an allocable portion of the premium will
reduce interest income in units of foreign currency. Exchange gain or loss will be realized with respect to such premium by treating the portion of such premium amortized as a return of principal.
With respect to a holder who does not elect to amortize premium, the amount of premium will constitute a market loss when the foreign currency note matures.

Exchange of Foreign Currencies.A U.S. Holder will have a tax basis in any foreign currency received as interest or on the
sale, exchange, retirement or other disposition of a senior note equal to such currency's U.S. dollar value at the time such foreign currency is received. As discussed above, however, if the foreign
currency senior notes are traded on an established securities market, cash basis taxpayers (or, upon election, accrual basis taxpayers) will determine the U.S. dollar value of any foreign currency
received in connection with the sale, exchange, retirement or other disposition by translating such foreign currency received at the spot rate of exchange on the settlement date of the sale, exchange,
retirement or other disposition. Any gain or loss realized by a U.S. Holder on a sale or other disposition of foreign currency (including the exchange of such currency for U.S. dollars) will be
ordinary income or loss and generally will be U.S. source gain or loss.

Foreign Tax Credit.Interest received (and market discount recognized) by a U.S. Holder generally will be treated as foreign
source income and will be considered "passive" income or "financial services" income, which is treated separately from other types of income in computing the foreign tax credit such U.S. Holder may
take under U.S. federal income tax laws.

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Subordinated Notes

Payment of Stated Interest and OID.The subordinated notes were issued with OID equal to the difference between their issue
price and their stated redemption price at maturity. The original issue price of each dollar subordinated note was $970.94 (as reduced by any payments made by JSG Funding of Irish stamp duty on the
initial issuance of the warrants, which is technically a liability of the initial beneficial holder of the warrant). The original issue price of each euro subordinated note was
€970.42 (as reduced by any payments made by JSG Funding of Irish stamp duty on the initial issuance of the warrants, which is technically a liability of the initial beneficial holder
of the warrant).

The
stated redemption price at maturity of the subordinated notes is the sum of all amounts payable with respect to the subordinated notes, whether denominated as principal or interest
(other than qualified stated interest payments). Qualified stated interest generally means stated interest that is unconditionally payable in cash or other property (other than additional debt
instruments of JSG Funding) at least annually at a single fixed rate (or at certain qualifying variable rates). Because interest on the subordinated notes is not unconditionally payable in cash or
other property (other than additional debt instruments of JSG Funding) at least annually, none of the stated interest with respect to the subordinated notes will be qualified stated interest.
Consequently, all of the stated interest payments (including any additional debt instruments of JSG Funding, if any, issued in respect to a subordinated note) on a subordinated note will be included
in the stated redemption price at maturity of such subordinated note for U.S. federal income tax purposes and must be accrued by a U.S. holder pursuant to the original issue discount rules, as
described below.

Generally,
U.S. Holders will be required to include the OID in ordinary income for U.S. federal income tax purposes as it accrues in advance of cash payments attributable to such income
(regardless of whether the U.S. Holder is a cash or accrual method taxpayer). OID will generally be treated as interest income to the U.S. Holder and will accrue on a constant
yield-to-maturity basis over the life of the subordinated notes.

The
amount of OID accruing with respect to any subordinated note will be the sum of the "daily portions" of OID with respect to such subordinated note for each day during the taxable
year in which a U.S. Holder owns a subordinated note, or accrued OID. The daily portion is determined by allocating to each day in any "accrual period" a pro rata portion of the OID allocable to that
accrual period. An
accrual period may be of any length and may vary in length over the term of a subordinated note, provided that each accrual period is no longer than one year and each scheduled payment of principal or
interest occurs either on the final day or on the first day of an accrual period. The amount of OID accruing during any full accrual period with respect to a subordinated note will be equal to:
(i) the "adjusted issue price" of such subordinated note at the beginning of that accrual period, multiplied by (ii) the yield to maturity of such subordinated note. The yield to
maturity is the discount rate which, when used in computing the present value of all principal and interest payments to be made under a subordinated note, produces an amount equal to the subordinated
note's issue price.

OID
allocable to a final accrual period is the difference between the amount payable at maturity and the adjusted issue price at the beginning of the final accrual period. If all accrual
periods are of equal length, except for an initial short accrual period, the amount of OID allocable to the initial short accrual period may be computed under any reasonable method. The adjusted issue
price of a subordinated note at the beginning of its first accrual period will be equal to its issue price. The adjusted issue price at the beginning of any subsequent accrual period will be equal to
(i) the adjusted issue price at the beginning of the preceding accrual period, plus (ii) the amount of OID accrued during the preceding accrual period, minus (iii) payments made
on the subordinated note during the preceding accrual period.

A
U.S. Holder of a euro subordinated note will be required to include in income the U.S. dollar value of the amount of OID accrued with respect to such euro subordinated note in a
taxable year in

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accordance
with either of two methods. Under the first method, the U.S. dollar value of such accrued OID will be determined by translating such income at the average rate of exchange for the relevant
accrual period, or with respect to an accrual period that spans two taxable years, at the average rate for the portion of such accrual period within the taxable year. The average rate of exchange for
an accrual period (or portion thereof) is the simple average of the spot rates for each business day of such period (or such other average that is reasonably derived and consistently applied). Under
the second method, a U.S. Holder may elect to translate such accrued OID using the spot rate in effect on the last day of the accrual period or, with respect to a partial accrual period, using the
spot rate in effect on the last day of the taxable year. If the last day of an accrual period is within five business days of the receipt of the accrued OID, a U.S. Holder may translate such OID using
the spot rate in effect on the date of receipt. The above-described election must be made in a statement filed with the U.S. Holder's first U.S. tax return for which the election is effective and must
be applied consistently to all debt obligations held by the U.S. Holder from year to year and may not be changed without the consent of the Internal Revenue Service. Whether or not such election is
made, a U.S. Holder may recognize exchange gain or loss (which will be treated as ordinary income or loss) with respect to accrued OID on the date such OID is actually paid or received (including upon
a sale or other disposition of such subordinated note, the receipt of proceeds of which include amounts attributable to accrued OID previously included in income). The amount of ordinary income or
loss recognized will be equal to the difference, if any, between the U.S. dollar value of the foreign currency received (determined using the spot rate in effect on the date such payment is received)
in respect of such accrued OID and the U.S. dollar value of the OID that accrued during such accrual period (as determined above). No additional exchange gain or loss will be recognized by such holder
if such foreign currency is converted to U.S. dollars on the date received at that spot rate. The U.S. federal tax consequences of the conversion of foreign currency into U.S. dollars are described
below. See "Exchange of Foreign Currencies."

Additional Subordinated Notes Affecting Yield to Maturity for OID Calculations.Interest accruing on the subordinated notes
will be payable, at JSG Funding's option, in cash or in the form of additional subordinated notes. For purposes of computing the amount of OID and the yield to maturity of the subordinated notes, we
will be deemed to exercise or not exercise such payment option in a manner which minimizes the yield to maturity on the subordinated notes. Because the subordinated notes were issued at a discount,
under the Treasury Regulations, we will be assumed to exercise the option to pay interest in the form of additional subordinated notes for purposes of calculating the yield to maturity. However, if,
contrary to such assumption, we actually make payments in cash, the original subordinated note is treated as if we made a pro rata prepayment equal to the amount of the cash interest payment. A pro
rata prepayment is treated as a payment in retirement of a portion of a debt instrument, which would likely result in gain to a U.S. Holder because the subordinated notes were issued at a discount. In
such case, a U.S. Holder will be required to allocate the adjusted tax basis and adjusted issue price of such holder's subordinated note (which is treated as a single debt instrument for U.S. federal
income tax purposes) between the original subordinated note and any additional subordinated notes received with respect thereto in proportion to their relative principal amounts. For determining
whether such gain is short or long term, a U.S. Holder's holding period in any additional subordinated notes with respect to an original subordinated note would likely be identical to the such
holder's holding period for the original subordinated note with respect to the additional subordinated notes were received.
Prospective investors are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the option to pay interest in the form of additional subordinated notes.

Disposition of Subordinated Notes.Upon the sale, exchange, retirement, or other disposition of a subordinated note, a U.S.
Holder generally will recognize taxable gain or loss equal to the difference between the amount realized upon the sale, exchange, retirement, or other disposition and such U.S. Holder's adjusted tax
basis in a subordinated note. Foreign currency received with respect to a euro

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subordinated
note will be considered first as the payment of unpaid OID (on which exchange gain or loss is recognized as described above) and then as payment of principal.

A
U.S. Holder's adjusted tax basis in a dollar subordinated note generally will equal the cost of the dollar subordinated note to such U.S. Holder, increased by any OID previously
accrued in gross income in respect to the dollar subordinated note and any market discount previously included in income by the holder with respect the subordinated note, and decreased by all payments
received on the dollar subordinated note.

Assuming
the euro subordinated notes are not traded on an established securities market, (1) the amount realized by a U.S. Holder on a sale, exchange, retirement, or other
disposition of a euro subordinated note generally will be based on the U.S. dollar value of the foreign currency on the date of disposition, and (2) a U.S. Holder's adjusted tax basis in a euro
subordinated note will equal the U.S. dollar cost of the euro subordinated note to such holder on the date of purchase, increased by any OID previously accrued in gross income in respect to the euro
subordinated note and any market discount previously included in income by the holder with respect to the subordinated note, and decreased by all payments received on the euro subordinated note.

If
the euro subordinated notes are traded on an established securities market, a special rule applies for the determination of the amount realized and the basis of the euro subordinated
notes held by a cash basis taxpayer. Pursuant to this rule, units of foreign currency paid or received are translated into U.S. dollars at the spot rate on the settlement date of the purchase or sale.
In that case, no exchange gain or loss will result from currency fluctuations between the trade date and the settlement date of such a purchase or sale. An accrual basis taxpayer may elect the same
treatment required of cash basis taxpayers with respect to purchases and sales of euro subordinated notes that are traded on an established securities market, provided the election is applied
consistently from year to year. Such election may not be changed without the consent of the Internal Revenue Service.

Except
as provided below with respect to gain or loss on a euro subordinated note attributable to currency fluctuations, a U.S. Holder's gain or loss realized upon the sale, exchange,
retirement, or other disposition of a subordinated note will generally be treated as U.S. source gain or loss and will be long term capital gain or loss if, at the time of the sale, exchange,
retirement or other disposition of a
subordinated note, the U.S. Holder has held the subordinated note for more than one year. If a U.S. Holder is an individual and the subordinated note being sold, exchanged, or retired is a capital
asset held for more than one year, the U.S. Holder may be eligible for reduced rates of taxation on any capital gain recognized. The ability to deduct capital losses is subject to limitations.

In
the case of a U.S. Holder who acquired the subordinated notes with market discount (discussed below), any gain recognized upon the sale, exchange, redemption, or other disposition of
the subordinated notes generally will be treated as ordinary income to the extent of the market discount that accrued during the period such U.S. Holder held such subordinated notes, unless the U.S.
Holder previously had elected to include such accrued market discount in the U.S. Holder's income on a current basis. See "Market Discount and Acquisition Premium."

Gain
or loss realized by a U.S. Holder upon the sale, exchange, retirement, or other disposition of a euro subordinated note that is attributable to fluctuations in the rate of exchange
between the U.S. dollar and the foreign currency will be ordinary income or loss and generally will be treated as U.S. source gain or loss. Gain or loss attributable to fluctuations in exchange rates
will equal the difference between (i) the U.S. dollar value of the foreign currency principal amount of the euro subordinated note, determined at the spot rate on the date such payment is
received or the euro subordinated note is disposed of (or, where the euro subordinated note is traded on an established securities market and the holder is a cash-basis taxpayer or an
electing accrual basis taxpayer, on the settlement date), and (ii) the U.S. dollar value of the principal amount of the euro subordinated note, determined at the spot rate on the date the U.S.
Holder acquired the euro subordinated note. Such foreign currency exchange

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gain
or loss will be recognized only to the extent of the total gain or loss realized by the U.S. Holder on the sale, exchange, retirement, or other disposition of the euro subordinated note.

Treatment of Additional Subordinated Notes.Interest accruing on the subordinated notes will be payable, at JSG Funding's
option, in cash or in the form of additional subordinated notes. For U.S. federal income tax purposes, payment of interest in the form additional subordinated notes is not considered a payment made on
the original subordinated notes, and additional subordinated notes issued as payment of interest will be aggregated with the original subordinated note and treated as a single debt instrument for U.S.
federal income tax purposes. The above discussion therefore assumes that the sale, exchange, retirement, or other disposition of a subordinated note by a U.S. Holder is a disposition of such single
debt instrument (i.e., is a disposition of such holder's interest in the original subordinated note and any additional subordinated notes received with respect thereto). If, contrary to such
assumption, the sale, exchange, retirement, or other disposition of the original subordinated note or any additional subordinated notes received with respect thereto occurs in separate transactions,
although not free from doubt, a U.S. Holder would likely be required to allocate the adjusted tax basis and adjusted issue price of such holder's subordinated note (which, as described above, is
treated as a single debt instrument for U.S. federal income tax purposes) between the original subordinated note and any additional subordinated notes received with respect thereto in proportion to
their relative principal amounts. In such case, a U.S. Holder's holding period in any additional subordinated notes with respect to an original subordinated note would likely be identical to the such
holder's holding period for the
original subordinated note with respect to the additional subordinated notes were received. Prospective purchasers are advised to consult their own tax advisors as to the U.S. federal income tax
consequences of disposing of the original subordinated note and any additional subordinated notes received with respect thereto in separate transactions.

Market Discount and Acquisition Premium

A U.S. Holder who purchases a subordinated note at a "market discount" that exceeds a statutorily definedde
minimisamount will be subject to the "market discount" rules. In general, in the case of a debt instrument issued with OID, "market discount" is the excess of the debt
instrument's "revised issue price" over the holder's basis in the debt instrument immediately after its acquisition. The "revised issue price" of a debt instrument is the sum of the issue price of the
debt instrument and all OID income on the debt instrument includible in the income of all holders prior to the taxpayer's acquisition of the debt instrument (although the matter is not free from
doubt, such amount will likely be reduced by the amount of any payments on the debt instrument prior to the taxpayers acquisition thereof).

Any
gain on sale of such instrument attributable to a U.S. Holder's unrecognized accrued market discount is generally treated as ordinary income to the U.S. Holder. The amount of accrued
market discount is calculated on a ratable basis or, at the election of the holder, on a constant yield to maturity basis. In addition, a U.S. Holder who acquires a debt instrument at a market
discount may be required to defer a portion of any interest expense that otherwise may be deductible on any indebtedness incurred or maintained to purchase or carry the debt instrument until the U.S.
Holder disposes of the debt instrument in a taxable transaction.

Instead
of recognizing any market discount upon a disposition of a subordinated note (and being required to defer any applicable interest expense), a U.S. Holder may elect to include
market discount in income currently as the discount accrues. Any current accruals of market discount with respect to subordinated notes pursuant to such election should be treated in a manner
consistent with accruals of OID on the subordinated notes (as discussed above). The current income inclusion election, once made, applies to all market discount obligations acquired by the electing
U.S. Holder on or after the first day of the first taxable year in which the election applies, and may not be revoked without the consent of the IRS.

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Accrued
market discount on a euro subordinated note (other than market discount that a U.S. Holder has elected to currently include in income) will be translated into U.S. dollars at the
spot rate on the date the foreign currency senior note is sold, exchanged, redeemed, or otherwise disposed of. No part of such accrued market discount is treated as exchange gain or loss. Accrued
market discount that a
U.S. Holder has elected to currently include in income will be translated into U.S. dollars at the average exchange rate for the accrual period. Such U.S. Holder may recognize exchange gain or loss
(which will be treated as ordinary income or loss) with respect to market discount on the date such market discount is actually received (including upon a sale or other disposition of such note, the
receipt of the proceeds of which include amounts attributable to accrued market discount previously included in income). The amount of ordinary income or loss recognized will be equal to the
difference, if any, between the U.S. dollar value of the foreign currency received (determined using the spot rate in effect on the date such payment is received) in respect of such accrued market
discount and the U.S. dollar value of the market discount that accrued during such accrual period. No additional exchange gain or loss will be recognized by such holder if such foreign currency is
converted to U.S. dollars on the date received at that spot rate. The U.S. federal tax consequences of the conversion of foreign currency into U.S. dollars are described below. See
"Exchange of Foreign Currencies."

A
U.S. Holder who purchases a subordinated note at a price exceeding the adjusted issue price of the subordinated note will have "acquisition premium" equal to such excess. The amount of
OID includible in gross income is reduced by a proportional amount of the acquisition premium. In effect, the amount of OID required to be included is equal to the gross amount of the required OID
inclusion multiplied by a constant fraction whose numerator is the excess of the subordinated note's "stated redemption price at maturity" over its purchase price and whose denominator is the OID
remaining to be accrued. A U.S. Holder of a euro subordinated note who has purchased such euro subordinated note with an acquisition premium will reduce OID accruals in units of foreign currency.
Exchange gain or loss will be realized with respect to such acquisition premium on the date such acquisition premium is received by treating the amount of such acquisition premium received as a return
of principal.

Exchange of Foreign Currencies.A U.S. Holder will have a tax basis in any foreign currency received as stated interest or on
the sale, exchange, retirement or other disposition of a subordinated note equal to such currency's U.S. dollar value at the time such foreign currency is received. As discussed above, however, if the
euro subordinated notes are traded on an established securities market, cash basis taxpayers (or, upon election, accrual basis taxpayers) will determine the U.S. dollar value of any foreign currency
received in connection with the sale, exchange, retirement or other disposition by translating such foreign currency received at the spot rate of exchange on the settlement date of the sale, exchange,
retirement or other disposition. Any gain or loss realized by a U.S. Holder on a sale or other disposition of foreign currency (including the exchange of such currency for U.S. dollars) will be
ordinary income or loss and generally will be U.S. source gain or loss.

Foreign Tax Credit.Income from accrued OID (and market discount recognized) generally will be treated as foreign source
income and will be considered "passive" income or "financial services" income, which is treated separately from other types of income in computing the foreign tax credit a U.S. Holder may take under
U.S. federal income tax laws.

Consequences to Non-U.S. Holders



Interest and Market Discount on the Senior Notes.A Non-U.S. Holder generally will not be subject to U.S. federal
income tax or withholding with respect to the interest (or market discount) on a senior note. If, however, the interest (including market discount) on a senior note is effectively connected to a U.S.
trade or business of the Non-U.S. Holder or, if a tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder, such holder, although exempt
from U.S. withholding

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tax,
will be subject to U.S. federal income tax on such interest (and market discount) on a net income basis in a similar manner as if it were a U.S. Holder. Interest (and market discount) received by
a Non-U.S. Holder on a senior note generally will be considered effectively connected with a U.S. trade or business only if the Non-U.S. Holder is (i) an insurance
company carrying on a U.S. business to which such interest (or market discount) is attributable, within the meaning of the Code, or (ii) has an office or other fixed place of business in the
U.S. to which the interest (or market discount) is attributable and either (x) the interest (or market discount) is derived in the active conduct of a banking, financing, or similar business
within the U.S. or (y) the interest (or market discount) is received by a corporation the principal business of which is trading in stock or securities for its own account. In addition, if such
holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject to adjustments. For this
purpose, interest (and market discount) on a senior note will be included in such foreign corporation's earnings and profits.

Disposition of Senior Notes.A Non-U.S. Holder will generally not be subject to U.S. federal income tax with
respect to gain recognized on a sale, exchange, redemption or other disposition of senior notes, provided that (i) the gain is not effectively connected with a trade or business of the
Non-U.S. Holder in the U.S. (or, if a tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder) and (ii) in the case of a foreign
individual, the foreign person is not present in the U.S. for 183 days or more in the taxable year, and certain other conditions are met.

If
an individual Non-U.S. Holder meets the effectively connected requirement described above, he will be taxed on his net gain (including any gain attributable to market
discount) derived from the sale or other disposition under U.S. federal income tax rates applicable to a U.S. Holder.

If
a Non-U.S. Holder that is a foreign corporation meets the "effectively connected" requirement described above, it will be taxed on its gain (including any gain
attributable to market discount) under U.S. federal income tax rates applicable to a U.S. Holder and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected
earnings and profits within the meaning of the Code for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable income tax treaty.

Subordinated Notes

Payment of Stated Interest, Market Discount, and OID.A Non-U.S. Holder generally will not be subject to U.S.
federal income tax or withholding with respect to the interest (or market discount or OID) on a subordinated note. If, however, the interest including market discount and OID on a subordinated note is
effectively connected to a U.S. trade or business of the Non-U.S. Holder or, if a tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder,
such holder, although exempt from U.S. withholding tax, will be subject to U.S. federal income tax on such interest (and market discount and OID) on a net income basis in a similar manner as if it
were a U.S. Holder. Interest (and market discount and OID) received by a Non-U.S. Holder on a subordinated note generally will be considered effectively connected with a U.S. trade or
business only if the Non-U.S. Holder is (i) an insurance company carrying on a U.S. business to which such interest (or market discount or OID) is attributable, within the meaning
of the Code, or (ii) has an office or other fixed place of business in the U.S. to which the interest (or market discount or OID) is attributable and either (x) the interest (or market
discount or OID) is derived in the active conduct of a banking, financing, or similar business within the U.S. or (y) the interest (or market discount or OID) is received by a corporation the
principal business of which is trading in stock or securities for its own account. In addition, if such holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to adjustments. For this purpose, interest (and market discount and OID) on a subordinated note will be included in such
foreign corporation's earnings and profits.

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Disposition of Subordinated Notes.A Non-U.S. Holder will generally not be subject to U.S. federal income tax
with respect to gain recognized on a sale, exchange, redemption or other disposition of subordinated notes, provided that (i) the gain is not effectively connected with a trade or business of
the Non-U.S. Holder in the U.S. (or, if a tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder) and (ii) in the case of a foreign
individual, the foreign person is not present in the U.S. for 183 days or more in the taxable year, and certain other conditions are met.

If
an individual Non-U.S. Holder meets the effectively connected requirement described above, he will be taxed on his net gain (including any gain attributable to market
discount) derived from the sale or other disposition under U.S. federal income tax rates applicable to a U.S. Holder.

If
a Non-U.S. Holder that is a foreign corporation meets the "effectively connected" requirement described above, it will be taxed on its gain (including any gain
attributable to market discount) under U.S. federal income tax rates applicable to a U.S. Holder and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected
earnings and profits within the meaning of the Code for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable income tax treaty.

Backup Withholding and Information Reporting

In general, holders may be subject to information reporting requirements and backup withholding at a rate of 28% with respect to interest on the notes and
proceeds received on the sale, exchange or redemption of the notes. The information reporting and backup withholding rules generally do not apply to payments to corporations, whether domestic or
foreign.

An
individual U.S. Holder generally will be subject to backup withholding on payments or proceeds received through a U.S. broker or nominee unless such U.S. Holder provides its taxpayer
identification number to the payor on a properly executed Internal Revenue Service Form W-9 or if the Internal Revenue Service notifies the payor that backup withholding is required
for such U.S. Holder.

A
Non-U.S. Holder generally will be subject to backup withholding on payments or proceeds received through a U.S. broker or nominee unless such Non-U.S. Holder
certifies its foreign status by providing a properly executed Internal Revenue Service Form W-8 BEN, W-8IMY, or W-8ECI.

Any
amount withheld under the backup withholding rules will be creditable against the U.S. federal tax liability of a U.S. Holder upon furnishing the required information to the Internal
Revenue Service.

Irish Taxation

The following is a summary of the material current Irish tax law and practice with regard to holders of the exchange notes (the "notes"). It does not purport to
be a complete description of all of the tax considerations that may be relevant to a decision to buy, hold, sell, redeem or dispose of the notes and does not constitute tax or legal advice but is a
summary of the material Irish tax considerations. The comments relate only to the position of persons who are the beneficial owners of the notes and all coupons and other rights thereon, and who will
hold notes as capital assets, and may not apply to certain classes of persons such as dealers in securities. The comments are generally based upon Irish tax law and the practice of the Irish Revenue
Commissioners as of the date hereof, which may be subject to change. Prospective noteholders are advised to consult their own tax advisers concerning the overall tax consequences of such ownership.

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Withholding Tax

Withholding tax will not apply to interest payments (whether satisfied in cash or in kind) made by JSG Funding to holders of the notes to the extent:

As
the notes are listed on the Luxembourg Stock Exchange and provided they remain in global bearer form, they will qualify as "quoted
eurobonds". Furthermore the paying agent is located outside Ireland. Accordingly, for so long as this is the case, the exemption under 1(a) above should apply to payments of
interest on the notes.

Original
issue discount, if any, payable on the notes will not be subject to Irish withholding tax irrespective of the place of residence or ordinary residence of the holder.

Encashment Tax

A collection or encashment agent in Ireland obtaining payment of interest whether in Ireland or elsewhere on a note or realizing in Ireland any interest on behalf
of a holder of a note must withhold income tax at the standard rate (which is currently 20%) on making payments of such interest. This obligation does not arise where the person that is the beneficial
owner of the note and entitled to the interest is not resident in Ireland and has made a declaration in the prescribed form and has provided that declaration to the collection or encashment agent, and
the interest is not deemed, under the provisions of Irish tax legislation, to be that of some other person. Holders should note that appointment of an Irish collection or encashment agent may (subject
to the above) bring them within the charge to Irish encashment tax.

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Taxation of Interest Arising on the Notes

Interest paid on notes issued in Ireland whether paid gross or not, or in cash or in kind, is Irish source income and may be chargeable to Irish income tax or
corporation tax, as the case may be. In general, holders that are resident or ordinarily resident in Ireland for tax purposes will be chargeable to Irish corporation tax or income tax in respect of
interest on the notes.

Holders
that are not resident or ordinarily resident in Ireland for tax purposes will be exempt from Irish income tax in respect of interest on the notes where:



Ireland
operates a self assessment system of tax and any person other than an "excluded company", "excluded
person" or "exempt double tax treaty resident" in receipt of Irish source income comes within its scope, including a person who
is neither resident nor ordinarily resident in Ireland. However, in the absence of a withholding tax there is currently no mechanism to enable the Irish Revenue Commissioners to obtain payment of any
liability from a non-resident person and for that reason to date it has been the practice of the Revenue Commissioners not to seek to collect the liability from such
non-resident persons unless the recipient of the income has any other
tax connection with Ireland such as a claim for repayment of Irish tax deducted at source, an Irish agency, branch, trustee or trade.

Generally,
original issue discount payable by an Irish resident JSG Funding is regarded as Irish source income and therefore, although paid gross, may be chargeable to Irish income tax
or corporation tax as the case may be. Holders that are resident or ordinarily resident in Ireland for tax purposes may be chargeable to Irish corporation tax or income tax in respect of original
issue discount, if any, payable on the notes depending on their circumstances.

EU Savings Tax Directive

On June 3, 2003, the European Union adopted the directive regarding the taxation of savings income in the form of interest payments from
debt-claims. Each Member State was required to implement the Directive before January 1, 2004 and to apply the Directive from January 1, 2005, although the application is
conditional on the outcome of negotiations with certain non-European Union countries including the United States and Switzerland. Finance Act 2004 implements the Directive into Irish tax
legislation. The aim of the Directive is to ensure that individual tax residents within the EU are subject to effective taxation on any interest income received by them. In order to achieve this, a
system of automatic exchange of information between Member States has been agreed. A number of Member States, Belgium, Austria and Luxembourg, will apply a withholding tax regime as part of a
transitional agreement under the Directive. This transitional arrangement will come into force once an agreement has been reached with certain non-European Union countries.

Capital Gains Tax

Holders resident or ordinarily resident in Ireland may be subject to Irish capital gains tax on any gain realized on the disposal (including redemptions) of the
notes. Irish capital gains tax is chargeable

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(currently
at the rate of 20%) on taxable capital gains, subject to any applicable indexation or loss relief.

Holders
that are neither resident nor ordinarily resident in Ireland will not be subject to Irish capital gains tax on any gain realized on the disposal of the notes unless the notes
either (i) are or were held for the purposes of a trade or business carried on by the holder in Ireland; or (ii) are not quoted on a
stock exchange and derive (directly or indirectly) the greater part of their value from Irish land or exploration rights.

Anti Avoidance

Holders of the notes who are resident or ordinarily resident in Ireland for tax purposes ("Irish Holders") may be subject to Irish income tax or corporation tax,
as the case may be, arising from their disposal. The nature of the tax charge will depend on the particular circumstances of the holder.

Irish
Holders should have regard, where appropriate, to the provisions relating to the taxation of income deemed to arise on certain sales of securities and other provisions contained in
the Taxes Consolidation Act, 1997 relating to the purchase and sale of securities. In particular, certain Irish Holders should note that if they dispose of their notes "cum" interest they may be
subject to income tax on the interest which has accrued on the notes up to the date of sale in certain circumstances. Irish Holders who sell or transfer the right to receive interest (whether paid in
cash or in kind) on the notes without selling or transferring the notes, may be liable to pay income tax on that interest, in the tax year in which the right to receive the interest is sold. In
addition, certain Irish holders who purchase the notes "cum" interest and who subsequently sell the notes "ex" interest may be disallowed loss relief for income tax in certain circumstances.

Stamp Duty

No Irish stamp duty will be payable on the issue or subsequent transfer of the notes.

Capital Acquisitions Tax

A gift or inheritance consisting of the notes will generally be within the charge to Irish capital acquisitions tax (which subject to available exemptions and
reliefs, is currently levied at 20%) if either (i) the disponer or the donee/successor in relation to the gift or inheritance is resident or ordinarily resident in Ireland (or in certain
circumstances, if the disponer is domiciled in Ireland irrespective of his residence or that of the donee/successor) on the relevant date or (ii) if the notes are Irish situated property.
Bearer instruments (such as the notes while in bearer form) would not usually be Irish situated property unless they are physically located in Ireland or there is a register of such notes maintained
in Ireland. In the event that the notes cease to be represented by a global bearer note and are issued in definitive form, the notes would be Irish situate property if the principal register is
maintained or required to be maintained in Ireland.

Documents on Display

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and file reports, including Annual Reports on
Form 20-F, and other information with the SEC. You may read and copy any document we file with the SEC at its public reference rooms at 450 Fifth Street, N.W. Washington D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. In addition, the SEC maintains an Internet site at http://www.sec.govthat contains
reports and other information regarding issuers that file electronically with the SEC. These filings are also available
to the public from commercial document retrieval services.

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JSG
Funding's annual report on Form 20-F, current reports on Form 6-K, the April 2003 registration statement on Form F-4
and all amendments to those reports are made available free of charge through our website (www.smurfit-group.com) as soon as practicable after such material is electronically filed with or furnished
to the Securities and Exchange Commission.

Item 11.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Market Risk

We are exposed to changes in interest rates. Our senior credit facility is variable rate debt. Interest rate changes therefore generally do not affect the market
value of such debt but do impact the amount of our interest payments and, therefore, our future earnings and cash flows, assuming other factors are held constant. As at December 31, 2004, we
had variable rate debt of approximately €849 million. Holding other variables constant, including levels of indebtedness, a one percentage point increase in interest rates would
have had an estimated impact on pre-tax earnings of approximately €8 million. Under the terms of our senior credit facility, we have entered into one or more
interest rate protection agreements establishing a fixed maximum interest rate with respect to some of the outstanding term loan borrowing under the
senior credit facility. We are required to keep these agreements or their replacements in place for at least two years after the closing of the transactions.

Currency Sensitivity

The consolidated group operates in the following principal currency areas: the euro, the U.S. dollar, the Swedish Krona and sterling. At the end of 2004,
29% of our net assets were denominated in currencies other than the euro, as compared to 25% at year-end 2003. In 2004, we reported a translation gain of
€15 million on our foreign currency net assets, compared to a translation gain of €59 million in 2003. We believe that a strengthening of the euro
exchange rate by 10% against all other foreign currencies from December 31, 2004 would reduce the shareholders' equity at the end of 2004 by approximately €23 million (as
compared to €21 million at end of 2003).

Commodity Pricing Risks

We are exposed to commodity price risks through our dependence on OCC, the principal raw material used in the manufacture of containerboard. The price of OCC is
dependent on both demand and supply conditions. Demand conditions include the production of recycled containerboard in Europe and the demand for OCC for the production of recycled containerboard
outside of Europe, principally in Asia. Supply conditions include the rate of recovery of OCC, itself dependant on historic pricing related to the cost of recovery, and have some slight seasonal
variations.

Just
over 1.05 metric tons of OCC are required to manufacture 1.0 metric tons of recycled containerboard. Consequently, an increase in the price of OCC of, for example,
€20 per metric ton would increase the cost of production of recycled containerboard by €21 per metric ton. Historically, increases in the cost of OCC have led to a
rapid rise in the price of recycled containerboard, with a lag of one to two months.

The
price of OCC in Europe has peaked dramatically twice in recent yearsin June 2002 and in April 2003. In each case, a relatively low level of supply was
matched with a relatively high level of demand, principally caused by increased demand from Asia. In the first case, the free-on-board price rose to over €150
per metric ton. Within a period of three months, supply and demand conditions leveled to return the price to around €100 per metric ton. In the second case, the spike was even more
rapid with waste prices falling back to previous levels almost immediately. In 2004, the price per metric ton has remained relatively stable.

92

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The
table below provides information about the European OCC price per metric ton at and for the years ended December 31, 2001, 2002, 2003 and 2004.

Free-on-Board OCC Price per Metric Ton

As of and for the Year Ended
December, 312001

2002

2003

2004(euro)Price at the end of the period

100

119

100

97Average price during period

95

124

112

102Highest price during period

100

156

135

107Lowest price during period

87

100

99

97


The
cost of producing our products is also sensitive to the price of energy. Energy prices, in particular oil and natural gas, have experienced significant volatility in recent years,
with a corresponding effect on our production costs. Two significant increases occurred in the last four years. In January 2001, natural gas prices reached a high of nearly $10.00 per million
British thermal units, or "mmBtu," compared to a historical 10-year average of $2.61 per mmBtu. Natural gas prices normalized in the second half of 2001. In 2004, gas prices reached $6.00
per mmBtu in March 2004, rising to a peak of almost $10.00 in October 2004 before falling again to $6.80 per mmBtu by the end of the year. Energy prices may not remain at current rates
and may rise to higher levels, in which case our production costs, competitive position and results of operations could be adversely affected thereby.

Qualitative Information about Market Risk

The operating parameters and policies of treasury management are established under formal board authority. The formal treasury policy covers the areas of funding,
counterparty risk, foreign exchange, controls and derivatives. Risk arising on counterparty default is controlled within a framework of dealing with high quality institutions and, by policy, limit the
amount of credit exposure to any one bank or institution. We use financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general
corporate purposes. Additionally, financial instruments, including derivative instruments, are used to hedge exposure to interest rate and foreign currency risks. We do not use financial instruments
for trading purposes. We mitigate the risk that counterparties to derivatives will fail to perform by contracting with major financial institutions having high credit ratings and consider the
likelihood of counterparty failure to be remote.

The
successful management of our currency and interest rate exposure depends on a variety of factors, some of which are outside of our control. We are exposed to the impact of interest
rate changes and foreign currency fluctuations due to our investing and funding activities and our operations in foreign currencies. We manage interest rate exposure to achieve an appropriate balance
of fixed and variable rate funding. To achieve this objective, we enter into interest rate swaps, options and forward rate agreements. Interest rate swap agreements are used to change the interest
payable or receivable on our underlying borrowing and cash from variable to fixed rate or from fixed to variable rate. At
December 31, 2004, the proportion of our total borrowing that was at fixed interest rates was 73% (as compared to 70% at December 31, 2003 and 65% at December 31, 2002).

The
fair value of our interest rate swap agreements at December 31, 2004, 2003 and 2002 was €(57.4) million, €(13.8) million and
€(1.1) million, respectively. See note 20 to the consolidated financial statements included elsewhere in this document. The weighted average interest rate on our total borrowing
as of December 31, 2004 was 7.91% (as compared to 7.89% at December 31, 2003 and 8.15% at December 31, 2002).

93

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Certain
of our currency swaps are not designated as hedges under SFAS No. 133 due to the fact that the maturity dates of the underlying debt do not match the maturity dates
of the swap transactions. The cash flows on these swaps do however economically hedge US dollar cash flows on the underlying debt for the period of the swap by effectively converting the
underlying US dollar cash flows on the debt into euro cash flows.

We
manage our balance sheet having regard to the currency exposures arising from our assets being denominated in a wide range of currencies. To this end, where foreign currency assets
are funded by borrowing, such borrowing is generally sourced in the currency of the related assets. We also hedge our currency exposure through the use of currency swaps, options and forward
contracts.

Item 12.    Description of Securities Other Than Equity Securities

Not applicable.

Item 13.    Defaults, Dividends Arrearages and Delinquencies

None.

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

Not applicable.

Item 15.    Controls and Procedures

The Company's management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the Company's
disclosure controls and procedures as of the end of the period covered by this report, as contemplated by Securities Exchange Act Rule 13a-15. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this annual report
has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date
the Chief Executive Officer and Chief Financial Officer completed their evaluation.

Item 16.    Reserved

Item 16A.    Audit Committee Financial Expert

Mr. Thomas Souleles serves as the Audit Committee financial expert. He has been a member of the Audit Committee since it was established.

Item 16B.    Code of Ethics

The Company has adopted a code of ethics that applies to its Chief Executive Officer, Chief Financial Officer, principal accounting officer and other corporate
and divisional employees. Our code of ethics is filed as an exhibit to this report. You can also download a copy from our web site, which is www.smurfit-group.com.

94

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Item 16C.    Principal Accountant Fees and Services

|                      |  | 2004   |  | 2003  
|--------------------- |  | ------ |  | ------
|
|Audit Fees(1)         |  | 4,190  |  | 4,083 
|Audit Related Fees(2) |  | 318    |  | 198   
|Tax Fees(3)           |  | 1,462  |  | 3,158 
|All Other Fees        |  | 870    |  | 105   
|                      |  |        |  |       
|                      |  | €6,840 |  | €7,544
|                      |  |        |  |       

---

Audit Committee Pre-Approval of Audit and Non-Audit Services

The Audit Committee is responsible for appointment, compensation and oversight of the work of the independent auditor. The Audit Committee has established, and
the Board of Directors has ratified, a policy for the pre-approval of all audit and permissible non-audit services. The policy sets out the procedures and conditions subject to
which services proposed to be performed by the independent auditor may be pre-approved. Under the policy, the Audit Committee appoints the independent auditor and pre-approves
the engagement of the independent auditor for the audit services, and related fees, to be provided for each fiscal year. In accordance with the policy, the Audit Committee has established detailed
pre-approved categories of non-audit services that may be performed by the independent auditor during each fiscal year, subject to annual fee limitations set by the committee.
All other non-audit services must be pre-approved by the Audit Committee.

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

Not applicable.

Item 16E.    Purchases of Equity Securities by the Issuer

Not applicable.

Item 17.    Financial Statements

Not applicable.

Item 18.    Financial Statements

The following financial statements and related schedules, together with the reports thereon of Ernst & Young, are filed as part of this annual report.

95

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|                                                                                                                                                                                                                                                                            |  | Page
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|JSG Funding                                                                                                                                                                                                                                                                 |  |     
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                                                                     |  | F-2 
|Consolidated Statements of Operations for the year ended December 31, 2004; for the year ended December 31, 2003; for the period from September 3, 2002 through December 31, 2002; and for the period from January 1, 2002
through September 2, 2002                        |  | F-3 
|Consolidated Statements of Total Recognized Gains and Losses for the year ended December 31, 2004; for the year ended December 31, 2003; for the period from September 3, 2002 through December 31, 2002; and for the period from
January 1, 2002 through September 2, 2002 |  | F-4 
|Consolidated Balance Sheets as at December 31, 2004 and 2003                                                                                                                                                                                                                |  | F-5 
|Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2004, 2003 and 2002                                                                                                                                                             |  | F-6 
|Consolidated Statements of Cash Flows for the year ended December 31, 2004; for the year ended December 31, 2003; for the period from September 3, 2002 through December 31, 2002; and for the period from January 1, 2002 through
September 2, 2002;                       |  | F-7 
|Notes to the Consolidated Financial Statements                                                                                                                                                                                                                              |  | F-8 
|JSG Acquisitions                                                                                                                                                                                                                                                            |  |     
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                                                                     |  | F-75
|Consolidated Statements of Operations for the year ended December 31, 2004; for the year ended December 31, 2003; for the period from September 3, 2002 through December 31, 2002; and for the period from January 1, 2002
through September 2, 2002                        |  | F-76
|Consolidated Statements of Total Recognized Gains and Losses for the year ended December 31, 2004; for the year ended December 31, 2003; for the period from September 3, 2002 through December 31, 2002; and for the period from
January 1, 2002 through September 2, 2002 |  | F-77
|Consolidated Balance Sheets as at December 31, 2004 and 2003                                                                                                                                                                                                                |  | F-78
|Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2004, 2003 and 2002                                                                                                                                                             |  | F-79
|Consolidated Statements of Cash Flows for the year ended December 31, 2004; for the year ended December 31, 2003; for the period from September 3, 2002 through December 31, 2002; and for the period from January 1, 2002 through
September 2, 2002;                       |  | F-80
|Notes to the Consolidated Financial Statements                                                                                                                                                                                                                              |  | F-81
|JSG Funding                                                                                                                                                                                                                                                                 |  |     
|Schedule IIValuation and Qualifying Accounts for the year ended December 31, 2004; for the year ended December 31, 2003; and for the period from September 3, 2002 through December 31, 2002                                                                               |  | S-1 
|JSG Acquisitions                                                                                                                                                                                                                                                            |  |     
|Schedule IIValuation and Qualifying Accounts for the year ended December 31, 2004; for the year ended December 31, 2003; and for the period from September 3, 2002 through December 31, 2002                                                                               |  | S-2 

96

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Item 19.    Exhibits

The following exhibits are filed as part of this annual report:

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1  |  | Memorandum and Articles of Association of JSG Funding plc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|2.1  |  | Euro Indenture, dated January 31, 2005, among JSG Funding plc, Deutsche Bank Trust Company Americas, as Trustee, Registrar and Paying Agent, Deutsche Bank Luxembourg S.A., as Paying Agent and Transfer Agent and Deutsche Bank AG acting through
its London Branch, as Principal Paying Agent and Transfer Agent, relating to the 7.75% euro senior subordinated notes.                                                                                                                                                                                                                                
|2.2  |  | Dollar Indenture, dated January 31, 2005, among JSG Funding plc, Deutsche Bank Trust Company Americas, as Trustee, Registrar and Paying Agent, and Deutsche Bank Luxembourg S.A., as Paying Agent and Transfer Agent, relating to the 7.75% dollar
senior subordinated notes.                                                                                                                                                                                                                                                                                                                            
|2.3  |  | Euro Registration Rights Agreement, dated January 31, 2005, among JSG Funding plc and Deutsche Bank AG London and Citigroup Global Markets Limited, as initial purchasers, relating to the 7.75% euro senior subordinated notes.                                                                                                                                                                                                                                                                                                                                                                         
|2.4  |  | Dollar Registration Rights Agreement, dated January 31, 2005, among JSG Funding plc and Deutsche Bank AG London and Citigroup Global Markets Limited, as initial purchasers, relating to the 7.75% dollar senior subordinated notes.                                                                                                                                                                                                                                                                                                                                                                     
|2.5  |  | Euro Deposit and Custody Agreement, dated January 31, 2005, among JSG Funding plc, Deutsche Bank Trust Company Americas, as Book-Entry Depositary and Note Custodian, relating to the 7.75% euro senior subordinated notes.                                                                                                                                                                                                                                                                                                                                                                              
|2.6  |  | Dollar Deposit and Custody Agreement, dated January 31, 2005, among JSG Funding plc, Deutsche Bank AG acting through its London Branch, as Book-Entry Depositary and Note Custodian, relating to the 7.75% dollar senior subordinated
notes.                                                                                                                                                                                                                                                                                                                                                             
|2.7  |  | Euro Indenture, dated September 30, 2002, among MDP Acquisitions plc (now known as JSG Funding plc), MDCP Acquisitions I (now known as JSG Acquisitions), Deutsche Bank Trust Company Americas, as Trustee, Registrar and Paying Agent, Deutsche Bank
Luxembourg S.A., as Paying Agent and Transfer Agent, and Deutsche Bank AG London, as Principal Paying Agent and Transfer Agent, relating to the euro senior notes issued on September 30, 2002 (incorporated by reference to Exhibit 4.3 to the
registrant's registration statement on Form F-4 (File No. 333-101456), filed on November 25, 2002).
|2.8  |  | Dollar Indenture, dated September 30, 2002, among MDP Acquisitions plc (now known as JSG Funding plc), MDCP Acquisitions I (now known as JSG Acquisitions), Deutsche Bank Trust Company Americas, as Trustee, Registrar and Paying Agent, and
Deutsche Bank Luxembourg S.A., as Paying Agent and Transfer Agent, relating to the dollar senior notes issued on September 30, 2002 (incorporated by reference to Exhibit 4.4 to the registrant's registration statement on Form F-4 (File
No. 333-101456), filed on November 25, 2002).                                                                   
|2.9  |  | Supplemental Indenture, dated February 14, 2003, among MDP Acquisitions plc (now known as JSG Funding plc), MDCP Acquisitions I (now known as JSG Acquisitions) and Deutsche Bank Trust Company Americas, as Trustee, relating to the euro senior
notes (incorporated by reference to Exhibit 4.15 to the registrant's registration statement on Form F-4 (File No. 333-104617), filed on April 17, 2003).                                                                                                                                                                                               
|2.10 |  | Supplemental Indenture, dated February 14, 2003, among MDP Acquisitions plc (now known as JSG Funding plc), MDCP Acquisitions I (now known as JSG Acquisitions), and Deutsche Bank Trust Company Americas, as Trustee, relating to the dollar senior
notes (incorporated by reference to Exhibit 4.14 to the registrant's registration statement on Form F-4/A (File No. 333-101456), filed on March 5, 2003).                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

97

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|2.11 |  | Euro Deposit and Custody Agreement, dated September 30, 2002, between MDP Acquisitions plc (now known as JSG Funding plc) and Deutsche Bank AG London as the Euro Book-entry Depositary and the Euro Custodian, relating to the euro senior notes
(incorporated by reference to Exhibit 4.5 to the registrant's registration statement on Form F-4 (File No. 333-101456), filed on November 25, 2002).                                                                                                                                                                                                                                                                                                                                                                                            
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.12 |  | Dollar Deposit and Custody Agreement, dated September 30, 2002, between MDP Acquisitions plc (now known as JSG Funding plc) and Deutsche Bank Trust Company Americas as the Dollar Book-entry Depositary and the Dollar Custodian, relating to the
dollar senior notes (incorporated by reference to Exhibit 4.6 to the registrant's registration statement on Form F-4 (File No. 333-101456), filed on November 25, 2002).                                                                                                                                                                                                                                                                                                                                                                       
|4.1  |  | Purchase Agreement, dated January 12, 2005, among JSG Funding plc and Deutsche Bank AG London and Citigroup Global Markets Limited, as initial purchasers, relating to the 7.75% senior subordinated notes (incorporated by reference to the
registrant's current report on Form 8-K (File No. 333-101456), filed on January 18, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.2  |  | Senior Credit Facility dated as of September 12, 2002 by and among MDCP Acquisitions plc (now known as Jefferson Smurfit Group Limited), MDCP Acquisitions I (now known as JSG Acquisitions), MDP Acquisitions plc (now known as JSG Funding plc),
Deutsche Bank AG London, Merrill Lynch International, Merrill Lynch Capital Corporation, JPMorgan Chase Bank, ABN AMRO Bank N.V., AIB Capital Markets, plc, Bank of America N.A., The Governor and Company of the Bank of Ireland, The Governor and
Company of the Bank of Scotland, Credit Lyonnais, Bayerische Hypo- und Vereinsbank AG, London Branch and Lehman Commercial Paper Inc. (incorporated by reference to Exhibit 99(b)(1) to the Schedule TO/A filed by Jefferson Smurfit Group plc
on September 16, 2002 (File No. 005-78329)).
|4.3  |  | Bridge Facility dated September 10, 2002 by and among MDP Acquisitions plc (now known as JSG Funding plc), Deutsche Bank AG London, Merrill Lynch Capital Corporation, JPMorgan Chase Bank, Lehman Commercial Paper Inc. and ABN AMRO Bank N.V.
(incorporated by reference to Exhibit 99(b)(2) to the Schedule TO/A filed by Jefferson Smurfit Group plc on September 16, 2002 (File No. 005-78329)).                                                                                                                                                                                                                                                                                                                                                                                             
|4.4  |  | Priority Agreement dated September 16, 2002, as amended September 27, 2002, among MDCP Acquisitions Limited (now known as Jefferson Smurfit Group Limited), MDP Acquisitions plc (now known as JSG Funding plc) and certain affiliated companies,
 Deutsche Bank AG London and certain other parties thereto (incorporated by reference to Exhibits 10.3 and 10.6 of the registrant's registration statement on Form F-4 (File No. 333-101456), filed on November 25, 2002).                                                                                                                                                                                                                                                                                                                      
|4.5  |  | Intercompany Loan Agreement, entered into on September 16, 2002, as amended September 27, 2002, between MDP Acquisitions plc (now known as JSG Funding plc) and MDCP Acquisitions I (now known as JSG Acquisitions) (incorporated by reference
to Exhibit 10.5 of the registrant's registration statement on Form F-4 (File No. 333-101456), filed on November 25, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                         
|4.6  |  | Intercompany Loan Agreement, dated February 14, 2003, between MDP Acquisitions plc (now known as JSG Funding plc) and MDCP Acquisitions I (now known as JSG Acquisitions).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.7  |  | Priority Agreement, dated February 14, 2003, among MDCP Acquisitions Limited (now known as Jefferson Smurfit Group Limited), MDP Acquisitions plc (now known as JSG Funding plc) and certain affiliated companies, Deutsche Bank AG London and
certain other parties thereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

98

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|4.8  |  | Intercompany Loan Agreement, dated January 31, 2005, between JSG Funding plc, as Lender, and JSG Acquisitions, as Borrower.                                                                                                                                 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.9  |  | Priority Agreement, dated January 31, 2005, among Jefferson Smurfit Group Limited and certain of its subsidiaries, Deutsche Bank AG London and certain other parties thereto.                                                                               
|4.10 |  | Management Equity Agreement dated as of February 6, 2004 among JSG Packaging Limited and each of Gary McGann, Anthony P.J. Smurfit, Ian J. Curley and Dr. Michael W.J. Smurfit.                                                                             
|4.11 |  | Registration Rights Agreement dated as of February 6, 2004 among JSG Packaging Limited, each of the MDCP co-investors and each of the other investors listed on the schedule thereto.                                                                       
|4.12 |  | Corporate Governance Agreement dated as of February 6, 2004 among JSG Packaging Limited, each of the MDCP co-investors, Dr. Michael W.J. Smurfit, Gary McGann, Anthony P.J. Smurfit, Ian J. Curley and each of the investors
listed on the schedule thereto.
|4.13 |  | JSG Packaging Limited 2004 Management Equity Plan, adopted by the board of directors of JSG Packaging Ltd on February 6, 2004.                                                                                                                              
|4.14 |  | Exchange and Shareholders Agreement, dated February 6, 2004, among JSG Packaging Limited and certain other parties thereto.                                                                                                                                 
|8.1  |  | List of Subsidiaries.                                                                                                                                                                                                                                       
|11.1 |  | Code of Ethics (incorporated by reference to Exhibit 11.1 of the registrant's annual report on Form 20-F (File No. 333-101456), filed on April 19, 2004).                                                                                                   
|12.1 |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Exchange Act.                                                                                                                         
|13.1 |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.                                                                        

99

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Signatures

The 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.

|JSG Funding plc                                                           | 
|------------------------------------------------------------------------- | 
|/s/I. J. CURLEYI. J. Curley
Chief Financial Officer
Date: April 28, 2005. | 

100

---





INDEX TO FINANCIAL STATEMENTS

PREDECESSOR OPERATIONS AND JSG FUNDING

Audited Consolidated Financial Statements of Jefferson Smurfit Group plc and Subsidiary Companies for the period from January 1,
2002 through September 2, 2002 and of JSG Funding plc and Subsidiary Companies as of December 31, 2004 and 2003 and for the years ended December 31, 2004 and 2003 and for the
period from June 12, 2002 through December 31, 2002:

|                                                             |  | Page
|------------------------------------------------------------ |  | ----
|Report of Independent Registered Public Accounting Firm      |  | F-2 
|Consolidated Statements of Operations                        |  | F-3 
|Consolidated Statements of Total Recognized Gains and Losses |  | F-4 
|Consolidated Balance Sheets                                  |  | F-5 
|Consolidated Statements of Changes in Shareholders' Equity   |  | F-6 
|Consolidated Financial Statements of Cash Flows              |  | F-7 
|Notes to the Consolidated Financial Statements               |  | F-8 

PREDECESSOR OPERATIONS AND JSG ACQUISITIONS

Audited Consolidated Financial Statements of Jefferson Smurfit Group plc and Subsidiary Companies for the period from January 1,
2002 through September 2, 2002 and of JSG Acquisitions and Subsidiary Companies as of December 31, 2004 and 2003 and for the year ended December 31, 2004 and 2003 and for the
period from June 14, 2002 through December 31, 2002:

|                                                             |  | Page
|------------------------------------------------------------ |  | ----
|Report of Independent Registered Public Accounting Firm      |  | F-75
|Consolidated Statements of Operations                        |  | F-76
|Consolidated Statements of Total Recognized Gains and Losses |  | F-77
|Consolidated Balance Sheets                                  |  | F-78
|Consolidated Statements of Changes in Shareholders' Equity   |  | F-79
|Consolidated Financial Statements of Cash Flows              |  | F-80
|Notes to the Consolidated Financial Statements               |  | F-81

F-1

---





JSG Funding plc and Subsidiary Companies    Report of Independent Registered Public Accounting Firm

To
the Board of Directors

JSG
Funding plc

We
have audited the accompanying consolidated balance sheets of JSG Funding plc (successor company) and subsidiaries (the "Company") as of December 31, 2004 and
December 31, 2003, and the related consolidated statements of operations, total recognized gains and losses, changes in shareholders' equity, and cash flows for each of the two years in the
period ended December 31, 2004 and for the period from June 12, 2002 to December 31, 2002. We have also audited the related consolidated statements of operations, total recognized
gains and losses, changes in shareholders' equity and cash flows of Jefferson Smurfit Group plc (predecessor company) and subsidiaries for the eight month and two day period ended September 2,
2002. Our audits also included the financial statement schedule listed in the Index at Item 18. These financial statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and schedule based on our audits.

We
conducted our audits in accordance with Auditing Standards issued by the Auditing Practices Board for use in Ireland and with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we
express no such opinion. An audit also 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of JSG Funding plc (successor company) and
subsidiaries at December 31, 2004 and December 31, 2003, and the consolidated results of their operations and their cash flows for each of the two years in the period ended
December 31, 2004 and for the period from June 12, 2002 to December 31, 2002, and the consolidated results of operations and cash flows of Jefferson Smurfit Group plc (predecessor
company) for the eight month and two day period ended September 2, 2002, in conformity with accounting principles generally accepted in Ireland, which differ in certain respects from those
followed in the United States of America (see Note 37 of Notes to the Consolidated Financial Statements). Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

Ernst &
Young

Dublin,
Ireland.

April
28, 2005

F-2

---





JSG Funding plc and Subsidiary Companies    Consolidated Statements of Operations

|                                                   |                         |    |  | Successor |           | Predecessor |          
|-------------------------------------------------- | ----------------------- | -- |  | --------- | --------- | ----------- | ---------
|
|
|Net sales                                          |                         | 3  |  |           |           |             |          
|                                                   | Continuing operations   |    |  |           | 4,293,540 |             | 4,159,166
|                                                   | Discontinued operations |    |  |           | 511,542   |             | 587,149  
|                                                   |                         |    |  |           |           |             |          
|                                                   |                         |    |  | 4,805,082 |           | 4,746,315   |          
|Cost of sales                                      |                         |    |  | 3,473,299 |           | 3,419,820   |          
|                                                   |                         |    |  |           |           |             |          
|Gross profit                                       |                         |    |  | 1,331,783 |           | 1,326,495   |          
|Net operating expenses                             |                         | 4  |  | 1,010,564 |           | 982,345     |          
|Reorganization and restructuring costs             |                         | 5  |  | 39,430    |           | 35,006      |          
|                                                   |                         |    |  |           |           |             |          
|Operating income subsidiaries                      |                         |    |  |           |           |             |          
|                                                   | Continuing operations   |    |  |           | 224,062   |             | 261,228  
|                                                   | Discontinued operations |    |  |           | 57,727    |             | 47,916   
|                                                   |                         |    |  |           |           |             |          
|                                                   |                         |    |  | 281,789   |           | 309,144     |          
|Share of associates' operating income              |                         |    |  | 12,611    |           | 12,155      |          
|Share of associates' restructuring costs           |                         | 5  |  |          |           |            |          
|                                                   |                         |    |  |           |           |             |          
|Total operating income                             |                         |    |  | 294,400   |           | 321,299     |          
|Income on sale of assets and businessescontinuing |                         | 5  |  | 22,173    |           | 5,560       |          
|Interest income                                    |                         |    |  | 8,335     |           | 11,631      |          
|Interest expense                                   |                         | 7  |  | (293,641  | )         | (309,368    | )        
|Finance costs on debt repurchased                  |                         |    |  | (5,697    | )         |            |          
|Other financial expense                            |                         | 24 |  | (15,718   | )         | (15,266     | )        
|Share of associates' net interest                  |                         |    |  | (1,301    | )         | (2,062      | )        
|                                                   |                         |    |  |           |           |             |          
|Income before taxes and equity minority interests  |                         | 8  |  | 8,551     |           | 11,794      |          
|Taxes on income                                    |                         | 9  |  | 26,973    |           | 62,354      |          
|                                                   |                         |    |  |           |           |             |          
|(Loss)/income before equity minority interests     |                         |    |  | (18,422   | )         | (50,560     | )        
|Equity minority interests                          |                         |    |  | 16,067    |           | 16,768      |          
|                                                   |                         |    |  |           |           |             |          
|Net (loss)/income for the period(1)                |                         |    |  | €(34,489  | )         | €(67,328    | )        
|                                                   |                         |    |  |           |           |             |          

---

The Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-3

---



JSG Funding plc and Subsidiary Companies    Consolidated Statements of Total Recognized Gains and Losses

|                                                               |            | Successor |         | Predecessor |        
|-------------------------------------------------------------- | ---------- | --------- | ------- | ----------- | -------
|
|
|(Loss)/income for the period                                   |            |           |         |             |        
|                                                               | Group      |           | (38,433 | )           | (71,927
|                                                               | Associates |           | 3,944   |             | 4,599  
|                                                               |            |           |         |             |        
|                                                               |            | (34,489   | )       | (67,328     | )      
|                                                               |            |           |         |             |        
|Translation adjustments on foreign currency net investments    |            |           |         |             |        
|                                                               | Group      |           | 15,222  |             | 58,982 
|                                                               |            |           |         |             |        
|Actuarial (loss)/gain recognized in retirement benefit schemes |            | (6,988    | )       | 25,603      |        
|                                                               |            |           |         |             |        
|Total recognized gains and losses                              |            |           |         |             |        
|                                                               | Group      |           | (30,199 | )           | 12,658 
|                                                               | Associates |           | 3,944   |             | 4,599  
|                                                               |            |           |         |             |        
|                                                               |            | €(26,255  | )       | €17,257     |        
|                                                               |            |           |         |             |        

Note of Historical Cost Profits and Losses

The results disclosed in the Consolidated Statements of Operations are not materially different to the results based on an unmodified historical basis.

The
Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-4

---





JSG Funding plc and Subsidiary Companies        Consolidated Balance Sheets

|                                                               |  | Note |  | 2004       |   | 2003       |  
|-------------------------------------------------------------- |  | ---- |  | ---------- | - | ---------- | -
|
|Assets                                                         |  |      |  |            |   |            |  
|Current assets                                                 |  |      |  |            |   |            |  
|Cash                                                           |  | 10   |  | 248,033    |   | 179,067    |  
|Accounts receivable and prepayments                            |  | 11   |  | 925,048    |   | 911,443    |  
|Amounts due by affiliates                                      |  |      |  | 395        |   |           |  
|Amounts due by affiliates after more than one year             |  |      |  | 270,552    |   | 277,264    |  
|Inventories                                                    |  | 12   |  | 452,166    |   | 477,432    |  
|                                                               |  |      |  |            |   |            |  
|Total current assets                                           |  |      |  | 1,896,194  |   | 1,845,206  |  
|                                                               |  |      |  |            |   |            |  
|Fixed assets                                                   |  |      |  |            |   |            |  
|Investments                                                    |  | 13   |  | 81,895     |   | 80,642     |  
|Property, plant and equipment                                  |  | 14   |  | 2,334,858  |   | 2,435,946  |  
|Intangible assets                                              |  | 15   |  | 1,455,130  |   | 1,455,133  |  
|                                                               |  |      |  |            |   |            |  
|Total fixed assets                                             |  |      |  | 3,871,883  |   | 3,971,721  |  
|                                                               |  |      |  |            |   |            |  
|Total assets                                                   |  |      |  | €5,768,077 |   | €5,816,927 |  
|                                                               |  |      |  |            |   |            |  
|Liabilities, minority interests and shareholders' equity       |  |      |  |            |   |            |  
|Current liabilities                                            |  |      |  |            |   |            |  
|Bank loans, overdrafts and other borrowing                     |  | 19   |  | 104,841    |   | 133,815    |  
|Accounts payable and accrued liabilities                       |  | 16   |  | 1,064,831  |   | 1,044,642  |  
|                                                               |  |      |  |            |   |            |  
|Total current liabilities                                      |  |      |  | 1,169,672  |   | 1,178,457  |  
|Non current liabilities                                        |  |      |  |            |   |            |  
|Long term debt and other long term liabilities                 |  | 18   |  | 2,959,840  |   | 3,022,350  |  
|Amounts due to affiliates                                      |  |      |  | 7,372      |   | 1,702      |  
|Provisions for liabilities and charges                         |  | 20   |  | 221,403    |   | 234,952    |  
|Pension liabilities                                            |  | 24   |  | 411,237    |   | 355,309    |  
|Capital grants deferred                                        |  |      |  | 14,260     |   | 15,155     |  
|Minority interests (equity interests)                          |  |      |  | 115,192    |   | 113,646    |  
|                                                               |  |      |  |            |   |            |  
|Total liabilities and minority interests                       |  |      |  | 4,898,976  |   | 4,921,571  |  
|                                                               |  |      |  |            |   |            |  
|Shareholders equity(1)                                         |  |      |  |            |   |            |  
|Share capital                                                  |  |      |  | 40         |   | 40         |  
|Other reserves                                                 |  |      |  | 946,002    |   | 930,780    |  
|Retained deficit                                               |  |      |  | (76,941    | ) | (35,464    | )
|                                                               |  |      |  |            |   |            |  
|Shareholders' equity                                           |  |      |  | 869,101    |   | 895,356    |  
|                                                               |  |      |  |            |   |            |  
|Total liabilities, minority interests and shareholders' equity |  |      |  | €5,768,077 |   | €5,816,927 |  
|                                                               |  |      |  |            |   |            |  

---

The Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-5

---



JSG Funding plc and Subsidiary Companies        Consolidated Statements of Changes in Shareholder's Equity

JSG Funding was incorporated on June 12, 2002, with an authorized share capital of 100,000 shares of €1 each, of which 40,000 were issued.
On September 2, 2002, the shares were redesignated as 100,000,000 ordinary shares of €0.001 each.

|                                                        |  | Share
capital |  | Other
reserves(1) |  | Retained
(deficit)/earnings |   | Total
shareholders'
equity |  
|------------------------------------------------------- |  | ------------- |  | ----------------- |  | --------------------------- | - | -------------------------- | -
|
|Shares issued                                           |  | 40            |  |                  |  |                            |   | 40                         |  
|Capital contribution                                    |  |              |  | 864,354           |  |                            |   | 864,354                    |  
|Income                                                  |  |              |  |                  |  | 1,854                       |   | 1,854                      |  
|Actuarial gain recognized in retirement benefit schemes |  |              |  |                  |  | 4,407                       |   | 4,407                      |  
|Currency translation adjustments                        |  |              |  | 7,444             |  |                            |   | 7,444                      |  
|                                                        |  |               |  |                   |  |                             |   |                            |  
|Balance at December 31, 2002                            |  | 40            |  | 871,798           |  | 6,261                       |   | 878,099                    |  
|Loss                                                    |  |              |  |                  |  | (67,328                     | ) | (67,328                    | )
|Actuarial gain recognized in retirement benefit schemes |  |              |  |                  |  | 25,603                      |   | 25,603                     |  
|Currency translation adjustments                        |  |              |  | 58,982            |  |                            |   | 58,982                     |  
|                                                        |  |               |  |                   |  |                             |   |                            |  
|Balance at December 31, 2003                            |  | 40            |  | 930,780           |  | (35,464                     | ) | 895,356                    |  
|Loss                                                    |  |              |  |                  |  | (34,489                     | ) | (34,489                    | )
|Actuarial loss recognized in retirement benefit schemes |  |              |  |                  |  | (6,988                      | ) | (6,988                     | )
|Currency translation adjustments                        |  |              |  | 15,222            |  |                            |   | 15,222                     |  
|                                                        |  |               |  |                   |  |                             |   |                            |  
|Balance at December 31, 2004                            |  | €40           |  | €946,002          |  | €(76,941                    | ) | €869,101                   |  
|                                                        |  |               |  |                   |  |                             |   |                            |  

---

An investment of €731,960,000 by Madison Dearborn Partners LLC and its affiliates, certain other co-investors and
certain members of management by way of capital contributions; a capital contribution by JSL of €125,000,000. JSL obtained the funds for this contribution by way of a loan from the
newcos which they borrowed under a bank credit facility. The newcos borrowing was non recourse to JSG Funding and was fully paid in December 2003; the remaining €7,394,000
represents the value ascribed to the warrants to purchase shares in JSL issued as part of the PIK units (see Note 19).

The
Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-6

---



JSG Funding plc and Subsidiary Companies        Consolidated Financial Statements of Cash Flows

|                                                                   |  |    |  | Successor |   | Predecessor |  
|------------------------------------------------------------------ |  | -- |  | --------- | - | ----------- | -
|
|
|Net cash flow from operating activities                            |  | 26 |  | 640,929   |   | 690,964     |  
|                                                                   |  |    |  |           |   |             |  
|Dividends received from associates                                 |  |    |  | 2,989     |   | 1,258       |  
|                                                                   |  |    |  |           |   |             |  
|Returns on investments and servicing of finance                    |  |    |  |           |   |             |  
|Interest received                                                  |  |    |  | 8,370     |   | 11,689      |  
|Interest paid                                                      |  |    |  | (234,540  | ) | (252,382    | )
|Interest paid on finance leases                                    |  |    |  | (1,962    | ) | (2,164      | )
|Other financial interest paid                                      |  |    |  | (15,718   | ) | (15,266     | )
|Dividends to minority interests                                    |  |    |  | (5,707    | ) | (7,496      | )
|Deferred debt issuance costs                                       |  |    |  | (5,814    | ) | (7,558      | )
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (255,371  | ) | (273,177    | )
|                                                                   |  |    |  |           |   |             |  
|Taxation                                                           |  |    |  |           |   |             |  
|Irish corporation tax paid                                         |  |    |  | (8,515    | ) | 2,616       |  
|Overseas tax paid                                                  |  |    |  | (50,249   | ) | (61,589     | )
|Overseas tax refunded                                              |  |    |  | 21,433    |   |            |  
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (37,331   | ) | (58,973     | )
|                                                                   |  |    |  |           |   |             |  
|Capital expenditure and financial investment                       |  |    |  |           |   |             |  
|Purchase of tangible fixed assets                                  |  |    |  | (206,466  | ) | (207,518    | )
|Less new finance leases                                            |  |    |  | 2,963     |   |            |  
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (203,503  | ) | (207,518    | )
|Capital grants received                                            |  |    |  | 1,874     |   | 1,995       |  
|Purchase of other investments                                      |  |    |  | (772      | ) | (1,052      | )
|Retirement of fixed assets                                         |  | 29 |  | 36,388    |   | 44,895      |  
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (166,013  | ) | (161,680    | )
|                                                                   |  |    |  |           |   |             |  
|Acquisitions and disposals                                         |  |    |  |           |   |             |  
|Purchase of subsidiaries and minorities                            |  | 32 |  | (2,731    | ) | (102,081    | )
|Deferred acquisition consideration                                 |  |    |  | (2,390    | ) | (54,773     | )
|Business disposals                                                 |  |    |  |          |   | 4,596       |  
|Receipts/(advances) from/to affiliates                             |  |    |  | 11,934    |   | (28,206     | )
|Investments in and advances to associates                          |  |    |  | (1,194    | ) | (82         | )
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | 5,619     |   | (180,546    | )
|                                                                   |  |    |  |           |   |             |  
|Equity dividends paid                                              |  | 28 |  |          |   |            |  
|                                                                   |  |    |  |           |   |             |  
|Cash inflow/(outflow) before use of liquid resources and financing |  |    |  | 190,822   |   | 17,846      |  
|                                                                   |  |    |  |           |   |             |  
|Management of liquid resources                                     |  |    |  | (16,989   | ) | 18,889      |  
|                                                                   |  |    |  |           |   |             |  
|Financing                                                          |  |    |  |           |   |             |  
|Issue of shares including minorities                               |  |    |  | 27        |   |            |  
|(Decrease)/increase in term debt                                   |  | 30 |  | (111,101  | ) | (2,142      | )
|Advances from/(to) JSL                                             |  |    |  | 1,102     |   | 410         |  
|Capital elements of finance leases repaid                          |  |    |  | (13,576   | ) | (5,689      | )
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (123,548  | ) | (7,421      | )
|                                                                   |  |    |  |           |   |             |  
|Increase/(decrease) in cash                                        |  |    |  | €50,285   |   | €29,314     |  
|                                                                   |  |    |  |           |   |             |  

The significant differences between the cash flow statement prepared under accounting principles generally accepted in the United States and that
prepared under accounting principles generally accepted in Ireland are given in Note 37.

The
Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-7

---





JSG Funding plc and Subsidiary Companies        Notes to the Consolidated Financial Statements

1 Basis of preparation

On July 5, 2002, JSG Acquisitions, a wholly owned subsidiary of JSG Funding plc ("JSG Funding"), commenced a public tender offer (the offer) for all of the
issued and to be issued share capital of Smurfit Packaging Corporation Ltd ("JSG"). On September 3, 2002, JSG Acquisitions declared the offer unconditional in all respects. JSG
Acquisitions subsequently acquired all of the ordinary shares of JSG, completing the acquisition in October 2002.

At
the time the offer was declared unconditional, JSG distributed to its shareholders by way of a share capital reduction its 29.3% interest in Smurfit-Stone Container Corporation
("SSCC"). We refer to that distribution as the "spin-off". In connection with the acquisition, certain non-operating assets and non-core operating assets of JSG
were transferred, in exchange for intercompany notes, to newly formed, wholly owned subsidiaries of Jefferson Smurfit Group Ltd ("JSL"). We refer to these subsidiaries collectively as the
"newcos". On October 2, 2002, the newcos borrowed €125 million under a bank credit facility, which was non-recourse to JSG Funding. The newcos then loaned the
proceeds to JSL, and JSL used them to make a capital contribution to JSG Funding. JSG Funding in turn made a capital contribution to JSG Acquisitions. The newcos facility was repaid in full prior to
December 31, 2003.

The
funding required to purchase all of the outstanding equity interests of JSG, to refinance certain existing indebtedness of JSG and to pay related fees and expenses was approximately
€3,510 million. These cash costs were financed as follows:

In
addition, approximately €637 million of existing borrowing of JSG was left outstanding. This amount was comprised of amounts outstanding under our 6.75% notes
due 2005 and 7.50% debentures due 2025, certain local bank borrowing, capital lease obligations, funded debt in Latin America and bank overdrafts.

On
March 31, 2003 the Group completed the acquisition of SSCC's European packaging assets. In this transaction which we refer to as the "SSCC Asset Swap", JSG Funding exchanged
its 50% ownership in Smurfit MBI, Canada and approximately €185 million in cash for SSCC's European assets. The cash consideration was financed by US$205 million of
95/8% senior notes due 2012 issued in February 2003.

On
December 22, 2004, we announced that we had signed a definitive agreement to sell our Munksjö specialty paper business to The EQT III Fund for approximately
€450 million. On

F-8

---



December 14,
2004, SCA (Svenska Cellullosa Aktiebolaget) announced that it had agreed to buy our Munksjö tissue business for approximately €28 million. The
completion of the sale of the specialty paper business, which comprises pulp, decor paper and speciality paper operations, was completed on March 1, 2005 and the proceeds from the disposal have
been used to pay down part of the term portion of our senior credit facility. The agreement to sell the tissue business is subject to customary closing conditions. Together, the operations being sold
had net sales of approximately €512 million for the year to December 31, 2004 (2003: €483 million). These operations together with Smurfit MBI,
which was sold as part of the SSCC Asset Swap in 2003, are reported as discontinued operations in the Consolidated Statements of Operations.

2 Accounting Policies

(a) Basis of accounting:

The financial statements are prepared under the historical cost convention and in accordance with generally accepted accounting principles in Ireland (Irish
GAAP). They are prepared and presented in euro (€). In preparing these financial statements, certain items have been included in order to comply with accounting presentation and
disclosure requirements applicable in the United States in respect of foreign registrants. An explanation of the significant differences between Irish and US GAAP as they apply to the Group and a
reconciliation to US GAAP are set out in Note 37. The financial statements do not constitute full group accounts within the meaning of Regulation 40(1) of the European Communities
(Companies: Group Accounts) Regulations, 1992 of Ireland insofar as such group accounts would have to comply with the disclosure and other requirements of those Regulations.

(b) Group consolidation:

The financial statements comprise a consolidation of the financial statements of JSG Funding or predecessor and their respective subsidiaries. Associates are
accounted for under the equity method of accounting. Where accounting policies followed by subsidiaries and associates differ significantly from those adopted for the purpose of the consolidated
financial statements, appropriate adjustments are
made in order to achieve a consistent basis of accounting. The results of subsidiaries acquired or sold are consolidated and the Group's share of the results of associates are included for the periods
from their effective date of acquisition or to their effective date of sale.

(c) Net sales and revenue recognition:

Net sales consist of sales to third parties after trade discounts and exclude sales taxes. Revenue is recognized at the time products are delivered or services
rendered to external customers.

(d) Goodwill:

Goodwill represents the excess of the cost of shares in subsidiaries over the fair value of their net assets acquired based on Group accounting policies. It is
capitalized and amortized over a period of 40 years as the directors believe that the durability of the business can be demonstrated and the value of goodwill is capable of being continually
reassessed. The carrying value of goodwill is subject to an impairment review at the end of the first full year following the year of acquisition and annually thereafter.

F-9

---



(e) Property, plant and equipment:

Property, plant and equipment is carried at cost less accumulated depreciation.

(f) Depreciation:

Freehold and long leasehold land are not depreciated. Short leasehold land and buildings are depreciated over the remaining period of the lease, adjusted for
estimated residual value. In the main, other tangible fixed assets are depreciated by equal annual installments over their estimated useful lives at the following rates:

|Freehold and long leasehold buildings |  | 15%   |  | Plant and machinery |  | 333% 
|------------------------------------- |  | ------ |  | ------------------- |  | ------
|Fixtures and fittings                 |  | 1025% |  | Motor vehicles      |  | 2025%

(g) Timberlands:

The cost of acquiring, establishing and maintaining forestry plantations are classified as timberlands. Depletion of timberlands represents the charge to income
relating to the timber extracted in the year.

(h) Leasing:

Assets acquired under finance leases are capitalized and included in tangible fixed assets and depreciated in accordance with Group depreciation policy. Payments
under operating leases are expensed over the period of the lease.

(i) Inventory valuation:

Inventory is valued at the lower of cost and net realizable value. Cost includes direct costs plus applicable factory and other overheads. Net realizable value is
the actual or estimated selling price less all applicable costs incurred or likely to be incurred in the realization of the selling price. Full provision is made for all damaged, deteriorated,
obsolete and unusable materials.

(j) Debt instruments:

The finance costs of debt instruments, which is the difference between the net proceeds and the total amount payable under the instrument, are accounted for over
the life of the instrument at a constant rate of interest on the outstanding balance. The proceeds of debt instruments, net of issue costs, are shown as liabilities on the balance sheet.

(k) Derivative instruments:

The Group uses forward currency contracts to reduce exposure to foreign exchange rates. The Group also uses interest rate swaps to adjust interest rate exposures.
The Group considers its derivative instruments qualify for hedge accounting when certain criteria are met.

F-10

---



Forward foreign currency contracts

The criteria for forward foreign currency contracts are:



The
rates under such contracts are used to record the hedged item. As a result, gains and losses are offset against the foreign exchange gains and losses on the related financial assets
and liabilities, or where the instrument is used to hedge a committed, or probable, future transaction, are deferred until the transaction occurs. Gains/losses on hedges of anticipated transactions
are recorded in the
Consolidated Statements of Operations when such anticipated transactions are no longer likely to occur.

Interest rate swaps

The Group's criteria for interest rate swaps are:



Interest
differentials are recognized and included in interest payable or receivable as appropriate.

Interest
rate swaps are not revalued to fair value and are not shown on the Group Balance Sheets.

Currency swaps

The Group enters currency swap agreements to reduce the impact of foreign currency rate fluctuations arising from unmatched foreign currency assets and
liabilities. Related foreign currency assets and liabilities are accounted for in the currency of the underlying swap agreement and translated at the closing rate.

(l) Foreign Currencies:

Foreign currency transactions are translated at the rate of exchange ruling at the date of the transaction or, if hedged forward, at the rate of exchange under
the related forward currency contract. Assets and liabilities denominated in foreign currencies are translated at the closing rate or, if hedged
forward, at the rate of exchange under the related forward currency contract. The resulting profits or losses are dealt with in the Consolidated Statements of Operations.

The
balance sheets of subsidiaries are translated using the closing rate method. The statements of operations and cash flows are translated at average rates ruling for the relevant
period. Resulting currency differences, together with those arising on hedging activities, are dealt with in reserves. The transactions of operations in hyper-inflationary economies are reported using
a relatively stable currency as the functional currency. The translation gains and losses arising are recognized in the Consolidated Statements of Operations.

F-11

---



(m) Post Retirement Benefits:

From September 3, 2002 (the date of acquisition), JSG Funding has adopted FRS 17"Retirement Benefits". FRS 17 applies to all types of benefits
that an employer provides after employees have completed their service, including pensions and other post retirement benefits. The expected increase in the present value of scheme liabilities arising
from employee service in the current or prior periods is charged against operating income. The expected returns on the schemes' assets and the increase during the period in the present value of the
schemes' liabilities arising from the passage of time are included in the Consolidated Statements of Operations as "Other Financial Expense". Differences between the expected and the actual return on
plan assets, together with the effect of changes in the current or prior assumptions underlying the liabilities are recognized in the Statement of Recognized Gains and Losses. Scheme assets are valued
at fair value and scheme liabilities are measured using the projected unit method. Net scheme assets and liabilities, reduced by deferred tax amounts, are recorded on the Balance Sheets as a pension
surplus or deficit as appropriate.

Prior
to September 3, 2002, pension costs were recognized in income on a systematic basis so that the cost of providing retirement benefits to employees was evenly matched to the
service lives of the employees concerned. Any excess or deficiency of the actuarial value of assets over the actuarial value of liabilities was amortized over the average remaining service lives of
the relevant, then current employees. Any surplus or deficit within a scheme was not recognized on the Balance Sheets. The cost of providing post retirement health care benefits to employees was
recognized on an actuarial basis. The effect of the adoption of FRS 17 on reported income from the date of acquisition is not material.

(n) Deferred taxation:

The Group provides deferred tax in accordance with FRS 19"Deferred Tax". Under this standard full provision is made for deferred tax arising from
timing differences between the recognition of gains and losses in the financial statements and their recognition in tax computations. We have chosen not to discount deferred tax assets and
liabilities.

(o) Research and development:

Research and development expenditure is written off as incurred.

(p) Use of estimates:

The preparation of financial statements requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates.

3 Segmental Analyses

The Group is an integrated paper and board manufacturer and converter. The Group has identified reportable segments on a geographic basis. In Europe, the Group
has two reportable segments: (1) Packaging and (2) Specialities. The Packaging segment is highly integrated. It includes a system of mills and plants that produces a full line of
containerboard that is converted into corrugated containers. Our specialties segment, prior to the Munksjö Specialties Disposal, was principally

F-12

---



comprised
of décor base paper, other specialty papers and graphicboard production. This segment also includes some non paper/packaging businesses such as our Bag in Box and Print
businesses. Additionally, there are central costs which represent corporate governance costs, including executive costs, and costs of the Group's legal, company secretarial, pension administration,
tax, treasury and controlling functions and other administrative costs.

Set
out below are segmental analyses of sales (by source), income before taxes and equity minority interests, total assets, long lived assets, net operating assets, capital expenditure,
depreciation, depletion and amortization expense and investments in equity method investees. Sales by destination are not materially different from sales by source. The analysis of income includes the
Group's share of the income before exceptional items, interest and taxes of associates. A geographical analysis of employees can be found in Note 6 and of income taxes in Note 9.

Salesthird party (external net sales)

|                         |  | Successor  |  | Predecessor
|------------------------ |  | ---------- |  | -----------
|
|
|Packaging                |  | 3,094,045  |  | 2,968,784  
|Specialities             |  | 1,008,477  |  | 991,874    
|                         |  |            |  |            
|Europe                   |  | 4,102,522  |  | 3,960,658  
|United States and Canada |  |           |  | 104,355    
|Latin America            |  | 702,560    |  | 681,302    
|                         |  |            |  |            
|                         |  | €4,805,082 |  | €4,746,315 
|                         |  |            |  |            

Third
party sales in Ireland were: €196,346,000 for the year ended December 31, 2004; €201,530,000 for the year ended December 31, 2003;
€68,354,000 for the period September 3, 2002 through December 31, 2002; and €126,349,000 for the period January 1, 2002 through September 2,
2002.

SalesGroup and third party

|                         |  | Successor  |  | Predecessor
|------------------------ |  | ---------- |  | -----------
|
|
|Packaging                |  | 4,314,053  |  | 4,029,387  
|Specialities             |  | 1,080,583  |  | 1,048,035  
|                         |  |            |  |            
|Europe                   |  | 5,394,636  |  | 5,077,422  
|United States and Canada |  |           |  | 104,355    
|Latin America            |  | 1,090,229  |  | 1,067,021  
|                         |  |            |  |            
|                         |  | €6,484,865 |  | €6,248,798 
|                         |  |            |  |            

F-13

---





Income before taxes and equity minority interests

|                                                                    |  | Successor |   | Predecessor |  
|------------------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Packaging                                                           |  | 155,562   |   | 213,918     |  
|Specialities                                                        |  | 96,777    |   | 88,020      |  
|Associates                                                          |  | 10,064    |   | 9,447       |  
|                                                                    |  |           |   |             |  
|Europe                                                              |  | 262,403   |   | 311,385     |  
|                                                                    |  |           |   |             |  
|Packaging                                                           |  |          |   | 7,775       |  
|Associates                                                          |  |          |   |            |  
|                                                                    |  |           |   |             |  
|United States and Canada                                            |  |          |   | 7,775       |  
|                                                                    |  |           |   |             |  
|Packaging                                                           |  | 116,360   |   | 86,180      |  
|Associates                                                          |  | 2,546     |   | 506         |  
|                                                                    |  |           |   |             |  
|Latin America                                                       |  | 118,906   |   | 86,686      |  
|                                                                    |  |           |   |             |  
|Asia (Associates)                                                   |  |          |   | 2,202       |  
|                                                                    |  |           |   |             |  
|Unallocated centre costs                                            |  | (25,272   | ) | (22,461     | )
|                                                                    |  |           |   |             |  
|Income before goodwill amortization, interest and exceptional items |  | 356,037   |   | 385,587     |  
|Goodwill amortization                                               |  | (37,925   | ) | (44,548     | )
|Group net interest                                                  |  | (291,003  | ) | (297,737    | )
|Share of associates' net interest                                   |  | (1,301    | ) | (2,062      | )
|                                                                    |  |           |   |             |  
|Income before exceptional items                                     |  | 25,808    |   | 41,240      |  
|Reorganization and restructuring costs                              |  | (39,430   | ) | (35,006     | )
|Income on sale of assets and businesses                             |  | 22,173    |   | 5,560       |  
|Share of associates' exceptional costs                              |  |          |   |            |  
|                                                                    |  |           |   |             |  
|                                                                    |  | €8,551    |   | €11,794     |  
|                                                                    |  |           |   |             |  

F-14

---



Total assets

|                          |  | 2004       |  | 2003      
|------------------------- |  | ---------- |  | ----------
|
|Packaging                 |  | 2,439,979  |  | 2,524,444 
|Specialities              |  | 775,260    |  | 757,590   
|                          |  |            |  |           
|Europe                    |  | 3,215,239  |  | 3,282,034 
|United States and Canada  |  | 3,357      |  | 2,729     
|Latin America             |  | 661,025    |  | 700,197   
|Group centre              |  | 162,379    |  | 99,570    
|                          |  |            |  |           
|                          |  | 4,042,000  |  | 4,084,530 
|Consolidated goodwill     |  | 1,455,130  |  | 1,455,133 
|Amounts due by affiliates |  | 270,947    |  | 277,264   
|                          |  |            |  |           
|                          |  | €5,768,077 |  | €5,816,927
|                          |  |            |  |           

Long lived assets

|                      |  | 2004       |  | 2003      
|--------------------- |  | ---------- |  | ----------
|
|Packaging             |  | 1,444,102  |  | 1,523,821 
|Specialities          |  | 478,067    |  | 463,882   
|                      |  |            |  |           
|Europe                |  | 1,922,169  |  | 1,987,703 
|Latin America         |  | 407,692    |  | 443,336   
|Group centre          |  | 4,997      |  | 4,907     
|                      |  |            |  |           
|                      |  | 2,334,858  |  | 2,435,946 
|Consolidated goodwill |  | 1,455,130  |  | 1,455,133 
|                      |  |            |  |           
|                      |  | €3,789,988 |  | €3,891,079
|                      |  |            |  |           

Long
lived assets in Ireland were €203,058,000 and €191,139,000 at December 31, 2004 and 2003 respectively.

F-15

---



Net operating assets

|                            |  | 2004       |   | 2003       |  
|--------------------------- |  | ---------- | - | ---------- | -
|
|Packaging                   |  | 1,663,743  |   | 1,792,346  |  
|Specialities                |  | 596,740    |   | 582,744    |  
|                            |  |            |   |            |  
|Europe                      |  | 2,260,483  |   | 2,375,090  |  
|United States and Canada    |  | (8,541     | ) | (5,541     | )
|Latin America               |  | 522,857    |   | 559,432    |  
|Asia                        |  |           |   | (1,106     | )
|Group centre                |  | (12,152    | ) | (4,708     | )
|                            |  |            |   |            |  
|Net operating assets        |  | 2,762,647  |   | 2,923,167  |  
|Consolidated goodwill       |  | 1,455,130  |   | 1,455,133  |  
|Amounts due by affiliates   |  | 262,421    |   | 275,562    |  
|Unallocated net liabilities |  | (3,611,097 | ) | (3,758,506 | )
|                            |  |            |   |            |  
|Shareholders' equity        |  | €869,101   |   | €895,356   |  
|                            |  |            |   |            |  

A reconciliation of net operating assets above to shareholders' equity is as follows:

|                                               |  | 2004       |   | 2003       |  
|---------------------------------------------- |  | ---------- | - | ---------- | -
|
|Per segmental analysis of net operating assets |  | 2,762,647  |   | 2,923,167  |  
|                                               |  |            |   |            |  
|Consolidated goodwill                          |  | 1,455,130  |   | 1,455,133  |  
|Amounts due by affiliates                      |  | 262,421    |   | 275,562    |  
|                                               |  |            |   |            |  
|Unallocated assets                             |  | 1,717,551  |   | 1,730,695  |  
|                                               |  |            |   |            |  
|Net borrowing                                  |  | (2,895,346 | ) | (3,072,822 | )
|Deferred debt issuance costs                   |  | 91,628     |   | 110,650    |  
|Corporation tax                                |  | (42,147    | ) | (64,147    | )
|Capital lease creditors                        |  | (17,400    | ) | (28,280    | )
|Provisions for liabilities and charges         |  | (221,403   | ) | (234,952   | )
|Pension liabilities                            |  | (411,237   | ) | (355,309   | )
|Minority interests (equity interests)          |  | (115,192   | ) | (113,646   | )
|                                               |  |            |   |            |  
|Unallocated net liabilities                    |  | (3,611,097 | ) | (3,758,506 | )
|                                               |  |            |   |            |  
|Shareholders' equity                           |  | €869,101   |   | €895,356   |  
|                                               |  |            |   |            |  

Total
assets comprise fixed assets and current assets. Long lived assets comprise property, plant and equipment and capitalized goodwill. Net operating assets comprise total assets less
total liabilities but excluding all assets and liabilities of a financing nature.

F-16

---





Capital expenditure

|                         |  | Successor |  | Predecessor
|------------------------ |  | --------- |  | -----------
|
|
|Packaging                |  | 114,251   |  | 130,340    
|Specialities             |  | 55,117    |  | 45,499     
|                         |  |           |  |            
|Europe                   |  | 169,368   |  | 175,839    
|United States and Canada |  |          |  | 1,365      
|Latin America            |  | 36,689    |  | 30,308     
|Group centre             |  | 409       |  | 6          
|                         |  |           |  |            
|                         |  | €206,466  |  | €207,518   
|                         |  |           |  |            

Depreciation, depletion and amortization expense

|                           |  | Successor |     | Predecessor
|-------------------------- |  | --------- | --- | -----------
|
|
|Packaging                  |  | 179,610   |     | 164,762    
|Specialities               |  | 41,983    |     | 43,700     
|                           |  |           |     |            
|Europe                     |  | 221,593   |     | 208,462    
|United States and Canada   |  |          |     | 2,244      
|Latin America              |  | 40,806    |     | 42,490     
|Group centre               |  | 218       |     | 270        
|                           |  |           |     |            
|Depreciation and depletion |  | 262,617   |     | 253,466    
|Goodwill amortization      |  | 37,925    | (1) | 44,548     
|                           |  |           |     |            
|                           |  | €300,542  |     | €298,014   
|                           |  |           |     |            

---

Investments in equity method investees

|              |  | 2004    |  | 2003   
|------------- |  | ------- |  | -------
|
|Europe        |  | 60,051  |  | 57,769 
|Latin America |  | 12,244  |  | 11,516 
|              |  |         |  |        
|              |  | €72,295 |  | €69,285
|              |  |         |  |        

F-17

---



4 Net Operating Expenses

|                        |  | Successor  |   | Predecessor |  
|----------------------- |  | ---------- | - | ----------- | -
|
|
|Distribution costs      |  | 349,047    |   | 337,489     |  
|Administrative expenses |  | 664,303    |   | 647,734     |  
|Other operating income  |  | (2,786     | ) | (2,878      | )
|                        |  |            |   |             |  
|                        |  | €1,010,564 |   | €982,345    |  
|                        |  |            |   |             |  

In
2003, a gain of €18 million on the sale of development land at The K Club was netted against administrative expenses.

5 Exceptional Items

|                                        |  | Successor |   | Predecessor |  
|--------------------------------------- |  | --------- | - | ----------- | -
|
|
|Group                                   |  |           |   |             |  
|Reorganization and restructuring costs  |  | (39,430   | ) | (35,006     | )
|Income on sale of assets and operations |  | 22,173    |   | 5,560       |  
|                                        |  |           |   |             |  
|                                        |  | €(17,257  | ) | €(29,446    | )
|                                        |  |           |   |             |  

|                               |  | Successor |  | Predecessor | 
|------------------------------ |  | --------- |  | ----------- | 
|
|
|Associates                     |  |           |  |             | 
|Merger and restructuring costs |  |          |  |            | 
|Debt extinguishment costs      |  |          |  |            | 
|                               |  |           |  |             | 
|                               |  |          |  |            | 
|                               |  |           |  |             | 

Group

The Group has recorded costs of €39,430,000 in 2004, representing reorganization and restructuring costs mainly in the European Packaging
division. This figure includes redundancy, closure and reorganization costs. The main closure costs relate to our Cordoba mill in Spain, which was permanently closed in the third quarter of 2004, and
to our Tamworth corrugated plant and Witham cartons plant in the United Kingdom, for which closures were announced in the final quarter of 2004. The related tax relief of €4,048,000 is
included in Taxes on income.

F-18

---



The
Group has reported a gain of €22,173,000 in respect of the sale of the Botanic Road property in Dublin, the sale of surplus property in Italy and Spain and the
disposal of our investment in Cartonnerie de Valois. The related tax charge of €1,939,000 is included in Taxes on income.

In
2003, the Group recorded costs of €35,006,000 representing reorganization and restructuring costs mainly in the European Packaging division. This figure includes
redundancy, closure and reorganization costs. The main closure costs relate to our Lestrem mill in France, which was permanently closed in October 2003. The related tax relief of
€9,367,179 is included in Taxes on income. The Group has reported a gain of €5,560,000 in respect of the disposal of its Maltese box plant and the sale of land at
Orsenigo and Asti in Italy. The related tax charge of €2,085,620 is included in Taxes on income.

6 Employees and Remuneration

The average number of persons employed by the Group by geographical area in the financial year was:

|                         |  | Successor |  | Predecessor
|------------------------ |  | --------- |  | -----------
|
|
|Europe                   |  | 22,931    |  | 22,348     
|United States and Canada |  |          |  | 639        
|Latin America            |  | 7,440     |  | 7,318      
|                         |  |           |  |            
|                         |  | 30,371    |  | 30,305     
|                         |  |           |  |            
|Associates employees     |  | 1,758     |  | 1,798      
|                         |  |           |  |            

|                          |  | Successor  |  | Predecessor
|------------------------- |  | ---------- |  | -----------
|
|
|The staff costs comprise: |  |            |  |            
|Wages and salaries        |  | 890,748    |  | 873,702    
|Social welfare            |  | 194,858    |  | 190,586    
|Pensions                  |  | 71,623     |  | 73,200     
|                          |  |            |  |            
|                          |  | €1,157,229 |  | €1,137,488 
|                          |  |            |  |            

F-19

---





7 Interest Expense

|                                                     |  | Successor |  | Predecessor
|---------------------------------------------------- |  | --------- |  | -----------
|
|
|Interest payable and similar charges:                |  |           |  |            
|On bank loans and overdrafts                         |  |           |  |            
|repayable within 5 years, by installment            |  | 25,123    |  | 26,614     
|repayable within 5 years, other than by installment |  | 2,965     |  | 3,207      
|                                                     |  |           |  |            
|                                                     |  | 28,088    |  | 29,821     
|On all other loans                                   |  | 265,553   |  | 279,547    
|                                                     |  |           |  |            
|                                                     |  | €293,641  |  | €309,368   
|                                                     |  |           |  |            

8 Income Before Taxes

|                                              |                                                         | Successor |         | Predecessor |        
|--------------------------------------------- | ------------------------------------------------------- | --------- | ------- | ----------- | -------
|
|
|Income before taxes is stated after charging: |                                                         |           |         |             |        
|                                              | Depreciation, depletion and amortization expense        |           | 300,542 |             | 298,014
|                                              |                                                         |           |         |             |        
|                                              | Auditors' remuneration (including expenses)             |           | 4,073   |             | 3,675  
|                                              |                                                         |           |         |             |        
|                                              | Operating lease rentals plant and machinery             |           | 13,042  |             | 10,404 
|                                              |                                                         |           |         |             |        
|                                              | Operating lease rentals other                           |           | 9,171   |             | 6,110  
|                                              |                                                         |           |         |             |        
|                                              | (Gain)/loss on foreign currency borrowing less deposits |           | (376    | )           | 6,401  
|                                              |                                                         |           |         |             |        
|                                              | Research and development costs                          |           | 4,924   |             | 4,979  
|                                              |                                                         |           |         |             |        
|                                              | Government grants                                       |           | 2,786   |             | 2,878  
|                                              |                                                         |           |         |             |        

Directors'
emoluments, including pension contributions amounted to €4,894,000 (2003: €3,250,000). Directors' emoluments, including pension contributions,
for the period from September 3, 2002, through December 31, 2002, amounted to €1,877,000.

The
following amounts relating to discontinued operations are included in arriving at Cost of sales and Net operating expenses in the Consolidated Statements of Operations.

|                        |                         | Successor |         | Predecessor
|----------------------- | ----------------------- | --------- | ------- | -----------
|
|
|Cost of sales:          |                         |           |         |            
|                        | Discontinued operations |           | 382,016 |            
|Net operating expenses: |                         |           |         |            
|                        | Discontinued operations |           | 71,799  |            

F-20

---



9 Taxes on income

|                                    |  | Successor |   | Predecessor |  
|----------------------------------- |  | --------- | - | ----------- | -
|
|
|Current Taxation                    |  |           |   |             |  
|Europe                              |  | (7,219    | ) | 32,463      |  
|United States and Canada            |  |          |   | (686        | )
|Latin America                       |  | 26,975    |   | 25,547      |  
|                                    |  |           |   |             |  
|                                    |  | 19,756    |   | 57,324      |  
|                                    |  |           |   |             |  
|Deferred Taxation                   |  |           |   |             |  
|Europe                              |  | 3,354     |   | 4,769       |  
|United States and Canada            |  | 8         |   | 5           |  
|Latin America                       |  | 1,257     |   | (2,811      | )
|                                    |  |           |   |             |  
|                                    |  | 4,619     |   | 1,963       |  
|                                    |  |           |   |             |  
|Taxes on income                     |  |           |   |             |  
|Holding Company and subsidiaries    |  | 24,375    |   | 59,287      |  
|Share of associates                 |  | 2,598     |   | 3,067       |  
|                                    |  |           |   |             |  
|                                    |  | €26,973   |   | €62,354     |  
|                                    |  |           |   |             |  
|Deferred taxation arises as follows |  |           |   |             |  
|Capital allowances                  |  | 3,873     |   | 1,068       |  
|Other                               |  | 746       |   | 895         |  
|                                    |  |           |   |             |  
|                                    |  | €4,619    |   | €1,963      |  
|                                    |  |           |   |             |  

Current
taxation represents corporation tax or its equivalent on the taxable income in each jurisdiction and unrelieved overseas tax on dividends. The net credit in Europe in 2004 arises
as a result of the refund of €20,527,000 in the Netherlands under the Bosal judgement. In 2004, unrelieved overseas tax on dividends amounted to €485,682 (2003:
€473,631). For the periods January 1 through September 2, 2002 and September 3 through December 31, 2002 respectively, unrelieved overseas tax on dividends
amounted to €488,827 and €108,686. In 2004, the amount of current taxation relating to Ireland was nil (2003: a credit of €3,295,000). For the periods
January 1 through September 2, 2002 and September 3 through December 31, 2002 respectively, the amount of current taxation relating to Ireland was
€4,667,000 and €1,100,000. In 2004, the amount of deferred taxation relating to Ireland was a credit of €3,630,000 (2003: a charge of
€5,225,000). For the periods January 1 through September 2, 2002 and September 3 through December 31, 2002 respectively, the amount of deferred taxation
relating to Ireland was nil.

The
deferred taxation charge of €4,619,000 (2003: €1,963,000) includes €635,000 (2003: €251,000) in respect of pensions.
The balance of €3,984,000 (2003: €1,712,000) is shown as a movement in the liability for Deferred Income Taxes.

The
Group has availed of a reduced taxation rate of 10%, which applies to certain manufacturing and financial service operations in Ireland. The reduced rate is due to expire in 2005 for
financial service operations and 2010 for manufacturing operations.

F-21

---



Income before tax is analyzed as follows:

|                                  |  | Successor |   | Predecessor |  
|--------------------------------- |  | --------- | - | ----------- | -
|
|
|Ireland                           |  | (30,709   | ) | (35,622     | )
|Foreign                           |  | 83,132    |   | 111,317     |  
|Associates                        |  | 11,310    |   | 10,093      |  
|Unallocated goodwill amortization |  | (37,925   | ) | (44,548     | )
|Exceptional items (Note 5)        |  | (17,257   | ) | (29,446     | )
|                                  |  |           |   |             |  
|                                  |  | €8,551    |   | €11,794     |  
|                                  |  |           |   |             |  

The
total tax charge in future periods will be affected by any changes to the corporation tax rates in force in the countries in which the Group operates. The current tax charges will
also be affected by changes in the excess of tax depreciation over book depreciation and the use of tax credits. The total tax charge for 2004 included €12,771,000 in respect of the
discontinued Munksjö specialties and tissue businesses.

No
deferred taxation is recognized on the unremitted earnings of overseas subsidiaries, joint ventures and associates; as earnings are continually reinvested by the Group, no taxation is
expected to be payable on them in the foreseeable future.

The
following table relates the applicable Republic of Ireland statutory tax rate to the effective tax rate of the Group, obtained by computing the tax charge as a percentage of income
before taxes and minority shareholders' interest:

|                                        |                                                                  | Successor |        | Predecessor |       
|--------------------------------------- | ---------------------------------------------------------------- | --------- | ------ | ----------- | ------
|
|
|Corporation tax at Irish statutory rate |                                                                  | 12.5      |        | 12.5        |       
|Adjusted for:                           |                                                                  |           |        |             |       
|                                        | Income subject to a higher rate of tax than Irish statutory rate |           | 639.6  |             | 387.6 
|                                        | Expenditure not deductible for tax purposes                      |           | 170.1  |             | 268.8 
|                                        | Tax losses unutilized/(utilized)                                 |           | 101.3  |             | (139.1
|                                        | Adjustments to tax charge in respect of previous periods         |           | (485.3 | )           | 2.8   
|                                        | Losses/(income) arising not subject to tax                       |           | (122.8 | )           | (3.9  
|                                        |                                                                  |           |        |             |       
|                                        |                                                                  | 315.4     |        | 528.7       |       
|                                        |                                                                  |           |        |             |       

F-22

---



10 Net Borrowing

|                          |  | 2004       |  | 2003      
|------------------------- |  | ---------- |  | ----------
|
|Cash at bank and in hand  |  | 248,033    |  | 179,067   
|Total borrowing (Note 19) |  | 3,143,379  |  | 3,251,889 
|                          |  |            |  |           
|                          |  | €2,895,346 |  | €3,072,822
|                          |  |            |  |           

11 Accounts Receivable and Prepayments

|                                              |  | 2004     |  | 2003    
|--------------------------------------------- |  | -------- |  | --------
|
|Amounts falling due within one year:          |  |          |  |         
|Trade receivables                             |  | 896,874  |  | 876,008 
|Less: Provision for bad and doubtful debts    |  | 52,910   |  | 54,840  
|                                              |  |          |  |         
|                                              |  | 843,964  |  | 821,168 
|Amounts owed by associates                    |  | 5,764    |  | 6,056   
|Other receivables                             |  | 37,740   |  | 37,173  
|Prepayments and accrued income                |  | 31,317   |  | 34,441  
|                                              |  |          |  |         
|                                              |  | 918,785  |  | 898,838 
|Amounts falling due after more than one year: |  |          |  |         
|Other receivables                             |  | 6,263    |  | 12,605  
|                                              |  |          |  |         
|                                              |  | €925,048 |  | €911,443
|                                              |  |          |  |         

12 Inventories

|                 |  | 2004     |  | 2003    
|---------------- |  | -------- |  | --------
|
|Raw materials    |  | 114,264  |  | 120,026 
|Work in progress |  | 22,283   |  | 26,238  
|Finished goods   |  | 184,060  |  | 204,678 
|Other            |  | 131,559  |  | 126,490 
|                 |  |          |  |         
|                 |  | €452,166 |  | €477,432
|                 |  |          |  |         

F-23

---





13 Investments

|                                 |  | 2004    |  | 2003   
|-------------------------------- |  | ------- |  | -------
|
|Associates (Note 13 (i))         |  | 72,295  |  | 69,285 
|Other investments (Note 13 (ii)) |  | 9,600   |  | 11,357 
|                                 |  |         |  |        
|                                 |  | €81,895 |  | €80,642
|                                 |  |         |  |        

13 (i): Associates

|                                |  | Share of
net assets |   | Loans  |   | Total   |  
|------------------------------- |  | ------------------- | - | ------ | - | ------- | -
|
|September 3, 2002 Acquired      |  | 142,058             |   | 8,792  |   | 150,850 |  
|Additions                       |  | 6,279               |   |       |   | 6,279   |  
|Retained earnings               |  | 4,019               |   |       |   | 4,019   |  
|Transfer to affiliates          |  | (9,523              | ) |       |   | (9,523  | )
|Repayment                       |  |                    |   | (1,368 | ) | (1,368  | )
|Reclassification                |  | 91                  |   |       |   | 91      |  
|Currency adjustment             |  | 1,079               |   | (388   | ) | 691     |  
|                                |  |                     |   |        |   |         |  
|December 31, 2002               |  | 144,003             |   | 7,036  |   | 151,039 |  
|Fair value adjustment           |  | (5,646              | ) |       |   | (5,646  | )
|Additions                       |  | 4,089               |   |       |   | 4,089   |  
|Acquisitions                    |  | 763                 |   |       |   | 763     |  
|Retained earnings               |  | 4,603               |   |       |   | 4,603   |  
|Sales                           |  | (41,656             | ) |       |   | (41,656 | )
|Repayment                       |  |                    |   | (6,728 | ) | (6,728  | )
|Reclassification on acquisition |  | (35,030             | ) |       |   | (35,030 | )
|Currency adjustment             |  | (2,153              | ) | 4      |   | (2,149  | )
|                                |  |                     |   |        |   |         |  
|December 31, 2003               |  | 68,973              |   | 312    |   | 69,285  |  
|Additions                       |  | 441                 |   |       |   | 441     |  
|Retained earnings               |  | 3,944               |   |       |   | 3,944   |  
|Sales                           |  | (124                | ) |       |   | (124    | )
|Reclassification                |  | (414                | ) |       |   | (414    | )
|Currency adjustment             |  | (837                | ) |       |   | (837    | )
|                                |  |                     |   |        |   |         |  
|December 31, 2004               |  | €71,983             |   | €312   |   | €72,295 |  
|                                |  |                     |   |        |   |         |  

We
have one remaining significant associateDuropack AG in Austria, of which we own 40%.

F-24

---



13 (ii): Other Investments

|                                     |  | Listed*
Cost |   | Unlisted
Cost |   | Total   |  
|------------------------------------ |  | ------------ | - | ------------- | - | ------- | -
|
|September 3, 2002 Acquired           |  | 6,717        |   | 74,940        |   | 81,657  |  
|Additions                            |  | 753          |   | 583           |   | 1,336   |  
|Transfer to affiliates               |  |             |   | (68,090       | ) | (68,090 | )
|Reclassification                     |  | (467         | ) | 32            |   | (435    | )
|Sales                                |  | (52          | ) | (24           | ) | (76     | )
|Write off to statement of operations |  | (21          | ) |              |   | (21     | )
|Currency adjustment                  |  | (4           | ) | (163          | ) | (167    | )
|                                     |  |              |   |               |   |         |  
|December 31, 2002                    |  | 6,926        |   | 7,278         |   | 14,204  |  
|Additions                            |  | 392          |   | 269           |   | 661     |  
|Acquisitions                         |  | 19           |   | 2,834         |   | 2,853   |  
|Reclassification                     |  | 38           |   | (5,260        | ) | (5,222  | )
|Sales                                |  | (787         | ) | (16           | ) | (803    | )
|Currency adjustment                  |  | (15          | ) | (321          | ) | (336    | )
|                                     |  |              |   |               |   |         |  
|December 31, 2003                    |  | 6,573        |   | 4,784         |   | 11,357  |  
|Additions                            |  | 231          |   | 541           |   | 772     |  
|Transfers                            |  |             |   | (14           | ) | (14     | )
|Reclassification                     |  |             |   | (1,426        | ) | (1,426  | )
|Sales                                |  | (509         | ) | (465          | ) | (974    | )
|Currency adjustment                  |  | 8            |   | (123          | ) | (115    | )
|                                     |  |              |   |               |   |         |  
|December 31, 2004                    |  | €6,303       |   | €3,297        |   | €9,600  |  
|                                     |  |              |   |               |   |         |  

---

Other investments are stated at cost. The market value of the listed investments at December 31, 2004 was €6,304,000 (2003:
€6,545,000; 2002: €7,028,000).

F-25

---



14 Property, Plant and Equipment

|                                  |  | Land & Buildings |   |         |   |            |  
|--------------------------------- |  | ---------------- | - | ------- | - | ---------- | -
|
|
|
|Cost or valuation                 |  |                  |   |         |   |            |  
|September 3, 2002 Acquired        |  | 897,687          |   | 33,821  |   | 3,058,488  |  
|Additions                         |  | 12,374           |   |        |   | 76,420     |  
|Retirements                       |  | (4,466           | ) | (2      | ) | (37,962    | )
|Reclassification                  |  | 23,810           |   |        |   | (11,693    | )
|Transfer to affiliates            |  | (52,745          | ) |        |   | (104,000   | )
|Currency adjustment               |  | (15,366          | ) | (103    | ) | (67,255    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2002                 |  | 861,294          |   | 33,716  |   | 2,913,998  |  
|                                  |  |                  |   |         |   |            |  
|Fair value adjustment             |  | 97,459           |   |        |   | 97,670     |  
|Reclassification                  |  | 8,404            |   | (329    | ) | (46,191    | )
|Acquisitions                      |  | 93,412           |   | 6,562   |   | 169,411    |  
|Additions                         |  | 21,354           |   |        |   | 179,652    |  
|Businesses sold                   |  |                 |   |        |   | (165,386   | )
|Retirements                       |  | (16,217          | ) | (302    | ) | (82,874    | )
|Currency adjustment               |  | (47,025          | ) | (1,494  | ) | (153,406   | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2003                 |  | 1,018,681        |   | 38,153  |   | 2,912,874  |  
|                                  |  |                  |   |         |   |            |  
|Fair value adjustment             |  |                 |   |        |   | 1,195      |  
|Reclassification                  |  | 8,849            |   | (8,305  | ) | (17,952    | )
|Additions                         |  | 27,076           |   | 2,950   |   | 167,634    |  
|Retirements                       |  | (10,567          | ) | (2,726  | ) | (66,863    | )
|Currency adjustment               |  | (14,254          | ) | 158     |   | (44,416    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2004                 |  | 1,029,785        |   | 30,230  |   | 2,952,472  |  
|                                  |  |                  |   |         |   |            |  
|Depreciation                      |  |                  |   |         |   |            |  
|September 3, 2002 Acquired        |  | 146,042          |   | 7,814   |   | 1,555,428  |  
|Charged                           |  | 12,093           |   | 333     |   | 67,449     |  
|Retirements                       |  | (1,989           | ) | 3       |   | (34,054    | )
|Reclassification                  |  | 687              |   |        |   | (5,116     | )
|Transfer to affiliates            |  | (11,173          | ) |        |   | (36,906    | )
|Currency adjustment               |  | (3,743           | ) | (5      | ) | (40,161    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2002                 |  | 141,917          |   | 8,145   |   | 1,506,640  |  
|                                  |  |                  |   |         |   |            |  
|Reclassification                  |  | (1,159           | ) | (92     | ) | (43,525    | )
|Charged                           |  | 25,141           |   | 1,231   |   | 220,438    |  
|Businesses sold                   |  |                 |   |        |   | (96,144    | )
|Retirements                       |  | (4,494           | ) | (316    | ) | (72,059    | )
|Currency adjustment               |  | (9,542           | ) | (84     | ) | (91,825    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2003                 |  | 151,863          |   | 8,884   |   | 1,423,525  |  
|                                  |  |                  |   |         |   |            |  
|Reclassification                  |  | (4,787           | ) | (2,621  | ) | (6,473     | )
|Charged                           |  | 27,895           |   | 1,141   |   | 227,503    |  
|Retirements                       |  | (1,882           | ) | (713    | ) | (64,287    | )
|Currency adjustment               |  | (3,487           | ) | 141     |   | (29,731    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2004                 |  | 169,602          |   | 6,832   |   | 1,550,537  |  
|                                  |  |                  |   |         |   |            |  
|Net book amount December 31, 2004 |  | €860,183         |   | €23,398 |   | €1,401,935 |  
|                                  |  |                  |   |         |   |            |  
|Net book amount December 31, 2003 |  | €866,818         |   | €29,269 |   | €1,489,349 |  
|                                  |  |                  |   |         |   |            |  
|Net book amount December 31, 2002 |  | €719,377         |   | €25,571 |   | €1,407,358 |  
|                                  |  |                  |   |         |   |            |  

F-26

---



|                                  |  | Timberland |  
|--------------------------------- |  | ---------- | -
|
|September 3, 2002 Acquired        |  | 66,854     |  
|Additions                         |  | 2,345      |  
|Depletion                         |  | (2,696     | )
|Currency adjustment               |  | (4,555     | )
|                                  |  |            |  
|December 31, 2002                 |  | 61,948     |  
|Additions                         |  | 6,512      |  
|Fair value adjustment             |  | (945       | )
|Depletion                         |  | (6,656     | )
|Currency adjustment               |  | (10,349    | )
|                                  |  |            |  
|December 31, 2003                 |  | 50,510     |  
|Additions                         |  | 8,806      |  
|Depletion                         |  | (6,078     | )
|Currency adjustment               |  | (3,896     | )
|                                  |  |            |  
|December 31, 2004                 |  | €49,342    |  
|                                  |  |            |  
|Net book amount December 31, 2004 |  | €2,334,858 |  
|                                  |  |            |  
|Net book amount December 31, 2003 |  | €2,435,946 |  
|                                  |  |            |  
|Net book amount December 31, 2002 |  | €2,214,254 |  
|                                  |  |            |  

Land and Buildings

Included in tangible assets is an amount for land of €282,021,000 (2003: €288,434,000; 2002: €243,964,000).

Capitalized leased property, plant and equipment

Included in the net book amount of tangible assets is an amount for capitalized leased assets of €50,355,000 (2003: €65,687,000;
2002: €70,981,000). The depreciation charge for capitalized leased assets for 2004 was €10,139,000 and the related finance charges amounted to
€1,962,000. The depreciation charge for capitalized leased assets for 2003 was €10,794,000 and the related finance charges amounted to €2,164,000. The
depreciation charge for capitalized leased assets for the periods January 1, 2002 through September 2, 2002 and September 3, 2002 through December 31, 2002 was
€8,866,000 and €3,799,000 respectively and the related finance charges amounted to €1,186,000 and €570,000 respectively.

F-27

---





15 Intangible Assets

|                                         |  | Goodwill   |  
|---------------------------------------- |  | ---------- | -
|
|September 3, 2002 Arising on Acquisition |  | 1,558,994  |  
|Amortization                             |  | (10,090    | )
|Currency adjustment                      |  | (5,359     | )
|                                         |  |            |  
|December 31, 2002                        |  | 1,543,545  |  
|Acquisitions                             |  | 174,659    |  
|Disposals                                |  | (80,543    | )
|Fair value adjustments                   |  | (142,723   | )
|Amortization                             |  | (44,548    | )
|Currency adjustment                      |  | 4,743      |  
|                                         |  |            |  
|December 31, 2003                        |  | 1,455,133  |  
|Acquisitions                             |  | 2,731      |  
|Disposals                                |  | (2,586     | )
|Fair value adjustments                   |  | 40,457     |  
|Amortization                             |  | (37,925    | )
|Currency adjustment                      |  | (2,680     | )
|                                         |  |            |  
|December 31, 2004                        |  | €1,455,130 |  
|                                         |  |            |  

Accumulated
amortization at December 31, 2004 and 2003 was €75,110,000 and €37,292,000 respectively.

16 Accounts Payable and Accrued Liabilities

|                                            |  | 2004       |  | 2003      
|------------------------------------------- |  | ---------- |  | ----------
|
|Trade payables                              |  | 652,744    |  | 603,947   
|Amounts owed to associatestrading balances |  | 3,683      |  | 3,239     
|Amounts due to affiliates                   |  | 1,154      |  |          
|Taxation creditors (Note 17)                |  | 70,829     |  | 86,975    
|Deferred acquisition consideration          |  | 2,330      |  | 3,178     
|Social welfare                              |  | 48,740     |  | 51,450    
|Accruals                                    |  | 189,079    |  | 200,051   
|Capital payables                            |  | 29,305     |  | 23,372    
|Other payables                              |  | 62,497     |  | 59,076    
|Capitalized lease obligations               |  | 4,470      |  | 13,354    
|                                            |  |            |  |           
|                                            |  | €1,064,831 |  | €1,044,642
|                                            |  |            |  |           

17 Taxation Creditors

|                          |  | 2004    |   | 2003    |  
|------------------------- |  | ------- | - | ------- | -
|
|Current taxation          |  | 42,147  |   | 64,147  |  
|Payroll taxes             |  | 29,256  |   | 27,593  |  
|VAT and other sales taxes |  | (574    | ) | (4,765  | )
|                          |  |         |   |         |  
|                          |  | €70,829 |   | €86,975 |  
|                          |  |         |   |         |  

F-28

---



18 Long Term Debt and Other Long Term Liabilities

|                                                 |  | 2004       |   | 2003       |  
|------------------------------------------------ |  | ---------- | - | ---------- | -
|
|Borrowingdue after more than one year (Note 19) |  | 3,038,538  |   | 3,118,074  |  
|Deferred debt issuance costs                     |  | (91,628    | ) | (110,650   | )
|Capitalized lease obligations                    |  | 12,930     |   | 14,926     |  
|                                                 |  |            |   |            |  
|                                                 |  | €2,959,840 |   | €3,022,350 |  
|                                                 |  |            |   |            |  

19 Borrowing

Analysis of Net Debt

|                                                          |                                                                          | 2004       |         | 2003       |        
|--------------------------------------------------------- | ------------------------------------------------------------------------ | ---------- | ------- | ---------- | -------
|
|Senior credit facility:                                   |                                                                          |            |         |            |        
|                                                          | Revolving credit facility(1)interest at relevant interbank rate + 2.25% |            |        |            |       
|                                                          | Tranche A Term loan(2a)interest at relevant interbank rate + 2.25%      |            | 275,090 |            | 530,231
|                                                          | Tranche B Term loan(2b)interest at relevant interbank rate + 2.75%      |            | 444,068 |            | 469,178
|                                                          | Tranche C Term loan(2c)interest at relevant interbank rate + 3.25%      |            | 450,262 |            | 469,178
|Yankee bonds including accrued interest(3)                |                                                                          | 416,245    |         | 415,971    |        
|Bank loans and overdrafts/(cash)                          |                                                                          | (155,812   | )       | (68,326    | )      
|                                                          |                                                                          |            |         |            |        
|Total subsidiary debt                                     |                                                                          | 1,429,853  |         | 1,816,232  |        
|Receivables securitization floating rate notes 2011(4)    |                                                                          | 210,000    |         |           |        
|                                                          |                                                                          |            |         |            |        
|Total subsidiary debt including securitization notes 2011 |                                                                          | 1,639,853  |         | 1,816,232  |        
|2012 Bonds (including accrued interest)(5)                |                                                                          | 965,645    |         | 998,689    |        
|                                                          |                                                                          |            |         |            |        
|Total senior debt                                         |                                                                          | 2,605,498  |         | 2,814,921  |        
|PIK units (including accrued interest)(6)                 |                                                                          | 289,848    |         | 257,901    |        
|                                                          |                                                                          |            |         |            |        
|Net debt                                                  |                                                                          | 2,895,346  |         | 3,072,822  |        
|Leases                                                    |                                                                          | 17,400     |         | 28,280     |        
|                                                          |                                                                          |            |         |            |        
|Net debt including leases                                 |                                                                          | €2,912,746 |         | €3,101,102 |        
|                                                          |                                                                          |            |         |            |        

---

F-29

---



|                                           |                           | 2004       |         | 2003      
|------------------------------------------ | ------------------------- | ---------- | ------- | ----------
|
|
|Analysis of borrowing by year of repayment |                           |            |         |           
|Within one year                            |                           | 78,283     |         | 26,558    
|                                           |                           |            |         |           
|Between 1 and 2 years                      |                           | 75,515     |         | 6,277     
|Between 2 and 3 years                      |                           | 171,966    |         | 2,429     
|Between 3 and 4 years                      |                           | 118,411    |         | 1,938     
|Between 4 and 5 years                      |                           | 163,427    |         | 1,738     
|Thereafter                                 |                           |            |         |           
|                                           | By installment            |            |        |           
|                                           | Other than by installment |            | 837,491 |           
|                                           |                           |            |         |           
|Due after more than one year               |                           | 1,366,810  |         | 1,671,728 
|                                           |                           |            |         |           
|Total borrowing                            |                           | €1,445,093 |         | €1,698,286
|                                           |                           |            |         |           

|                                     |  | 2004     |  | 2003      
|------------------------------------ |  | -------- |  | ----------
|
|
|Analysis of borrowing                |  |          |  |           
|Secured bank loans and overdrafts:   |  |          |  |           
|Overseas loans                       |  | 7,453    |  | 7,496     
|Domestic loans                       |  | 29,514   |  | 1,355,521 
|                                     |  |          |  |           
|                                     |  | 36,967   |  | 1,363,017 
|Unsecured bank loans and overdrafts: |  |          |  |           
|Overseas loans                       |  | 24,855   |  | 3,793     
|Domestic loans                       |  | 16,461   |  |          
|                                     |  |          |  |           
|                                     |  | 41,316   |  | 3,793     
|                                     |  |          |  |           
|Total bank loans and overdrafts      |  | 78,283   |  | 1,366,810 
|                                     |  |          |  |           
|Secured other loans                  |  |         |  | 462,912   
|Unsecured other loans                |  | 26,558   |  | 1,208,816 
|                                     |  |          |  |           
|Total other loans                    |  | 26,558   |  | 1,671,728 
|                                     |  |          |  |           
|Total borrowing                      |  | €104,841 |  | €3,038,538
|                                     |  |          |  |           

Security
comprises fixed and floating charges over the assets of certain subsidiaries and pledges over the Group's shareholding in certain of its subsidiaries. The gross amount of
receivables collateralizing the receivables securitization at December 31, 2004 was €261,225,000. At December 31, 2004 cash of €12,655,000 was in
securitization bank accounts which was not available for transfer to other group subsidiaries.

F-30

---





Included in secured other loans are the following long term obligations:

|                                                        |  | '000
|------------------------------------------------------- |  | ----
|Guaranteed Debentures 7.50% due 2025                    |  | $   
|Receivables securitization floating rate notes due 2011 |  |     

Included
in unsecured other loans are the following long term obligations:

|                                                     |  | '000
|---------------------------------------------------- |  | ----
|Senior Notes 10.125% due 2012                        |  |     
|Senior Notes 9.625% due 2012                         |  | $   
|100,000 € units of 15.5% subordinated notes due 2013 |  |     
|150,000 $ units of 15.5% subordinated notes due 2013 |  | $   

Committed
facilities amounted to €3,497,533,000 (2003: €3,517,760,000) of which €3,069,466,000 (2003: €3,091,589,000) were
utilized at December 31, 2004. The weighted average period until maturity of undrawn committed facilities is 4.6 years (2003: 5.7 years).

Maturity of Undrawn Committed Facilities

|                      |  | 2004     |  | 2003    
|--------------------- |  | -------- |  | --------
|
|Within 1 year         |  | 3,067    |  |        
|Between 1 and 2 years |  |         |  | 1,171   
|More than 2 years     |  | 425,000  |  | 425,000 
|                      |  |          |  |         
|                      |  | €428,067 |  | €426,171
|                      |  |          |  |         

Financial instruments and risk management

The operating parameters and policies of treasury management are established under board authority. The formal treasury policy covers the areas of funding,
counterparty risk, foreign exchange, controls and derivatives. Risk arising on counterparty default is controlled within a framework of dealing with high quality institutions that meet certain minimum
criteria. The Group uses derivative instruments in the management of interest rate and currency risk.

The
Group's financial instruments, other than derivatives, comprise borrowing, cash and liquid resources, and various items, such as trade debtors, trade creditors etc, that arise
directly from its operations. The Group uses derivative financial instruments primarily to manage its exposure to market risks from changes in interest and foreign exchange rates. The Group does not
enter into or issue derivative financial instruments for trading purposes. The Group's policy is to centrally manage interest rate and currency exposure.

(a)   Interest rate risk management

The Group manages interest rate exposure to achieve an appropriate balance of fixed and variable rate funding. To achieve this objective, the Group enters into
interest rate swaps, options and forward rate agreements. Interest rate swap agreements are used to change the interest receivable or payable on the Group's underlying cash and borrowing from variable
to fixed rates or from fixed to variable

F-31

---



rates.
At the year end, 73% (2003: 70%) of the Group's borrowing was at fixed rates after taking account of interest rate swaps. The weighted average interest rate on borrowing outstanding at the year
end was 7.91% (2003: 7.89%). The weighted average interest rate on short term borrowing was 6.11% (2003: 5.26%).

Outstanding
interest rate swap agreements at December 31, 2004 are summarized as follows:

|Currency |  | Notional
Principal
(Millions) |  | Termination
Dates |  | % Fixed
Payable |  | % Variable
Receivable |     | % Fixed
Receivable |  | % Variable
Payable |    
|-------- |  | ----------------------------- |  | ----------------- |  | --------------- |  | --------------------- | --- | ------------------ |  | ------------------ | ---
|EUR      |  | 200                           |  | 2005              |  | 3.43-3.485      |  | Euribor               | (1) |                   |  |                   |    
|EUR      |  | 110                           |  | 2006              |  | 3.49-4.37       |  | Euribor               |     |                   |  |                   |    
|SEK      |  | 94                            |  | 2006              |  |                |  |                      |     | 5.24               |  | Stibor             | (2)
|EUR      |  | 700                           |  | 2007              |  | 3.39-3.62       |  | Euribor               |     |                   |  |                   |    

---

Outstanding interest rate swap agreements at December 31, 2003 are summarized as follows:

|Currency |  | Notional
Principal
(Millions) |  | Termination
Dates |  | % Fixed
Payable |  | % Variable
Receivable |  | % Fixed
Receivable |  | % Variable
Payable
|-------- |  | ----------------------------- |  | ----------------- |  | --------------- |  | --------------------- |  | ------------------ |  | ------------------
|EUR      |  | 600                           |  | 2005              |  | 3.43-3.505      |  | Euribor               |  |                   |  |                  
|EUR      |  | 10                            |  | 2006              |  | 4.37            |  | Euribor               |  |                   |  |                  
|SEK      |  | 94                            |  | 2006              |  |                |  |                      |  | 5.24               |  | Stibor            
|EUR      |  | 400                           |  | 2007              |  | 3.39-3.457      |  | Euribor               |  |                   |  |                  

After taking into account the various interest rate swaps and currency swaps entered into by the Group, the interest rate profile of the Group's
financial liabilities at December 31, 2004 was:

|              |  |        |  |      |  |        |  | Fixed rate financial liabilities
|------------- |  | ------ |  | ---- |  | ------ |  | --------------------------------
|
|
|Euro          |  | 2,345  |  | 628  |  | 1,717  |  | 8.25                            
|Sterling      |  | 77     |  | 77   |  |       |  |                                 
|US Dollar     |  | 595    |  | 23   |  | 572    |  | 11.21                           
|Norwegian     |  | 43     |  | 43   |  |       |  |                                 
|Swedish Krona |  | 79     |  | 79   |  |       |  |                                 
|Other         |  | 22     |  | 18   |  | 4      |  | 13.20                           
|              |  |        |  |      |  |        |  |                                 
|Total         |  | €3,161 |  | €868 |  | €2,293 |  |                                 
|              |  |        |  |      |  |        |  |                                 

F-32

---



(b)   Foreign exchange risk management

The Group manages its balance sheet having regard to the currency exposures arising from its assets being denominated in a wide range of currencies. To this end,
where foreign currency assets are funded by borrowing, such borrowing is generally sourced in the currency of the related assets. The Group also hedges a portion of its currency exposure through the
use of currency swaps and forward contracts. At
December 31, 2004 the Group had entered into €163 million (2003: €185 million) currency equivalent of forward contracts and
€66 million (2003: €85 million) equivalent of options contracts in respect of its day to day trading.

Outstanding
currency swap agreements at December 31, 2004 are summarized as follows:

|Currency swapped |     | Currency received |     | Maturity date |  | Interest rate paid |  | Interest rate received
|---------------- | --- | ----------------- | --- | ------------- |  | ------------------ |  | ----------------------
|
|USD              | 195 |                   | EUR | 200           |  | 2007               |  | Euribor + 318         
|USD              | 204 |                   | EUR | 190           |  | 2012               |  | 9.6481                
|USD              | 231 |                   | EUR | 199           |  | 2005               |  | Euribor + 464         
|USD              | 136 |                   | EUR | 101           |  | 2005               |  | Euribor + 81          
|USD              | 35  |                   | EUR | 25            |  | 2005               |  | Euribor + 708         
|USD              | 113 |                   | SEK | 749           |  | 2005               |  | Stibor + 597          
|USD              | 5   |                   | SEK | 33            |  | 2005               |  | Stibor + 110          

---

Outstanding currency swap agreements at December 31, 2003 are summarized as follows:

|Currency swapped |     | Currency received |     | Maturity date |  | Interest rate paid |  | Interest rate received
|---------------- | --- | ----------------- | --- | ------------- |  | ------------------ |  | ----------------------
|
|USD              | 195 |                   | EUR | 200           |  | 2007               |  | Euribor + 318         
|USD              | 204 |                   | EUR | 190           |  | 2012               |  | 9.6481                
|USD              | 231 |                   | EUR | 199           |  | 2005               |  | Euribor + 464         
|USD              | 136 |                   | EUR | 101           |  | 2005               |  | Euribor + 81          
|USD              | 35  |                   | EUR | 25            |  | 2005               |  | Euribor + 708         
|USD              | 113 |                   | SEK | 749           |  | 2005               |  | Stibor + 597          
|USD              | 5   |                   | SEK | 33            |  | 2005               |  | Stibor + 110          

At
December 31, 2004 the Group had also entered into currency swaps of €90 million equivalent (2003: €187 million) as part of its
short term liquidity management.

Excluding
the Group's Latin American operations, there were no significant transactional currency exposures at December 31, 2004, that gave rise to net currency gains and losses
recognized in the Consolidated Statements of Operations. Such exposures comprise the monetary assets and liabilities of the Group that are not denominated in the operating (or "functional") currency
of the operating unit involved. As at December 31, 2004, transactional currency exposures in the Group's Latin American operations amounted to €19 million (2003:
€20 million).

F-33

---



(c)   Fair value of financial instruments

The carrying amounts and estimated fair values of the material financial instruments of the Group are as follows:

|                                                 |  | 2004      |  | 2003      |  
|------------------------------------------------ |  | --------- |  | --------- | -
|
|
|Assets                                           |  |           |  |           |  
|Cash, short term deposits and liquid investments |  | 248,033   |  | 248,033   |  
|Accounts receivable and prepayments              |  | 918,785   |  | 918,785   |  
|Publicly traded investments                      |  | 6,303     |  | 6,304     |  
|Liabilities                                      |  |           |  |           |  
|Short term debt                                  |  | 104,841   |  | 104,841   |  
|Accounts payable and accrued liabilities         |  | 1,064,831 |  | 1,064,831 |  
|Medium and long term debt                        |  | 3,038,538 |  | 3,196,014 |  
|Derivative financial instruments                 |  |           |  |           |  
|Interest rate swap agreements                    |  |           |  | (57,397   | )
|Currency swap agreements                         |  |           |  | (125,743  | )
|Foreign exchange contracts                       |  |           |  | 12,068    |  
|Energy/pulp hedging contracts                    |  |           |  | (6,024    | )

The
following methods and assumptions were used by the Group in estimating its fair value disclosures for financial instruments:

Cash, short term deposits and liquid investments, debtors and creditors:

The carrying amounts reported in the Balance Sheets approximates fair value because of the short maturity of these instruments.

Listed investments:

These are valued based on quoted prices.

Short term debt and medium and long term debt:

The fair value of the Group's debt is estimated using either the replacement cost of equivalent instruments or discounted cash flow analysis, based on the Group's
current incremental borrowing rates for similar types of borrowing arrangements and maturities.

Interest rate swap agreements:

The fair value of the Group's interest rate swap agreements is estimated using discounted cash flow analysis. In addition the fair value amount includes the
interest rate component of currency swaps.

F-34

---



Currency swap agreements and foreign exchange contracts:

The fair value of these instruments is based on the estimated replacement cost of equivalent instruments at the balance sheet date.

Gains
and losses on instruments used for hedging are not recognized until the exposure that is being hedged is itself recognized. Unrecognized gains and losses on instruments used for
hedging, and the movement therein, are as follows:

|                                                                                   |  | Gains |   | Losses |  | Total net
gains/(losses) |  
|---------------------------------------------------------------------------------- |  | ----- | - | ------ |  | ------------------------ | -
|
|Unrecognized gains and losses on hedges at December 31, 2003                       |  | 40    |   | 32     |  | 8                        |  
|Gains and losses arising in previous years that were recognized in 2004            |  | 25    |   | 16     |  | 9                        |  
|                                                                                   |  |       |   |        |  |                          |  
|Gains and losses arising before December 31, 2003 that were not recognized in 2004 |  | 15    |   | 16     |  | (1                       | )
|Gains and losses arising in 2004 that were not recognized in 2004                  |  | (9    | ) | 48     |  | (57                      | )
|                                                                                   |  |       |   |        |  |                          |  
|Unrecognized gains and losses on hedges at December 31, 2004                       |  | €6    |   | €64    |  | €(58                     | )
|                                                                                   |  |       |   |        |  |                          |  
|Of which:                                                                          |  |       |   |        |  |                          |  
|Gains and losses expected to be recognized in 2005                                 |  | 5     |   | 23     |  | (18                      | )
|                                                                                   |  |       |   |        |  |                          |  
|Gains and losses expected to be recognized in 2006 or later                        |  | 1     |   | 41     |  | (40                      | )
|                                                                                   |  |       |   |        |  |                          |  

(d)   Credit Risk

Potential concentrations of credit risk to the Group consist principally of cash deposits, short term investments and trade debtors. The Group only deposits cash
surpluses with quality credit rated banks and institutions that meet certain criteria and by policy limits the amount of credit exposure to any one bank or institution. Trade debtors comprise a large,
widespread customer base. The Group mitigates the risk that counterparties to derivatives will fail to perform by contracting with major financial institutions having high credit ratings and considers
the likelihood of counterparty failure to be remote. At December 31, 2004 the Group did not consider there to be any significant concentration of credit risk.

F-35

---



20 Provision for Liabilities and Charges

|                                  |  | Deferred
Income
Taxes |     | Other
Deferred
Provisions |   | Total    |  
|--------------------------------- |  | --------------------- | --- | ------------------------- | - | -------- | -
|
|September 3, 2002 Acquired        |  | 159,691               |     | 80,560                    |   | 240,251  |  
|Charge to statement of operations |  | 3,052                 |     | (7,659                    | ) | (4,607   | )
|Paid in year                      |  |                      |     | (2,061                    | ) | (2,061   | )
|Transfer to affiliates            |  |                      |     | 64                        |   | 64       |  
|Reclassification                  |  | (1,283                | )   | (5,408                    | ) | (6,691   | )
|Currency adjustment               |  | (2,564                | )   | (1,539                    | ) | (4,103   | )
|                                  |  |                       |     |                           |   |          |  
|December 31, 2002                 |  | 158,896               |     | 63,957                    |   | 222,853  |  
|Charge to statement of operations |  | 1,712                 | (1) | 5,628                     |   | 7,340    |  
|Paid in year                      |  |                      |     | 3,253                     |   | 3,253    |  
|Acquisitions                      |  | 3,626                 |     | 2,571                     |   | 6,197    |  
|Reclassification                  |  | 18,001                |     | (14,787                   | ) | 3,214    |  
|Fair value adjustments            |  | 674                   |     |                          |   | 674      |  
|Currency adjustment               |  | (6,083                | )   | (2,496                    | ) | (8,579   | )
|                                  |  |                       |     |                           |   |          |  
|December 31, 2003                 |  | 176,826               |     | 58,126                    |   | 234,952  |  
|Charge to statement of operations |  | 3,984                 | (1) | (42                       | ) | 3,942    |  
|Paid in year                      |  |                      |     | (9,769                    | ) | (9,769   | )
|Acquisitions                      |  | 1                     |     |                          |   | 1        |  
|Fair value adjustments            |  | (7,134                | )   |                          |   | (7,134   | )
|Reclassification                  |  | 4,406                 |     | (2,592                    | ) | 1,814    |  
|Currency adjustment               |  | (1,647                | )   | (756                      | ) | (2,403   | )
|                                  |  |                       |     |                           |   |          |  
|December 31, 2004                 |  | €176,436              |     | €44,967                   |   | €221,403 |  
|                                  |  |                       |     |                           |   |          |  

|                                     |  | 2004     |  | 2003     |  | 2002    
|------------------------------------ |  | -------- |  | -------- |  | --------
|
|Deferred taxation arises as follows: |  |          |  |          |  |         
|Accelerated capital allowances       |  | 158,246  |  | 112,672  |  | 108,527 
|Other timing differences             |  | 18,190   |  | 64,154   |  | 50,369  
|                                     |  |          |  |          |  |         
|                                     |  | €176,436 |  | €176,826 |  | €158,896
|                                     |  |          |  |          |  |         

---

At December 31, 2004, we had net operating loss carryforwards of €200 million (2003:
€210 million), which are available indefinitely. These loss carryforwards have a tax value of €61 million (2003: €65 million).
Valuation allowances of €30 million (2003: €50 million) have been established for a portion of these deferred tax assets. The realization of these
deferred tax assets is dependent on future taxable income. Based upon recent levels of taxable income, we expect that our deferred tax assets, net of valuation allowances, will be fully utilized.

F-36

---



21 Contingent Liabilities

In addition to litigation arising in the ordinary course of business, we are involved in certain civil and criminal proceedings in Spain arising out of a past
acquisition. In November 1988, a subsidiary of JSG acquired Industrial Cartonera, S.A., or ICSA, a Spanish incorporated company, from a subsidiary of Torras Hostench S.A., or Torras. In early
1989, JSG acquired a 35% interest in another Spanish company called Industrias del Papel y de la Celulosa, S.A., or INPACSA, a former parent of ICSA. A number of individuals associated with Torras
were charged by the public prosecutor in Madrid with diverting, for their own use, a substantial part of the purchase consideration paid by JSG for ICSA. The public prosecutor, on behalf of the
minority shareholders of INPACSA, also claimed that certain transactions, including the transfer of ICSA by INPACSA which took place prior to JSG's acquisition of ICSA, caused damage to the minority
shareholders of INPACSA. In 1998, the public prosecutor also charged JSG's Chairman, Dr. Michael W.J. Smurfit, as the representative of JSG, in these proceedings with respect to the alleged
damage to the minority shareholders of INPACSA and Torras. A JSG subsidiary is also one of a number of parties against whom secondary civil liability has been claimed.

JSG
and Smurfit International B.V. have each indemnified Dr. Smurfit against loss or liability due to such proceedings. Bonds have been posted with the Spanish court in the amount
of €47 million, which equals the amount of alleged damages, excluding interest. The maximum estimated current total exposure relating to the liabilities, including interest
through
December 31, 2002, is approximately €118 million, for which no reserve has been taken and which amount will accrue interest until payment of any final judgment.
Preliminary proceedings commenced in late March 2003 and on April 11, 2003, the court dismissed the proceedings against Dr. Smurfit, the JSG subsidiary and others. The bonds
previously posted were released and the Spanish court has now taken a lien over certain Spanish assets pending final resolution of the case. The final decision of the court was handed down in
March 2004 and confirmed the earlier dismissal with respect to Dr. Smurfit and the JSG subsidiary. The decision is being appealed to a higher court by two private complainants but not by
the public prosecutor. We cannot assure you, however, that the consequences of any adverse findings, if any, will not have a material adverse effect on our financial position or results of operations.

We
are also the subject of litigation in the Dominican Republic arising from our acquisition in 1998 of a controlling interest in a small local corrugator owned by Industria Cartonera
Dominicana. The lawsuits, alleging damages in excess of $300 million, are brought by a local competitor who is claiming loss of potential profits, as a consequence of our entry to the market.
He is also alleging breach of contract. In June 2004 we received an adverse ruling in our main lawsuit, which found for the original plaintiff but which made no determination as to damages. The
damage amount has been left for yet another court to decide. We have appealed this ruling and are challenging a number of due irregularities surrounding the ruling.

We
believe the foregoing lawsuits are without merit and are defending them vigorously.

In
July 2004, representatives of the Office of Fair Trading visited our UK operation. We understand that the investigation, which centers on the sheet feeding business, was
prompted by consumer complaints, which were filed during the UK Competition Commission's investigation of the March 2004 acquisition proposal by David S. Smith Limited for Linpac Limited, a
competitor of our sheet feeding business. The investigation is looking into high levels of pricing transparency which exist in the sector and which are a function of, inter alia, vertical integration,
SWAPs and market concentration. We are co-operating fully with the ongoing investigation.

F-37

---



22 Lease Obligations

Obligations under finance leases:

|                                                 |  | 2004    |   | 2003    |  
|------------------------------------------------ |  | ------- | - | ------- | -
|
|Payable within one year                          |  | 5,283   |   | 14,307  |  
|Payable in one to two years                      |  | 3,902   |   | 5,083   |  
|Payable in two to three years                    |  | 3,406   |   | 3,640   |  
|Payable in three to four years                   |  | 2,884   |   | 3,393   |  
|Payable in four to five years                    |  | 2,475   |   | 2,890   |  
|Payable thereafter                               |  | 1,974   |   | 2,572   |  
|                                                 |  |         |   |         |  
|Total minimum lease payments                     |  | 19,924  |   | 31,885  |  
|Less amount representing interest                |  | (2,524  | ) | (3,605  | )
|                                                 |  |         |   |         |  
|Present value of minimum lease payments          |  | €17,400 |   | €28,280 |  
|                                                 |  |         |   |         |  
|Current portion of capital lease obligations     |  | 4,470   |   | 13,354  |  
|Non-current portion of capital lease obligations |  | 12,930  |   | 14,926  |  
|                                                 |  |         |   |         |  
|                                                 |  | €17,400 |   | €28,280 |  
|                                                 |  |         |   |         |  

Commitments
under operating leases, payable in the coming year, relate to leases expiring in the following periods:

|                                   |  | Land and
Buildings |  | Other   |  | Total  
|---------------------------------- |  | ------------------ |  | ------- |  | -------
|
|Within one year                    |  | 1,126              |  | 7,286   |  | 8,412  
|Within two to five years inclusive |  | 1,513              |  | 7,125   |  | 8,638  
|Over five years                    |  | 4,615              |  | 102     |  | 4,717  
|                                   |  |                    |  |         |  |        
|                                   |  | €7,254             |  | €14,513 |  | €21,767
|                                   |  |                    |  |         |  |        

The
total commitments under non-cancelable operating leases at December 31, 2004 are as follows:

|                               |  | 2004   
|------------------------------ |  | -------
|
|Payable within one year        |  | 21,767 
|Payable in one to two years    |  | 14,594 
|Payable in two to three years  |  | 10,020 
|Payable in three to four years |  | 7,619  
|Payable in four to five years  |  | 6,097  
|Payable thereafter             |  | 27,952 
|                               |  |        
|                               |  | €88,049
|                               |  |        

F-38

---



23 Capital Commitments

The
following capital commitments authorized by the directors had not been provided for in the Group financial statements:

|                   |  | 2004     |  | 2003   
|------------------ |  | -------- |  | -------
|
|Contracted for     |  | 41,813   |  | 59,939 
|Not contracted for |  | 76,172   |  | 37,125 
|                   |  |          |  |        
|                   |  | €117,985 |  | €97,064
|                   |  |          |  |        

24 Employee Pension Plans and Similar Obligations

Successor

The Group has pension plans for its employees in many of the countries in which it operates. The major occupational pension plans are of the
defined benefit type. The Group's pension plans are accounted for in accordance with Financial Reporting Standard (FRS) 17"Retirement Benefits." FRS 17 applies to all types of
benefits that an employer provides after employees have completed their service, including pensions and other post retirement benefits. The pension cost for the Group's major occupational pension
plans has been determined using the projected unit credit method. The current agreed rates of contribution for future years are comparable to current levels.

Periodic
actuarial valuations are performed on all of the major plans, by independent professionally qualified actuaries, between December 31, 2003 and December 31, 2004.

In
general, actuarial valuations are not available for public inspection; however, the results of valuations are advised to members of the various schemes.

The
Group also operates plans in the U.S., which provide certain employees with post retirement health care benefits. Actuarial valuations of these plans were performed as at
December 31, 2003 using the projected unit credit method. The principal assumption made by the actuaries was that the per capita weighted average assumed rate of increase in covered benefits
was 10% (2003: 11%), reducing by 1% per annum until reaching the ultimate of 5% in 2009. The effect of a 1% increase or decrease in the health care trend rate would not materially increase the
accumulated post retirement benefit obligation as at December 31, 2004.

The
main financial assumptions used to calculate scheme liabilities under FRS 17 are set out below:

Major Assumptions

|                                        |  | Europe    |  | USA       |  | Latin America
|--------------------------------------- |  | --------- |  | --------- |  | -------------
|
|December 2004                           |  |           |  |           |  |              
|Rate of increase in salaries            |  | 1.504.00 |  | 3.754.00 |  | 3.506.85    
|Rate of increase to pensions in payment |  | Nil4.00  |  | Nil       |  | Nil          
|Discount rate for scheme liabilities    |  | 4.506.50 |  | 6.006.25 |  | 5.2512.00   
|Inflation                               |  | 1.254.00 |  | 2.00      |  | 2.753.50    

F-39

---





|                                        |  | Europe    |  | USA  |  | Latin America
|--------------------------------------- |  | --------- |  | ---- |  | -------------
|
|December 2003                           |  |           |  |      |  |              
|Rate of increase in salaries            |  | 1.504.00 |  | 4.00 |  | 2.007.50    
|Rate of increase to pensions in payment |  | Nil4.00  |  | Nil  |  | Nil          
|Discount rate for scheme liabilities    |  | 5.006.50 |  | 6.25 |  | 6.2512.66   
|Inflation                               |  | 1.004.00 |  | 2.25 |  | 2.754.00    

|                                        |  | Europe    |  | USA and
Canada |  | Latin America
|--------------------------------------- |  | --------- |  | -------------- |  | -------------
|
|December 2002                           |  |           |  |                |  |              
|Rate of increase in salaries            |  | 1.254.00 |  | 3.354.00      |  | 3.457.00    
|Rate of increase to pensions in payment |  | Nil2.75  |  | Nil2.00       |  | Nil          
|Discount rate for scheme liabilities    |  | 5.006.00 |  | 6.506.75      |  | 6.7510.50   
|Inflation                               |  | 1.253.00 |  | 2.002.25      |  | 3.454.50    

The
expected long term rates of return on the assets of the significant plans were as follows:

|              |  | Europe    |  | USA  |  | Latin America
|------------- |  | --------- |  | ---- |  | -------------
|
|December 2004 |  |           |  |      |  |              
|Equities      |  | 7.508.00 |  | 8.50 |  | 8.2510.50   
|Bonds         |  | 3.757.00 |  | 4.50 |  | 4.255.25    
|Property      |  | 6.507.00 |  | n/a  |  | n/a          
|Other         |  | 2.757.36 |  | 3.50 |  | 3.253.50    

|              |  | Europe    |  | USA  |  | Latin America
|------------- |  | --------- |  | ---- |  | -------------
|
|December 2003 |  |           |  |      |  |              
|Equities      |  | 8.00      |  | 8.50 |  | 8.5013.00   
|Bonds         |  | 4.517.00 |  | 4.50 |  | 4.5010.00   
|Other         |  | 3.007.00 |  | 3.50 |  | Nil3.50     

|              |  | Europe    |  | USA and
Canada |  | Latin America
|------------- |  | --------- |  | -------------- |  | -------------
|
|December 2002 |  |           |  |                |  |              
|Equities      |  | 5.008.50 |  | 9.2010.50     |  | 7.75         
|Bonds         |  | 4.615.75 |  | 5.305.50      |  | 7.00         
|Other         |  | 5.006.35 |  | 3.508.70      |  | 4.50         

F-40

---



The
market values of the assets of the schemes were as follows:

|                                    |  | Europe    |   | USA      |   | Latin America |   | Total     |  
|----------------------------------- |  | --------- | - | -------- | - | ------------- | - | --------- | -
|
|December 2004                       |  |           |   |          |   |               |   |           |  
|Equities                            |  | 299,530   |   | 16,391   |   | 8,006         |   | 323,927   |  
|Bonds                               |  | 237,519   |   | 8,890    |   | 5,999         |   | 252,408   |  
|Property                            |  | 40,117    |   |         |   |              |   | 40,117    |  
|Other                               |  | 36,536    |   | 737      |   | 1,380         |   | 38,653    |  
|                                    |  |           |   |          |   |               |   |           |  
|Total market value                  |  | 613,702   |   | 26,018   |   | 15,385        |   | 655,105   |  
|Present value of scheme liabilities |  | 1,027,593 |   | 42,844   |   | 40,224        |   | 1,110,661 |  
|                                    |  |           |   |          |   |               |   |           |  
|(Deficit) in the plans              |  | (413,891  | ) | (16,826  | ) | (24,839       | ) | (455,556  | )
|Deferred tax asset                  |  | 42,835    |   |         |   | 1,484         |   | 44,319    |  
|                                    |  |           |   |          |   |               |   |           |  
|Net pension (liability)             |  | €(371,056 | ) | €(16,826 | ) | €(23,355      | ) | €(411,237 | )
|                                    |  |           |   |          |   |               |   |           |  

|                                    |  | Europe    |   | USA      |   | Latin America |   | Total     |  
|----------------------------------- |  | --------- | - | -------- | - | ------------- | - | --------- | -
|
|December 2003                       |  |           |   |          |   |               |   |           |  
|Equities                            |  | 294,891   |   | 14,208   |   | 11,641        |   | 320,740   |  
|Bonds                               |  | 220,760   |   | 7,932    |   | 10,195        |   | 238,887   |  
|Other                               |  | 60,599    |   | 1,049    |   | 557           |   | 62,205    |  
|                                    |  |           |   |          |   |               |   |           |  
|Total market value                  |  | 576,250   |   | 23,189   |   | 22,393        |   | 621,832   |  
|Present value of scheme liabilities |  | 977,308   |   | 45,437   |   | 45,627        |   | 1,068,372 |  
|                                    |  |           |   |          |   |               |   |           |  
|(Deficit) in the plans              |  | (401,058  | ) | (22,248  | ) | (23,234       | ) | (446,540  | )
|Deferred tax asset                  |  | 83,285    |   |         |   | 7,946         |   | 91,231    |  
|                                    |  |           |   |          |   |               |   |           |  
|Net pension (liability)             |  | €(317,773 | ) | €(22,248 | ) | €(15,288      | ) | €(355,309 | )
|                                    |  |           |   |          |   |               |   |           |  

|                                    |  | Europe    |   | USA and
Canada |   | Latin America |   | Total     |  
|----------------------------------- |  | --------- | - | -------------- | - | ------------- | - | --------- | -
|
|December 2002                       |  |           |   |                |   |               |   |           |  
|Equities                            |  | 252,291   |   | 71,428         |   | 11,342        |   | 335,061   |  
|Bonds                               |  | 196,362   |   | 34,171         |   | 3,021         |   | 233,554   |  
|Other                               |  | 92,848    |   | 11,438         |   | 11,567        |   | 115,853   |  
|                                    |  |           |   |                |   |               |   |           |  
|Total market value                  |  | 541,501   |   | 117,037        |   | 25,930        |   | 684,468   |  
|Present value of scheme liabilities |  | 795,088   |   | 204,488        |   | 36,929        |   | 1,036,505 |  
|                                    |  |           |   |                |   |               |   |           |  
|(Deficit) in the plans              |  | (253,587  | ) | (87,451        | ) | (10,999       | ) | (352,037  | )
|Deferred tax asset/(liability)      |  | 35,636    |   | 23,713         |   | (2,008        | ) | 57,341    |  
|                                    |  |           |   |                |   |               |   |           |  
|Net pension (liability)             |  | €(217,951 | ) | €(63,738       | ) | €(13,007      | ) | €(294,696 | )
|                                    |  |           |   |                |   |               |   |           |  

F-41

---



The
following tables set out the components of the defined benefit cost:

Analysis of the amount charged to operating income

|Year ended December 31, 2004         |  | €000    |  
|------------------------------------ |  | ------- | -
|Current service cost                 |  | 37,163  |  
|Past service benefit                 |  | (1,793  | )
|Gain on settlements and curtailments |  | (542    | )
|                                     |  |         |  
|Total operating charge               |  | €34,828 |  
|                                     |  |         |  

|Year ended December 31, 2003 |  | €000   
|---------------------------- |  | -------
|Current service cost         |  | 36,593 
|Past service cost            |  | 655    
|                             |  |        
|Total operating charge       |  | €37,248
|                             |  |        

|Period from September 3, 2002 through December 31, 2002 |  | €000   
|------------------------------------------------------- |  | -------
|Current service cost                                    |  | 11,011 
|Past service cost                                       |  | 1,533  
|                                                        |  |        
|Total operating charge                                  |  | €12,544
|                                                        |  |        

Analysis of the amount charged to other financial expense

|Year ended December 31, 2004                |  | €000    |  
|------------------------------------------- |  | ------- | -
|Expected return on pension scheme assets    |  | (40,137 | )
|Interest cost on pension scheme liabilities |  | 55,855  |  
|                                            |  |         |  
|Net charge                                  |  | €15,718 |  
|                                            |  |         |  

|Year ended December 31, 2003                |  | €000    |  
|------------------------------------------- |  | ------- | -
|Expected return on pension scheme assets    |  | (39,460 | )
|Interest cost on pension scheme liabilities |  | 54,726  |  
|                                            |  |         |  
|Net charge                                  |  | €15,266 |  
|                                            |  |         |  

|Period from September 3, 2002 through December 31, 2002 |  | €000    |  
|------------------------------------------------------- |  | ------- | -
|Expected return on pension scheme assets                |  | (19,048 | )
|Interest cost on pension scheme liabilities             |  | 29,823  |  
|                                                        |  |         |  
|Net charge                                              |  | €10,775 |  
|                                                        |  |         |  

F-42

---



Analysis of the amount recognized in the statement of recognized gains and losses

|Year ended December 31, 2004                                              |  | €000     |  
|------------------------------------------------------------------------- |  | -------- | -
|Actual return less expected return on pension scheme assets               |  | 9,573    |  
|Net experience (losses) on scheme liabilities                             |  | (5,901   | )
|Changes in financial assumptions underlying the scheme liabilities        |  | (13,963  | )
|                                                                          |  |          |  
|Actuarial loss recognized in the statement of recognized gains and losses |  | €(10,291 | )
|                                                                          |  |          |  

|Year ended December 31, 2003                                              |  | €000    |  
|------------------------------------------------------------------------- |  | ------- | -
|Actual return less expected return on pension scheme assets               |  | 20,475  |  
|Net experience gains on scheme liabilities                                |  | 8,901   |  
|Changes in financial assumptions underlying the scheme liabilities        |  | (1,576  | )
|                                                                          |  |         |  
|Actuarial gain recognized in the statement of recognized gains and losses |  | €27,800 |  
|                                                                          |  |         |  

|Period from September 3, 2002 through December 31, 2002                   |  | €000    |  
|------------------------------------------------------------------------- |  | ------- | -
|Actual return less expected return on pension scheme assets               |  | 7,218   |  
|Net experience gains on scheme liabilities                                |  | 27,515  |  
|Changes in financial assumptions underlying the scheme liabilities        |  | (22,226 | )
|                                                                          |  |         |  
|Actuarial gain recognized in the statement of recognized gains and losses |  | €12,507 |  
|                                                                          |  |         |  

F-43

---



Movement in pension liability

|                                                   |  | €000     |  
|-------------------------------------------------- |  | -------- | -
|September 3, 2002 Acquired                         |  | 376,436  |  
|Current service cost                               |  | 11,011   |  
|Past service cost                                  |  | 1,533    |  
|Contributions                                      |  | (18,508  | )
|Other finance expense                              |  | 10,775   |  
|Reclassification                                   |  | (12,255  | )
|Actuarial gain                                     |  | (12,507  | )
|Currency adjustment                                |  | (4,448   | )
|                                                   |  |          |  
|Deficit in scheme at January 1, 2003               |  | 352,037  |  
|Current service cost                               |  | 36,593   |  
|Past service cost                                  |  | 655      |  
|Contributions                                      |  | (52,253  | )
|Other finance expense                              |  | 15,266   |  
|Actuarial gain                                     |  | (27,800  | )
|Fair value adjustment                              |  | 68,431   |  
|Acquisitions                                       |  | 133,137  |  
|Disposals                                          |  | (59,614  | )
|Currency adjustment                                |  | (19,912  | )
|                                                   |  |          |  
|Deficit in scheme at January 1, 2004               |  | 446,540  |  
|Current service cost                               |  | 37,163   |  
|Past service benefit                               |  | (1,793   | )
|Recognition of gain on settlement and curtailments |  | (542     | )
|Contributions                                      |  | (51,921  | )
|Other finance expense                              |  | 15,718   |  
|Actuarial loss                                     |  | 10,291   |  
|Reclassification                                   |  | 2,291    |  
|Disposals                                          |  | (101     | )
|Currency adjustment                                |  | (2,090   | )
|                                                   |  |          |  
|Deficit in scheme at December 31, 2004             |  | €455,556 |  
|                                                   |  |          |  

F-44

---



History of amounts recognized in the statement of recognized gains and losses

Difference between actual and expected return on pension scheme assets

|Year ended December 31, 2004                                                                |  |            |  
|------------------------------------------------------------------------------------------- |  | ---------- | -
|Amount                                                                                      |  | 9,573,000  |  
|Percentage of scheme assets                                                                 |  | 1          | %
|Year ended December 31, 2003                                                                |  |            |  
|Amount                                                                                      |  | 20,475,000 |  
|Percentage of scheme assets                                                                 |  | 3          | %
|Period from September 3, 2002 through December 31, 2002                                     |  |            |  
|Amount                                                                                      |  | 7,218,000  |  
|Percentage of scheme assets                                                                 |  | 1          | %
|Experience gains and losses on scheme liabilities                                           |  |            |  
|Year ended December 31, 2004                                                                |  |            |  
|Amount                                                                                      |  | 5,901,000  |  
|Percentage of the present value of scheme liabilities                                       |  | 1          | %
|Year ended December 31, 2003                                                                |  |            |  
|Amount                                                                                      |  | 8,901,000  |  
|Percentage of the present value of scheme liabilities                                       |  | 1          | %
|Period from September 3, 2002 through December 31, 2002                                     |  |            |  
|Amount                                                                                      |  | 27,515,000 |  
|Percentage of the present value of scheme liabilities                                       |  | 3          | %
|Total actuarial gains and losses recognized in the statement of recognized gains and losses |  |            |  
|Year ended December 31, 2004                                                                |  |            |  
|Amount                                                                                      |  | 10,291,000 |  
|Percentage of the present value of scheme liabilities                                       |  | 1          | %
|Year ended December 31, 2003                                                                |  |            |  
|Amount                                                                                      |  | 27,800,000 |  
|Percentage of the present value of scheme liabilities                                       |  | 3          | %
|Period from September 3, 2002 through December 31, 2002                                     |  |            |  
|Amount                                                                                      |  | 12,507,000 |  
|Percentage of the present value of scheme liabilities                                       |  | 1          | %

Some
of the schemes are closed schemes and therefore under the projected unit method the current service cost would be expected to increase as the members of the scheme approach
retirement and reduce as members retire or leave service.

F-45

---



In
certain countries, in accordance with local practice, plans are financed internally and the provisions relating to such cases are included in pension liabilities. At
December 31, 2004 these amount to €277,274,000 (2003: €263,165,000; 2002: €169,330,000).

The
defined contribution pension scheme expense for the year ended December 31, 2004 was €21,077,000 (2003: €20,686,000; period from
September 3, 2002 to December 31, 2002: €5,047,000).

Predecessor

Prior to September 3, 2002, the pension cost for JSG's major occupational pension plans had been determined in accordance with the advice of actuaries,
mainly using the projected unit credit or attained age methods and accounted for in accordance with SSAP 24.

The
principal assumptions used in the calculation of the profit and loss expense under SSAP 24 of €43,285,000 for the period from January 1, 2002 through
September 2, 2002 was that the projected annual rate of investment return will exceed the projected annual rate of increase in pensionable earnings by between 2% to 4%. Under SSAP 24, surpluses
or deficits on the pension plans arising from the actuarial valuations are spread over the expected weighted average service lives of the members of the relevant plan. The actuarial reports are
available for inspection by the members of the relevant schemes only.

The
defined contribution pension scheme expense for the period from January 1, 2002 to September 2, 2002 was €9,926,000.

25 Related Party Transactions

Transactions with associates

We conduct certain transactions with associates in the normal course of business. A significant level of predecessor's transactions were conducted with SSCC.

The
transactions with associates for each period are summarized as follows:

|                      |  | Successor |  | Predecessor
|--------------------- |  | --------- |  | -----------
|
|
|Sale of goods         |  | 28,725    |  | 41,612     
|Purchase of goods     |  | 9,930     |  | 11,484     
|Receiving of services |  | 922       |  | 265        
|Rendering of services |  | 776       |  | 697        

F-46

---





Transactions with related parties

In connection with the acquisition, certain non-operating assets and non-core operating assets of JSG were transferred to the newcos, in
exchange for intercompany notes.

|                                          |  | Successor
|----------------------------------------- |  | ---------
|
|
|Rendering and receiving of services (net) |  |         
|Transfer of businesses                    |  |         
|Transfer of tangible assets               |  |         
|Transfer of financial assets              |  |         
|Transfer of cash from business disposals  |  | 11,934   
|Transfer of other assets                  |  |         

26 Net Cash Flow from Operating Activities

|                                                                |  | Successor |   | Predecessor |  
|--------------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Operating income                                                |  | 281,789   |   | 309,144     |  
|Reorganization and restructuring costs                          |  | 23,231    |   | 16,357      |  
|Depreciation and depletion (net of government grants amortized) |  | 259,831   |   | 250,590     |  
|Goodwill amortization                                           |  | 37,925    |   | 44,548      |  
|Finance lease interest paid                                     |  | 1,962     |   | 2,164       |  
|(Increase)/decrease in other payables and provisions            |  | (12,891   | ) | 6,451       |  
|Decrease/(increase) in working capital (Note 27)                |  | 47,419    |   | 62,832      |  
|Currency adjustment                                             |  | 1,663     |   | (1,122      | )
|                                                                |  |           |   |             |  
|                                                                |  | €640,929  |   | €690,964    |  
|                                                                |  |           |   |             |  

27 Movement in Working Capital

|                                   |  | Inventories |   | Receivables |   | Payables*   |   | Total    |  
|---------------------------------- |  | ----------- | - | ----------- | - | ----------- | - | -------- | -
|
|December 31, 2003                  |  | 477,432     |   | 911,443     |   | (967,141    | ) | 421,734  |  
|Reclassification                   |  | 4,151       |   | (15,903     | ) | 3,202       |   | (8,550   | )
|Deferred acquisition consideration |  |            |   |            |   | 854         |   | 854      |  
|Decrease in working capital        |  | (22,434     | ) | 38,291      |   | (63,276     | ) | (47,419  | )
|Currency adjustment                |  | (6,983      | ) | (8,783      | ) | 9,301       |   | (6,465   | )
|                                   |  |             |   |             |   |             |   |          |  
|December 31, 2004                  |  | €452,166    |   | €925,048    |   | €(1,017,060 | ) | €360,154 |  
|                                   |  |             |   |             |   |             |   |          |  

F-47

---



|                                   |  | Inventories |   | Receivables |   | Payables*  |   | Total    |  
|---------------------------------- |  | ----------- | - | ----------- | - | ---------- | - | -------- | -
|
|December 31, 2002                  |  | 470,207     |   | 1,016,181   |   | (1,018,286 | ) | 468,102  |  
|Acquisitions                       |  | 59,724      |   | 115,628     |   | (109,936   | ) | 65,416   |  
|Disposed                           |  | (33,890     | ) | (72,899     | ) | 44,173     |   | (62,616  | )
|Reclassification                   |  | (1,267      | ) | (12,566     | ) | 57,676     |   | 43,843   |  
|Deferred acquisition consideration |  |            |   |            |   | (3,178     | ) | (3,178   | )
|Decrease in working capital        |  | 4,638       |   | (102,680    | ) | 35,210     |   | (62,832  | )
|Currency adjustment                |  | (21,980     | ) | (32,221     | ) | 27,200     |   | (27,001  | )
|                                   |  |             |   |             |   |            |   |          |  
|December 31, 2003                  |  | €477,432    |   | €911,443    |   | €(967,141  | ) | €421,734 |  
|                                   |  |             |   |             |   |            |   |          |  

|                            |  | Inventories |   | Receivables |   | Payables*   |   | Total    |  
|--------------------------- |  | ----------- | - | ----------- | - | ----------- | - | -------- | -
|
|September 3, 2002 Acquired  |  | 508,433     |   | 1,140,679   |   | (1,113,171  | ) | 535,941  |  
|Disposals                   |  | (3,360      | ) | (12,341     | ) | 18,152      |   | 2,451    |  
|Decrease in working capital |  | (23,064     | ) | (76,401     | ) | 63,490      |   | (35,975  | )
|Currency adjustment         |  | (11,802     | ) | (35,756     | ) | 13,243      |   | (34,315  | )
|                            |  |             |   |             |   |             |   |          |  
|December 31, 2002           |  | €470,207    |   | €1,016,181  |   | €(1,018,286 | ) | €468,102 |  
|                            |  |             |   |             |   |             |   |          |  

---

28 Equity Dividends Paid

|                                |  | Successor |  | Predecessor
|------------------------------- |  | --------- |  | -----------
|
|
|Dividends to Group shareholders |  |          |  |           
|                                |  |           |  |            

29 Retirement of Fixed Assets

|                              |  | Successor |  | Predecessor
|----------------------------- |  | --------- |  | -----------
|
|
|Property, plant and equipment |  | 33,860    |  | 12,351     
|Investments                   |  | 2,528     |  | 32,544     
|                              |  |           |  |            
|                              |  | €36,388   |  | €44,895    
|                              |  |           |  |            

F-48

---



30 Reconciliation of Net Cash Flow to Movement in Net Debt

|                                             |  | Successor   |   | Predecessor |  
|-------------------------------------------- |  | ----------- | - | ----------- | -
|
|
|Increase/(decrease) in cash                  |  | 50,285      |   | 29,314      |  
|Decrease/(increase) in term debt             |  | 111,101     |   | 2,142       |  
|Increase/(decrease) in liquid resources      |  | 16,989      |   | (18,889     | )
|Capital elements of finance leases repaid    |  | 13,576      |   | 5,689       |  
|                                             |  |             |   |             |  
|Change in net debt resulting from cash flows |  | 191,951     |   | 18,256      |  
|New finance leases                           |  | (2,963      | ) |            |  
|Loans and finance leases acquired            |  |            |   | (122,952    | )
|Loans and finance leases disposed            |  |            |   | 23,695      |  
|Other non cash movements                     |  | (40,876     | ) | (38,537     | )
|Currency adjustment                          |  | 40,244      |   | 153,282     |  
|                                             |  |             |   |             |  
|Movement in net debt                         |  | 188,356     |   | 33,744      |  
|Net debt at beginning of period              |  | (3,101,102  | ) | (3,134,846  | )
|                                             |  |             |   |             |  
|Net debt at end of period                    |  | €(2,912,746 | ) | €(3,101,102 | )
|                                             |  |             |   |             |  

31 Analysis of Net Debt

|Successor                                |  | December
2003 |   | Cash Flow |   | Acquisitions
and
disposals |  | Non Cash |   | Currency |   | December
2004 |  
|---------------------------------------- |  | ------------- | - | --------- | - | -------------------------- |  | -------- | - | -------- | - | ------------- | -
|
|Cash                                     |  | 86,137        |   | 55,623    |   |                           |  |         |   | (1,611   | ) | 140,149       |  
|Short term deposits and liquid resources |  | 92,930        |   | 16,989    |   |                           |  | (35      | ) | (2,000   | ) | 107,884       |  
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Cash and investments                     |  | 179,067       |   | 72,612    |   |                           |  | (35      | ) | (3,611   | ) | 248,033       |  
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Bank overdrafts and demand loans         |  | (22,368       | ) | (5,338    | ) |                           |  |         |   | (962     | ) | (28,668       | )
|Loans repayable within one year          |  | (111,447      | ) | 54,348    |   |                           |  | 3,698    |   | (22,772  | ) | (76,173       | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Short term borrowing                     |  | (133,815      | ) | 49,010    |   |                           |  | 3,698    |   | (23,734  | ) | (104,841      | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Long and medium term borrowing           |  | (3,118,074    | ) | 56,753    |   |                           |  | (44,539  | ) | 67,322   |   | (3,038,538    | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Net borrowing                            |  | (3,072,822    | ) | 178,375   |   |                           |  | (40,876  | ) | 39,977   |   | (2,895,346    | )
|Finance leases                           |  | (28,280       | ) | 13,576    |   |                           |  | (2,963   | ) | 267      |   | (17,400       | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Net debt                                 |  | €(3,101,102   | ) | €191,951  |   |                           |  | €(43,839 | ) | €40,244  |   | €(2,912,746   | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  

F-49

---



|                                         |  | December
2002 |   | Cash Flow |   | Acquisitions
and
disposals |   | Non Cash |   | Currency |   | December
2003 |  
|---------------------------------------- |  | ------------- | - | --------- | - | -------------------------- | - | -------- | - | -------- | - | ------------- | -
|
|Cash                                     |  | 69,224        |   | 22,493    |   |                           |   |         |   | (5,580   | ) | 86,137        |  
|Short term deposits and liquid resources |  | 115,107       |   | (18,889   | ) |                           |   | (58      | ) | (3,230   | ) | 92,930        |  
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Cash and investments                     |  | 184,331       |   | 3,604     |   |                           |   | (58      | ) | (8,810   | ) | 179,067       |  
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Bank overdrafts and demand loans         |  | (51,378       | ) | 6,821     |   |                           |   |         |   | 22,189   |   | (22,368       | )
|Loans repayable within one year          |  | (110,776      | ) | 36,206    |   |                           |   | 2,279    |   | (39,156  | ) | (111,447      | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Short term borrowing                     |  | (162,154      | ) | 43,027    |   |                           |   | 2,279    |   | (16,967  | ) | (133,815      | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Long and medium term borrowing           |  | (3,134,436    | ) | (34,064   | ) | (86,119                    | ) | (40,758  | ) | 177,303  |   | (3,118,074    | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Net borrowing                            |  | (3,112,259    | ) | 12,567    |   | (86,119                    | ) | (38,537  | ) | 151,526  |   | (3,072,822    | )
|Finance leases                           |  | (22,587       | ) | 5,689     |   | (13,138                    | ) |         |   | 1,756    |   | (28,280       | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Net debt                                 |  | €(3,134,846   | ) | €18,256   |   | €(99,257                   | ) | €(38,537 | ) | €153,282 |   | €(3,101,102   | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  

|                                         |  | September 3,
2002 |  | Cash Flow   |   | Acquisitions
and
Disposals |   | Non Cash |   | Currency |   | December
2002 |  
|---------------------------------------- |  | ----------------- |  | ----------- | - | -------------------------- | - | -------- | - | -------- | - | ------------- | -
|
|Cash                                     |  |                  |  | (14,484     | ) | 86,143                     |   |         |   | (2,435   | ) | 69,224        |  
|Short term deposits and liquid resources |  |                  |  | 10,521      |   | 106,791                    |   | (367     | ) | (1,838   | ) | 115,107       |  
|                                         |  |                   |  |             |   |                            |   |          |   |          |   |               |  
|Cash and investments                     |  |                  |  | (3,963      | ) | 192,934                    |   | (367     | ) | (4,273   | ) | 184,331       |  
|                                         |  |                   |  |             |   |                            |   |          |   |          |   |               |  
|Bank overdrafts and demand loans         |  |                  |  | (4,054      | ) | (57,820                    | ) |         |   | 10,496   |   | (51,378       | )
|Loans repayable within one year          |  |                  |  | 51,257      |   | (116,416                   | ) | (34,508  | ) | (11,109  | ) | (110,776      | )
|                                         |  |                   |  |             |   |                            |   |          |   |          |   |               |  
|Short term borrowing                     |  |                  |  | 47,203      |   | (174,236                   | ) | (34,508  | ) | (613     | ) | (162,154      | )
|                                         |  |                   |  |             |   |                            |   |          |   |          |   |               |  
|Long and medium term borrowing           |  |                  |  | (1,751,165  | ) | (1,426,333                 | ) |         |   | 43,062   |   | (3,134,436    | )
|                                         |  |                   |  |             |   |                            |   |          |   |          |   |               |  
|Net borrowing                            |  |                  |  | (1,707,925  | ) | (1,407,635                 | ) | (34,875  | ) | 38,176   |   | (3,112,259    | )
|Finance leases                           |  |                  |  | 2,031       |   | (24,641                    | ) |         |   | 23       |   | (22,587       | )
|                                         |  |                   |  |             |   |                            |   |          |   |          |   |               |  
|Net debt                                 |  |                  |  | €(1,705,894 | ) | €(1,432,276                | ) | €(34,875 | ) | €38,199  |   | €(3,134,846   | )
|                                         |  |                   |  |             |   |                            |   |          |   |          |   |               |  

F-50

---





|Predecessor                              |  | December
2001 |   | Cash Flow |   | Acquisitions
and
Disposals |   | Non Cash |   | Currency |   | September 2,
2002 |  
|---------------------------------------- |  | ------------- | - | --------- | - | -------------------------- | - | -------- | - | -------- | - | ----------------- | -
|
|Cash                                     |  | 87,756        |   | 961       |   |                           |   |         |   | (2,574   | ) | 86,143            |  
|Short term deposits and liquid resources |  | 352,353       |   | (239,468  | ) |                           |   | (1,041   | ) | (5,053   | ) | 106,791           |  
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Cash and investments                     |  | 440,109       |   | (238,507  | ) |                           |   | (1,041   | ) | (7,627   | ) | 192,934           |  
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Bank overdrafts and demand loans         |  | (76,419       | ) | 11,341    |   |                           |   |         |   | 7,258    |   | (57,820           | )
|Loans repayable within one year          |  | (174,569      | ) | 24,994    |   |                           |   | 4,772    |   | 28,387   |   | (116,416          | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Short term borrowing                     |  | (250,988      | ) | 36,335    |   |                           |   | 4,772    |   | 35,645   |   | (174,236          | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Long and medium term borrowing           |  | (1,302,687    | ) | (67,645   | ) | (118,477                   | ) |         |   | 62,476   |   | (1,426,333        | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Net borrowing                            |  | (1,113,566    | ) | (269,817  | ) | (118,477                   | ) | 3,731    |   | 90,494   |   | (1,407,635        | )
|Finance leases                           |  | (23,597       | ) | 4,945     |   | (6,232                     | ) |         |   | 243      |   | (24,641           | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Net debt                                 |  | €(1,137,163   | ) | €(264,872 | ) | €(124,709                  | ) | €3,731   |   | €90,737  |   | €(1,432,276       | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  

Cash
comprises cash in hand and overnight deposits. The movement in liquid resources represents movement in all monetary assets (excluding cash, short term deposits and overnight
borrowing) which are convertible into cash at, or close to, their carrying value in the balance sheet. These specifically comprise government gilts, commercial paper and deposits, with maturities of
less than one year when acquired. They are categorized as held-to-maturity because the Group has both the intent and the ability to hold these investments until maturity.

32 Acquisitions and disposals

|                                 |  | Successor |  | Predecessor |  
|-------------------------------- |  | --------- |  | ----------- | -
|
|
|Net assets acquired (see below)  |  |          |  | 6,180       |  
|Reclassification from associates |  |          |  | (35,030     | )
|Goodwill                         |  | 2,731     |  | 174,659     |  
|                                 |  |           |  |             |  
|                                 |  | €2,731    |  | €145,809    |  
|                                 |  |           |  |             |  
|Satisfied by:                    |  |           |  |             |  
|Cash payments                    |  | 2,731     |  | 145,809     |  
|Cash acquired                    |  |          |  | (52,683     | )
|Bank overdrafts acquired         |  |          |  | 8,955       |  
|                                 |  |           |  |             |  
|Net cash outflows                |  | €2,731    |  | €102,081    |  
|                                 |  |           |  |             |  

F-51

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Summary of net assets acquired:

|                                               |                                             | Successor |   | Predecessor |        
|---------------------------------------------- | ------------------------------------------- | --------- | - | ----------- | -------
|
|
|Net assets acquired:                           |                                             |           |   |             |        
|Fixed assets:                                  |                                             |           |   |             |        
|                                               | Property, plant and equipment               |           |  |             | 269,385
|                                               | Investments                                 |           |  |             | 3,616  
|Current assets:                                |                                             |           |   |             |        
|                                               | Inventories                                 |           |  |             | 59,724 
|                                               | Accounts receivable and prepayments         |           |  |             | 115,628
|                                               | Cash and investments held as current assets |           |  |             | 52,683 
|                                               |                                             |           |   |             |        
|Total assets                                   |                                             |          |   | 501,036     |        
|Accounts payable and accrued liabilities       |                                             |          |   | (135,268    | )      
|Long term debt and other payables              |                                             |          |   | (113,896    | )      
|Provisions for liabilities and charges         |                                             |          |   | (6,197      | )      
|Fair value adjustment                          |                                             |          |   | (239,495    | )      
|Minority interest                              |                                             |          |   |            |        
|                                               |                                             |           |   |             |        
|Net assets acquired at fair value to the Group |                                             |          |   | €6,180      |        
|                                               |                                             |           |   |             |        

The acquisition of predecessor was completed on September 3, 2002. It had not been possible to complete the investigation for determining
fair values for this acquisition by April 8, 2003 and accordingly estimated fair values were used in the financial statements for the year ended December 31, 2002. The final fair value
adjustments incorporated during 2003 are set out below.

|                                               |  | Provisional
values at
December 31,
2002 |   | Revaluation |   | Final fair
value |  
|---------------------------------------------- |  | --------------------------------------- | - | ----------- | - | ---------------- | -
|
|Cash                                           |  | 193                                     |   |            |   | 193              |  
|Accounts receivable and prepayments            |  | 1,141                                   |   | (4          | ) | 1,137            |  
|Inventories                                    |  | 508                                     |   |            |   | 508              |  
|Investments                                    |  | 233                                     |   |            |   | 233              |  
|Property, plant and equipment                  |  | 2,373                                   |   | 195         |   | 2,568            |  
|Accounts payable and accruals                  |  | (1,377                                  | ) | (8          | ) | (1,385           | )
|Long term debt and other long term liabilities |  | (1,460                                  | ) |            |   | (1,460           | )
|Other liabilities                              |  | (520                                    | ) | (31         | ) | (551             | )
|Minorities                                     |  | (154                                    | ) | (9          | ) | (163             | )
|                                               |  |                                         |   |             |   |                  |  
|Net assets acquired                            |  | 937                                     |   | 143         |   | 1,080            |  
|Goodwill                                       |  | 1,559                                   |   | (143        | ) | 1,416            |  
|                                               |  |                                         |   |             |   |                  |  
|Consideration                                  |  | €2,496                                  |   |            |   | €2,496           |  
|                                               |  |                                         |   |             |   |                  |  

F-52

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Summary of effects of the acquisition of the SSCC European assets

|                                               |  | Book value |   | Revaluations |   | Fair value |  
|---------------------------------------------- |  | ---------- | - | ------------ | - | ---------- | -
|
|Cash                                           |  | 29         |   |             |   | 29         |  
|Accounts receivable and prepayments            |  | 103        |   |             |   | 103        |  
|Inventories                                    |  | 49         |   |             |   | 49         |  
|Property, plant and equipment                  |  | 103        |   | 115          |   | 218        |  
|Accounts payable and accruals                  |  | (98        | ) |             |   | (98        | )
|Long term debt and other long term liabilities |  | (115       | ) |             |   | (115       | )
|Other liabilities                              |  | (95        | ) | (59          | ) | (154       | )
|                                               |  |            |   |              |   |            |  
|Net assets acquired                            |  | €(24       | ) | €56          |   | 32         |  
|                                               |  |            |   |              |   |            |  
|Goodwill                                       |  |            |   |              |   | 174        |  
|                                               |  |            |   |              |   |            |  
|Consideration                                  |  |            |   |              |   | €206       |  
|                                               |  |            |   |              |   |            |  

33 Post Balance Sheet Events

On December 22, 2004 we announced that we had signed a definitive agreement to sell our Munksjö specialties business to The EQT III Fund for
approximately €450 million. On December 14, 2004 SCA (Svenska Cellullosa Aktiebolaget) announced that it had agreed to buy our Munksjö Tissue business for
approximately €28 million. The sale of our Munksjö specialties business to The EQT III Fund was completed on March 1, 2005 and the proceeds from the
disposal have been used to pay down part of the term portion of our senior credit facility. The sale of our Munksjo tissue business is subject to customary closing conditions. The
Munksjö specialty assets comprised pulp, decor paper, and specialty paper businesses and had sales from operations for 2004 of approximately €480 million. The
Munksjö tissue assets being sold comprise a paper mill producing base paper for tissue and two tissue conversion plants, and generated sales from operations of approximately
€50 million in 2004. We are retaining the Munksjö containerboard and corrugated assets, located in Norway, Sweden and Poland, which comprise approximately 90,000
metric tons of containerboard and 150,000 metric tons of corrugated capacity.

A
summary of the assets and liabilities disposed is as follows:

|                                               |  | € millions |  
|---------------------------------------------- |  | ---------- | -
|Cash                                           |  | 5          |  
|Accounts receivable and prepayments            |  | 59         |  
|Inventories                                    |  | 64         |  
|Property, plant and equipment                  |  | 254        |  
|Accounts payable and accruals                  |  | (60        | )
|Long term debt and other long term liabilities |  | (40        | )
|Other liabilities                              |  | (25        | )
|                                               |  |            |  
|                                               |  | €257       |  
|                                               |  |            |  

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On
January 13, 2005, JSG Funding commenced a tender offer to purchase for cash all outstanding existing 15.5% subordinated notes, which we refer to as the "tender offer". As of
January 1, 2005, $211,110,848 aggregate principal amount of our 15.5% subordinated notes due 2013 and €140,740,568 aggregate principal amount of our 15.5% subordinated notes due
2013 were outstanding. In connection with the tender offer, we also solicited consents to amend the indentures governing the existing 15.5% subordinated notes to remove substantially all of the
restrictive covenants thereunder. The tender offer was completed and the proposed amendments became effective on February 14, 2005. We intend to redeem the .01% of the 15.5% dollar subordinated
notes not tendered pursuant to the tender offer in accordance with the terms and conditions of the indentures governing the existing 15.5% subordinated notes. Under these indentures, the earliest we
may redeem the 15.5% subordinated notes not tendered is October 1, 2005, at a redemption price of 108.0% of the aggregate principal amount of the existing 15.5% subordinated notes. All of the
euro 15.5% subordinated notes were tendered. In January 2005, JSG completed an offering of approximately €370 million of 7.75% subordinated cash-pay notes.
JSG Funding applied the net proceeds from this offering to fund the purchase of its existing 15.5% subordinated notes pursuant to the tender offer and to pay related fees and expenses.

Concurrently
with the completion of this offering of notes, JSG Holdings completed an offering of €325 million in aggregate principal amount of 11.5% senior PIK
notes due 2015 (the "PIK notes"), substantially all of the net proceeds of which were loaned to JSG Packaging, which, in turn, paid such net proceeds to its shareholders by means of a share capital
reduction under Irish law. Neither JSG Funding nor any of its subsidiaries guarantee the PIK notes and thus the PIK notes are effectively subordinated to all debt and other liabilities and preferred
stock, if any, of JSG Funding and its subsidiaries.

34 Parent Undertakings and Controlling Parties

The immediate controlling party of the company is JSL. The ultimate controlling party and parent undertaking of the largest group of which the company is a
member, and for which group financial statements are prepared, is JSG Packaging Ltd. (JSG Packaging). The parent undertaking of the smallest group of which the company is a member, and for which group
financial statements are prepared, is JSG Holdings. JSG Packaging, JSG Holdings plc (JSG Holdings) and JSL are companies incorporated in Ireland.

We
are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and file reports, including Annual Reports on Form 20-F, and other
information with the SEC. You may read and copy any document we file with the SEC at its public reference rooms at 450 Fifth Street, N.W. Washington D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information on the public reference rooms and their copy charges. In addition, the SEC maintains an Internet site at http://www.sec.govthat contains reports and other
information regarding issuers that file electronically with the SEC. These filings are also available
to the public from commercial document retrieval services.

JSG
Funding's annual report on Form 20-F, current reports on Form 6-K, the April 2003 registration statement on Form F-4 and all
amendments to those reports are made available free of charge through our website (www.smurfit-group.com) as soon as practicable after such material is electronically filed with or furnished to the
Securities and Exchange Commission.

F-54

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35 Companies (Amendment) Act, 1986

The financial statements in this report do not comprise "full group accounts" within the meaning of Regulation 40(1) of the European Communities
(Companies: Group Accounts) Regulations, 1992 of Ireland in so far as such group accounts would have to comply with the disclosure and other requirements of those Regulations. Full group accounts for
JSL for the period from September 3, 2002 through December 31, 2002 and for the year ended December 31, 2003 have been filed with the Irish Registrar of Companies. Full accounts
for JSG Packaging Ltd. for the year ended December 31, 2004 will be filed with the Registrar in due course.

36 Comparative Figures

Certain figures for the prior years have been adjusted to conform with 2004 classifications and disclosure requirements.

37 Differences Between Accounting Principles Generally Accepted in Ireland and in the
United States

The Group's consolidated financial statements are prepared in accordance with accounting principles generally accepted in Ireland ("Irish GAAP"), which differ in
certain respects from accounting principles generally accepted in the United States ("US GAAP"). The significant differences as they apply to the Group and the necessary adjustments are summarized
below.

Goodwill

Irish GAAP, FRS 10"Goodwill and Intangible Assets," requires goodwill to be capitalized as an intangible fixed asset and amortized in the statement
of operations over its estimated useful live. For US GAAP, the Group applies SFAS No. 142 "Goodwill and Other Intangible Assets". Under SFAS No. 142, goodwill is no longer amortized, but
is tested for impairment on an annual basis and whenever indicators of impairment arise. The Group's identified indicators of impairment under SFAS No. 142 are the same as under SAB
No. 100, "Restructuring and Impairment Charges".

The
goodwill impairment test, which is based on fair value, is to be performed on a reporting unit level using a two-step impairment test. A reporting unit is an operating
segment as defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", or one level lower. In the first step, the fair value of a reporting unit is compared
with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill is not deemed to be impaired and step two of the impairment test is not
required. If the fair value of the reporting unit is lower than the carrying value of long term assets and net working capital, step two needs to be performed to measure the amount of impairment. The
second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the
carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. The loss recognized cannot exceed
the carrying amount of goodwill.

The
fair value of each reporting unit was determined based upon JSG's segment reporting. According to these calculations, the fair value of the reporting units exceeded the carrying
value of their net assets. Therefore, the additional analysis was not required and there was no impairment of goodwill upon adoption of SFAS No. 142. The Group performed an annual impairment
test as of December 31, 2002, 2003 and 2004. No indicators of impairment were identified.

F-55

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Deferred taxation

Irish GAAP, FRS 19"Deferred Tax" requires full provision to be made for deferred tax arising from timing differences between the recognition of gains
and losses in the financial statements and their recognition in tax computations. In adopting FRS 19, we have chosen not to discount deferred tax assets and liabilities. This standard eliminates a
number of the differences between accounting for deferred tax under Irish and US GAAP. However under SFAS 109"Accounting for Income Taxes", deferred taxation would also be provided
under US GAAP on the difference between the accounting and taxation bases of assets and liabilities of subsidiaries acquired. Deferred income taxes on the taxable US GAAP adjustments are included
within the reconciliations.

Retirement benefits

Under Irish GAAP, FRS 17"Retirement Benefits" requires that scheme assets are valued at fair value and scheme liabilities are measured using the
Projected Unit Credit method. Net scheme assets and liabilities, reduced by deferred tax amounts, are required to be shown on the face of the balance sheet as a pension asset or liability as
appropriate. JSG Funding has also adopted Urgent Issues Task Force abstract 35"Death-in-service and incapacity benefits" ("UITF 35"). Under US GAAP the main
differences with Irish GAAP arise in relation to the recognition of actuarial gains and losses and the treatment of death-in-service and incapacity benefits. Under US GAAP, net
scheme assets and liabilities are required to be shown gross of deferred tax amounts.

Predecessor,
under Irish GAAP, followed SSAP 24"Accounting for Pension Costs", whereby the pension costs in respect of predecessor's defined benefit plans were assessed in
accordance with the advice of independent actuaries using assumptions and methods which, taken as a whole, produced the actuaries' best estimates of the cost of providing the relevant pension
benefits. US GAAP specifically requires the use of the Projected Unit Credit method and the matching of the projected benefit obligation against the fair value of the plan's assets, adjusted to
reflect any unrecognized obligations or assets, in determining the pension cost or credit for the period. In addition, under US GAAP, the assumptions used must be based on current market rates.

Exceptional and extraordinary items

Under Irish GAAP, profits and losses associated with early debt extinguishment are included in income before taxation. For predecessor, these costs would have
been treated as extraordinary items under US GAAP.

In
April 2002, the FASB issued SFAS No. 145"Rescission of FASB Statements No.4, 44 and 62, Amendment of FASB No.13 and Technical Corrections". SFAS
No. 145 requires, in most cases, gains and losses on extinguishments of debt to be classified as income or loss from continuing operations, rather than extraordinary items. The statement was
effective for fiscal years after May 15, 2002.

Investment in SSCC

Prior to the acquisition of JSG on September 3, 2002, the Group's main investment in the U.S. was in SSCC. At the time of the acquisition, JSG distributed
to its shareholders by way of a share capital reduction its 29.3% interest in SSCC. In the period presented prior to the acquisition SSCC was

F-56

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an
associate of which JSG owned approximately 29.3%. For the period presented prior to the acquisition, Group equity accounted for SSCC. For the periods after the acquisition, Group did not equity
account for SSCC.

The
reconciliation of net (loss)/income below reflects the effects in each year presented of the differences between Irish GAAP and US GAAP of the Group's share of SSCC's results of
operations. The reconciliation of shareholders' equity reflects the cumulative effects of the adjustments to operations and the different basis of the Group's investment under US GAAP.

Hyper-inflationary economies

The Group accounts for the activities of its subsidiaries in Mexico, Colombia, Venezuela and Argentina, which have high rates of inflation, using the US dollar as
the functional currency.

Under
US GAAP for each of the periods presented, Mexico, Colombia, Argentina and Venezuela would not be regarded as hyper-inflationary and the Mexican Peso, the Colombian Peso, the
Argentinean Peso and the Bolivar respectively would have been used as the functional currency. The application of US GAAP has no material effect on the reported net income of these subsidiaries.

Stock based employee compensation expense

SFAS No. 123"Accounting for Stock Based Compensation" encourages, but does not require, compensation expense for employee stock options to be
measured based on their fair value at the date of grant, determined using option valuation models. Successor has elected to continue to account for stock based employee compensation in accordance with
APB Opinion No. 25"Accounting for Stock Issued to Employees" ("APB 25") and related interpretations and to provide the pro forma information required by SFAS No. 123.

Predecessor
operated variable option plans. As the options did not vest until certain targets were achieved, the number of shares which could be acquired by employees was not fully
determinable until after the date of grant. In accordance with Urgent Issues Task Force abstract 17"Employee Share Schemes" ("UITF 17"), under Irish GAAP predecessor's employee options
did not result in charges against income except to the extent that the market value of the shares at the date of grant exceeded the amount the employee must pay to exercise the option.

Under
US GAAP, following the measurement principles of APB 25, compensation expense would be accrued and booked to income over the vesting period. The vesting period commences when it
becomes probable that the underlying targets attaching to the options will be achieved and the number of shares will be known and ends with the date when the granting of the shares is not contingent
upon the performance of additional services or other conditions. Compensation expense would be booked on a period by period basis to reflect the difference between the price an employee must pay to
acquire the shares underlying the option and the market price of the shares, at the end of each accounting period until the final vesting date.

Debt instruments issue costs

Under Irish GAAP debt issue costs are deducted from the proceeds of the relevant debt instruments. Under US GAAP such costs would be shown as deferred charges in
the balance sheet. In

F-57

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both
cases the amount of such costs are expensed at a constant rate of interest on the outstanding balance of the debt.

Accounting for associates

Irish GAAP requires separate disclosure of operating earnings, net interest, exceptional items and the taxation charge arising in associates. Under US GAAP
earnings of associates, net of taxation would be shown as a single line item in arriving at net income.

Financial instruments

Under Irish GAAP all hedging instruments are matched with their underlying hedged item. Each instrument's gain or loss is brought into the profit and loss account
and its fair value into the balance sheet at the same time as is the matched underlying asset, liability, income or cost.

Under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" all derivative instruments are recognized on the balance sheet at their fair values. Changes in
fair value are either recognized periodically in income or in shareholders' equity as a component of comprehensive income depending on whether the derivative qualifies for hedge accounting in
accordance with the requirements of SFAS No. 133, and if so, whether it qualifies as a fair value hedge or cash flow hedge. Changes in fair value of derivatives accounted for as fair value
hedges are recorded in income along with the corresponding portions of the changes in the fair value of the hedged items, to the extent they are effective as hedges. Changes in fair value of
derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive income net of deferred taxes. Changes in fair values of derivatives not
qualifying as hedges are reported in net income.

Currency swaps

Under Irish GAAP, the fair value of currency swaps relating to outstanding debt is an adjustment to the carrying value of debt. Under US GAAP, it would be
separately recorded as part of other assets or liabilities.

Impairment writedowns

Under Irish GAAP, impairment writedowns are included in accumulated depreciation. Under US GAAP they would be deducted from the cost of the assets
identified as being impaired.

Under
US GAAP, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" establishes a single accounting model for long-lived assets
to be disposed of by sale consistent with the fundamental provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". While it
supersedes portions of APB Opinion 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions", it retains the discontinued operations presentation, yet it broadens that presentation to include a component of an entity (rather than a segment of a business). However,
discontinued operations are no longer recorded at net realizable value and future operating losses are no longer recognized before they occur. Under

F-58

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SFAS
No. 144, it is no longer necessary to allocate goodwill to long-lived assets and then perform impairment testing. Furthermore, it has been stipulated that in situations where
it is expected that certain flows of capital will be accumulated in areas subject to impairment testing, these can be calculated on the basis of a probability-weighted cash flow estimate. SFAS
No. 144 also establishes criteria for determining when an asset should be treated as held for sale.

SFAS
No. 144 was effective for the fiscal years beginning after December 15, 2001. Accordingly, the Group adopted SFAS No. 144 as of January 1, 2002. The
adoption of SFAS No. 144 did not have a material impact on the Group's financial position, results of operations or cash flows.

Restructuring and integration costs

The rules for recognizing restructuring and integration costs in the statement of income are generally consistent between Irish and US GAAP. However, under Irish
GAAP, on the acquisition of a business, costs in connection with restructuring would not be recorded in purchase accounting but would be expensed as incurred post acquisition. Under US GAAP, a
purchase accounting liability would be recorded for qualifying costs and goodwill increased if certain requirements are satisfied.

Purchase price allocation

Under Irish GAAP the entire excess purchase price is allocated to goodwill. Under US GAAP, the excess purchase price over the fair value of the net tangible
assets acquired would first be allocated to identifiable intangible assets based on their estimated fair values, with the remainder being allocated to goodwill.

Leveraged buyout transactions

Under US GAAP, because of the application of the EITF issue 88-16, "Basis in Leveraged Buyout Transactions", only partial purchase accounting applied
to the acquisition of JSG. The approximate 8% rollover investment by senior management shareholders would be valued at their predecessor basis in JSG as opposed to the inherent new basis in successor.
The primary effect of that adjustment was to reduce goodwill and shareholders' equity. Under Irish GAAP, no such adjustment is required.

Composition of JSG Funding Groupconsolidation of companies sold to affiliates

As part of the MDP acquisition, certain assets were transferred to newcos, wholly owned subsidiaries of JSL. The newcos borrowed
€125 million which was lent to JSL to fund a €125 million capital contribution in JSG Funding. Under US GAAP, the newcos would be consolidated in JSG
Funding's financial statements, causing debt of JSG Funding to increase and equity of JSG Funding to decrease. Even though JSG Funding under US GAAP would consolidate the newcos, JSG Funding had no
repayment obligations relating to the newco debt, which was recourse only to the assets of the newcos. The newcos facility was fully paid before December 31, 2003.

Inventory valuationfair value

Under Irish GAAP the fair value of inventory in an acquisition would be based either, on the current cost to the acquired entity of reproducing the inventory or
on the historical cost of the

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inventory
(including the interest cost of holding the inventory) where it is difficult to find replacement cost as replacement would be impossible. Under US GAAP, inventory would be valued at fair
market value having regard to the intentions of the acquirer when identifying and allocating these fair values.

Long term receivables

Under Irish GAAP, certain long term receivables are included in current assets. Under US GAAP, they are included in long term assets.

The
following is a summary of the significant adjustments to income and shareholders' equity which would be required if US GAAP were to be applied instead of Irish GAAP.

Income

|                                                                                        |                                               | Successor |         | Predecessor |        
|--------------------------------------------------------------------------------------- | --------------------------------------------- | --------- | ------- | ----------- | -------
|
|
|Net (loss)/income reported in the consolidated statements of operations                 |                                               | (34,489   | )       | (67,328     | )      
|Adjustments:                                                                            |                                               |           |         |             |        
|                                                                                        | Goodwill amortization                         |           | 37,925  |             | 33,817 
|                                                                                        | Retirement benefits                           |           | (3,061  | )           | (3,999 
|                                                                                        | Share of earnings of associatesSSCC          |           |        |             |       
|                                                                                        | Deferred taxation                             |           | 9,309   |             | 22,699 
|                                                                                        | Stock based compensation expense              |           | (330    | )           | (493   
|                                                                                        | Inventory valuationfair value                |           |        |             | (5,264 
|                                                                                        | Management rollover investment                |           | 616     |             | 894    
|                                                                                        | Financial instrumentsfair value              |           | (33,275 | )           | (13,779
|                                                                                        | Consolidation of companies sold to affiliates |           | (8,195  | )           | (3,295 
|                                                                                        |                                               |           |         |             |        
|                                                                                        |                                               | 2,989     |         | 30,580      |        
|                                                                                        |                                               |           |         |             |        
|Net (loss)/income as adjusted to accord with US GAAP                                    |                                               | €(31,500  | )       | €(36,748    | )      
|Arising from:                                                                           |                                               |           |         |             |        
|                                                                                        | Continuing operations                         |           | (70,588 | )           | (60,201
|Extraordinary items (net of tax: September 2, 2002:                                     |                                               |           |         |             |        
|                                                                                        | €1,715,000)                                   |           |        |             |       
|Discontinued activities                                                                 |                                               | 39,088    |         | 23,453      |        
|                                                                                        |                                               |           |         |             |        
|Net (loss)/income available to ordinary shareholders as adjusted to accord with US GAAP |                                               | €(31,500  | )       | €(36,748    | )      
|                                                                                        |                                               |           |         |             |        

F-60

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Comprehensive Income

|                                                                                        |  | Successor |   | Predecessor |  
|--------------------------------------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Net (loss)/income available to ordinary shareholders as adjusted to accord with US GAAP |  | (31,500   | ) | (36,748     | )
|Other comprehensive income/(loss):                                                      |  |           |   |             |  
|Financial instrumentsfair value                                                        |  | (19,365   | ) | (1,757      | )
|Unrealized foreign currency translation adjustments                                     |  | 31,500    |   | 91,196      |  
|Retirement benefits                                                                     |  | (4,824    | ) | 6,533       |  
|Share of associates other comprehensive income/(loss):                                  |  |           |   |             |  
|Deferred hedge loss                                                                     |  |          |   |            |  
|Unrealized losses and foreign currency translation adjustments                          |  |          |   |            |  
|Net loss reclassified into earnings                                                     |  |          |   |            |  
|                                                                                        |  |           |   |             |  
|Comprehensive (loss)/income                                                             |  | €(24,189  | ) | €59,224     |  
|                                                                                        |  |           |   |             |  

Net
losses of €3,697,000 of the accumulated adjustments to comprehensive income in respect of the fair value of financial instruments are expected to be reclassified into
earnings in the next twelve months. These instruments derive from gains and losses on derivatives hedging cash flows on forecasted transactions (the maximum period for which is two years) and on
interest rate swaps qualifying as cash flow hedges.

F-61

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Shareholders' Equity

|                                                                    |  | 2004     |   | 2003     |  
|------------------------------------------------------------------- |  | -------- | - | -------- | -
|
|Shareholders' equity as reported in the consolidated balance sheets |  | 869,101  |   | 895,356  |  
|                                                                    |  |          |   |          |  
|Adjustments:                                                        |  |          |   |          |  
|GoodwillGross                                                      |  | 137,538  |   | 137,127  |  
|Aggregate amortization                                             |  | 81,695   |   | 43,770   |  
|Hyper-inflationary economiesproperty, plant and equipment          |  |          |   |          |  
|Cost                                                               |  | 140,133  |   | 91,200   |  
|Aggregate depreciation                                             |  | (63,141  | ) | (38,996  | )
|Hyper-inflationary economiesinvestments                            |  | 3,013    |   | 2,239    |  
|Retirement benefits                                                 |  | (34,147  | ) | (34,736  | )
|Deferred taxation                                                   |  | (127,194 | ) | (134,831 | )
|Financial instrumentsfair value                                    |  | (48,741  | ) | 3,899    |  
|Minority share of US GAAP adjustments                               |  | (8,615   | ) | (2,582   | )
|Consolidate newcos                                                  |  | (125,000 | ) | (125,000 | )
|Rollover investment by JSG management                               |  | (75,574  | ) | (76,190  | )
|Shareholders' equity of companies sold to affiliates                |  | (21,519  | ) | (9,854   | )
|                                                                    |  |          |   |          |  
|                                                                    |  | (141,552 | ) | (143,954 | )
|                                                                    |  |          |   |          |  
|Shareholders' equity as adjusted to accord with US GAAP             |  | €727,549 |   | €751,402 |  
|                                                                    |  |          |   |          |  

Cumulative Other Comprehensive Income Amounts

|                                                          |  | Currency
Translation
Adjustments |  | Financial
Instruments
(Losses) |   | Retirement
Benefits |   | Total   
|--------------------------------------------------------- |  | -------------------------------- |  | ------------------------------ | - | ------------------- | - | --------
|
|September 3, 2002                                         |  |                                 |  |                               |   |                    |   |        
|Movement from September 3, 2002 through December 31, 2002 |  | 16,900                           |  | (4,534                         | ) | 3,773               |   | 16,139  
|                                                          |  |                                  |  |                                |   |                     |   |         
|Balance at December 31, 2002                              |  | 16,900                           |  | (4,534                         | ) | 3,773               |   | 16,139  
|Movement in the year                                      |  | 91,196                           |  | (1,757                         | ) | 6,533               |   | 95,972  
|                                                          |  |                                  |  |                                |   |                     |   |         
|Balance at December 31, 2003                              |  | 108,096                          |  | (6,291                         | ) | 10,306              |   | 112,111 
|Movement in the year                                      |  | 31,500                           |  | (19,365                        | ) | (4,824              | ) | 7,311   
|                                                          |  |                                  |  |                                |   |                     |   |         
|Balance at December 31, 2004                              |  | €139,596                         |  | €(25,656                       | ) | €5,482              |   | €119,422
|                                                          |  |                                  |  |                                |   |                     |   |         

F-62

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Cash Flows

The consolidated statement of cash flows prepared under Irish GAAP presents substantially the same information as that required under US GAAP by SFAS
No. 95"Statement of Cash Flows". This standard differs, however, with regard to the classification of items within the statements and as regards the definition of cash and cash
equivalents. Under US GAAP, cash would not include bank overdrafts. The movements on such bank overdrafts are required to be included in financing activities under SFAS No. 95. Under US
GAAP only short term investments with a maturity of three months or less at the date of acquisition are included in cash equivalents. Under Irish GAAP movements in short term investments are
classified as management of liquid resources. Under Irish GAAP, cash flows are presented separately for operating activities, dividends received from associates, returns on investments and servicing
of finance, taxation, capital expenditure and financial investment, acquisitions and disposals, equity dividends paid, management of liquid resources and financing. US GAAP, however, requires only
three categories of cash flow activity to be reported: operating, investing and financing.

Cash
flows from taxation and returns on investments and servicing of finance shown under Irish GAAP would be included as operating activities under US GAAP. Cash flows from capital
expenditure, financial investment and acquisitions and disposals would be included as investing activities under US GAAP. The payment of dividends would be included as a financing activity
under US GAAP. Under US GAAP, capitalized interest is treated as part of the cost of the asset to which it relates and is thus included as part of investing cash flows; under Irish GAAP all
interest is treated as part of returns on investments and servicing of finance.

The
categories of cash flow activity under US GAAP are summarized as follows:

|                                                 |  | Successor |   | Predecessor |  
|------------------------------------------------ |  | --------- | - | ----------- | -
|
|
|Cash inflow from operating activities            |  | 362,737   |   | 375,126     |  
|Cash (outflow) on investing activities           |  | (174,770  | ) | (333,626    | )
|Cash (outflow)/inflow from financing activities  |  | (129,731  | ) | (29,296     | )
|                                                 |  |           |   |             |  
|Increase/(decrease) in cash and cash equivalents |  | 58,236    |   | 12,204      |  
|Currency adjustment on cash and cash equivalents |  | (3,611    | ) | (8,810      | )
|Cash and cash equivalents at beginning of period |  | 176,323   |   | 172,929     |  
|                                                 |  |           |   |             |  
|Cash and cash equivalents at end of period       |  | €230,948  |   | €176,323    |  
|                                                 |  |           |   |             |  

F-63

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Deferred taxationadditional information required by SFAS 109

The analysis of the US GAAP deferred taxation liability required by SFAS 109 is as follows:

|                                                    |  | 2004     |   | 2003     |  
|--------------------------------------------------- |  | -------- | - | -------- | -
|
|Deferred taxation liabilities:                      |  |          |   |          |  
|Excess of book value over tax value of fixed assets |  | 295,702  |   | 302,859  |  
|Other timing differences                            |  | 83,526   |   | 101,069  |  
|                                                    |  |          |   |          |  
|                                                    |  | 379,228  |   | 403,928  |  
|                                                    |  |          |   |          |  
|Deferred taxation assets:                           |  |          |   |          |  
|Net operating loss carry forwards                   |  | (61,422  | ) | (65,120  | )
|Valuation allowances                                |  | 29,631   |   | 49,546   |  
|Retirement benefits(1)                              |  | (45,679  | ) | (93,690  | )
|Other timing differences                            |  | (42,447  | ) | (74,238  | )
|                                                    |  |          |   |          |  
|                                                    |  | (119,917 | ) | (183,502 | )
|                                                    |  |          |   |          |  
|                                                    |  | €259,311 |   | €220,426 |  
|                                                    |  |          |   |          |  
|Split as follows:                                   |  |          |   |          |  
|Current                                             |  | (20,177  | ) | (31,930  | )
|Non current                                         |  | 279,488  |   | 252,356  |  
|                                                    |  |          |   |          |  
|                                                    |  | €259,311 |   | €220,426 |  
|                                                    |  |          |   |          |  

---

Valuation allowances are set up for losses carried forward in those jurisdictions in which it is more likely than not that the losses carried
forward will not be utilized to offset future taxable income or in which there is no deferred tax liability against which the related asset can be offset prior to expiry.

Share option schemesadditional information required by SFAS No. 123

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation" and amended by SFAS No. 148, "Accounting for Stock-Based
CompensationTransition and Disclosure," the Group has elected to account for shares to be issued under the Management Participation Agreement under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and adopt the disclosure only provisions of SFAS No. 123 and SFAS No. 148. Under SFAS No. 123, options are
valued at the grant date using the Black-Scholes valuation model and compensation expenses are recognized ratably over the vesting period. Had compensation expenses been determined as prescribed by
SFAS No. 123, the Group's net income for the period presented would have been as shown in the table below.

Under
Predecessor's 1987 Option Schemes, the 1999 Executive Share Option Plan and the 2000 United Kingdom Executive Approved Share Option Plan (the "Schemes"), selected employees of JSG
and its subsidiaries were granted non-qualified options to acquire ordinary shares of JSG. The share

F-64

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options
were exercisable at a price equal to the market price, as defined, of JSG's ordinary shares at the time of grant. The options became exercisable upon the occurrence of certain trigger events,
as defined, within 10 years from the date of grant. The options were to expire not later than 10 years from the date of grant.

Predecessor
elected to follow APB 25 and related interpretations in accounting for its share options because the alternative fair value accounting provided for under SFAS No. 123
requires use of option valuation models that were not developed for use in valuing employee share options. SFAS No. 123 requires pro forma information regarding net income. This information has
been determined as if JSG had accounted for those employee share options issued subsequent to December 31, 1994 under the fair value method of that statement. Due to the recognition of option
expense over the vesting period, the pro forma net income information required by SFAS No. 123 is not likely to be representative of the effects on the reported pro forma net income for future
years. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model.

The
Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the expected share price volatility. Because the Group's employees share options have characteristics significantly
different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee share options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period (see "Stock based employee compensation expense" above for a description of the vesting period).

|                                                                                                                                            |  | Successor |   | Predecessor |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Net (loss)/income attributable to common shareholders under US GAAP                                                                         |  |           |   |             |  
|As reported                                                                                                                                 |  | (31,500   | ) | (36,748     | )
|Add: Stock based employee compensation expense included in reported net income, net of related tax effects                                  |  | 259       |   | 394         |  
|Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  | (1,073    | ) | (769        | )
|                                                                                                                                            |  |           |   |             |  
|Pro forma                                                                                                                                   |  | €(32,314  | ) | €(37,123    | )
|                                                                                                                                            |  |           |   |             |  

JSG's
1999 Performance Share Plan allowed participating executives to receive annual allocations that could result in the award of rights to acquire ordinary shares in JSG for a nominal
consideration. Awards were granted over a proportion of the shares over which an allocation was made to the extent
that pre-set performance targets were achieved over a performance period of not less than four years.

F-65

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Under the Special Long Term Incentive Plans adopted in 2000, the Chairman & Chief Executive Officer, President & Chief Operations Officer and Chief
Financial Officer each received an allocation that could result in the award of rights to acquire ordinary shares in JSG for a nominal consideration. Awards were granted over a proportion of the
shares over which an allocation was made to the extent that pre-set performance targets were achieved over a performance period of three years.

During
2000, JSG introduced save as you earn share option schemes for eligible employees in both Ireland (the "Irish SAYE Scheme") and the UK (the "UK SAYE Scheme"). Under these schemes,
employees could opt to save fixed amounts on a regular basis, over a three-year, five-year or seven-year period, subject to a maximum monthly saving of
€320 (Irish SAYE Scheme) or Stg£250 (UK SAYE Scheme). The participants could use the amounts saved plus interest earned to acquire shares under options granted by JSG at
the start of the savings period.

A
summary of the Group's share options and related activity is as follows:

|                                 |  | Shares under
option |   | Option Price
Range |  | Weighted
Average
Exercise Price
|-------------------------------- |  | ------------------- | - | ------------------ |  | -------------------------------
|Outstanding at December 31, 2001 |  | 76,084,708          |   | €0.00€2.62        |  | €1.64                          
|Exercised                        |  | (55,601,020         | ) | €0.00€2.62        |  | €1.63                          
|Cancelled                        |  | (20,483,688         | ) | €0.00€2.62        |  | €1.66                          
|                                 |  |                     |   |                    |  |                                
|Outstanding at September 2, 2002 |  |                    |   |                   |  |                               
|                                 |  |                     |   |                    |  |                                

No
options were outstanding at September 2, 2002. Successor had no options outstanding at December 31, 2002, December 31, 2003 or December 31, 2004.

Pension costs and termination indemnitiesinformation required by SFAS No. 87 and SFAS No. 132

The components of the defined benefit net pension expense for the Group's defined benefit plans, termination indemnities and post retirement healthcare defined
benefit plans for the years ended

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---



December 31,
2004 and 2003 and the periods ended September 2, 2002 and December 31, 2002 under SFAS No. 87 amended by SFAS No. 132 are estimated to be as follows:

|                                                            |  | Successor |   | Predecessor |  
|----------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Service cost                                                |  | 38,470    |   | 36,885      |  
|Interest cost                                               |  | 56,282    |   | 55,573      |  
|Expected return on plan assets                              |  | (40,627   | ) | (39,669     | )
|Amortization of unrecognized transition obligation or asset |  |          |   |            |  
|Recognized gains and losses                                 |  | 61        |   | 4,118       |  
|Recognized prior service cost                               |  | 57        |   | 655         |  
|Loss due to settlement or curtailment                       |  | (636      | ) |            |  
|                                                            |  |           |   |             |  
|                                                            |  | €53,607   |   | €57,562     |  
|                                                            |  |           |   |             |  

The defined benefit net pension expense for 2004 and 2003 includes all of the Group's pension plans. Because of the difficulty in obtaining the
information for 2002, the defined benefit net pension expense for 2002 includes only the Group's principal pension plans.

F-67

---



The
estimated fund status of the Group's defined benefit plans, termination indemnities and post retirement healthcare defined benefit schemes under SFAS No. 87 amended by SFAS
No. 132 was as follows:

|                                                           |  | 2004      |   | 2003      |  
|---------------------------------------------------------- |  | --------- | - | --------- | -
|
|Change in benefit obligation                               |  |           |   |           |  
|Benefit obligation at beginning of period                  |  | 1,081,891 |   | 1,051,246 |  
|Service cost                                               |  | 38,470    |   | 36,885    |  
|Interest cost                                              |  | 56,282    |   | 55,573    |  
|Contributions by plan participants                         |  | 7,908     |   | 7,455     |  
|Actuarial gains and losses                                 |  | 8,486     |   | (10,996   | )
|Benefits paid                                              |  | (60,748   | ) | (52,682   | )
|Divestitures, curtailments or settlements                  |  | (542      | ) |          |  
|Plan amendments                                            |  | (1,793    | ) | 655       |  
|Reclassification                                           |  | 2,291     |   |          |  
|Fair value adjustments                                     |  |          |   | 70,685    |  
|Acquisitions                                               |  |          |   | 133,967   |  
|Disposals                                                  |  | (101      | ) | (159,426  | )
|Currency adjustments                                       |  | (8,872    | ) | (51,471   | )
|                                                           |  |           |   |           |  
|Benefit obligation at end of period                        |  | 1,123,272 |   | 1,081,891 |  
|                                                           |  |           |   |           |  
|Change in plan assets                                      |  |           |   |           |  
|Fair value of plan assets at beginning of period           |  | 621,833   |   | 684,468   |  
|Actual return on assets                                    |  | 40,999    |   | 61,640    |  
|Contributions by employer                                  |  | 51,921    |   | 52,253    |  
|Contributions by plan participants                         |  | 7,908     |   | 7,455     |  
|Benefits paid                                              |  | (60,748   | ) | (52,682   | )
|Fair value adjustments                                     |  |          |   | 2,254     |  
|Acquisitions                                               |  |          |   | 830       |  
|Disposals                                                  |  |          |   | (99,812   | )
|Currency adjustment                                        |  | (6,808    | ) | (34,573   | )
|                                                           |  |           |   |           |  
|Fair value of plan assets at end of period                 |  | 655,105   |   | 621,833   |  
|                                                           |  |           |   |           |  
|Funded status of the plans                                 |  | (468,167  | ) | (460,058  | )
|Amounts available to be applied as an increase/(reduction) |  |           |   |           |  
|of future pension costs:                                   |  |           |   |           |  
|Unrecognized actuarial gains or losses                     |  | (13,162   | ) | (21,218   | )
|Unrecognized prior service cost                            |  | (1,680    | ) |          |  
|Minimum pension liability                                  |  | (6,694    | ) |          |  
|                                                           |  |           |   |           |  
|(Accrued) pension costs                                    |  | €(489,703 | ) | €(481,276 | )
|                                                           |  |           |   |           |  

F-68

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The
Group's postretirement healthcare defined benefit schemes are in the US and, up to the date of the asset swap, Canada. The estimated fund status of these schemes at
December 31, 2004 were €2,245,000 (2003: €2,620,000).

Plan
assets less than projected benefit obligations include overfunded plans at December 31, 2004, nil (2003: €730,000) and underfunded plans at
December 31, 2004 of €468,167,000 (2003: €460,788,000).

The
following assumptions were used to determine the defined benefit expense for the Group.

|                                                                      |  | 2004 |  | 2003 |  | 2002
|--------------------------------------------------------------------- |  | ---- |  | ---- |  | ----
|Weighted average assumed discount rate                                |  | 5.5% |  | 5.4% |  | 5.9%
|Weighted average rates of compensation increase                       |  | 3.3% |  | 3.2% |  | 3.6%
|Weighted average expected long term rates of return on planned assets |  | 6.7% |  | 6.5% |  | 7.1%

The
calculation of the projected benefit obligation at December 31, 2004 assumed a discount rate of approximately 5.1% (2003: 5.5%).

The
assets of the plans are invested primarily in equities, fixed interest securities, insurance contracts and real estate.

The
weighted-average asset allocations at December 31, 2004 and 2003 by asset category of the defined benefit pension schemes is shown below:

|                  |  | Plan assets
|----------------- |  | -----------
|
|
|
|Equity securities |  | 1580%     
|Debt securities   |  | 2085%     
|Real Estate       |  | 010%      
|Other             |  | 010%      
|                  |  |            
|Total             |  |            
|                  |  |            

The
Group maintains target allocation percentages among various asset classes based on an investment policy established for the pension plans which is designed to achieve long term rate
of return objectives, while mitigating against downside risk and considering expected cash flows. Our investment policy is reviewed from time to time to ensure consistency with our long term objective
of funding 100% of the projected benefit obligation.

The
expected long term rate of return on plan assets reflects the average return rates expected on the funds invested or to be invested to provide for the benefits included in the
projected benefit obligation. In estimating those rates, appropriate consideration is given to the current returns being earned by the plan assets in the fund and the rates of return expected to be
available for reinvestment.

The
Group's expected return on assets of the defined benefit schemes is based on recommendations from the plan actuary, having considered anticipated future long term performance

F-69

---



of
individual asset classes. Consideration is also given to the appropriate asset allocation strategy, given the anticipated requirements of the plan to determine the average rate of return expected
on the funds invested to provide for the pension plan benefits. While appropriate consideration is given to recent fund performance and historical returns, the assumption is primarily a
long-term, prospective rate. Based on our most recent study, the expected long term return assumption effective January 1, 2005 will be 6.4%.

The
expected contributions to the defined benefit plans is anticipated to be €49,842,000 in the year ended December 31, 2005. The accumulated benefit obligation of
all schemes at December 31, 2004 is €968,427,000.

Expected
future benefit payments for each of the next five fiscal years and in the aggregate for the five fiscal years thereafter are shown below:

|Year      |  | Benefit Payments
|--------- |  | ----------------
|
|2005      |  | 62,045          
|2006      |  | 63,445          
|2007      |  | 64,982          
|2008      |  | 66,533          
|2009      |  | 68,079          
|20102014 |  | 365,935         

38 New Accounting Standards

On December 17, 2003 the Financial Accounting Standards Board ("FASB") issued revised FASB Interpretation No. 46 ("FIN 46R"). FIN 46R delayed the
effective date for variable interest entities created before February 1, 2003, with the exception of special-purpose entities, until the first fiscal year or interim period after
December 15, 2003. As of January 1, 2004, we adopted FIN 46R. We performed a review to identify any variable interest entities on the adoption of FIN 46R. The adoption of FIN 46R
did not have a material effect on our US GAAP reconciliations of net income and shareholders' equity.

On
January 12, 2004, the FASB issued Staff Position No. FAS 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003" ("FSP 106-1"). The FSP 106-1 permits employers that sponsor post retirement benefit plans that provide prescription drug benefits to
retirees to make a one-time election to defer accounting for any effects of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the "Medicare Act"). The Medicare
Act only affects post retirement benefit plans of our employees based in the United States and is not expected to have a material effect on our results of operations or financial condition.

In
November 2004, the FASB issued SFAS No. 151, "Inventory CostsAn Amendment of ARB No. 43, Chapter 4." SFAS No. 151 amends the guidance
in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other
provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period

F-70

---



charges
regardless of whether they meet the criterion of "so abnormal" as stated in ARB No. 43. Additionally, SFAS No. 151 requires that the allocation of fixed production overheads to
the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005 and is required to be
adopted by us in the first quarter of fiscal 2006, beginning on January 1, 2006. We are currently evaluating the effect that the adoption of SFAS No. 151 will have on our consolidated
results of operations and financial condition but we do not expect SFAS No. 151 to have a material impact.

In
December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"), which replaces SFAS No. 123, "Accounting for
Stock-Based Compensation," and supercedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123R requires all share-based payments to employees, including grants
of employee stock options, to be recognized in
the financial statements based on their fair values beginning with the first fiscal year beginning after June 15, 2005, with early adoption encouraged. The pro forma disclosures previously
permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition. Under SFAS No. 123R, we must determine the appropriate fair value model to be used for
valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive
adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that
compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would
record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. We are evaluating the requirements of SFAS No. 123R and have not yet
determined the method of adoption or the effect of adopting SFAS No. 123R, and we have not determined whether the adoption will result in amounts that are similar to the current pro forma
disclosures under SFAS No. 123.

In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary AssetsAn Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions." SFAS No. 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29,
"Accounting for Nonmonetary Transactions," and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for the fiscal periods beginning after
June 15, 2005 and is required to be adopted by us in the first quarter of fiscal 2006, beginning on January 1, 2006. We are currently evaluating the effect that the adoption of
SFAS No. 153 will have on our consolidated results of operations and financial condition but we do not expect it to have a material impact.

F-71

---





39 Organizational Structure

Each of JSG Packaging, JSG Holdings, JSL, JSG Funding, JSG Acquisitions and JSG are holding companies with no operations of their own.
A listing of JSG's principal subsidiaries is set out below.

|Subsidiaries                                                                                                                |  | Principal Activities                                                                                            |  | Country of Incorporation |  | Holding %
|--------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | ---------
|Carton de Colombia, S.A.Apartado Aereo 219,
Cali, Colombia                                                                  |  | Manufacture of paperboard and packaging products                                                                |  | Colombia                 |  | 70       
|Carton de Venezuela, S.A.Apartado Aereo 609,
Caracas, Venezuela                                                             |  | Manufacture of paperboard and packaging products                                                                |  | Venezuela                |  | 88       
|Grupo Smurfit Mexico, S.A. de C.V.Jaime Balmes, No. 11 Torre D. 7 Piso,
Col. Los Morales Polanco 11510,
Mexico D.F., Mexico |  | Manufacture of paperboard and packaging products                                                                |  | Mexico                   |  | 100      
|Nettingsdorfer Papierfabrik AG & Co KGA-4054 Nettingsdorf-Fabrik, Austria                                                   |  | Manufacture of containerboard and holding company for Austrian operations which manufacture corrugated board    |  | Austria                  |  | 100      
|Smurfit, S.A.Paque Saenz Pena 3088th Floor,
Buenos Aires, Argentina                                                        |  | Manufacture of paperboard and packaging products                                                                |  | Argentina                |  | 100      
|Smurfit Capital Funding LimitedBeech Hill, Clonskeagh,
Dublin 4, Ireland                                                    |  | Finance company                                                                                                 |  | Ireland                  |  | 100      
|Smurfit Deutschland GmbH & Co KGTilsiter Strasse 144,
22047 Hamburg, Germany                                                |  | Holding company for German operations which manufacture paperboard and packaging products                       |  | Germany                  |  | 100      
|Smurfit International B.V.Fred Roeskestraat 123,
1076 EE Amsterdam,
The Netherlands                                         |  | Principal international holding company                                                                         |  | The Netherlands          |  | 100      
|Smurfit International France S.A.2 rue Goethe,
75116 Paris, France                                                          |  | Holding company for French operations whose activities are the manufacture of paperboard and packaging products |  | France                   |  | 100      
|                                                                                                                            |  |                                                                                                                 |  |                          |  |          

F-72

---



|Smurfit Investments UK LimitedDarlington Road, West Auckland,
Bishop Auckland, Co. Durham
DL14 9PE, United Kingdom |  | Holding company for UK operations whose principal activities are the manufacture of paperboard and packaging products                                                                                |  | United Kingdom |  | 100
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | ---
|Smurfit Ireland LimitedBeech Hill, Clonskeagh,
Dublin 4, Ireland                                                   |  | Manufacture of paperboard and packaging products and printing                                                                                                                                        |  | Ireland        |  | 100
|Smurfit Munksjö AB(1)Box 624,
SE-551 18 Jönköping, Sweden                                                          |  | Holding company for operations in Sweden and other countries which manufacture specialty papers and packaging products                                                                               |  | Sweden         |  | 100
|Smurfit Nervion, S.A.B Arriandi s/n, 48215 lurreta,
Vizcaya, Spain                                                 |  | Manufacture of sack paper and holding company for Spanish, Portuguese and sack converting operations whose principal activities are the manufacture of paperboard, packaging and paper sack products |  | Spain          |  | 99 
|Smurfit SISA, S.p.AStrada Serravalle 30,
15067 Novi Ligure (AL), Italy                                             |  | Manufacture of paperboard and packaging products                                                                                                                                                     |  | Italy          |  | 90 

---

F-73

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JSG Acquisitions and Subsidiary Companies    Report of Independent Registered Public Accounting Firm

To
the Board of Directors
JSG Acquisitions

We
have audited the accompanying consolidated balance sheets of JSG Acquisitions (successor company) and subsidiaries (the "Company") as of December 31, 2004 and
December 31, 2003, and the related consolidated statements of operations, total recognized gains and losses, changes in shareholders' equity, and cash flows for each of the two years in the
period ended December 31, 2004 and for the period from June 14, 2002 to December 31, 2002. We have also audited the related consolidated statements of operations, total recognized
gains and losses, changes in shareholders' equity and cash flows of Jefferson Smurfit Group plc (predecessor company) and subsidiaries for the eight month and two day period ended September 2,
2002. Our audits also included the financial statement schedule listed in the Index at Item 18. These financial statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and schedule based on our audits.

We
conducted our audits in accordance with Auditing Standards issued by the Auditing Practices Board for use in Ireland and with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we
express no such opinion. An audit also 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of JSG Acquisitions (successor company) and
subsidiaries at December 31, 2004 and December 31, 2003, and the consolidated results of their operations and their cash flows for each of the two years in the period ended
December 31, 2004 and for the period from June 14, 2002 to December 31, 2002, and the consolidated results of operations and cash flows of Jefferson Smurfit Group plc (predecessor
company) for the eight month and two day period ended September 2, 2002, in conformity with accounting principles generally accepted in Ireland, which differ in certain respects from those
followed in the United States of America (see Note 37 of Notes to the Consolidated Financial Statements). Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

Ernst & Young

Dublin,
Ireland.
April 28, 2005

F-74

---





JSG Acquisitions and Subsidiary Companies    Consolidated Statements of Operations

|                                                   |               |                         |  | Successor |           | Predecessor |          
|-------------------------------------------------- | ------------- | ----------------------- |  | --------- | --------- | ----------- | ---------
|
|
|Net sales                                          |               | 3                       |  |           |           |             |          
|                                                   |               | Continuing operations   |  |           |           | 4,293,540   |          
|                                                   |               | Discontinued operations |  |           |           | 511,542     |          
|                                                   |               |                         |  |           |           |             |          
|                                                   |               |                         |  | 4,805,082 |           | 4,746,315   |          
|                                                   | Cost of sales |                         |  |           | 3,473,299 |             | 3,419,820
|                                                   |               |                         |  |           |           |             |          
|Gross profit                                       |               |                         |  | 1,331,783 |           | 1,326,495   |          
|Net operating expenses                             |               | 4                       |  | 1,010,565 |           | 982,296     |          
|Reorganization and restructuring costs             |               | 5                       |  | 39,430    |           | 35,006      |          
|                                                   |               |                         |  |           |           |             |          
|Operating income subsidiaries                      |               |                         |  |           |           |             |          
|                                                   |               | Continuing operations   |  |           |           | 224,061     |          
|                                                   |               | Discontinued operations |  |           |           | 57,727      |          
|                                                   |               |                         |  |           |           |             |          
|                                                   |               |                         |  | 281,788   |           | 309,193     |          
|Share of associates' operating income              |               |                         |  | 12,611    |           | 12,155      |          
|Share of associates' restructuring costs           |               | 5                       |  |          |           |            |          
|                                                   |               |                         |  |           |           |             |          
|Total operating income                             |               |                         |  | 294,399   |           | 321,348     |          
|Income on sale of assets and businessescontinuing |               | 5                       |  | 22,173    |           | 5,560       |          
|Interest income                                    |               |                         |  | 8,335     |           | 11,631      |          
|Interest expense                                   |               | 7                       |  | (293,009  | )         | (308,754    | )        
|Finance costs on debt repurchased                  |               |                         |  | (5,697    | )         |            |          
|Other financial expense                            |               | 24                      |  | (15,718   | )         | (15,266     | )        
|Share of associates' net interest                  |               |                         |  | (1,301    | )         | (2,062      | )        
|                                                   |               |                         |  |           |           |             |          
|Income before taxes and equity minority interests  |               | 8                       |  | 9,182     |           | 12,457      |          
|Taxes on income                                    |               | 9                       |  | 26,973    |           | 62,354      |          
|                                                   |               |                         |  |           |           |             |          
|(Loss)/income before equity minority interests     |               |                         |  | (17,791   | )         | (49,897     | )        
|Equity minority interests                          |               |                         |  | 16,067    |           | 16,768      |          
|                                                   |               |                         |  |           |           |             |          
|Net (loss)/income for the period(1)                |               |                         |  | €(33,858  | )         | €(66,665    | )        
|                                                   |               |                         |  |           |           |             |          

---

The Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-75

---



JSG Acquisitions and Subsidiary Companies    Consolidated Statements of Total Recognized Gains and Losses

|                                                               |            | Successor |         | Predecessor |        
|-------------------------------------------------------------- | ---------- | --------- | ------- | ----------- | -------
|
|
|(Loss)/income for the period                                   |            |           |         |             |        
|                                                               | Group      |           | (37,802 | )           | (71,264
|                                                               | Associates |           | 3,944   |             | 4,599  
|                                                               |            |           |         |             |        
|                                                               |            | (33,858   | )       | (66,665     | )      
|                                                               |            |           |         |             |        
|Translation adjustments on foreign currency net investments    |            |           |         |             |        
|                                                               | Group      |           | 15,222  |             | 58,982 
|                                                               |            |           |         |             |        
|Actuarial (loss)/gain recognized in retirement benefit schemes |            | (6,988    | )       | 25,603      |        
|                                                               |            |           |         |             |        
|Total recognized gains and losses                              |            |           |         |             |        
|                                                               | Group      |           | (29,569 | )           | 13,321 
|                                                               | Associates |           | 3,945   |             | 4,599  
|                                                               |            |           |         |             |        
|                                                               |            | €(25,624  | )       | €17,920     |        
|                                                               |            |           |         |             |        

Note of Historical Cost Profits and Losses

The
results disclosed in the Consolidated Statements of Operations are not materially different to the results based on an unmodified historical basis.

The
Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-76

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JSG Acquisitions and Subsidiary Companies    Consolidated Balance Sheets

|                                                               |  | Note |  | 2004       |   | 2003       |  
|-------------------------------------------------------------- |  | ---- |  | ---------- | - | ---------- | -
|
|Assets                                                         |  |      |  |            |   |            |  
|Current assets                                                 |  |      |  |            |   |            |  
|Cash                                                           |  | 10   |  | 247,958    |   | 179,067    |  
|Accounts receivable and prepayments                            |  | 11   |  | 925,048    |   | 911,443    |  
|Amounts due by affiliates                                      |  |      |  | 395        |   |           |  
|Amounts due by affiliates after more than one year             |  |      |  | 270,698    |   | 277,439    |  
|Inventories                                                    |  | 12   |  | 452,166    |   | 477,432    |  
|                                                               |  |      |  |            |   |            |  
|Total current assets                                           |  |      |  | 1,896,265  |   | 1,845,381  |  
|                                                               |  |      |  |            |   |            |  
|Fixed assets                                                   |  |      |  |            |   |            |  
|Investments                                                    |  | 13   |  | 81,895     |   | 80,642     |  
|Property, plant and equipment                                  |  | 14   |  | 2,334,858  |   | 2,435,946  |  
|Intangible assets                                              |  | 15   |  | 1,455,116  |   | 1,455,119  |  
|                                                               |  |      |  |            |   |            |  
|Total fixed assets                                             |  |      |  | 3,871,869  |   | 3,971,707  |  
|                                                               |  |      |  |            |   |            |  
|Total assets                                                   |  |      |  | €5,768,134 |   | €5,817,088 |  
|                                                               |  |      |  |            |   |            |  
|Liabilities, minority interests and shareholders' equity       |  |      |  |            |   |            |  
|Current liabilities                                            |  |      |  |            |   |            |  
|Bank loans, overdrafts and other borrowing                     |  | 19   |  | 82,550     |   | 110,511    |  
|Accounts payable and accrued liabilities                       |  | 16   |  | 1,064,831  |   | 1,044,642  |  
|                                                               |  |      |  |            |   |            |  
|Total current liabilities                                      |  |      |  | 1,147,381  |   | 1,155,153  |  
|Non current liabilities                                        |  |      |  |            |   |            |  
|Long term debt and other long term liabilities                 |  | 18   |  | 1,769,376  |   | 1,820,624  |  
|Amounts due to affiliates                                      |  |      |  | 1,226,013  |   | 1,233,353  |  
|Provisions for liabilities and charges                         |  | 20   |  | 221,403    |   | 234,952    |  
|Pension liabilities                                            |  | 24   |  | 411,237    |   | 355,309    |  
|Capital grants deferred                                        |  |      |  | 14,260     |   | 15,155     |  
|Minority interests (equity interests)                          |  |      |  | 115,192    |   | 113,646    |  
|                                                               |  |      |  |            |   |            |  
|Total liabilities and minority interests                       |  |      |  | 4,904,862  |   | 4,928,192  |  
|                                                               |  |      |  |            |   |            |  
|Shareholders' equity(1)                                        |  |      |  |            |   |            |  
|Share capital                                                  |  |      |  | 40         |   | 40         |  
|Other reserves                                                 |  |      |  | 938,608    |   | 923,386    |  
|Retained deficit                                               |  |      |  | (75,376    | ) | (34,530    | )
|                                                               |  |      |  |            |   |            |  
|Shareholders' equity                                           |  |      |  | 863,272    |   | 888,896    |  
|                                                               |  |      |  |            |   |            |  
|Total liabilities, minority interests and shareholders' equity |  |      |  | €5,768,134 |   | €5,817,088 |  
|                                                               |  |      |  |            |   |            |  

---

The Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-77

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JSG Acquisitions and Subsidiary Companies    Consolidated Statements of Changes in Shareholders' Equity

JSG
Acquisitions was incorporated on June 14, 2002, with an authorized share capital of 100,000 shares of €1 each, of which 40,000 were issued.

|                                                        |  | Share
capital |  | Other
reserves(1) |  | Retained
(deficit)/
earnings |   | Total
shareholders'
equity |  
|------------------------------------------------------- |  | ------------- |  | ----------------- |  | ---------------------------- | - | -------------------------- | -
|
|Shares issued                                           |  | 40            |  |                  |  |                             |   | 40                         |  
|Capital contribution                                    |  |              |  | 856,960           |  |                             |   | 856,960                    |  
|Income                                                  |  |              |  |                  |  | 2,125                        |   | 2,125                      |  
|Actuarial gain recognized in retirement benefit schemes |  |              |  |                  |  | 4,407                        |   | 4,407                      |  
|Currency translation adjustments                        |  |              |  | 7,444             |  |                             |   | 7,444                      |  
|                                                        |  |               |  |                   |  |                              |   |                            |  
|Balance at December 31, 2002                            |  | 40            |  | 864,404           |  | 6,532                        |   | 870,976                    |  
|Loss                                                    |  |              |  |                  |  | (66,665                      | ) | (66,665                    | )
|Actuarial gain recognized in retirement benefit schemes |  |              |  |                  |  | 25,603                       |   | 25,603                     |  
|Currency translation adjustments                        |  |              |  | 58,982            |  |                             |   | 58,982                     |  
|                                                        |  |               |  |                   |  |                              |   |                            |  
|Balance at December 31, 2003                            |  | 40            |  | 923,386           |  | (34,530                      | ) | 888,896                    |  
|                                                        |  |               |  |                   |  |                              |   |                            |  
|Loss                                                    |  |              |  |                  |  | (33,858                      | ) | (33,858                    | )
|Actuarial loss recognized in retirement benefit schemes |  |              |  |                  |  | (6,988                       | ) | (6,988                     | )
|Currency translation adjustments                        |  |              |  | 15,222            |  |                             |   | 15,222                     |  
|                                                        |  |               |  |                   |  |                              |   |                            |  
|Balance at December 31, 2004                            |  | €40           |  | €938,608          |  | €(75,376                     | ) | €863,272                   |  
|                                                        |  |               |  |                   |  |                              |   |                            |  

---

The Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-78

---





JSG Acquisitions and Subsidiary Companies        Consolidated Financial Statements of Cash Flows

|                                                                   |  |    |  | Successor |   | Predecessor |  
|------------------------------------------------------------------ |  | -- |  | --------- | - | ----------- | -
|
|
|Net cash flow from operating activities                            |  | 26 |  | 640,928   |   | 691,027     |  
|                                                                   |  |    |  |           |   |             |  
|Dividends received from associates                                 |  |    |  | 2,989     |   | 1,258       |  
|                                                                   |  |    |  |           |   |             |  
|Returns on investments and servicing of finance                    |  |    |  |           |   |             |  
|Interest received                                                  |  |    |  | 8,370     |   | 11,687      |  
|Interest paid                                                      |  |    |  | (278,449  | ) | (292,701    | )
|Interest paid on finance leases                                    |  |    |  | (1,962    | ) | (2,164      | )
|Other financial interest paid                                      |  |    |  | (15,718   | ) | (15,266     | )
|Dividends to minority interests                                    |  |    |  | (5,707    | ) | (7,496      | )
|Deferred debt issuance costs                                       |  |    |  | (5,814    | ) | (7,558      | )
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (299,280  | ) | (313,498    | )
|                                                                   |  |    |  |           |   |             |  
|Taxation                                                           |  |    |  |           |   |             |  
|Irish corporation tax (paid)/refunded                              |  |    |  | (8,515    | ) | 2,616       |  
|Overseas tax paid                                                  |  |    |  | (50,249   | ) | (61,589     | )
|Overseas tax refunded                                              |  |    |  | 21,433    |   |            |  
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (37,331   | ) | (58,973     | )
|                                                                   |  |    |  |           |   |             |  
|Capital expenditure and financial investment                       |  |    |  |           |   |             |  
|Purchase of tangible fixed assets                                  |  |    |  | (206,466  | ) | (207,518    | )
|Less new finance leases                                            |  |    |  | 2,963     |   |            |  
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (203,503  | ) | (207,518    | )
|Capital grants received                                            |  |    |  | 1,874     |   | 1,995       |  
|Purchase of other investments                                      |  |    |  | (772      | ) | (1,052      | )
|Retirement of fixed assets                                         |  | 29 |  | 36,388    |   | 44,895      |  
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (166,013  | ) | (161,680    | )
|                                                                   |  |    |  |           |   |             |  
|Acquisitions and disposals                                         |  |    |  |           |   |             |  
|Purchase of subsidiaries and minorities                            |  | 32 |  | (2,731    | ) | (102,081    | )
|Deferred acquisition consideration                                 |  |    |  | (2,390    | ) | (54,773     | )
|Business disposals                                                 |  |    |  |          |   | 4,596       |  
|Receipts/(advances) from/to affiliates                             |  |    |  | 11,934    |   | (28,206     | )
|Investments in and advances to associates                          |  |    |  | (1,194    | ) | (82         | )
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | 5,619     |   | (180,546    | )
|                                                                   |  |    |  |           |   |             |  
|Equity dividends paid                                              |  | 28 |  |          |   |            |  
|                                                                   |  |    |  |           |   |             |  
|Cash inflow/(outflow) before use of liquid resources and financing |  |    |  | 146,912   |   | (22,412     | )
|                                                                   |  |    |  |           |   |             |  
|Management of liquid resources                                     |  |    |  | (16,914   | ) | 18,812      |  
|                                                                   |  |    |  |           |   |             |  
|Financing                                                          |  |    |  |           |   |             |  
|Issue of shares including minorities                               |  |    |  | 27        |   |            |  
|(Decrease)/increase in term debt                                   |  | 30 |  | (67,266   | ) | (49,789     | )
|Advances from JSL                                                  |  |    |  | 1,102     |   | 88,392      |  
|Capital elements of finance leases repaid                          |  |    |  | (13,576   | ) | (5,689      | )
|                                                                   |  |    |  |           |   |             |  
|                                                                   |  |    |  | (79,713   | ) | 32,914      |  
|                                                                   |  |    |  |           |   |             |  
|Increase/(decrease) in cash                                        |  |    |  | €50,285   |   | €29,314     |  
|                                                                   |  |    |  |           |   |             |  

The significant differences between the cash flow statement prepared under accounting principles generally accepted in the United States and that
prepared under accounting principles generally accepted in Ireland are given in Note 37.

The
Notes to the Consolidated Financial Statements are an integral part of these Financial Statements.

F-79

---





JSG Acquisitions and Subsidiary Companies        Notes to the Consolidated Financial Statements

1 Basis of preparation

On July 5, 2002, JSG Acquisitions, a wholly owned subsidiary of JSG Funding plc ("JSG Funding"), commenced a public tender offer (the offer) for all of the
issued and to be issued share capital of Smurfit Packaging Corporation Ltd ("JSG"). On September 3, 2002, JSG Acquisitions declared the offer unconditional in all respects. JSG
Acquisitions subsequently acquired all of the ordinary shares of JSG, completing the acquisition in October 2002.

At
the time the offer was declared unconditional, JSG distributed to its shareholders by way of a share capital reduction its 29.3% interest in Smurfit-Stone Container Corporation
("SSCC"). We refer to that distribution as the "spin-off". In connection with the acquisition, certain non-operating assets and non-core operating assets of JSG
were transferred, in exchange for intercompany notes, to newly formed, wholly owned subsidiaries of Jefferson Smurfit Group Ltd ("JSL"). We refer to these subsidiaries
collectively as the "newcos". On October 2, 2002, the newcos borrowed €125 million under a bank credit facility, which was non-recourse to JSG Funding. The
newcos then loaned the proceeds to JSL, and JSL used them to make a capital contribution to JSG Funding. JSG Funding in turn made a capital contribution to JSG Acquisitions. The newcos facility was
repaid in full prior to December 31, 2003.

The
funding required to purchase all of the outstanding equity interests of JSG, to refinance certain existing indebtedness of JSG and to pay related fees and expenses was approximately
€3,510 million. These cash costs were financed as follows:

In
addition, approximately €637 million of existing borrowing of JSG was left outstanding. This amount was comprised of amounts outstanding under our 6.75% notes
due 2005 and 7.50% debentures due 2025, certain local bank borrowing, capital lease obligations, funded debt in Latin America and bank overdrafts.

JSG
Funding, as the immediate parent of JSG Acquisitions, issued the notes of 2 and 3 above and loaned the proceeds to JSG Acquisitions.

On
March 31, 2003 the Group completed the acquisition of SSCC's European packaging assets. In this transaction which we refer to as the "SSCC Asset Swap", JSG Funding exchanged
its 50% ownership in Smurfit MBI, Canada and approximately €185 million in cash for SSCC's European

F-80

---



assets.
The cash consideration was financed by US$205 million of 95/8% senior notes due 2012 issued in February 2003.

On
December 22, 2004, we announced that we had signed a definitive agreement to sell our Munksjö specialty paper business to The EQT III Fund for approximately
€450 million. On December 14, 2004, SCA (Svenska Cellulosa Aktiebolaget) announced that it had agreed to buy our Munksjö tissue business for approximately
€28 million. The completion of the sale of the specialty paper business, which comprises pulp, decor paper and speciality paper operations, was announced on March 1, 2005
and the proceeds from the disposal have been used to pay down part of the term portion of our senior facility. The agreement to sell the tissue business is subject to customary closing conditions.
Together, the operations being sold had net sales of approximately €512 million for the year to December 31, 2004 (2003: €483 million). These
operations together with Smurfit MBI, which was sold as part of the SSCC Asset Swap in 2003, are reported as discontinued operations in the Consolidated Statements of Operations.

2 Accounting Policies

(a) Basis of accounting:

The financial statements are prepared under the historical cost convention and in accordance with generally accepted accounting principles in Ireland (Irish
GAAP). They are prepared and presented in euro (€). In preparing these financial statements, certain items have been included in order to comply with accounting presentation and
disclosure requirements applicable in the United States in respect of foreign registrants. An explanation of the significant differences between Irish and US GAAP as they apply to the Group and a
reconciliation to US GAAP are set out in Note 37. The financial statements do not constitute full group accounts within the meaning of Regulation 40(1) of the European Communities
(Companies: Group Accounts) Regulations, 1992 of Ireland insofar as such group accounts would have to comply with the disclosure and other requirements of those Regulations

(b) Group consolidation:

The financial statements comprise a consolidation of the financial statements of JSG Acquisitions or predecessor and their respective subsidiaries. Associates are
accounted for under the equity method of accounting. Where accounting policies followed by subsidiaries and associates differ significantly from those adopted for the purpose of the consolidated
financial statements, appropriate adjustments are made in order to achieve a consistent basis of accounting. The results of subsidiaries acquired or sold are consolidated and the Group's share of the
results of associates are included for the periods from their effective date of acquisition or to their effective date of sale.

(c) Net sales and revenue recognition:

Net sales consist of sales to third parties after trade discounts and exclude sales taxes. Revenue is recognized at the time products are delivered or services
rendered to external customers.

(d) Goodwill:

Goodwill represents the excess of the cost of shares in subsidiaries over the fair value of their net assets acquired based on Group accounting policies. It is
capitalized and amortized over a period of

F-81

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40 years
as the directors believe that the durability of the business can be demonstrated and the value of goodwill is capable of being continually reassessed. The carrying value of goodwill is
subject to an impairment review at the end of the first full year following the year of acquisition and annually thereafter.

(e) Property, plant and equipment:

Property, plant and equipment is carried at cost less accumulated depreciation.

(f) Depreciation:

Freehold and long leasehold land are not depreciated. Short leasehold land and buildings are depreciated over the remaining period of the lease, adjusted for
estimated residual value. In the main, other tangible fixed assets are depreciated by equal annual installments over their estimated useful lives at the following rates:

|Freehold and long leasehold buildings |  | 15%   |  | Plant and machinery |  | 333% 
|------------------------------------- |  | ------ |  | ------------------- |  | ------
|Fixtures and fittings                 |  | 1025% |  | Motor vehicles      |  | 2025%

(g) Timberlands:

The cost of acquiring, establishing and maintaining forestry plantations are classified as timberlands. Depletion of timberlands represents the charge to income
relating to the timber extracted in the year.

(h) Leasing:

Assets acquired under finance leases are capitalized and included in tangible fixed assets and depreciated in accordance with Group depreciation policy. Payments
under operating leases are expensed over the period of the lease.

(i) Inventory valuation:

Inventory is valued at the lower of cost and net realizable value. Cost includes direct costs plus applicable factory and other overheads. Net realizable value is
the actual or estimated selling price less all applicable costs incurred or likely to be incurred in the realization of the selling price. Full provision is made for all damaged, deteriorated,
obsolete and unusable materials.

(j) Debt instruments:

The finance costs of debt instruments, which is the difference between the net proceeds and the total amount payable under the instrument, are accounted for over
the life of the instrument at a constant rate of interest on the outstanding balance. The proceeds of debt instruments, net of issue costs, are shown as liabilities on the balance sheet.

F-82

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(k) Derivative instruments:

The Group uses forward currency contracts to reduce exposure to foreign exchange rates. The Group also uses interest rate swaps to adjust interest rate exposures.
The Group considers its derivative instruments qualify for hedge accounting when certain criteria are met.



The criteria for forward foreign currency contracts are:



The
rates under such contracts are used to record the hedged item. As a result, gains and losses are offset against the foreign exchange gains and losses on the related financial assets
and liabilities, or where the instrument is used to hedge a committed, or probable, future transaction, are deferred until the transaction occurs. Gains/losses on hedges of anticipated transactions
are recorded in the Consolidated Statements of Operations when such anticipated transactions are no longer likely to occur.



The Group's criteria for interest rate swaps are:



Interest
differentials are recognized and included in interest payable or receivable as appropriate.

Interest
rate swaps are not revalued to fair value and are not shown on the Group balance sheet.



The Group enters currency swap agreements to reduce the impact of foreign currency rate fluctuations arising from unmatched foreign currency assets and
liabilities. Related foreign currency assets and
liabilities are accounted for in the currency of the underlying swap agreement and translated at the closing rate.

(l) Foreign Currencies:

Foreign currency transactions are translated at the rate of exchange ruling at the date of the transaction or, if hedged forward, at the rate of exchange under
the related forward currency contract. Assets and liabilities denominated in foreign currencies are translated at the closing rate or, if hedged forward, at the rate of exchange under the related
forward currency contract. The resulting profits or losses are dealt with in the Consolidated Statements of Operations.

The
balance sheets of subsidiaries are translated using the closing rate method. The statements of operations and cash flows are translated at average rates ruling for the relevant
period. Resulting

F-83

---



currency
differences, together with those arising on hedging activities, are dealt with in reserves. The transactions of operations in hyper-inflationary economies are reported using a relatively
stable currency as the functional currency. The translation gains and losses arising are recognized in the Consolidated Statements of Operations.

(m) Post Retirement Benefits:

From September 3, 2002 (the date of acquisition), JSG Acquisitions has adopted FRS 17"Retirement Benefits". FRS 17 applies to all types of
benefits that an employer provides after employees have completed their service, including pensions and other post retirement benefits. The expected increase in the present value of scheme liabilities
arising from employee service in the current or prior periods is charged against operating income. The expected returns on the schemes' assets and the increase during the period in the present value
of the schemes' liabilities arising from the passage of time are included in the Consolidated Statements of Operations as "Other Financial Expense". Differences between the expected and the actual
return on plan assets, together with the effect of changes in the current or prior assumptions underlying the liabilities are recognized in the Statement of Recognized Gains and Losses. Scheme assets
are valued at fair value and scheme liabilities are measured using the projected unit method. Net scheme assets and liabilities, reduced by deferred tax amounts, are recorded on the Balance Sheet as a
pension surplus or deficit as appropriate.

Prior
to September 3, 2002, pension costs were recognized in income on a systematic basis so that the cost of providing retirement benefits to employees was evenly matched to the
service lives of the
employees concerned. Any excess or deficiency of the actuarial value of assets over the actuarial value of liabilities was amortized over the average remaining service lives of the relevant, then
current employees. Any surplus or deficit within a scheme was not recognized on the Balance Sheets. The cost of providing post retirement health care benefits to employees was recognized on an
actuarial basis. The effect of the adoption of FRS 17 on reported income from the date of acquisition is not material.

(n) Deferred taxation:

The Group provides deferred tax in accordance with FRS 19"Deferred Tax". Under this standard full provision is made for deferred tax arising from
timing differences between the recognition of gains and losses in the financial statements and their recognition in tax computations. We have chosen not to discount deferred tax assets and
liabilities.

(o) Research and development:

Research and development expenditure is written off as incurred.

(p) Use of estimates:

The preparation of financial statements requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates.

F-84

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3 Segmental Analyses

The Group is an integrated paper and board manufacturer and converter. The Group has identified reportable segments on a geographic basis. In Europe, the Group
has two reportable segments: (1) Packaging and (2) Specialities. The Packaging segment is highly integrated. It includes a system of
mills and plants that produces a full line of containerboard that is converted into corrugated containers. Our specialities segment, prior to the Munksjö Specialties Disposal, was
principally comprised of décor base paper, other specialty papers and graphicboard production. This segment also includes some non paper/packaging businesses such as our Bag in Box and
Print businesses. Additionally, there are central costs which represent corporate governance costs, including executive costs, and costs of the Group's legal, company secretarial, pension
administration, tax, treasury and controlling functions and other administrative costs.

Set
out below are segmental analyses of sales (by source), income before taxes and equity minority interests, total assets, long-lived assets, net operating assets, capital
expenditure, depreciation, depletion and amortization expense and investments in equity method investees. Sales by destination are not materially different from sales by source. The analysis of income
includes the Groups' share of the income before exceptional items, interest and taxes of associates. A geographical analysis of employees can be found in Note 6 and of income taxes in
Note 9.

Salesthird party (external net sales)

|                         |  | Successor  |  | Predecessor
|------------------------ |  | ---------- |  | -----------
|
|
|Packaging                |  | 3,094,045  |  | 2,968,784  
|Specialities             |  | 1,008,477  |  | 991,874    
|                         |  |            |  |            
|Europe                   |  | 4,102,522  |  | 3,960,658  
|United States and Canada |  |           |  | 104,355    
|Latin America            |  | 702,560    |  | 681,302    
|                         |  |            |  |            
|                         |  | €4,805,082 |  | €4,746,315 
|                         |  |            |  |            

Third party sales in Ireland were: €196,346,000 for the year ended December 31, 2004; €201,530,000 for the year ended
December 31, 2003; €68,354,000 for the period September 3, 2002 through December 31, 2002; and €126,349,000 for the period January 1, 2002
through September 2, 2002.

F-85

---





SalesGroup and third party

|                         |  | Successor  |  | Predecessor
|------------------------ |  | ---------- |  | -----------
|
|
|Packaging                |  | 4,314,053  |  | 4,029,387  
|Specialities             |  | 1,080,583  |  | 1,048,035  
|                         |  |            |  |            
|Europe                   |  | 5,394,636  |  | 5,077,422  
|United States and Canada |  |           |  | 104,355    
|Latin America            |  | 1,090,229  |  | 1,067,021  
|                         |  |            |  |            
|                         |  | €6,484,865 |  | €6,248,798 
|                         |  |            |  |            

Income before taxes and equity minority interests

|                                        |  | Successor |   | Predecessor |  
|--------------------------------------- |  | --------- | - | ----------- | -
|
|
|Packaging                               |  | 155,562   |   | 213,918     |  
|Specialities                            |  | 96,777    |   | 88,020      |  
|Associates                              |  | 10,064    |   | 9,447       |  
|                                        |  |           |   |             |  
|Europe                                  |  | 262,403   |   | 311,385     |  
|                                        |  |           |   |             |  
|Packaging                               |  |          |   | 7,775       |  
|Associates                              |  |          |   |            |  
|                                        |  |           |   |             |  
|United States and Canada                |  |          |   | 7,775       |  
|                                        |  |           |   |             |  
|Packaging                               |  | 116,360   |   | 86,180      |  
|Associates                              |  | 2,546     |   | 506         |  
|                                        |  |           |   |             |  
|Latin America                           |  | 118,906   |   | 86,686      |  
|                                        |  |           |   |             |  
|Asia (Associates)                       |  |          |   | 2,202       |  
|                                        |  |           |   |             |  
|Unallocated centre costs                |  | (25,273   | ) | (22,412     | )
|                                        |  |           |   |             |  
|Income before goodwill amortization,    |  |           |   |             |  
|interest and exceptional items          |  | 356,036   |   | 385,636     |  
|Goodwill amortization                   |  | (37,925   | ) | (44,548     | )
|Group net interest                      |  | (290,371  | ) | (297,123    | )
|Share of associates' net interest       |  | (1,301    | ) | (2,062      | )
|                                        |  |           |   |             |  
|Income before exceptional items         |  | 26,439    |   | 41,903      |  
|Reorganization and restructuring costs  |  | (39,430   | ) | (35,006     | )
|Income on sale of assets and businesses |  | 22,173    |   | 5,560       |  
|Share of associates' exceptional costs  |  |          |   |            |  
|                                        |  |           |   |             |  
|                                        |  | €9,182    |   | €12,457     |  
|                                        |  |           |   |             |  

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---



Total assets

|                          |  | 2004       |  | 2003      
|------------------------- |  | ---------- |  | ----------
|
|Packaging                 |  | 2,439,979  |  | 2,524,444 
|Specialities              |  | 775,260    |  | 757,590   
|                          |  |            |  |           
|Europe                    |  | 3,215,239  |  | 3,282,034 
|United States and Canada  |  | 3,357      |  | 2,729     
|Latin America             |  | 661,025    |  | 700,197   
|Group centre              |  | 162,304    |  | 99,570    
|                          |  |            |  |           
|                          |  | 4,041,925  |  | 4,084,530 
|Consolidated goodwill     |  | 1,455,116  |  | 1,455,119 
|Amounts due by affiliates |  | 271,093    |  | 277,439   
|                          |  |            |  |           
|                          |  | €5,768,134 |  | €5,817,088
|                          |  |            |  |           

Long lived assets

|                      |  | 2004       |  | 2003      
|--------------------- |  | ---------- |  | ----------
|
|Packaging             |  | 1,444,102  |  | 1,523,821 
|Specialities          |  | 478,067    |  | 463,882   
|                      |  |            |  |           
|Europe                |  | 1,922,169  |  | 1,987,703 
|Latin America         |  | 407,692    |  | 443,336   
|Group centre          |  | 4,997      |  | 4,907     
|                      |  |            |  |           
|                      |  | 2,334,858  |  | 2,435,946 
|Consolidated goodwill |  | 1,455,116  |  | 1,455,119 
|                      |  |            |  |           
|                      |  | €3,789,974 |  | €3,891,065
|                      |  |            |  |           

Long lived assets in Ireland were €203,058,000 and €191,139,000 at December 31 2004 and 2003 respectively.

F-87

---



Net operating assets

|                            |  | 2004       |   | 2003       |  
|--------------------------- |  | ---------- | - | ---------- | -
|
|Packaging                   |  | 1,663,743  |   | 1,792,346  |  
|Specialities                |  | 596,740    |   | 582,744    |  
|                            |  |            |   |            |  
|Europe                      |  | 2,260,483  |   | 2,375,090  |  
|United States and Canada    |  | (8,541     | ) | (5,541     | )
|Latin America               |  | 522,857    |   | 559,432    |  
|Asia                        |  |           |   | (1,106     | )
|Group centre                |  | (12,152    | ) | (4,708     | )
|                            |  |            |   |            |  
|Net operating assets        |  | 2,762,647  |   | 2,923,167  |  
|Consolidated goodwill       |  | 1,455,116  |   | 1,455,119  |  
|Amounts due by affiliates   |  | 269,939    |   | 277,439    |  
|Unallocated net liabilities |  | (3,624,430 | ) | (3,766,829 | )
|                            |  |            |   |            |  
|Shareholders' equity        |  | €863,272   |   | €888,896   |  
|                            |  |            |   |            |  

A reconciliation of net operating assets above to shareholders' equity is as follows:

|                                               |  | 2004       |   | 2003       |  
|---------------------------------------------- |  | ---------- | - | ---------- | -
|
|Per segmental analysis of net operating assets |  | 2,762,647  |   | 2,923,167  |  
|                                               |  |            |   |            |  
|Consolidated goodwill                          |  | 1,455,116  |   | 1,455,119  |  
|Amounts due by affiliates                      |  | 269,939    |   | 277,439    |  
|                                               |  |            |   |            |  
|Unallocated assets                             |  | 1,725,055  |   | 1,732,558  |  
|                                               |  |            |   |            |  
|Net borrowing                                  |  | (1,682,666 | ) | (1,847,792 | )
|Deferred debt issuance costs                   |  | 91,628     |   | 110,650    |  
|Amounts due to affiliates                      |  | (1,226,013 | ) | (1,233,353 | )
|Corporation tax                                |  | (42,147    | ) | (64,147    | )
|Capital lease creditors                        |  | (17,400    | ) | (28,280    | )
|Provisions for liabilities and charges         |  | (221,403   | ) | (234,952   | )
|Pension liabilities                            |  | (411,237   | ) | (355,309   | )
|Minority interests (equity interests)          |  | (115,192   | ) | (113,646   | )
|                                               |  |            |   |            |  
|Unallocated net liabilities                    |  | (3,624,430 | ) | (3,766,829 | )
|                                               |  |            |   |            |  
|Shareholders' equity                           |  | €863,272   |   | €888,896   |  
|                                               |  |            |   |            |  

Total assets comprise fixed assets and current assets. Long lived assets comprise property, plant and equipment and capitalized goodwill. Net
operating assets comprise total assets less total liabilities but excluding all assets and liabilities of a financing nature.

F-88

---





Capital expenditure

|                         |  | Successor |  | Predecessor
|------------------------ |  | --------- |  | -----------
|
|
|Packaging                |  | 114,251   |  | 130,340    
|Specialities             |  | 55,117    |  | 45,499     
|                         |  |           |  |            
|Europe                   |  | 169,368   |  | 175,839    
|United States and Canada |  |          |  | 1,365      
|Latin America            |  | 36,689    |  | 30,308     
|Group centre             |  | 409       |  | 6          
|                         |  |           |  |            
|                         |  | €206,466  |  | €207,518   
|                         |  |           |  |            

Depreciation, depletion and amortization expense

|                           |  | Successor |     | Predecessor
|-------------------------- |  | --------- | --- | -----------
|
|
|Packaging                  |  | 179,610   |     | 164,762    
|Specialities               |  | 41,983    |     | 43,700     
|                           |  |           |     |            
|Europe                     |  | 221,593   |     | 208,462    
|United States and Canada   |  |          |     | 2,244      
|Latin America              |  | 40,806    |     | 42,490     
|Group centre               |  | 218       |     | 270        
|                           |  |           |     |            
|Depreciation and depletion |  | 262,617   |     | 253,466    
|Goodwill amortization      |  | 37,925    | (1) | 44,548     
|                           |  |           |     |            
|                           |  | €300,542  |     | €298,014   
|                           |  |           |     |            

---

Investments in equity method investees

|              |  | 2004    |  | 2003   
|------------- |  | ------- |  | -------
|
|Europe        |  | 60,051  |  | 57,769 
|Latin America |  | 12,244  |  | 11,516 
|              |  |         |  |        
|              |  | €72,295 |  | €69,285
|              |  |         |  |        

F-89

---



4 Net Operating Expenses

|                        |  | Successor  |   | Predecessor |  
|----------------------- |  | ---------- | - | ----------- | -
|
|
|Distribution costs      |  | 349,047    |   | 337,489     |  
|Administrative expenses |  | 664,304    |   | 647,685     |  
|Other operating income  |  | (2,786     | ) | (2,878      | )
|                        |  |            |   |             |  
|                        |  | €1,010,565 |   | €982,296    |  
|                        |  |            |   |             |  

In
2003, a gain of €18 million on the sale of development land at The K Club was netted against administrative expenses.

5 Exceptional Items

|                                        |  | Successor |   | Predecessor |  
|--------------------------------------- |  | --------- | - | ----------- | -
|
|
|Group                                   |  |           |   |             |  
|Reorganization and restructuring costs  |  | (39,430   | ) | (35,006     | )
|Income on sale of assets and operations |  | 22,173    |   | 5,560       |  
|                                        |  |           |   |             |  
|                                        |  | €(17,257  | ) | €(29,446    | )
|                                        |  |           |   |             |  

|                               |  | Successor |  | Predecessor | 
|------------------------------ |  | --------- |  | ----------- | 
|
|
|Associates                     |  |           |  |             | 
|Merger and restructuring costs |  |          |  |            | 
|Debt extinguishment costs      |  |          |  |            | 
|                               |  |           |  |             | 
|                               |  |          |  |            | 
|                               |  |           |  |             | 

Group

The Group has recorded costs of €39,430,000 in 2004 representing reorganization and restructuring costs mainly in the European Packaging division.
This figure includes redundancy, closure and reorganization costs. The main closure costs relate to our Cordoba mill in Spain, which was permanently closed in the third quarter of 2004, and to our
Tamworth corrugated plant and Witham cartons plant in the United Kingdom, for which closures were announced in the final quarter of 2004. The related tax relief of €4,048,000 is
included in Taxes on income.

F-90

---



The
Group has reported a gain of €22,173,000 in respect of the sale of the Botanic Road property in Dublin, the sale of surplus property in Italy and Spain and the
disposal of our investment in Cartonnerie de Valois. The related tax charge of €1,939,000 is included in Taxes on income.

In
2003, the Group recorded costs of €35,006,000 representing reorganization and restructuring costs mainly in the European Packaging division. This figure includes
redundancy, closure and reorganization costs. The main closure costs relate to our Lestrem mill in France, which was permanently closed in October 2003. The related tax relief of
€9,367,179 is included in Taxes on income. The Group has reported a gain of €5,560,000 in respect of the disposal of its Maltese box plant and the sale of land at
Orsenigo and Asti in Italy. The related tax charge of €2,085,620 is included in Taxes on income.

6 Employees and Remuneration

The average number of persons employed by the Group by geographical area in the financial year was:

|                         |  | Successor |  | Predecessor
|------------------------ |  | --------- |  | -----------
|
|
|Europe                   |  | 22,931    |  | 22,348     
|United States and Canada |  |          |  | 639        
|Latin America            |  | 7,440     |  | 7,318      
|                         |  |           |  |            
|                         |  | 30,371    |  | 30,305     
|                         |  |           |  |            
|Associates' employees    |  | 1,758     |  | 1,798      
|                         |  |           |  |            

|                          |  | Successor  |  | Predecessor
|------------------------- |  | ---------- |  | -----------
|
|
|The staff costs comprise: |  |            |  |            
|Wages and salaries        |  | 890,748    |  | 873,702    
|Social welfare            |  | 194,858    |  | 190,586    
|Pensions                  |  | 71,623     |  | 73,200     
|                          |  |            |  |            
|                          |  | €1,157,229 |  | €1,137,488 
|                          |  |            |  |            

F-91

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7 Interest Expense

|                                                     |  | Successor |  | Predecessor
|---------------------------------------------------- |  | --------- |  | -----------
|
|
|Interest payable and similar charges:                |  |           |  |            
|On bank loans and overdrafts                         |  |           |  |            
|repayable within 5 years, by installment            |  | 25,123    |  | 26,614     
|repayable within 5 years, other than by installment |  | 2,965     |  | 3,207      
|                                                     |  |           |  |            
|                                                     |  | 28,088    |  | 29,821     
|Payable to affiliates                                |  | 137,730   |  | 136,941    
|On all other loans                                   |  | 127,191   |  | 141,992    
|                                                     |  |           |  |            
|                                                     |  | €293,009  |  | €308,754   
|                                                     |  |           |  |            

8 Income Before Taxes

|                                              |                                                         | Successor |         | Predecessor |        
|--------------------------------------------- | ------------------------------------------------------- | --------- | ------- | ----------- | -------
|
|
|Income before taxes is stated after charging: |                                                         |           |         |             |        
|                                              | Depreciation, depletion and amortization expense        |           | 300,542 |             | 298,014
|                                              |                                                         |           |         |             |        
|                                              | Auditors' remuneration (including expenses)             |           | 4,059   |             | 3,654  
|                                              |                                                         |           |         |             |        
|                                              | Operating lease rentals plant and machinery             |           | 13,042  |             | 10,404 
|                                              |                                                         |           |         |             |        
|                                              | Operating lease rentals other                           |           | 9,171   |             | 6,110  
|                                              |                                                         |           |         |             |        
|                                              | (Gain)/loss on foreign currency borrowing less deposits |           | (376    | )           | 6,401  
|                                              |                                                         |           |         |             |        
|                                              | Research and development costs                          |           | 4,924   |             | 4,979  
|                                              |                                                         |           |         |             |        
|                                              | Government grants                                       |           | 2,786   |             | 2,878  
|                                              |                                                         |           |         |             |        

Directors'
emoluments, including pension contributions amounted to €10,005,000 (2003: €7,048,000). Directors' emoluments, including pension
contributions, for the period from September 3, 2002, through December 31, 2002, amounted to €3,323,000.

The
following amounts relating to discontinued operations are included in arriving at Cost of sales and Net operating expenses in the Consolidated Statements of Operations.

|                        |                         | Successor |         | Predecessor
|----------------------- | ----------------------- | --------- | ------- | -----------
|
|
|Cost of sales:          |                         |           |         |            
|                        | Discontinued operations |           | 382,016 |            
|Net operating expenses: |                         |           |         |            
|                        | Discontinued operations |           | 71,799  |            

F-92

---





9 Taxes on income

|                                    |  | Successor |   | Predecessor |  
|----------------------------------- |  | --------- | - | ----------- | -
|
|
|Current Taxation                    |  |           |   |             |  
|Europe                              |  | (7,219    | ) | 32,463      |  
|United States and Canada            |  |          |   | (686        | )
|Latin America                       |  | 26,975    |   | 25,547      |  
|                                    |  |           |   |             |  
|                                    |  | 19,756    |   | 57,324      |  
|                                    |  |           |   |             |  
|Deferred Taxation                   |  |           |   |             |  
|Europe                              |  | 3,354     |   | 4,769       |  
|United States and Canada            |  | 8         |   | 5           |  
|Latin America                       |  | 1,257     |   | (2,811      | )
|                                    |  |           |   |             |  
|                                    |  | 4,619     |   | 1,963       |  
|                                    |  |           |   |             |  
|Taxation on income                  |  |           |   |             |  
|Holding Company and subsidiaries    |  | 24,375    |   | 59,287      |  
|Share of associates                 |  | 2,598     |   | 3,067       |  
|                                    |  |           |   |             |  
|                                    |  | €26,973   |   | €62,354     |  
|                                    |  |           |   |             |  
|Deferred taxation arises as follows |  |           |   |             |  
|Capital allowances                  |  | 3,873     |   | 1,068       |  
|Other                               |  | 746       |   | 895         |  
|                                    |  |           |   |             |  
|                                    |  | €4,619    |   | €1,963      |  
|                                    |  |           |   |             |  

Current taxation represents corporation tax or its equivalent on the taxable income in each jurisdiction and unrelieved overseas tax on dividends.
The net credit in Europe in 2004 arises as a result of the refund of €20,527,000 in the Netherlands under the Bosal judgement. In 2004, unrelieved overseas tax on dividends amounted to
€485,682 (2003: €473,631). For the periods January 1 through September 2, 2002 and September 3 through December 31, 2002 respectively,
unrelieved overseas tax on dividends amounted to €488,827 and €108,686. In 2004, the amount of current taxation relating to Ireland was nil (2003: a credit of
€3,295,000). For the periods January 1 through September 2, 2002 and September 3 through December 31, 2002 respectively, the amount of current taxation
relating to Ireland was €4,667,000 and €1,100,000. In 2004, the amount of deferred taxation relating to Ireland was a credit of €3,630,000 (2003: a
charge of €5,225,000). For the periods January 1 through September 2, 2002 and September 3 through December 31, 2002 respectively, the amount of deferred
taxation relating to Ireland was nil.

The
deferred taxation charge of €4,619,000 (2003: €1,963,000) includes €635,000 (2003: €251,000) in respect of pensions.
The balance of €3,984,000 (2003: €1,712,000) is shown as a movement in the liability for Deferred Income Taxes.

The
Group has availed of a reduced taxation rate of 10%, which applies to certain manufacturing and financial service operations in Ireland. The reduced rate is due to expire in 2005 for
financial service operations and 2010 for manufacturing operations.

F-93

---



Income before tax is analyzed as follows:

|                                  |  | Successor |   | Predecessor |  
|--------------------------------- |  | --------- | - | ----------- | -
|
|
|Ireland                           |  | (30,078   | ) | (34,959     | )
|Foreign                           |  | 83,133    |   | 111,317     |  
|Associates                        |  | 11,309    |   | 10,093      |  
|Unallocated goodwill amortization |  | (37,925   | ) | (44,548     | )
|Exceptional items (Note 5)        |  | (17,257   | ) | (29,446     | )
|                                  |  |           |   |             |  
|                                  |  | €9,182    |   | €12,457     |  
|                                  |  |           |   |             |  

The total tax charge in future periods will be affected by any changes to the corporation tax rates in force in the countries in which the Group
operates. The current tax charges will also be affected by changes in the excess of tax depreciation over book depreciation and the use of tax credits. The total tax charge for 2004 included
€12,771,000 in respect of the discontinued Munksjö specialties and tissue businesses.

No
deferred taxation is recognized on the unremitted earnings of overseas subsidiaries, joint ventures and associates; as earnings are continually reinvested by the Group, no taxation is
expected to be payable on them in the foreseeable future.

The
following table relates the applicable Republic of Ireland statutory tax rate to the effective tax rate of the Group, obtained by computing the tax charge as a percentage of income
before taxes and minority shareholders' interest:

|                                        |                                                                  | Successor |        | Predecessor |       
|--------------------------------------- | ---------------------------------------------------------------- | --------- | ------ | ----------- | ------
|
|
|Corporation tax at Irish statutory rate |                                                                  | 12.5      |        | 12.5        |       
|Adjusted for:                           |                                                                  |           |        |             |       
|                                        | Income subject to a higher rate of tax than Irish statutory rate |           | 595.6  |             | 367.4 
|                                        | Expenditure not deductible for tax purposes                      |           | 157.6  |             | 253.2 
|                                        | Tax losses unutilized/(utilized)                                 |           | 94.3   |             | (131.5
|                                        | Adjustments to tax charge in respect of previous periods         |           | (451.9 | )           | 2.7   
|                                        | Losses)/(income) arising not subject to tax                      |           | (114.3 | )           | (3.7  
|                                        |                                                                  |           |        |             |       
|                                        |                                                                  | 293.8     |        | 500.6       |       
|                                        |                                                                  |           |        |             |       

F-94

---



10 Net Borrowing

|                          |  | 2004       |  | 2003      
|------------------------- |  | ---------- |  | ----------
|
|Cash at bank and in hand  |  | 247,958    |  | 179,067   
|Total borrowing (Note 19) |  | 1,930,624  |  | 2,026,859 
|                          |  |            |  |           
|                          |  | €1,682,666 |  | €1,847,792
|                          |  |            |  |           

11 Accounts Receivable and Prepayments

|                                              |  | 2004     |  | 2003    
|--------------------------------------------- |  | -------- |  | --------
|
|Amounts falling due within one year:          |  |          |  |         
|Trade receivables                             |  | 896,874  |  | 876,008 
|Less: Provision for bad and doubtful debts    |  | 52,910   |  | 54,840  
|                                              |  |          |  |         
|                                              |  | 843,964  |  | 821,168 
|Amounts owed by associates                    |  | 5,764    |  | 6,056   
|Other receivables                             |  | 37,740   |  | 37,173  
|Prepayments and accrued income                |  | 31,317   |  | 34,441  
|                                              |  |          |  |         
|                                              |  | 918,785  |  | 898,838 
|Amounts falling due after more than one year: |  |          |  |         
|Other receivables                             |  | 6,263    |  | 12,605  
|                                              |  |          |  |         
|                                              |  | €925,048 |  | €911,443
|                                              |  |          |  |         

12 Inventories

|                 |  | 2004     |  | 2003    
|---------------- |  | -------- |  | --------
|
|Raw materials    |  | 114,264  |  | 120,026 
|Work in progress |  | 22,283   |  | 26,238  
|Finished goods   |  | 184,060  |  | 204,678 
|Other            |  | 131,559  |  | 126,490 
|                 |  |          |  |         
|                 |  | €452,166 |  | €477,432
|                 |  |          |  |         

F-95

---





13 Investments

|                                 |  | 2004    |  | 2003   
|-------------------------------- |  | ------- |  | -------
|
|Associates (Note 13 (i))         |  | 72,295  |  | 69,285 
|Other investments (Note 13 (ii)) |  | 9,600   |  | 11,357 
|                                 |  |         |  |        
|                                 |  | €81,895 |  | €80,642
|                                 |  |         |  |        

13 (i): Associates

|                                |  | Share of
net assets |   | Loans  |   | Total   |  
|------------------------------- |  | ------------------- | - | ------ | - | ------- | -
|
|September 3, 2002 Acquired      |  | 142,058             |   | 8,792  |   | 150,850 |  
|Additions                       |  | 6,279               |   |       |   | 6,279   |  
|Retained earnings               |  | 4,019               |   |       |   | 4,019   |  
|Transfer to affiliates          |  | (9,523              | ) |       |   | (9,523  | )
|Repayment                       |  |                    |   | (1,368 | ) | (1,368  | )
|Reclassification                |  | 91                  |   |       |   | 91      |  
|Currency adjustment             |  | 1,079               |   | (388   | ) | 691     |  
|                                |  |                     |   |        |   |         |  
|December 31, 2002               |  | 144,003             |   | 7,036  |   | 151,039 |  
|Fair value adjustment           |  | (5,646              | ) |       |   | (5,646  | )
|Additions                       |  | 4,089               |   |       |   | 4,089   |  
|Acquisitions                    |  | 763                 |   |       |   | 763     |  
|Retained earnings               |  | 4,603               |   |       |   | 4,603   |  
|Sales                           |  | (41,656             | ) |       |   | (41,656 | )
|Repayment                       |  |                    |   | (6,728 | ) | (6,728  | )
|Reclassification on acquisition |  | (35,030             | ) |       |   | (35,030 | )
|Currency adjustment             |  | (2,153              | ) | 4      |   | (2,149  | )
|                                |  |                     |   |        |   |         |  
|December 31, 2003               |  | 68,973              |   | 312    |   | 69,285  |  
|Additions                       |  | 441                 |   |       |   | 441     |  
|Retained earnings               |  | 3,944               |   |       |   | 3,944   |  
|Sales                           |  | (124                | ) |       |   | (124    | )
|Reclassification                |  | (414                | ) |       |   | (414    | )
|Currency adjustment             |  | (837                | ) |       |   | (837    | )
|                                |  |                     |   |        |   |         |  
|December 31, 2004               |  | €71,983             |   | €312   |   | €72,295 |  
|                                |  |                     |   |        |   |         |  

We
have one remaining significant associateDuropack AG in Austria, of which we own 40%.

F-96

---



13 (ii): Other Investments

|                                     |  | Listed*
Cost |   | Unlisted
Cost |   | Total   |  
|------------------------------------ |  | ------------ | - | ------------- | - | ------- | -
|
|September 3, 2002 Acquired           |  | 6,717        |   | 74,940        |   | 81,657  |  
|Additions                            |  | 753          |   | 583           |   | 1,336   |  
|Transfer to affiliates               |  |             |   | (68,090       | ) | (68,090 | )
|Reclassification                     |  | (467         | ) | 32            |   | (435    | )
|Sales                                |  | (52          | ) | (24           | ) | (76     | )
|Write off to statement of operations |  | (21          | ) |              |   | (21     | )
|Currency adjustment                  |  | (4           | ) | (163          | ) | (167    | )
|                                     |  |              |   |               |   |         |  
|December 31, 2002                    |  | 6,926        |   | 7,278         |   | 14,204  |  
|Additions                            |  | 392          |   | 269           |   | 661     |  
|Acquisitions                         |  | 19           |   | 2,834         |   | 2,853   |  
|Reclassification                     |  | 38           |   | (5,260        | ) | (5,222  | )
|Sales                                |  | (787         | ) | (16           | ) | (803    | )
|Currency adjustment                  |  | (15          | ) | (321          | ) | (336    | )
|                                     |  |              |   |               |   |         |  
|December 31, 2003                    |  | 6,573        |   | 4,784         |   | 11,357  |  
|Additions                            |  | 231          |   | 541           |   | 772     |  
|Transfers                            |  |             |   | (14           | ) | (14     | )
|Reclassification                     |  |             |   | (1,426        | ) | (1,426  | )
|Sales                                |  | (509         | ) | (465          | ) | (974    | )
|Currency adjustment                  |  | 8            |   | (123          | ) | (115    | )
|                                     |  |              |   |               |   |         |  
|December 31, 2004                    |  | €6,303       |   | €3,297        |   | €9,600  |  
|                                     |  |              |   |               |   |         |  

---

Other investments are stated at cost. The market value of the listed investments at December 31, 2004 was €6,304,000 (2003:
€6,545,000; 2002: €7,028,000).

F-97

---



14 Property, Plant and Equipment

|                                  |  | Land & Buildings |   |         |   |            |  
|--------------------------------- |  | ---------------- | - | ------- | - | ---------- | -
|
|
|
|Cost or valuation                 |  |                  |   |         |   |            |  
|September 3, 2002 Acquired        |  | 897,687          |   | 33,821  |   | 3,058,488  |  
|Additions                         |  | 12,374           |   |        |   | 76,420     |  
|Retirements                       |  | (4,466           | ) | (2      | ) | (37,962    | )
|Reclassification                  |  | 23,810           |   |        |   | (11,693    | )
|Transfer to affiliates            |  | (52,745          | ) |        |   | (104,000   | )
|Currency adjustment               |  | (15,366          | ) | (103    | ) | (67,255    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2002                 |  | 861,294          |   | 33,716  |   | 2,913,998  |  
|                                  |  |                  |   |         |   |            |  
|Fair value adjustment             |  | 97,459           |   |        |   | 97,670     |  
|Reclassification                  |  | 8,404            |   | (329    | ) | (46,191    | )
|Acquisitions                      |  | 93,412           |   | 6,562   |   | 169,411    |  
|Additions                         |  | 21,354           |   |        |   | 179,652    |  
|Businesses sold                   |  |                 |   |        |   | (165,386   | )
|Retirements                       |  | (16,217          | ) | (302    | ) | (82,874    | )
|Currency adjustment               |  | (47,025          | ) | (1,494  | ) | (153,406   | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2003                 |  | 1,018,681        |   | 38,153  |   | 2,912,874  |  
|                                  |  |                  |   |         |   |            |  
|Fair value adjustment             |  |                 |   |        |   | 1,195      |  
|Reclassification                  |  | 8,849            |   | (8,305  | ) | (17,952    | )
|Additions                         |  | 27,076           |   | 2,950   |   | 167,634    |  
|Retirements                       |  | (10,567          | ) | (2,726  | ) | (66,863    | )
|Currency adjustment               |  | (14,254          | ) | 158     |   | (44,416    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2004                 |  | 1,029,785        |   | 30,230  |   | 2,952,472  |  
|                                  |  |                  |   |         |   |            |  
|Depreciation                      |  |                  |   |         |   |            |  
|September 3, 2002 Acquired        |  | 146,042          |   | 7,814   |   | 1,555,428  |  
|Charged                           |  | 12,093           |   | 333     |   | 67,449     |  
|Retirements                       |  | (1,989           | ) | 3       |   | (34,054    | )
|Reclassification                  |  | 687              |   |        |   | (5,116     | )
|Transfer to affiliates            |  | (11,173          | ) |        |   | (36,906    | )
|Currency adjustment               |  | (3,743           | ) | (5      | ) | (40,161    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2002                 |  | 141,917          |   | 8,145   |   | 1,506,640  |  
|                                  |  |                  |   |         |   |            |  
|Reclassification                  |  | (1,159           | ) | (92     | ) | (43,525    | )
|Charged                           |  | 25,141           |   | 1,231   |   | 220,438    |  
|Businesses sold                   |  |                 |   |        |   | (96,144    | )
|Retirements                       |  | (4,494           | ) | (316    | ) | (72,059    | )
|Currency adjustment               |  | (9,542           | ) | (84     | ) | (91,825    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2003                 |  | 151,863          |   | 8,884   |   | 1,423,525  |  
|                                  |  |                  |   |         |   |            |  
|Reclassification                  |  | (4,787           | ) | (2,621  | ) | (6,473     | )
|Charged                           |  | 27,895           |   | 1,141   |   | 227,503    |  
|Retirements                       |  | (1,882           | ) | (713    | ) | (64,287    | )
|Currency adjustment               |  | (3,487           | ) | 141     |   | (29,731    | )
|                                  |  |                  |   |         |   |            |  
|December 31, 2004                 |  | 169,602          |   | 6,832   |   | 1,550,537  |  
|                                  |  |                  |   |         |   |            |  
|Net book amount December 31, 2004 |  | €860,183         |   | €23,398 |   | €1,401,935 |  
|                                  |  |                  |   |         |   |            |  
|Net book amount December 31, 2003 |  | €866,818         |   | €29,269 |   | €1,489,349 |  
|                                  |  |                  |   |         |   |            |  
|Net book amount December 31, 2002 |  | €719,377         |   | €25,571 |   | €1,407,358 |  
|                                  |  |                  |   |         |   |            |  

F-98

---



|                                  |  | Timberland |  
|--------------------------------- |  | ---------- | -
|
|September 3, 2002 Acquired        |  | 66,854     |  
|Additions                         |  | 2,345      |  
|Depletion                         |  | (2,696     | )
|Currency adjustment               |  | (4,555     | )
|                                  |  |            |  
|December 31, 2002                 |  | 61,948     |  
|Additions                         |  | 6,512      |  
|Fair value adjustment             |  | (945       | )
|Depletion                         |  | (6,656     | )
|Currency adjustment               |  | (10,349    | )
|                                  |  |            |  
|December 31, 2003                 |  | 50,510     |  
|Additions                         |  | 8,806      |  
|Depletion                         |  | (6,078     | )
|Currency adjustment               |  | (3,896     | )
|                                  |  |            |  
|December 31, 2004                 |  | €49,342    |  
|                                  |  |            |  
|Net book amount December 31, 2004 |  | €2,334,858 |  
|                                  |  |            |  
|Net book amount December 31, 2003 |  | €2,435,946 |  
|                                  |  |            |  
|Net book amount December 31, 2002 |  | €2,214,254 |  
|                                  |  |            |  

Land and Buildings

Included in tangible assets is an amount for land of €282,021,000 (2003: €288,434,000;
2002: €243,964,000).

Capitalized leased property, plant and equipment

Included in the net book amount of tangible assets is an amount for capitalized leased assets of €50,355,000 (2003: €65,687,000;
2002: €70,981,000). The depreciation charge for capitalized leased assets for 2004 was €10,139,000 and the related finance charges amounted to
€1,962,000. The depreciation charge for capitalized leased assets for 2003 was €10,794,000 and the related finance charges amounted to €2,164,000. The
depreciation charge for capitalized leased assets for the periods January 1, 2002 through September 2, 2002 and September 3, 2002 through December 31, 2002 was
€8,866,000 and €3,799,000 respectively and the related finance charges amounted to €1,186,000 and €570,000 respectively.

F-99

---





15 Intangible Assets

|                                         |  | Goodwill   |  
|---------------------------------------- |  | ---------- | -
|
|September 3, 2002 Arising on Acquisition |  | 1,558,980  |  
|Amortization                             |  | (10,090    | )
|Currency adjustment                      |  | (5,359     | )
|                                         |  |            |  
|December 31, 2002                        |  | 1,543,531  |  
|Acquisitions                             |  | 174,659    |  
|Disposals                                |  | (80,543    | )
|Fair value adjustments                   |  | (142,723   | )
|Amortization                             |  | (44,548    | )
|Currency adjustment                      |  | 4,743      |  
|                                         |  |            |  
|December 31, 2003                        |  | 1,455,119  |  
|Acquisitions                             |  | 2,731      |  
|Disposals                                |  | (2,586     | )
|Fair value adjustments                   |  | 40,457     |  
|Amortization                             |  | (37,925    | )
|Currency adjustment                      |  | (2,680     | )
|                                         |  |            |  
|December 31, 2004                        |  | €1,455,116 |  
|                                         |  |            |  

Accumulated
amortization at December 31, 2004 and 2003 was €75,110,000 and €37,292,000 respectively.

16 Accounts Payable and Accrued Liabilities

|                                            |  | 2004       |  | 2003      
|------------------------------------------- |  | ---------- |  | ----------
|
|Trade payables                              |  | 652,744    |  | 603,947   
|Amounts owed to associatestrading balances |  | 3,683      |  | 3,239     
|Amounts due to affiliates                   |  | 1,154      |  |          
|Taxation creditors (Note 17)                |  | 70,829     |  | 86,975    
|Deferred acquisition consideration          |  | 2,330      |  | 3,178     
|Social welfare                              |  | 48,740     |  | 51,450    
|Accruals                                    |  | 189,079    |  | 200,051   
|Capital payables                            |  | 29,305     |  | 23,372    
|Other payables                              |  | 62,497     |  | 59,076    
|Capitalized lease obligations               |  | 4,470      |  | 13,354    
|                                            |  |            |  |           
|                                            |  | €1,064,831 |  | €1,044,642
|                                            |  |            |  |           

F-100

---



17 Taxation Creditors

|                          |  | 2004    |   | 2003    |  
|------------------------- |  | ------- | - | ------- | -
|
|Current taxation          |  | 42,147  |   | 64,147  |  
|Payroll taxes             |  | 29,256  |   | 27,593  |  
|VAT and other sales taxes |  | (574    | ) | (4,765  | )
|                          |  |         |   |         |  
|                          |  | €70,829 |   | €86,975 |  
|                          |  |         |   |         |  

18 Long Term Debt and Other Long Term Liabilities

|                                                 |  | 2004       |   | 2003       |  
|------------------------------------------------ |  | ---------- | - | ---------- | -
|
|Borrowingdue after more than one year (Note 19) |  | 1,848,074  |   | 1,916,348  |  
|Deferred debt issuance costs                     |  | (91,628    | ) | (110,650   | )
|Capitalized lease obligations                    |  | 12,930     |   | 14,926     |  
|                                                 |  |            |   |            |  
|                                                 |  | €1,769,376 |   | €1,820,624 |  
|                                                 |  |            |   |            |  

19 Borrowing

Analysis of Net Debt

|                                                       |                                                                          | 2004       |         | 2003       |        
|------------------------------------------------------ | ------------------------------------------------------------------------ | ---------- | ------- | ---------- | -------
|
|Senior credit facility:                                |                                                                          |            |         |            |        
|                                                       | Revolving credit facility(1)interest at relevant interbank rate + 2.25% |            |        |            |       
|                                                       | Tranche A Term loan(2a)interest at relevant interbank rate + 2.25%      |            | 275,090 |            | 530,231
|                                                       | Tranche B Term loan(2b)interest at relevant interbank rate + 2.75%      |            | 444,068 |            | 469,178
|                                                       | Tranche C Term loan(2c)interest at relevant interbank rate + 3.25%      |            | 450,262 |            | 469,178
|Yankee bonds including accrued interest(3)             |                                                                          | 416,245    |         | 415,971    |        
|Bank loans and overdrafts/(cash)                       |                                                                          | (112,999   | )       | (36,766    | )      
|                                                       |                                                                          |            |         |            |        
|Total subsidiary debt                                  |                                                                          | 1,472,666  |         | 1,847,792  |        
|Receivables securitization floating rate notes 2011(4) |                                                                          | 210,000    |         |           |        
|                                                       |                                                                          |            |         |            |        
|Net debt                                               |                                                                          | 1,682,666  |         | 1,847,792  |        
|Leases                                                 |                                                                          | 17,400     |         | 28,280     |        
|                                                       |                                                                          |            |         |            |        
|Net debt including leases                              |                                                                          | €1,700,066 |         | €1,876,072 |        
|                                                       |                                                                          |            |         |            |        

---

F-101

---



|                                           |                           | 2004       |         | 2003    
|------------------------------------------ | ------------------------- | ---------- | ------- | --------
|
|
|Analysis of borrowing by year of repayment |                           |            |         |         
|Within one year                            |                           | 78,283     |         | 4,267   
|                                           |                           |            |         |         
|Between 1 and 2 years                      |                           | 75,515     |         | 6,277   
|Between 2 and 3 years                      |                           | 171,966    |         | 2,429   
|Between 3 and 4 years                      |                           | 118,411    |         | 1,938   
|Between 4 and 5 years                      |                           | 163,427    |         | 1,738   
|Thereafter                                 |                           |            |         |         
|                                           | By installment            |            |        |         
|                                           | Other than by installment |            | 837,491 |         
|                                           |                           |            |         |         
|Due after more than one year               |                           | 1,366,810  |         | 481,264 
|                                           |                           |            |         |         
|Total borrowing                            |                           | €1,445,093 |         | €485,531
|                                           |                           |            |         |         

|                                     |  | 2004    |  | 2003      
|------------------------------------ |  | ------- |  | ----------
|
|
|Analysis of borrowing                |  |         |  |           
|Secured bank loans and overdrafts:   |  |         |  |           
|Overseas loans                       |  | 7,453   |  | 7,496     
|Domestic loans                       |  | 29,514  |  | 1,355,521 
|                                     |  |         |  |           
|                                     |  | 36,967  |  | 1,363,017 
|Unsecured bank loans and overdrafts: |  |         |  |           
|Overseas loans                       |  | 24,855  |  | 3,793     
|Domestic loans                       |  | 16,461  |  |          
|                                     |  |         |  |           
|                                     |  | 41,316  |  | 3,793     
|                                     |  |         |  |           
|Total bank loans and overdrafts      |  | 78,283  |  | 1,366,810 
|                                     |  |         |  |           
|Secured other loans                  |  |        |  | 462,912   
|Unsecured other loans                |  | 4,267   |  | 18,352    
|                                     |  |         |  |           
|Total other loans                    |  | 4,267   |  | 481,264   
|                                     |  |         |  |           
|Total borrowing                      |  | €82,550 |  | €1,848,074
|                                     |  |         |  |           

Security
comprises fixed and floating charges over the assets of certain subsidiaries and pledges over the Group's shareholding in certain of its subsidiaries. The gross amount of
receivables collateralizing the receivables securitization at December 31, 2004 was €261,225,000. At December 31,

F-102

---



2004
cash of €12,655,000 was in securitization bank accounts which was not available for transfer to other group subsidiaries.

Included
in secured other loans are the following long term obligations:

|                                                        |  | 000
|------------------------------------------------------- |  | ---
|Guaranteed Debentures 7.50% due 2025                    |  | $  
|Receivables securitization floating rate notes due 2011 |  |    

Committed
facilities amounted to €2,307,064,000 (2003: €2,325,889,000) of which €1,878,997,000
(2003: €1,899,728,000) were utilized at December 31, 2004. The weighted average period until maturity of undrawn committed facilities is 4.6 years
(2003: 5.7 years).

|Maturity of Undrawn Committed Facilities |  | 2004     |  | 2003    
|---------------------------------------- |  | -------- |  | --------
|
|Within 1 year                            |  | 3,067    |  |        
|Between 1 and 2 years                    |  |         |  | 1,171   
|More than 2 years                        |  | 425,000  |  | 425,000 
|                                         |  |          |  |         
|                                         |  | €428,067 |  | €426,171
|                                         |  |          |  |         

Financial instruments and risk management

The operating parameters and policies of treasury management are established under board authority. The formal treasury policy covers the areas of funding,
counterparty risk, foreign exchange, controls and derivatives. Risk arising on counterparty default is controlled within a framework of dealing with high quality institutions that meet certain minimum
criteria. The Group uses derivative instruments in the management of interest rate and currency risk.

The
Group's financial instruments, other than derivatives, comprise borrowing, cash and liquid resources, and various items, such as trade debtors, trade creditors etc, that arise
directly from its operations. The Group uses derivative financial instruments primarily to manage its exposure to market risks from changes in interest and foreign exchange rates. The Group does not
enter into or issue derivative financial instruments for trading purposes. The Group's policy is to centrally manage interest rate and currency exposure.

(a) Interest rate risk management

The Group manages interest rate exposure to achieve an appropriate balance of fixed and variable rate funding. To achieve this objective, the Group enters into
interest rate swaps, options and forward rate agreements. Interest rate swap agreements are used to change the interest receivable or payable on the Group's underlying cash and borrowing from variable
to fixed rates or from fixed to variable rates. At the year end, 55% (2003: 52%) of the Group's borrowing was at fixed rates after taking account of interest rate swaps. The weighted average
interest rate on borrowing outstanding at the year end was 6.1% (2003: 6.2%). The weighted average interest rate on short term borrowing was 6.11% (2003: 5.26%).

F-103

---





Outstanding interest rate swap agreements at December 31, 2004 are summarized as follows:

|Currency |  | Notional
Principal
(Millions) |  | Termination
Dates |  | % Fixed
Payable |  | % Variable
Receivable |  | % Fixed
Receivable |  | % Variable
Payable
|-------- |  | ----------------------------- |  | ----------------- |  | --------------- |  | --------------------- |  | ------------------ |  | ------------------
|EUR      |  | 200                           |  | 2005              |  | 3.433.485      |  | Euribor(1)            |  |                   |  |                  
|EUR      |  | 110                           |  | 2006              |  | 3.494.37       |  | Euribor               |  |                   |  |                  
|SEK      |  | 94                            |  | 2006              |  |                |  |                      |  | 5.24               |  | Stibor(2)         
|EUR      |  | 700                           |  | 2007              |  | 3.393.62       |  | Euribor               |  |                   |  |                  

---

Outstanding interest rate swap agreements at December 31, 2003 are summarized as follows:

|Currency |  | Notional
Principal
(millions) |  | Termination
Dates |  | % Fixed
Payable |  | % Variable
Receivable |  | % Fixed
Receivable |  | % Variable
Payable
|-------- |  | ----------------------------- |  | ----------------- |  | --------------- |  | --------------------- |  | ------------------ |  | ------------------
|EUR      |  | 600                           |  | 2005              |  | 3.433.505      |  | Euribor               |  |                   |  |                  
|EUR      |  | 10                            |  | 2006              |  | 4.37            |  | Euribor               |  |                   |  |                  
|SEK      |  | 94                            |  | 2006              |  |                |  |                      |  | 5.24               |  | Stibor            
|EUR      |  | 400                           |  | 2007              |  | 3.393.457      |  | Euribor               |  |                   |  |                  

After
taking into account the various interest rate swaps and currency swaps entered into by the Group, the interest rate profile of the Group's financial liabilities at
December 31, 2004 was:

|              |  |        |   |      |  |        |   | Fixed rate financial liabilities
|------------- |  | ------ | - | ---- |  | ------ | - | --------------------------------
|
|
|Euro          |  | 1,851  |   | 628  |  | 1,223  |   | 6.91                            
|Sterling      |  | 77     |   | 77   |  |       |   |                                 
|US Dollar     |  | (124   | ) | 23   |  | (147   | ) | 9.65                            
|Norwegian     |  | 43     |   | 43   |  |       |   |                                 
|Swedish Krona |  | 79     |   | 79   |  |       |   |                                 
|Other         |  | 22     |   | 18   |  | 4      |   | 13.20                           
|              |  |        |   |      |  |        |   |                                 
|Total         |  | €1,948 |   | €868 |  | €1,080 |   |                                 
|              |  |        |   |      |  |        |   |                                 

(b) Foreign exchange risk management

The Group manages its balance sheet having regard to the currency exposures arising from its assets being denominated in a wide range of currencies. To this end,
where foreign currency assets are funded by borrowing, such borrowing is generally sourced in the currency of the related assets. The Group also hedges a portion of its currency exposure through the
use of currency swaps and forward contracts. At December 31, 2004 the Group had entered into €163 million (2003: €185 million)

F-104

---



currency
equivalent of forward contracts and €66 million (2003: €85 million) equivalent of options contracts in respect of its day to day trading.

Outstanding
currency swap agreements at December 31, 2004 are summarized as follows:

|Currency swapped
        (millions) |  | Currency received
(millions) |  | Maturity date |  | Interest rate paid |  | Interest rate received
|----------------------------------- |  | ---------------------------- |  | ------------- |  | ------------------ |  | ----------------------
|USD 195                             |  | EUR 200                      |  | 2007          |  | Euribor + 318      |  | Libor(1) + 300        
|USD 204                             |  | EUR 190                      |  | 2012          |  | 9.6481             |  | 9.6491                
|USD 231                             |  | EUR 199                      |  | 2005          |  | Euribor + 464      |  | 6.8238                
|USD 136                             |  | EUR 101                      |  | 2005          |  | Euribor + 81       |  | Libor + 93            
|USD 35                              |  | EUR 25                       |  | 2005          |  | Euribor + 708      |  | 7.55                  
|USD 113                             |  | SEK 749                      |  | 2005          |  | Stibor + 597       |  | 7.55                  
|USD 5                               |  | SEK 33                       |  | 2005          |  | Stibor + 110       |  | Libor + 93            

---

Outstanding currency swap agreements at December 31, 2003 are summarized as follows:

|Currency swapped
        (millions) |  | Currency received
(millions) |  | Maturity date |  | Interest rate paid |  | Interest rate received
|----------------------------------- |  | ---------------------------- |  | ------------- |  | ------------------ |  | ----------------------
|USD 195                             |  | EUR 200                      |  | 2007          |  | Euribor + 318      |  | Libor + 300           
|USD 204                             |  | EUR 190                      |  | 2012          |  | 9.6481             |  | 9.6491                
|USD 231                             |  | EUR 199                      |  | 2005          |  | Euribor + 464      |  | 6.8238                
|USD 136                             |  | EUR 101                      |  | 2005          |  | Euribor + 81       |  | Libor + 93            
|USD 35                              |  | EUR 25                       |  | 2005          |  | Euribor + 708      |  | 7.55                  
|USD 113                             |  | SEK 749                      |  | 2005          |  | Stibor + 597       |  | 7.55                  
|USD 5                               |  | SEK 33                       |  | 2005          |  | Stibor + 110       |  | Libor + 93            

At December 31, 2004 the Group had also entered into currency swaps of €90 million equivalent (2003:
€187 million) as part of its short term liquidity management.

Excluding
the Group's Latin American operations, there were no significant transactional currency exposures at December 31, 2004, that gave rise to net currency gains and losses
recognized in the Consolidated Statements of Operations. Such exposures comprise the monetary assets and liabilities of the Group that are not denominated in the operating (or "functional") currency
of the operating unit involved. As at December 31, 2004, transactional currency exposures in the Group's Latin American operations amounted to €19 million (2003:
€20 million).

F-105

---



(c) Fair value of financial instruments

The carrying amounts and estimated fair values of the material financial instruments of the Group are as follows:

|                                                 |  | 2004      |  | 2003      |  
|------------------------------------------------ |  | --------- |  | --------- | -
|
|
|Assets                                           |  |           |  |           |  
|Cash, short term deposits and liquid investments |  | 247,958   |  | 247,958   |  
|Accounts receivable and prepayments              |  | 918,785   |  | 918,785   |  
|Publicly traded investments                      |  | 6,303     |  | 6,304     |  
|Liabilities                                      |  |           |  |           |  
|Short term debt                                  |  | 82,550    |  | 82,550    |  
|Accounts payable and accrued liabilities         |  | 1,064,831 |  | 1,064,831 |  
|Medium and long term debt                        |  | 1,848,074 |  | 1,846,788 |  
|Derivative financial instruments                 |  |           |  |           |  
|Interest rate swap agreements                    |  |           |  | (57,397   | )
|Currency swap agreements                         |  |           |  | (125,743  | )
|Foreign exchange contracts                       |  |           |  | 12,068    |  
|Energy/pulp hedging contracts                    |  |           |  | (6,024    | )

The
following methods and assumptions were used by the Group in estimating its fair value disclosures for financial instruments:

Cash, short term deposits and liquid investments, debtors and creditors:

The carrying amounts reported in the Balance Sheets approximates fair value because of the short maturity of these instruments.

Listed investments:

These are valued based on quoted prices.

Short term debt and medium and long term debt:

The fair value of the Group's debt is estimated using either the replacement cost of equivalent instruments or discounted cash flow analysis, based on the Group's
current incremental borrowing rates for similar types of borrowing arrangements and maturities.

Interest rate swap agreements:

The fair value of the Group's interest rate swap agreements is estimated using discounted cash flow analysis. In addition the fair value amount includes the
interest rate component of currency swaps.

F-106

---



Currency swap agreements and foreign exchange contracts:

The fair value of these instruments is based on the estimated replacement cost of equivalent instruments at the balance sheet date.

Gains
and losses on instruments used for hedging are not recognized until the exposure that is being hedged is itself recognized. Unrecognized gains and losses on instruments used for
hedging, and the movement therein, are as follows:

|                                                                                   |  | Gains |   | Losses |  | Total net
gains/(losses) |  
|---------------------------------------------------------------------------------- |  | ----- | - | ------ |  | ------------------------ | -
|
|Unrecognized gains and losses on hedges at December 31, 2003                       |  | 40    |   | 32     |  | 8                        |  
|Gains and losses arising in previous years that were recognized in 2004            |  | 25    |   | 16     |  | 9                        |  
|Gains and losses arising before December 31, 2003 that were not recognized in 2004 |  | 15    |   | 16     |  | (1                       | )
|Gains and losses arising in 2004 that were not recognized in 2004                  |  | (9    | ) | 48     |  | (57                      | )
|                                                                                   |  |       |   |        |  |                          |  
|Unrecognized gains and losses on hedges at December 31, 2004                       |  | €6    |   | €64    |  | €(58                     | )
|                                                                                   |  |       |   |        |  |                          |  
|Of which: Gains and losses expected to be recognized in 2005                       |  | 5     |   | 23     |  | (18                      | )
|                                                                                   |  |       |   |        |  |                          |  
|Gains and losses expected to be recognized in 2006 or later                        |  | 1     |   | 41     |  | (40                      | )
|                                                                                   |  |       |   |        |  |                          |  

(d) Credit Risk

Potential concentrations of credit risk to the Group consist principally of cash deposits, short term investments and trade debtors. The Group only deposits cash
surpluses with quality credit rated banks and institutions that meet certain criteria and by policy limits the amount of credit exposure to any one bank or institution. Trade debtors comprise a large,
widespread customer base. The Group mitigates the risk that counterparties to derivatives will fail to perform by contracting with major financial institutions having high credit ratings and considers
the likelihood of counterparty failure to be remote. At December 31, 2004 the Group did not consider there to be any significant concentration of credit risk.

F-107

---



20 Provision for Liabilities and Charges

|                                  |  | Deferred
Income
Taxes |     | Other
Deferred
Provisions |   | Total    |  
|--------------------------------- |  | --------------------- | --- | ------------------------- | - | -------- | -
|
|
|September 3, 2002 Acquired        |  | 159,691               |     | 80,560                    |   | 240,251  |  
|Charge to statement of operations |  | 3,052                 |     | (7,659                    | ) | (4,607   | )
|Paid in year                      |  |                      |     | (2,061                    | ) | (2,061   | )
|Transfer to affiliates            |  |                      |     | 64                        |   | 64       |  
|Reclassification                  |  | (1,283                | )   | (5,408                    | ) | (6,691   | )
|Currency adjustment               |  | (2,564                | )   | (1,539                    | ) | (4,103   | )
|                                  |  |                       |     |                           |   |          |  
|December 31, 2002                 |  | 158,896               |     | 63,957                    |   | 222,853  |  
|Charge to statement of operations |  | 1,712                 | (1) | 5,628                     |   | 7,340    |  
|Paid in year                      |  |                      |     | 3,253                     |   | 3,253    |  
|Acquisitions                      |  | 3,626                 |     | 2,571                     |   | 6,197    |  
|Reclassification                  |  | 18,001                |     | (14,787                   | ) | 3,214    |  
|Fair value adjustments            |  | 674                   |     |                          |   | 674      |  
|Currency adjustment               |  | (6,083                | )   | (2,496                    | ) | (8,579   | )
|                                  |  |                       |     |                           |   |          |  
|December 31, 2003                 |  | 176,826               |     | 58,126                    |   | 234,952  |  
|Charge to statement of operations |  | 3,984                 | (1) | (42                       | ) | 3,942    |  
|Paid in year                      |  |                      |     | (9,769                    | ) | (9,769   | )
|Acquisitions                      |  | 1                     |     |                          |   | 1        |  
|Fair value adjustments            |  | (7,134                | )   |                          |   | (7,134   | )
|Reclassification                  |  | 4,406                 |     | (2,592                    | ) | 1,814    |  
|Currency adjustment               |  | (1,647                | )   | (756                      | ) | (2,403   | )
|                                  |  |                       |     |                           |   |          |  
|December 31, 2004                 |  | €176,436              |     | €44,967                   |   | €221,403 |  
|                                  |  |                       |     |                           |   |          |  

|                                     |  | 2004     |  | 2003     |  | 2002    
|------------------------------------ |  | -------- |  | -------- |  | --------
|
|Deferred taxation arises as follows: |  |          |  |          |  |         
|Accelerated capital allowances       |  | 158,246  |  | 112,672  |  | 108,527 
|Other timing differences             |  | 18,190   |  | 64,154   |  | 50,369  
|                                     |  |          |  |          |  |         
|                                     |  | €176,436 |  | €176,826 |  | €158,896
|                                     |  |          |  |          |  |         

---

At December 31, 2004, we had net operating loss carryforwards of €200 million (2003:
€210 million), which are available indefinitely. These loss carryforwards have a tax value of €61 million (2003: €65 million).
Valuation allowances of €30 million (2003: €50 million) have been established for a portion of these deferred tax assets. The realization of these
deferred tax assets is dependent on future taxable income. Based upon recent levels of taxable income, we expect that our deferred tax assets, net of valuation allowances, will be fully utilized.

F-108

---



21 Contingent Liabilities

In addition to litigation arising in the ordinary course of business, we are involved in certain civil and criminal proceedings in Spain arising out of a past
acquisition. In November 1988, a subsidiary of JSG acquired Industrial Cartonera, S.A., or ICSA, a Spanish incorporated company, from a subsidiary of Torras Hostench S.A., or Torras. In early
1989, JSG acquired a 35% interest in another Spanish company called Industrias del Papel y de la Celulosa, S.A., or INPACSA, a former parent of ICSA. A number of individuals associated with Torras
were charged by the public prosecutor in Madrid with diverting, for their own use, a substantial part of the purchase consideration paid by JSG for ICSA. The public prosecutor, on behalf of the
minority shareholders of INPACSA, also claimed that certain transactions, including the transfer of ICSA by INPACSA which took place prior to JSG's acquisition of ICSA, caused damage to the minority
shareholders of INPACSA. In 1998, the public prosecutor also charged JSG's Chairman, Dr. Michael W.J. Smurfit, as the representative of JSG, in these proceedings with respect to the alleged
damage to the minority shareholders of INPACSA and Torras. A JSG subsidiary is also one of a number of parties against whom secondary civil liability has been claimed.

JSG
and Smurfit International B.V. have each indemnified Dr. Smurfit against loss or liability due to such proceedings. Bonds have been posted with the Spanish court in the amount
of €47 million, which equals the amount of alleged damages, excluding interest. The maximum estimated current total exposure relating to the liabilities, including interest
through December 31, 2002, is approximately €118 million, for which no reserve has been taken and which amount will accrue interest until payment of any final judgment.
Preliminary proceedings commenced in late March 2003 and on April 11, 2003, the court dismissed the proceedings against Dr. Smurfit, the JSG subsidiary and others. The bonds
previously posted were released and the Spanish court has now taken a lien over certain Spanish assets pending final resolution of the case. The final decision of the court was handed down in
March 2004 and confirmed the earlier dismissal with respect to Dr. Smurfit and the JSG subsidiary. The decision is being appealed to a higher court by two private complainants but not by
the public prosecutor. We cannot assure you, however, that the consequences of any adverse findings, if any, will not have a material adverse effect on our financial position or results of operations.

We
are also the subject of litigation in the Dominican Republic arising from our acquisition in 1998 of a controlling interest in a small local corrugator owned by Industria Cartonera
Dominicana. The lawsuits, alleging damages in excess of $300 million, are brought by a local competitor who is claiming loss of potential profits, as a consequence of our entry to the market.
He is also alleging breach of contract. In June 2004 we received an adverse ruling in our main lawsuit, which found for the original plaintiff but which made no determination as to damages. The
damage amount has been left for yet another court to decide. We have appealed this ruling and are challenging a number of due irregularities surrounding the ruling.

We
believe the foregoing lawsuits are without merit and are defending them vigorously.

In
July 2004, representatives of the Office of Fair Trading visited our UK operation. We understand that the investigation, which centers on the sheet feeding business, was
prompted by consumer complaints, which were filed during the UK Competition Commission's investigation of the March 2004 acquisition proposal by David S. Smith Limited for Linpac Limited, a
competitor of our sheet feeding business. The investigation is looking into high levels of pricing transparency which exist in the sector and which are a function of, inter alia, vertical integration,
SWAPs and market concentration. We are co-operating fully with the ongoing investigation.

F-109

---





22 Lease Obligations

Obligations
under finance leases:

|                                                 |  | 2004    |   | 2003    |  
|------------------------------------------------ |  | ------- | - | ------- | -
|
|Payable within one year                          |  | 5,283   |   | 14,307  |  
|Payable in one to two years                      |  | 3,902   |   | 5,083   |  
|Payable in two to three years                    |  | 3,406   |   | 3,640   |  
|Payable in three to four years                   |  | 2,884   |   | 3,393   |  
|Payable in four to five years                    |  | 2,475   |   | 2,890   |  
|Payable thereafter                               |  | 1,974   |   | 2,572   |  
|Total minimum lease payments                     |  | 19,924  |   | 31,885  |  
|                                                 |  |         |   |         |  
|Less amount representing interest                |  | (2,524  | ) | (3,605  | )
|                                                 |  |         |   |         |  
|Present value of minimum lease payments          |  | €17,400 |   | €28,280 |  
|                                                 |  |         |   |         |  
|Current portion of capital lease obligations     |  | 4,470   |   | 13,354  |  
|Non-current portion of capital lease obligations |  | 12,930  |   | 14,926  |  
|                                                 |  |         |   |         |  
|                                                 |  | €17,400 |   | €28,280 |  
|                                                 |  |         |   |         |  

Commitments
under operating leases, payable in the coming year, relate to leases expiring in the following periods:

|                                   |  | Land and
Buildings |  | Other   |  | Total  
|---------------------------------- |  | ------------------ |  | ------- |  | -------
|
|Within one year                    |  | 1,126              |  | 7,286   |  | 8,412  
|Within two to five years inclusive |  | 1,513              |  | 7,125   |  | 8,638  
|Over five years                    |  | 4,615              |  | 102     |  | 4,717  
|                                   |  |                    |  |         |  |        
|                                   |  | €7,254             |  | €14,513 |  | €21,767
|                                   |  |                    |  |         |  |        

The
total commitments under non-cancelable operating leases at December 31, 2004 are as follows:

|                               |  | 2004   
|------------------------------ |  | -------
|
|Payable within one year        |  | 21,767 
|Payable in one to two years    |  | 14,594 
|Payable in two to three years  |  | 10,020 
|Payable in three to four years |  | 7,619  
|Payable in four to five years  |  | 6,097  
|Payable thereafter             |  | 27,952 
|                               |  |        
|                               |  | €88,049
|                               |  |        

F-110

---



23 Capital Commitments

The
following capital commitments authorized by the directors had not been provided for in the Group financial statements:

|                   |  | 2004     |  | 2003   
|------------------ |  | -------- |  | -------
|
|Contracted for     |  | 41,813   |  | 59,939 
|Not contracted for |  | 76,172   |  | 37,125 
|                   |  |          |  |        
|                   |  | €117,985 |  | €97,064
|                   |  |          |  |        

24 Employee Pension Plans and Similar Obligations

Successor

The Group has pension plans for its employees in many of the countries in which it operates. The major occupational pension plans are of the
defined benefit type. The Group's pension plans are accounted for in accordance with Financial Reporting Standard (FRS) 17"Retirement Benefits". FRS 17 applies to all types of
benefits that an employer provides after employees have completed their service, including pensions and other post retirement benefits. The pension cost for the Group's major occupational pension
plans has been determined using the projected unit credit method. The current agreed rates of contribution for future years are comparable to current levels.

Periodic
actuarial valuations are performed on all of the major plans, by independent professionally qualified actuaries, between December 31, 2003 and December 31, 2004.

In
general, actuarial valuations are not available for public inspection; however, the results of valuations are advised to members of the various schemes.

The
Group also operates plans in the U.S., which provide certain employees with post retirement health care benefits. Actuarial valuations of these plans were performed as at
December 31, 2003 using the projected unit credit method. The principal assumption made by the actuaries was that the per capita weighted average assumed rate of increase in covered benefits
was 10% (2003: 11%), reducing by 1% per annum until reaching the ultimate of 5% in 2009. The effect of a 1% increase or decrease in the health care trend rate would not materially increase the
accumulated post retirement benefit obligation as at December 31, 2004.

The
main financial assumptions used to calculate scheme liabilities under FRS 17 are set out below:

|Major Assumptions                       |  | Europe    |  | USA       |  | Latin
America
|--------------------------------------- |  | --------- |  | --------- |  | -------------
|
|December 2004                           |  |           |  |           |  |              
|Rate of increase in salaries            |  | 1.504.00 |  | 3.754.00 |  | 3.506.85    
|Rate of increase to pensions in payment |  | Nil4.00  |  | Nil       |  | Nil          
|Discount rate for scheme liabilities    |  | 4.506.50 |  | 6.006.25 |  | 5.2512.00   
|Inflation                               |  | 1.254.00 |  | 2.00      |  | 2.753.50    

F-111

---



|                                        |  | Europe    |  | USA  |  | Latin
America
|--------------------------------------- |  | --------- |  | ---- |  | -------------
|
|December 2003                           |  |           |  |      |  |              
|Rate of increase in salaries            |  | 1.504.00 |  | 4.00 |  | 2.007.50    
|Rate of increase to pensions in payment |  | Nil4.00  |  | Nil  |  | Nil          
|Discount rate for scheme liabilities    |  | 5.006.50 |  | 6.25 |  | 6.2512.66   
|Inflation                               |  | 1.004.00 |  | 2.25 |  | 2.754.00    

|                                        |  | Europe    |  | USA and
Canada |  | Latin
America
|--------------------------------------- |  | --------- |  | -------------- |  | -------------
|
|December 2002                           |  |           |  |                |  |              
|Rate of increase in salaries            |  | 1.254.00 |  | 3.354.00      |  | 3.457.00    
|Rate of increase to pensions in payment |  | Nil2.75  |  | Nil2.00       |  | Nil          
|Discount rate for scheme liabilities    |  | 5.006.00 |  | 6.506.75      |  | 6.7510.50   
|Inflation                               |  | 1.253.00 |  | 2.002.25      |  | 3.454.50    

The
expected long term rates of return on the assets of the significant plans were as follows:

|              |  | Europe    |  | USA  |  | Latin
America
|------------- |  | --------- |  | ---- |  | -------------
|
|December 2004 |  |           |  |      |  |              
|Equities      |  | 7.508.00 |  | 8.50 |  | 8.2510.50   
|Bonds         |  | 3.757.00 |  | 4.50 |  | 4.255.25    
|Property      |  | 6.507.00 |  | n/a  |  | n/a          
|Other         |  | 2.757.36 |  | 3.50 |  | 3.253.50    

|              |  | Europe    |  | USA  |  | Latin
America
|------------- |  | --------- |  | ---- |  | -------------
|
|December 2003 |  |           |  |      |  |              
|Equities      |  | 8.00      |  | 8.50 |  | 8.5013.00   
|Bonds         |  | 4.517.00 |  | 4.50 |  | 4.5010.00   
|Other         |  | 3.007.00 |  | 3.50 |  | Nil3.50     

|              |  | Europe    |  | USA and Canada |  | Latin
America
|------------- |  | --------- |  | -------------- |  | -------------
|
|December 2002 |  |           |  |                |  |              
|Equities      |  | 5.008.50 |  | 9.2010.50     |  | 7.75         
|Bonds         |  | 4.615.75 |  | 5.305.50      |  | 7.00         
|Other         |  | 5.006.35 |  | 3.508.70      |  | 4.50         

F-112

---



The
market values of the assets of the schemes were as follows:

|                                    |  | Europe    |   | USA      |   | Latin
America |   | Total     |  
|----------------------------------- |  | --------- | - | -------- | - | ------------- | - | --------- | -
|
|December 2004                       |  |           |   |          |   |               |   |           |  
|Equities                            |  | 299,530   |   | 16,391   |   | 8,006         |   | 323,927   |  
|Bonds                               |  | 237,519   |   | 8,890    |   | 5,999         |   | 252,408   |  
|Property                            |  | 40,117    |   |         |   |              |   | 40,117    |  
|Other                               |  | 36,536    |   | 737      |   | 1,380         |   | 38,653    |  
|                                    |  |           |   |          |   |               |   |           |  
|Total market value                  |  | 613,702   |   | 26,018   |   | 15,385        |   | 655,105   |  
|Present value of scheme liabilities |  | 1,027,593 |   | 42,844   |   | 40,224        |   | 1,110,661 |  
|                                    |  |           |   |          |   |               |   |           |  
|(Deficit) in the plans              |  | (413,891  | ) | (16,826  | ) | (24,839       | ) | (455,556  | )
|Deferred tax asset                  |  | 42,835    |   |         |   | 1,484         |   | 44,319    |  
|                                    |  |           |   |          |   |               |   |           |  
|Net pension (liability)             |  | €(371,056 | ) | €(16,826 | ) | €(23,355      | ) | €(411,237 | )
|                                    |  |           |   |          |   |               |   |           |  

|                                    |  | Europe    |   | USA      |   | Latin
America |   | Total     |  
|----------------------------------- |  | --------- | - | -------- | - | ------------- | - | --------- | -
|
|December 2003                       |  |           |   |          |   |               |   |           |  
|Equities                            |  | 294,891   |   | 14,208   |   | 11,641        |   | 320,740   |  
|Bonds                               |  | 220,760   |   | 7,932    |   | 10,195        |   | 238,887   |  
|Other                               |  | 60,599    |   | 1,049    |   | 557           |   | 62,205    |  
|                                    |  |           |   |          |   |               |   |           |  
|Total market value                  |  | 576,250   |   | 23,189   |   | 22,393        |   | 621,832   |  
|Present value of scheme liabilities |  | 977,308   |   | 45,437   |   | 45,627        |   | 1,068,372 |  
|                                    |  |           |   |          |   |               |   |           |  
|(Deficit) in the plans              |  | (401,058  | ) | (22,248  | ) | (23,234       | ) | (446,540  | )
|Deferred tax asset                  |  | 83,285    |   |         |   | 7,946         |   | 91,231    |  
|                                    |  |           |   |          |   |               |   |           |  
|Net pension (liability)             |  | €(317,773 | ) | €(22,248 | ) | €(15,288      | ) | €(355,309 | )
|                                    |  |           |   |          |   |               |   |           |  

|                                    |  | Europe    |   | USA and Canada |   | Latin
America |   | Total     |  
|----------------------------------- |  | --------- | - | -------------- | - | ------------- | - | --------- | -
|
|December 2002                       |  |           |   |                |   |               |   |           |  
|Equities                            |  | 252,291   |   | 71,428         |   | 11,342        |   | 335,061   |  
|Bonds                               |  | 196,362   |   | 34,171         |   | 3,021         |   | 233,554   |  
|Other                               |  | 92,848    |   | 11,438         |   | 11,567        |   | 115,853   |  
|                                    |  |           |   |                |   |               |   |           |  
|Total market value                  |  | 541,501   |   | 117,037        |   | 25,930        |   | 684,468   |  
|Present value of scheme liabilities |  | 795,088   |   | 204,488        |   | 36,929        |   | 1,036,505 |  
|                                    |  |           |   |                |   |               |   |           |  
|(Deficit) in the plans              |  | (253,587  | ) | (87,451        | ) | (10,999       | ) | (352,037  | )
|Deferred tax asset/(liability)      |  | 35,636    |   | 23,713         |   | (2,008        | ) | 57,341    |  
|                                    |  |           |   |                |   |               |   |           |  
|Net pension (liability)             |  | €(217,951 | ) | €(63,738       | ) | €(13,007      | ) | €(294,696 | )
|                                    |  |           |   |                |   |               |   |           |  

F-113

---



The
following tables set out the components of the defined benefit cost:

Analysis of the amount charged to operating income

|Year ended December 31, 2004         |  | €000    |  
|------------------------------------ |  | ------- | -
|Current service cost                 |  | 37,163  |  
|Past service benefit                 |  | (1,793  | )
|Gain on settlements and curtailments |  | (542    | )
|                                     |  |         |  
|Total operating charge               |  | €34,828 |  
|                                     |  |         |  

|Year ended December 31, 2003 |  | €000   
|---------------------------- |  | -------
|Current service cost         |  | 36,593 
|Past service cost            |  | 655    
|                             |  |        
|Total operating charge       |  | €37,248
|                             |  |        

|Period from September 3, 2002 through December 31, 2002 |  | €000   
|------------------------------------------------------- |  | -------
|Current service cost                                    |  | 11,011 
|Past service cost                                       |  | 1,533  
|                                                        |  |        
|Total operating charge                                  |  | €12,544
|                                                        |  |        

Analysis of the amount charged to other financial expense

|Year ended December 31, 2004                |  | €000    |  
|------------------------------------------- |  | ------- | -
|Expected return on pension scheme assets    |  | (40,137 | )
|Interest cost on pension scheme liabilities |  | 55,855  |  
|                                            |  |         |  
|Net charge                                  |  | €15,718 |  
|                                            |  |         |  

|Year ended December 31, 2003                |  | €000    |  
|------------------------------------------- |  | ------- | -
|Expected return on pension scheme assets    |  | (39,460 | )
|Interest cost on pension scheme liabilities |  | 54,726  |  
|                                            |  |         |  
|Net charge                                  |  | €15,266 |  
|                                            |  |         |  

|Period from September 3, 2002 through December 31, 2002 |  | €000    |  
|------------------------------------------------------- |  | ------- | -
|Expected return on pension scheme assets                |  | (19,048 | )
|Interest cost on pension scheme liabilities             |  | 29,823  |  
|                                                        |  |         |  
|Net charge                                              |  | €10,775 |  
|                                                        |  |         |  

F-114

---



Analysis of the amount recognized in the statement of recognized gains and losses

|Year ended December 31, 2004                                              |  | €000     |  
|------------------------------------------------------------------------- |  | -------- | -
|Actual return less expected return on pension scheme assets               |  | 9,573    |  
|Net experience (losses) on scheme liabilities                             |  | (5,901   | )
|Changes in financial assumptions underlying the scheme liabilities        |  | (13,963  | )
|                                                                          |  |          |  
|Actuarial loss recognized in the statement of recognized gains and losses |  | €(10,291 | )
|                                                                          |  |          |  

|Year ended December 31, 2003                                              |  | €000    |  
|------------------------------------------------------------------------- |  | ------- | -
|Actual return less expected return on pension scheme assets               |  | 20,475  |  
|Net experience gains on scheme liabilities                                |  | 8,901   |  
|Changes in financial assumptions underlying the scheme liabilities        |  | (1,576  | )
|                                                                          |  |         |  
|Actuarial gain recognized in the statement of recognized gains and losses |  | €27,800 |  
|                                                                          |  |         |  

|Period from September 3, 2002 through December 31, 2002                   |  | €000    |  
|------------------------------------------------------------------------- |  | ------- | -
|Actual return less expected return on pension scheme assets               |  | 7,218   |  
|Net experience gains on scheme liabilities                                |  | 27,515  |  
|Changes in financial assumptions underlying the scheme liabilities        |  | (22,226 | )
|                                                                          |  |         |  
|Actuarial gain recognized in the statement of recognized gains and losses |  | €12,507 |  
|                                                                          |  |         |  

F-115

---





Movement in pension liability

|                                                   |  | €000     |  
|-------------------------------------------------- |  | -------- | -
|September 3, 2002 Acquired                         |  | 376,436  |  
|Current service cost                               |  | 11,011   |  
|Past service cost                                  |  | 1,533    |  
|Contributions                                      |  | (18,508  | )
|Other finance expense                              |  | 10,775   |  
|Reclassification                                   |  | (12,255  | )
|Actuarial gain                                     |  | (12,507  | )
|Currency adjustment                                |  | (4,448   | )
|                                                   |  |          |  
|Deficit in scheme at January 1, 2003               |  | 352,037  |  
|Current service cost                               |  | 36,593   |  
|Past service cost                                  |  | 655      |  
|Contributions                                      |  | (52,253  | )
|Other finance expense                              |  | 15,266   |  
|Actuarial gain                                     |  | (27,800  | )
|Fair value adjustment                              |  | 68,431   |  
|Acquisitions                                       |  | 133,137  |  
|Disposals                                          |  | (59,614  | )
|Currency adjustment                                |  | (19,912  | )
|                                                   |  |          |  
|Deficit in scheme at January 1, 2004               |  | 446,540  |  
|Current service cost                               |  | 37,163   |  
|Past service benefit                               |  | (1,793   | )
|Recognition of gain on settlement and curtailments |  | (542     | )
|Contributions                                      |  | (51,921  | )
|Other finance expense                              |  | 15,718   |  
|Actuarial loss                                     |  | 10,291   |  
|Reclassification                                   |  | 2,291    |  
|Disposals                                          |  | (101     | )
|Currency adjustment                                |  | (2,090   | )
|                                                   |  |          |  
|Deficit in scheme at December 31, 2004             |  | €455,556 |  
|                                                   |  |          |  

F-116

---



History of amounts recognized in the statement of recognized gains and losses

Difference between actual and expected return on pension scheme assets

|Year ended December 31, 2004                                                                |  |           
|------------------------------------------------------------------------------------------- |  | ----------
|Amount                                                                                      |  | 9,573,000 
|Percentage of scheme assets                                                                 |  | 1%        
|Year ended December 31, 2003                                                                |  |           
|Amount                                                                                      |  | 20,475,000
|Percentage of scheme assets                                                                 |  | 3%        
|Period from September 3, 2002 through December 31, 2002                                     |  |           
|Amount                                                                                      |  | 7,218,000 
|Percentage of scheme assets                                                                 |  | 1%        
|Experience gains and losses on scheme liabilities                                           |  |           
|Year ended December 31, 2004                                                                |  |           
|Amount                                                                                      |  | 5,901,000 
|Percentage of the present value of scheme liabilities                                       |  | 1%        
|Year ended December 31, 2003                                                                |  |           
|Amount                                                                                      |  | 8,901,000 
|Percentage of the present value of scheme liabilities                                       |  | 1%        
|Period from September 3, 2002 through December 31, 2002                                     |  |           
|Amount                                                                                      |  | 27,515,000
|Percentage of the present value of scheme liabilities                                       |  | 3%        
|Total actuarial gains and losses recognized in the statement of recognized gains and losses |  |           
|Year ended December 31, 2004                                                                |  |           
|Amount                                                                                      |  | 10,291,000
|Percentage of the present value of scheme liabilities                                       |  | 1%        
|Year ended December 31, 2003                                                                |  |           
|Amount                                                                                      |  | 27,800,000
|Percentage of the present value of scheme liabilities                                       |  | 3%        
|Period from September 3, 2002 through December 31, 2002                                     |  |           
|Amount                                                                                      |  | 12,507,000
|Percentage of the present value of scheme liabilities                                       |  | 1%        

Some
of the schemes are closed schemes and therefore under the projected unit method the current service cost would be expected to increase as the members of the scheme approach
retirement and reduce as members retire or leave service.

In
certain countries, in accordance with local practice, plans are financed internally and the provisions relating to such cases are included in pension liabilities. At
December 31, 2004 these amount to €277,274,000 (2003: €263,165,000; 2002: €169,330,000).

F-117

---



The
defined contribution pension scheme expense for the year ended December 31, 2004 was €21,077,000 (2003: €20,686,000; period from
September 3, 2002 to December 31, 2002: €5,047,000).

Predecessor

Prior to September 3, 2002, the pension cost for JSG's major occupational pension plans had been determined in accordance with the advice of actuaries,
mainly using the projected unit credit or attained age methods and accounted for in accordance with SSAP 24.

The
principal assumptions used in the calculation of the profit and loss expense under SSAP 24 of €43,285,000 for the period from January 1, 2002 through
September 2, 2002 was that the projected annual rate of investment return will exceed the projected annual rate of increase in pensionable earnings by between 2% to 4%. Under SSAP 24,
surpluses or deficits on the pension plans arising from the actuarial valuations are spread over the expected weighted average service lives of the members of the relevant plan. The actuarial reports
are available for inspection by the members of the relevant schemes only.

The
defined contribution pension scheme expense for the period from January 1, 2002 to September 2, 2002 was €9,926,000.

25 Related Party Transactions

Transactions with associates

We conduct certain transactions with associates in the normal course of business. A significant level of predecessor's transactions were conducted with SSCC.

The
transactions with associates for each period are summarized as follows:

|                      |  | Successor |  | Predecessor
|--------------------- |  | --------- |  | -----------
|
|
|Sale of goods         |  | 28,725    |  | 41,612     
|Purchase of goods     |  | 9,930     |  | 11,484     
|Receiving of services |  | 922       |  | 265        
|Rendering of services |  | 776       |  | 697        

F-118

---



Transactions with related parties

In connection with the acquisition, certain non-operating assets and non-core operating assets of JSG were transferred to the newcos, in
exchange for intercompany notes.

|                                          |  | Successor
|----------------------------------------- |  | ---------
|
|
|Rendering and receiving of services (net) |  |         
|Transfer of businesses                    |  |         
|Transfer of tangible assets               |  |         
|Transfer of financial assets              |  |         
|Transfer of cash from business disposals  |  | 11,934   
|Transfer of other assets                  |  |         

26 Net Cash Flow from Operating Activities

|                                                                |  | Successor |   | Predecessor |  
|--------------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Operating income                                                |  | 281,788   |   | 309,193     |  
|Reorganization and restructuring costs                          |  | 23,231    |   | 16,357      |  
|Depreciation and depletion (net of government grants amortized) |  | 259,831   |   | 250,590     |  
|Goodwill amortization                                           |  | 37,925    |   | 44,548      |  
|Finance lease interest paid                                     |  | 1,962     |   | 2,164       |  
|(Increase)/decrease in other payables and provisions            |  | (12,891   | ) | 6,451       |  
|Decrease/(increase) in working capital (Note 27)                |  | 47,419    |   | 62,848      |  
|Currency adjustment                                             |  | 1,663     |   | (1,124      | )
|                                                                |  |           |   |             |  
|                                                                |  | €640,928  |   | €691,027    |  
|                                                                |  |           |   |             |  

27 Movement in Working Capital

|                                   |  | Inventories |   | Receivables |   | Payables*   |   | Total    |  
|---------------------------------- |  | ----------- | - | ----------- | - | ----------- | - | -------- | -
|
|December 31, 2003                  |  | 477,432     |   | 911,443     |   | (967,141    | ) | 421,734  |  
|Reclassification                   |  | 4,151       |   | (15,903     | ) | 3,202       |   | (8,550   | )
|Deferred acquisition consideration |  |            |   |            |   | 854         |   | 854      |  
|Decrease in working capital        |  | (22,434     | ) | 38,291      |   | (63,276     | ) | (47,419  | )
|Currency adjustment                |  | (6,983      | ) | (8,783      | ) | 9,301       |   | (6,465   | )
|                                   |  |             |   |             |   |             |   |          |  
|December 31, 2004                  |  | €452,166    |   | €925,048    |   | €(1,017,060 | ) | €360,154 |  
|                                   |  |             |   |             |   |             |   |          |  

F-119

---



|                                   |  | Inventories |   | Receivables |   | Payables*  |   | Total    |  
|---------------------------------- |  | ----------- | - | ----------- | - | ---------- | - | -------- | -
|
|December 31, 2002                  |  | 470,207     |   | 1,016,181   |   | (1,018,286 | ) | 468,102  |  
|Acquisitions                       |  | 59,724      |   | 115,628     |   | (109,936   | ) | 65,416   |  
|Disposed                           |  | (33,890     | ) | (72,899     | ) | 44,173     |   | (62,616  | )
|Reclassification                   |  | (1,267      | ) | (12,566     | ) | 57,676     |   | 43,843   |  
|Deferred acquisition consideration |  |            |   |            |   | (3,178     | ) | (3,178   | )
|Decrease in working capital        |  | 4,638       |   | (102,680    | ) | 35,194     |   | (62,848  | )
|Currency adjustment                |  | (21,980     | ) | (32,221     | ) | 27,216     |   | (26,985  | )
|                                   |  |             |   |             |   |            |   |          |  
|December 31, 2003                  |  | €477,432    |   | €911,443    |   | €(967,141  | ) | €421,734 |  
|                                   |  |             |   |             |   |            |   |          |  

|                            |  | Inventories |   | Receivables |   | Payables*   |   | Total    |  
|--------------------------- |  | ----------- | - | ----------- | - | ----------- | - | -------- | -
|
|September 3, 2002 Acquired  |  | 508,433     |   | 1,140,679   |   | (1,113,171  | ) | 535,941  |  
|Disposals                   |  | (3,360      | ) | (12,341     | ) | 18,152      |   | 2,451    |  
|Decrease in working capital |  | (23,064     | ) | (76,401     | ) | 63,490      |   | (35,975  | )
|Currency adjustment         |  | (11,802     | ) | (35,756     | ) | 13,243      |   | (34,315  | )
|                            |  |             |   |             |   |             |   |          |  
|December 31, 2002           |  | €470,207    |   | €1,016,181  |   | €(1,018,286 | ) | €468,102 |  
|                            |  |             |   |             |   |             |   |          |  

---

28 Equity Dividends Paid

|                                |  | Successor |  | Predecessor
|------------------------------- |  | --------- |  | -----------
|
|
|Dividends to Group shareholders |  |          |  |           
|                                |  |           |  |            

29 Retirement of Fixed Assets

|                              |  | Successor |  | Predecessor
|----------------------------- |  | --------- |  | -----------
|
|
|Property, plant and equipment |  | 33,860    |  | 12,351     
|Investments                   |  | 2,528     |  | 32,544     
|                              |  |           |  |            
|                              |  | €36,388   |  | €44,895    
|                              |  |           |  |            

F-120

---





30 Reconciliation of Net Cash Flow to Movement in Net Debt

|                                             |  | Successor   |   | Predecessor |  
|-------------------------------------------- |  | ----------- | - | ----------- | -
|
|
|Increase/(decrease) in cash                  |  | 50,285      |   | 29,314      |  
|Decrease/(increase) in term debt             |  | 67,266      |   | 49,789      |  
|Increase/(decrease) in liquid resources      |  | 16,914      |   | (18,812     | )
|Capital elements of finance leases repaid    |  | 13,576      |   | 5,689       |  
|                                             |  |             |   |             |  
|Change in net debt resulting from cash flows |  | 148,041     |   | 65,980      |  
|New finance leases                           |  | (2,963      | ) |            |  
|Loans and finance leases acquired            |  |            |   | (122,952    | )
|Loans and finance leases disposed            |  |            |   | 23,695      |  
|Other non cash movements                     |  | 3,663       |   | 2,221       |  
|Currency adjustment                          |  | 27,265      |   | 153,216     |  
|                                             |  |             |   |             |  
|Movement in net debt                         |  | 176,006     |   | 122,160     |  
|Net debt at beginning of period              |  | (1,876,072  | ) | (1,998,232  | )
|                                             |  |             |   |             |  
|Net debt at end of period                    |  | €(1,700,066 | ) | €(1,876,072 | )
|                                             |  |             |   |             |  

31 Analysis of Net Debt

|Successor                                |  | December 2003 |   | Cash Flow |   | Acquisitions
and Disposals |  | Non Cash |   | Currency |   | December 2004 |  
|---------------------------------------- |  | ------------- | - | --------- | - | -------------------------- |  | -------- | - | -------- | - | ------------- | -
|
|Cash                                     |  | 86,137        |   | 55,623    |   |                           |  |         |   | (1,611   | ) | 140,149       |  
|Short term deposits and liquid resources |  | 92,930        |   | 16,914    |   |                           |  | (35      | ) | (2,000   | ) | 107,809       |  
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Cash and investments                     |  | 179,067       |   | 72,537    |   |                           |  | (35      | ) | (3,611   | ) | 247,958       |  
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Bank overdrafts and demand loans         |  | (22,373       | ) | (5,338    | ) |                           |  |         |   | (962     | ) | (28,673       | )
|Loans repayable within one year          |  | (88,138       | ) | 54,280    |   |                           |  | 3,698    |   | (23,717  | ) | (53,877       | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Short term borrowing                     |  | (110,511      | ) | 48,942    |   |                           |  | 3,698    |   | (24,679  | ) | (82,550       | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Long and medium term borrowing           |  | (1,916,348    | ) | 12,986    |   |                           |  |         |   | 55,288   |   | (1,848,074    | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Net borrowing                            |  | (1,847,792    | ) | 134,465   |   |                           |  | 3,663    |   | 26,998   |   | (1,682,666    | )
|Finance leases                           |  | (28,280       | ) | 13,576    |   |                           |  | (2,963   | ) | 267      |   | (17,400       | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  
|Net debt                                 |  | €(1,876,072   | ) | €148,041  |   |                           |  | €700     |   | €27,265  |   | €(1,700,066   | )
|                                         |  |               |   |           |   |                            |  |          |   |          |   |               |  

F-121

---



|                                         |  | December 2002 |   | Cash Flow |   | Acquisitions
and Disposals |   | Non Cash |   | Currency |   | December 2003 |  
|---------------------------------------- |  | ------------- | - | --------- | - | -------------------------- | - | -------- | - | -------- | - | ------------- | -
|
|Cash                                     |  | 69,224        |   | 22,493    |   |                           |   |         |   | (5,580   | ) | 86,137        |  
|Short term deposits and liquid resources |  | 115,031       |   | (18,812   | ) |                           |   | (58      | ) | (3,231   | ) | 92,930        |  
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Cash and investments                     |  | 184,255       |   | 3,681     |   |                           |   | (58      | ) | (8,811   | ) | 179,067       |  
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Bank overdrafts and demand loans         |  | (51,379       | ) | 6,821     |   |                           |   |         |   | 22,185   |   | (22,373       | )
|Loans repayable within one year          |  | (79,584       | ) | 31,085    |   |                           |   | 2,279    |   | (41,918  | ) | (88,138       | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Short term borrowing                     |  | (130,963      | ) | 37,906    |   |                           |   | 2,279    |   | (19,733  | ) | (110,511      | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Long and medium term borrowing           |  | (2,028,937    | ) | 18,704    |   | (86,119                    | ) |         |   | 180,004  |   | (1,916,348    | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Net borrowing                            |  | (1,975,645    | ) | 60,291    |   | (86,119                    | ) | 2,221    |   | 151,460  |   | (1,847,792    | )
|Finance leases                           |  | (22,587       | ) | 5,689     |   | (13,138                    | ) |         |   | 1,756    |   | (28,280       | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  
|Net debt                                 |  | €(1,998,232   | ) | €65,980   |   | €(99,257                   | ) | €2,221   |   | €153,216 |   | €(1,876,072   | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |               |  

|                                         |  | September 3, 2002 |  | Cash Flow |   | Acquisitions
and Disposals |   | Non Cash |   | Currency |   | December 2002 |  
|---------------------------------------- |  | ----------------- |  | --------- | - | -------------------------- | - | -------- | - | -------- | - | ------------- | -
|
|Cash                                     |  |                  |  | (14,484   | ) | 86,143                     |   |         |   | (2,435   | ) | 69,224        |  
|Short term deposits and liquid resources |  |                  |  | 10,445    |   | 106,791                    |   | (367     | ) | (1,838   | ) | 115,031       |  
|                                         |  |                   |  |           |   |                            |   |          |   |          |   |               |  
|Cash and investments                     |  |                  |  | (4,039    | ) | 192,934                    |   | (367     | ) | (4,273   | ) | 184,255       |  
|                                         |  |                   |  |           |   |                            |   |          |   |          |   |               |  
|Bank overdrafts and demand loans         |  |                  |  | (4,054    | ) | (57,820                    | ) |         |   | 10,495   |   | (51,379       | )
|Loans repayable within one year          |  |                  |  | 83,653    |   | (116,416                   | ) | (34,508  | ) | (12,313  | ) | (79,584       | )
|                                         |  |                   |  |           |   |                            |   |          |   |          |   |               |  
|Short term borrowing                     |  |                  |  | 79,599    |   | (174,236                   | ) | (34,508  | ) | (1,818   | ) | (130,963      | )
|                                         |  |                   |  |           |   |                            |   |          |   |          |   |               |  
|Long and medium term borrowing           |  |                  |  | (643,768  | ) | (1,426,333                 | ) |         |   | 41,164   |   | (2,028,937    | )
|                                         |  |                   |  |           |   |                            |   |          |   |          |   |               |  
|Net borrowing                            |  |                  |  | (568,208  | ) | (1,407,635                 | ) | (34,875  | ) | 35,073   |   | (1,975,645    | )
|Finance leases                           |  |                  |  | 2,031     |   | (24,641                    | ) |         |   | 23       |   | (22,587       | )
|                                         |  |                   |  |           |   |                            |   |          |   |          |   |               |  
|Net debt                                 |  |                  |  | €(566,177 | ) | €(1,432,276                | ) | €(34,875 | ) | €35,096  |   | €(1,998,232   | )
|                                         |  |                   |  |           |   |                            |   |          |   |          |   |               |  

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|Predecessor                              |  | December 2001 |   | Cash Flow |   | Acquisitions
and Disposals |   | Non Cash |   | Currency |   | September 2, 2002 |  
|---------------------------------------- |  | ------------- | - | --------- | - | -------------------------- | - | -------- | - | -------- | - | ----------------- | -
|
|Cash                                     |  | 87,756        |   | 961       |   |                           |   |         |   | (2,574   | ) | 86,143            |  
|Short term deposits and liquid resources |  | 352,353       |   | (239,468  | ) |                           |   | (1,041   | ) | (5,053   | ) | 106,791           |  
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Cash and investments                     |  | 440,109       |   | (238,507  | ) |                           |   | (1,041   | ) | (7,627   | ) | 192,934           |  
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Bank overdrafts and demand loans         |  | (76,419       | ) | 11,341    |   |                           |   |         |   | 7,258    |   | (57,820           | )
|Loans repayable within one year          |  | (174,569      | ) | 24,994    |   |                           |   | 4,772    |   | 28,387   |   | (116,416          | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Short term borrowing                     |  | (250,988      | ) | 36,335    |   |                           |   | 4,772    |   | 35,645   |   | (174,236          | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Long and medium term borrowing           |  | (1,302,687    | ) | (67,645   | ) | (118,477                   | ) |         |   | 62,476   |   | (1,426,333        | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Net borrowing                            |  | (1,113,566    | ) | (269,817  | ) | (118,477                   | ) | 3,731    |   | 90,494   |   | (1,407,635        | )
|Finance leases                           |  | (23,597       | ) | 4,945     |   | (6,232                     | ) |         |   | 243      |   | (24,641           | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  
|Net debt                                 |  | €(1,137,163   | ) | €(264,872 | ) | €(124,709                  | ) | €3,731   |   | €90,737  |   | €(1,432,276       | )
|                                         |  |               |   |           |   |                            |   |          |   |          |   |                   |  

Cash
comprises cash in hand and overnight deposits. The movement in liquid resources represents movement in all monetary assets (excluding cash, short term deposits and overnight
borrowing) which are convertible into cash at, or close to, their carrying value in the balance sheet. These specifically comprise government gilts, commercial paper and deposits, with maturities of
less than one year when acquired. They are categorized as held-to-maturity because the Group has both the intent and the ability to hold these investments until maturity.

32 Acquisitions and disposals

|                                 |  | Successor |  | Predecessor |  
|-------------------------------- |  | --------- |  | ----------- | -
|
|
|Net assets acquired (see below)  |  |          |  | 6,180       |  
|Reclassification from associates |  |          |  | (35,030     | )
|Goodwill                         |  | 2,731     |  | 174,659     |  
|                                 |  |           |  |             |  
|                                 |  | €2,731    |  | €145,809    |  
|                                 |  |           |  |             |  
|Satisfied by:                    |  |           |  |             |  
|Cash payments                    |  | 2,731     |  | 145,809     |  
|Cash acquired                    |  |          |  | (52,683     | )
|Bank overdrafts acquired         |  |          |  | 8,955       |  
|                                 |  |           |  |             |  
|Net cash outflows                |  | €2,731    |  | €102,081    |  
|                                 |  |           |  |             |  

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Summary
of net assets acquired:

|                                               |                                             | Successor |   | Predecessor |        
|---------------------------------------------- | ------------------------------------------- | --------- | - | ----------- | -------
|
|
|Net assets acquired:                           |                                             |           |   |             |        
|Fixed assets:                                  |                                             |           |   |             |        
|                                               | Property, plant and equipment               |           |  |             | 269,385
|                                               | Investments                                 |           |  |             | 3,616  
|Current assets:                                |                                             |           |   |             |        
|                                               | Inventories                                 |           |  |             | 59,724 
|                                               | Accounts receivable and prepayments         |           |  |             | 115,628
|                                               | Cash and investments held as current assets |           |  |             | 52,683 
|                                               |                                             |           |   |             |        
|Total assets                                   |                                             |          |   | 501,036     |        
|Accounts payable and accrued liabilities       |                                             |          |   | (135,268    | )      
|Long term debt and other payables              |                                             |          |   | (113,896    | )      
|Provisions for liabilities and charges         |                                             |          |   | (6,197      | )      
|Fair value adjustment                          |                                             |          |   | (239,495    | )      
|Minority interest                              |                                             |          |   |            |        
|                                               |                                             |           |   |             |        
|Net assets acquired at fair value to the Group |                                             |          |   | €6,180      |        
|                                               |                                             |           |   |             |        

The
acquisition of predecessor was completed on September 3, 2002. It had not been possible to complete the investigation for determining fair values for this acquisition by
April 8, 2003 and accordingly estimated fair values were used in the financial statements for the year ended December 31, 2002. The final fair value adjustments incorporated during 2003
are set out below.

|                                               |  | Provisional
values at
December 31,
2002 |   | Revaluation |   | Final fair
value |  
|---------------------------------------------- |  | --------------------------------------- | - | ----------- | - | ---------------- | -
|
|Cash                                           |  | 193                                     |   |            |   | 193              |  
|Accounts receivable and prepayments            |  | 1,141                                   |   | (4          | ) | 1,137            |  
|Inventories                                    |  | 508                                     |   |            |   | 508              |  
|Investments                                    |  | 233                                     |   |            |   | 233              |  
|Property, plant and equipment                  |  | 2,373                                   |   | 195         |   | 2,568            |  
|Accounts payable and accruals                  |  | (1,377                                  | ) | (8          | ) | (1,385           | )
|Long term debt and other long term liabilities |  | (1,460                                  | ) |            |   | (1,460           | )
|Other liabilities                              |  | (520                                    | ) | (31         | ) | (551             | )
|Minorities                                     |  | (154                                    | ) | (9          | ) | (163             | )
|                                               |  |                                         |   |             |   |                  |  
|Net assets acquired                            |  | 937                                     |   | 143         |   | 1,080            |  
|Goodwill                                       |  | 1,559                                   |   | (143        | ) | 1,416            |  
|                                               |  |                                         |   |             |   |                  |  
|Consideration                                  |  | €2,496                                  |   |            |   | €2,496           |  
|                                               |  |                                         |   |             |   |                  |  

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Summary of effects of the acquisition of the SSCC European assets

|                                               |  | Book Value |   | Revaluations |   | Fair Value |  
|---------------------------------------------- |  | ---------- | - | ------------ | - | ---------- | -
|
|Cash                                           |  | 29         |   |             |   | 29         |  
|Accounts receivable and prepayments            |  | 103        |   |             |   | 103        |  
|Inventories                                    |  | 49         |   |             |   | 49         |  
|Property, plant and equipment                  |  | 103        |   | 115          |   | 218        |  
|Accounts payable and accruals                  |  | (98        | ) |             |   | (98        | )
|Long term debt and other long term liabilities |  | (115       | ) |             |   | (115       | )
|Other liabilities                              |  | (95        | ) | (59          | ) | (154       | )
|                                               |  |            |   |              |   |            |  
|Net assets acquired                            |  | €(24       | ) | €56          |   | 32         |  
|                                               |  |            |   |              |   |            |  
|Goodwill                                       |  |            |   |              |   | 174        |  
|                                               |  |            |   |              |   |            |  
|Consideration                                  |  |            |   |              |   | €206       |  
|                                               |  |            |   |              |   |            |  

33 Post Balance Sheet Events

On December 22, 2004 we announced that we had signed a definitive agreement to sell our Munksjö specialties business to The EQT III
Fund for approximately €450 million. On December 14, 2004 SCA (Svenska Cellullosa Aktiebolaget) announced that it had agreed to buy our Munksjö Tissue
business for approximately €28 million. The sale of our Munksjö specialties business to The EQT III Fund was completed on March 1, 2005 and the
proceeds from the disposal have been used to pay down part of the term portion of our senior credit facility. The sale of our Munksjö tissue business is subject to customary closing
conditions. The Munksjö specialty assets comprised pulp, decor paper, and specialty paper businesses and had sales from operations for 2004 of approximately
€480 million. The Munksjö tissue assets being sold comprise a paper mill producing base paper for tissue and two tissue conversion plants, and generated sales
from operations of approximately €50 million in 2004. We are retaining the Munksjö containerboard and corrugated assets, located in Norway, Sweden and Poland,
which comprise approximately 90,000 metric tons of containerboard and 150,000 metric tons of corrugated capacity.

A
summary of the assets and liabilities disposed is as follows:

|                                               |  | € millions |  
|---------------------------------------------- |  | ---------- | -
|Cash                                           |  | 5          |  
|Accounts receivable and prepayments            |  | 59         |  
|Inventories                                    |  | 64         |  
|Property, plant and equipment                  |  | 254        |  
|Accounts payable and accruals                  |  | (60        | )
|Long term debt and other long term liabilities |  | (40        | )
|Other liabilities                              |  | (25        | )
|                                               |  |            |  
|                                               |  | €257       |  
|                                               |  |            |  

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On
January 13, 2005, JSG Funding commenced a tender offer to purchase for cash all outstanding existing 15.5% subordinated notes, which we refer to as the "tender offer". As of
January 1, 2005, $211,110,848 aggregate principal amount of our 15.5% subordinated notes due 2013 and €140,740,568 aggregate principal amount of our 15.5% subordinated notes due
2013 were outstanding. In connection with the tender offer, we also solicited consents to amend the indentures governing the existing 15.5% subordinated notes to remove substantially all of the
restrictive covenants thereunder. The tender offer was completed and the proposed amendments became effective on February 14, 2005. We intend to redeem the .01% of the 15.5% dollar subordinated
notes not tendered pursuant to the tender offer in accordance with the terms and conditions of the indentures governing the existing 15.5% subordinated notes. Under these indentures, the earliest we
may redeem the 15.5% subordinated notes not tendered is October 1, 2005, at a redemption price of 108.0% of the aggregate principal amount of the existing 15.5% subordinated notes. All of the
euro 15.5% subordinated notes were tendered. In January 2005, JSG completed an offering of approximately €370 million of 7.75% subordinated cash-pay notes.
JSG Funding applied the net proceeds from this offering to fund the purchase of its existing 15.5% subordinated notes pursuant to the tender offer and to pay related fees and expenses.

Concurrently
with the completion of this offering of notes, JSG Holdings completed an offering of €325 million in aggregate principal amount of 11.5% senior PIK
notes due 2015 (the "PIK notes"), substantially all of the net proceeds of which were loaned to JSG Packaging, which, in turn, paid such net proceeds to its shareholders by means of a share capital
reduction under Irish law. Neither JSG Funding nor any of its subsidiaries guarantee the PIK notes and thus the PIK notes are effectively subordinated to all debt and other liabilities and preferred
stock, if any, of JSG Funding and its subsidiaries.

34 Parent Undertakings and Controlling Parties

The immediate controlling party and the parent undertaking of the smallest group of which the company is a member, and for which group financial statements are
prepared, is JSG Funding, a company incorporated in Ireland. The ultimate controlling party and the parent undertaking of the largest group of which the company is a member, and for which group
financial statements are prepared, is JSG Packaging Ltd. (JSG Packaging), a company incorporated in Ireland.

We
are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and file reports, including Annual Reports on Form 20-F, and other
information with the SEC. You may read and copy any document we file with the SEC at its public reference rooms at 450 Fifth Street, N.W. Washington D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. In addition, the SEC maintains an Internet site at http://www.sec.govthat contains reports and other
information regarding issuers that file electronically with the SEC. These filings are also available
to the public from commercial document retrieval services.

JSG
Funding's annual report on Form 20-F, current reports on Form 6-K, the April 2003 registration statement on Form F-4
and all amendments to those reports are made available free of charge through our website (www.smurfit-group.com) as soon as practicable after such material is electronically filed with or furnished
to the Securities and Exchange Commission.

F-126

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35 Companies (Amendment) Act, 1986

The financial statements in this report do not comprise "full group accounts" within the meaning of Regulation 40(1) of the European Communities
(Companies: Group Accounts) Regulations, 1992 of Ireland in so far as such group accounts would have to comply with the disclosure and other requirements of those Regulations. Full group accounts for
JSL for the period from September 3, 2002 through December 31, 2002 and for the year ended December 31, 2003 have been filed with the Irish Registrar of Companies. Full accounts
for JSG Packaging for the year ended December 31, 2004 will be filed with the Registrar in due course.

36 Comparative Figures

Certain figures for the prior years have been adjusted to conform with 2004 classifications and disclosure requirements.

37 Differences Between Accounting Principles Generally Accepted in Ireland and in the
United States

The Group's consolidated financial statements are prepared in accordance with accounting principles generally accepted in Ireland ("Irish GAAP"), which differ in
certain respects from accounting principles generally accepted in the United States ("US GAAP"). The significant differences as they apply to the Group and the necessary adjustments are
summarized below.

Goodwill

Irish GAAP, FRS 10"Goodwill and Intangible Assets," requires goodwill to be capitalized as an intangible fixed asset and amortized in the
statement of operations over its estimated useful live. For US GAAP, the Group applies SFAS No. 142 "Goodwill and Other Intangible Assets". Under SFAS No. 142, goodwill is no
longer amortized, but is tested for impairment on an annual basis and whenever indicators of impairment arise. The Group's identified indicators of impairment under SFAS No. 142 are the same as
under SAB No. 100, "Restructuring and Impairment Charges".

The
goodwill impairment test, which is based on fair value, is to be performed on a reporting unit level using a two-step impairment test. A reporting unit is an operating
segment as defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", or one level lower. In the first step, the fair value of a reporting unit is
compared with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill is not deemed to be impaired and step two of the impairment test is
not required. If the fair value of the reporting unit is lower than the carrying value of long term assets and net working capital, step two needs to be performed to measure the amount of impairment.
The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If
the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. The loss recognized cannot
exceed the carrying amount of goodwill.

The
fair value of each reporting unit was determined based upon JSG's segment reporting. According to these calculations, the fair value of the reporting units exceeded the carrying
value of their net assets. Therefore, the additional analysis was not required and there was no impairment of goodwill upon adoption of SFAS No. 142. The Group performed an annual impairment
test as of December 31, 2002, 2003 and 2004. No indicators of impairment were identified.

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Deferred taxation

Irish GAAP, FRS 19"Deferred Tax" requires full provision to be made for deferred tax arising from timing differences between the recognition
of gains and losses in the financial statements and their recognition in tax computations. In adopting FRS 19, we have chosen not to discount deferred tax assets and liabilities. This standard
eliminates a number of the differences between accounting for deferred tax under Irish and US GAAP. However under SFAS 109"Accounting for Income Taxes", deferred taxation
would also be provided under US GAAP on the difference between the accounting and taxation bases of assets and liabilities of subsidiaries acquired. Deferred income taxes on the taxable
US GAAP adjustments are included within the reconciliations.

Retirement benefits

Under Irish GAAP, FRS 17"Retirement Benefits" requires that scheme assets are valued at fair value and scheme liabilities are measured using
the Projected Unit Credit method. Net scheme assets and liabilities, reduced by deferred tax amounts, are required to be shown on the face of the balance sheet as a pension asset or liability as
appropriate. JSG Acquisitions has also adopted Urgent Issues Task Force abstract 35"Death-in-service and
incapacity benefits" ("UITF 35"). Under US GAAP the main differences with Irish GAAP arise in relation to the recognition of actuarial gains and losses and the treatment of
death-in-service and incapacity benefits. Under US GAAP, net scheme assets and liabilities are required to be shown gross of deferred tax amounts.

Predecessor,
under Irish GAAP, followed SSAP 24"Accounting for Pension Costs", whereby the pension costs in respect of predecessor's defined benefit plans were assessed in
accordance with the advice of independent actuaries using assumptions and methods which, taken as a whole, produced the actuaries' best estimates of the cost of providing the relevant pension
benefits. US GAAP specifically requires the use of the Projected Unit Credit method and the matching of the projected benefit obligation against the fair value of the plan's assets, adjusted to
reflect any unrecognized obligations or assets, in determining the pension cost or credit for the period. In addition, under US GAAP, the assumptions used must be based on current market rates.

Exceptional and extraordinary items

Under Irish GAAP, profits and losses associated with early debt extinguishment are included in income before taxation. For predecessor, these costs would have
been treated as extraordinary items under US GAAP.

In
April 2002, the FASB issued SFAS No. 145"Rescission of FASB Statements No.4, 44 and 62, Amendment of FASB No. 13 and Technical Corrections". SFAS
No. 145 requires, in most cases, gains and losses on extinguishments of debt to be classified as income or loss from continuing operations, rather than extraordinary items. The statement was
effective for fiscal years after May 15, 2002.

Investment in SSCC

Prior to the acquisition of JSG on September 3, 2002, the Group's main investment in the U.S. was in SSCC. At the time of the acquisition, JSG distributed
to its shareholders by way of a share capital reduction its 29.3% interest in SSCC. In the period presented prior to the acquisition SSCC was

F-128

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an
associate of which JSG owned approximately 29.3%. For the period presented prior to the acquisition, Group equity accounted for SSCC. For the periods after the acquisition, Group did not equity
account for SSCC.

The
reconciliation of net (loss)/income below reflects the effects in each year presented of the differences between Irish GAAP and US GAAP of the Group's share of SSCC's results
of operations. The reconciliation of shareholders' equity reflects the cumulative effects of the adjustments to operations and the different basis of the Group's investment under US GAAP.

Hyper-inflationary economies

The Group accounts for the activities of its subsidiaries in Mexico, Colombia, Venezuela and Argentina, which have high rates of inflation, using the
US dollar as the functional currency.

Under
US GAAP for each of the periods presented, Mexico, Colombia, Argentina and Venezuela would not be regarded as hyper-inflationary and the Mexican Peso, the Colombian Peso,
the Argentinean Peso and the Bolivar respectively would have been used as the functional currency. The application of US GAAP has no material effect on the reported net income of these
subsidiaries.

Stock based employee compensation expense

SFAS No. 123"Accounting for Stock Based Compensation encourages", but does not require, compensation expense for employee stock options to be
measured based on their fair value at the date of grant, determined using option valuation models. Successor has elected to continue to account for stock based employee compensation in accordance with
APB Opinion No. 25"Accounting for Stock Issued to Employees" ("APB 25") and related interpretations and to provide the pro forma information required by SFAS No. 123.

Predecessor
operated variable option plans. As the options did not vest until certain targets were achieved, the number of shares which could be acquired by employees was not fully
determinable until after the date of grant. In accordance with Urgent Issues Task Force abstract 17"Employee Share Schemes" ("UITF 17"), under Irish GAAP predecessor"s employee options
did not result in charges against income except to the extent that the market value of the shares at the date of grant exceeded the amount the employee must pay to exercise the option.

Under
US GAAP, following the measurement principles of APB 25, compensation expense would be accrued and booked to income over the vesting period. The vesting period
commences when it becomes probable that the underlying targets attaching to the options will be achieved and the number of shares will be known and ends with the date when the granting of the shares
is not contingent upon the performance of additional services or other conditions. Compensation expense would be booked on a period by period basis to reflect the difference between the price an
employee must pay to acquire
the shares underlying the option and the market price of the shares, at the end of each accounting period until the final vesting date.

Debt instruments issue costs

Under Irish GAAP debt issue costs are deducted from the proceeds of the relevant debt instruments. Under US GAAP such costs would be shown as deferred
charges in the balance sheet. In

F-129

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both
cases the amount of such costs are expensed at a constant rate of interest on the outstanding balance of the debt.

Accounting for associates

Irish GAAP requires separate disclosure of operating earnings, net interest, exceptional items and the taxation charge arising in associates. Under US GAAP
earnings of associates, net of taxation would be shown as a single line item in arriving at net income.

Financial instruments

Under Irish GAAP all hedging instruments are matched with their underlying hedged item. Each instrument's gain or loss is brought into the profit and loss account
and its fair value into the balance sheet at the same time as is the matched underlying asset, liability, income or cost.

Under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", all derivative instruments are recognized on the balance sheet at their fair values. Changes in
fair value are either recognized periodically in income or in shareholders' equity as a component of comprehensive income depending on whether the derivative qualifies for hedge accounting in
accordance with the requirements of SFAS No. 133, and if so, whether it qualifies as a fair value hedge or cash flow hedge. Changes in fair value of derivatives accounted for as fair value
hedges are recorded in income along with the corresponding portions of the changes in the fair value of the hedged items, to the extent they are effective as hedges. Changes in fair value of
derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive income net of deferred taxes. Changes in fair values of derivatives not
qualifying as hedges are reported in net income.

Currency swaps

Under Irish GAAP, the fair value of currency swaps relating to outstanding debt is an adjustment to the carrying value of debt. Under US GAAP, it would be
separately recorded as part of other assets or liabilities.

Impairment writedowns

Under Irish GAAP, impairment writedowns are included in accumulated depreciation. Under US GAAP they would be deducted from the cost of the assets
identified as being impaired.

Under
US GAAP, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" establishes a single accounting model for long-lived
assets to be disposed of by sale consistent with the fundamental provisions of SFAS No. 121. While it supersedes portions of APB Opinion 30, "Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", it retains the discontinued
operations presentation, yet it broadens that presentation to include a component of an entity (rather than a segment of a business). However, discontinued operations are no longer recorded at net
realizable value and future operating losses are no longer recognized before they occur. Under SFAS No. 144, it is no longer necessary to allocate goodwill to long-lived assets and
then perform

F-130

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impairment
testing. Furthermore, it has been stipulated that in situations where it is expected that certain flows of capital will be accumulated in areas subject to impairment testing, these can be
calculated on the basis of a probability-weighted cash flow estimate. SFAS No. 144 also establishes criteria for determining when an asset should be treated as held for sale.

SFAS
No. 144 was effective for the fiscal years beginning after December 15, 2001. Accordingly, the Group adopted SFAS No. 144 as of January 1, 2002. The
adoption of SFAS No. 144 did not have a material impact on the Group's financial position, results of operations or cash flows.

Restructuring and integration costs

The rules for recognizing restructuring and integration costs in the statement of income are generally consistent between Irish and US GAAP. However, under
Irish GAAP, on the acquisition of a business, costs in connection with restructuring would not be recorded in purchase accounting but would be expensed as incurred post acquisition. Under
US GAAP, a purchase accounting liability would be recorded for qualifying costs and goodwill increased if the requirements of EITF Issue 95-3"Recognition of Liabilities
in connection with a Purchase Business Combination", are satisfied.

Purchase price allocation

Under Irish GAAP the entire excess purchase price is allocated to goodwill. Under US GAAP, the excess purchase price over the fair value of the net
tangible assets acquired would first be allocated to identifiable intangible assets based on their estimated fair values, with the remainder being allocated to goodwill.

Leveraged buyout transactions

Under US GAAP, because of the application of the EITF issue 88-16, "Basis in Leveraged Buyout Transactions", only partial purchase accounting
applied to the acquisition of JSG. The approximate 8% rollover investment by senior management shareholders would be valued at their predecessor basis in JSG as opposed to the inherent new basis in
successor. The primary effect of that adjustment was to reduce goodwill and shareholders' equity. Under Irish GAAP, no such adjustment is required.

Composition of JSG Funding Groupconsolidation of companies sold to affiliates

As part of the MDP acquisition, certain assets were transferred to newcos, wholly owned subsidiaries of JSL. The newcos borrowed
€125 million which was lent to JSL to fund a €125 million capital contribution in JSG Funding. Under US GAAP, the newcos would be consolidated in
JSG Acquisitions's financial statements, causing debt of JSG Acquisitions to increase and equity of JSG Acquisition to decrease. Even though JSG Acquisition under US GAAP would consolidate the
newcos, JSG Acquisitions had no repayment obligations relating to the newco debt, which was recourse only to the assets of the newcos. The newcos facility was fully paid before December 31,
2003.

Inventory valuationfair value

Under Irish GAAP the fair value of inventory in an acquisition would be based either, on the current cost to the acquired entity of reproducing the inventory or
on the historical cost of the

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inventory
(including the interest cost of holding the inventory) where it is difficult to find replacement cost as replacement would be impossible. Under US GAAP, inventory would be valued at
fair market value having regard to the intentions of the acquirer when identifying and allocating these fair values.

Long term receivables

Under Irish GAAP, certain long term receivables are included in current assets. Under US GAAP, they are included in long term assets.

The
following is a summary of the significant adjustments to income and shareholders' equity which would be required if US GAAP were to be applied instead of Irish GAAP.

Income

|                                                                                        |                                               | Successor |         | Predecessor |        
|--------------------------------------------------------------------------------------- | --------------------------------------------- | --------- | ------- | ----------- | -------
|
|
|Net (loss)/income reported in the consolidated statements of operations                 |                                               | (33,858   | )       | (66,665     | )      
|Adjustments:                                                                            |                                               |           |         |             |        
|                                                                                        | Goodwill amortization                         |           | 37,925  |             | 33,817 
|                                                                                        | Retirement benefits                           |           | (3,061  | )           | (3,999 
|                                                                                        | Share of earnings of associatesSSCC          |           |        |             |       
|                                                                                        | Deferred taxation                             |           | 9,309   |             | 22,699 
|                                                                                        | Stock based compensation expense              |           | (330    | )           | (493   
|                                                                                        | Inventory valuationfair value                |           |        |             | (5,264 
|                                                                                        | Management rollover investment                |           | 616     |             | 894    
|                                                                                        | Financial instrumentsfair value              |           | (33,275 | )           | (13,779
|                                                                                        | Consolidation of companies sold to affiliates |           | (8,195  | )           | (3,295 
|                                                                                        |                                               |           |         |             |        
|                                                                                        |                                               | 2,989     |         | 30,580      |        
|                                                                                        |                                               |           |         |             |        
|Net (loss)/income as adjusted to accord with US GAAP                                    |                                               | €(30,869  | )       | €(36,085    | )      
|                                                                                        |                                               |           |         |             |        
|Arising from:                                                                           |                                               |           |         |             |        
|                                                                                        | Continuing operations                         |           | (69,957 | )           | (59,538
|Extraordinary items (net of tax: September 2, 2002: €1,715,000)                         |                                               |          |         |            |        
|Discontinued activities                                                                 |                                               | 39,088    |         | 23,453      |        
|                                                                                        |                                               |           |         |             |        
|Net (loss)/income available to ordinary shareholders as adjusted to accord with US GAAP |                                               | €(30,869  | )       | €(36,085    | )      
|                                                                                        |                                               |           |         |             |        

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Comprehensive Income

|                                                                                        |  | Successor |   | Predecessor |  
|--------------------------------------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Net (loss)/income available to ordinary shareholders as adjusted to accord with US GAAP |  | (30,869   | ) | (36,085     | )
|Other comprehensive income/(loss):                                                      |  |           |   |             |  
|Financial instrumentsfair value                                                        |  | (19,365   | ) | (1,757      | )
|Unrealized foreign currency translation adjustments                                     |  | 31,500    |   | 91,196      |  
|Retirement benefits                                                                     |  | (4,824    | ) | 6,533       |  
|Share of associates other comprehensive income/(loss):                                  |  |           |   |             |  
|Deferred hedge loss                                                                     |  |          |   |            |  
|Unrealized losses and foreign currency translation adjustments                          |  |          |   |            |  
|Net loss reclassified into earnings                                                     |  |          |   |            |  
|                                                                                        |  |           |   |             |  
|Comprehensive (loss)/income                                                             |  | €(23,558  | ) | €59,887     |  
|                                                                                        |  |           |   |             |  

Net losses of €3,697,000 of the accumulated adjustments to comprehensive income in respect of the fair value of financial
instruments are expected to be reclassified into earnings in the next twelve months. These instruments derive from gains and losses on derivatives hedging cash flows on forecasted transactions (the
maximum period for which is two years) and on interest rate swaps qualifying as cash flow hedges.

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Shareholders' Equity

|                                                                    |  | 2004     |   | 2003     |  
|------------------------------------------------------------------- |  | -------- | - | -------- | -
|
|Shareholders' equity as reported in the consolidated balance sheets |  | 863,272  |   | 888,896  |  
|Adjustments:                                                        |  |          |   |          |  
|GoodwillGross                                                      |  | 137,538  |   | 137,127  |  
|Aggregate amortization                                             |  | 81,695   |   | 43,770   |  
|Hyper-inflationary economiesproperty, plant and equipment          |  |          |   |          |  
|Cost                                                               |  | 140,133  |   | 91,200   |  
|Aggregate depreciation                                             |  | (63,141  | ) | (38,996  | )
|Hyper-inflationary economiesinvestments                            |  | 3,013    |   | 2,239    |  
|Retirement benefits                                                 |  | (34,147  | ) | (34,736  | )
|Deferred taxation                                                   |  | (127,194 | ) | (134,831 | )
|Financial instrumentsfair value                                    |  | (48,741  | ) | 3,899    |  
|Minority share of US GAAP adjustments                               |  | (8,615   | ) | (2,582   | )
|Consolidate newcos                                                  |  | (125,000 | ) | (125,000 | )
|Rollover investment by JSG management                               |  | (75,574  | ) | (76,190  | )
|Shareholders' equity of companies sold to affiliates                |  | (21,519  | ) | (9,854   | )
|                                                                    |  |          |   |          |  
|                                                                    |  | (141,552 | ) | (143,954 | )
|                                                                    |  |          |   |          |  
|Shareholders' equity as adjusted to accord with US GAAP             |  | €721,720 |   | €744,942 |  
|                                                                    |  |          |   |          |  

Cumulative Other Comprehensive Income Amounts

|                                                          |  | Currency
Translation
Adjustments |  | Financial
Instruments
(Losses) |   | Retirement
Benefits |   | Total   
|--------------------------------------------------------- |  | -------------------------------- |  | ------------------------------ | - | ------------------- | - | --------
|
|September 3, 2002                                         |  |                                 |  |                               |   |                    |   |        
|Movement from September 3, 2002 through December 31, 2002 |  | 16,900                           |  | (4,534                         | ) | 3,773               |   | 16,139  
|                                                          |  |                                  |  |                                |   |                     |   |         
|Balance at December 31, 2002                              |  | 16,900                           |  | (4,534                         | ) | 3,773               |   | 16,139  
|Movement in the year                                      |  | 91,196                           |  | (1,757                         | ) | 6,533               |   | 95,972  
|                                                          |  |                                  |  |                                |   |                     |   |         
|Balance at December 31, 2003                              |  | 108,096                          |  | (6,291                         | ) | 10,306              |   | 112,111 
|Movement in the year                                      |  | 31,500                           |  | (19,365                        | ) | (4,824              | ) | 7,311   
|                                                          |  |                                  |  |                                |   |                     |   |         
|Balance at December 31, 2004                              |  | €139,596                         |  | €(25,656                       | ) | €5,482              |   | €119,422
|                                                          |  |                                  |  |                                |   |                     |   |         

F-134

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Cash Flows

The consolidated statement of cash flows prepared under Irish GAAP presents substantially the same information as that required under US GAAP by SFAS
No. 95"Statement of Cash Flows." This standard differs, however, with regard to the classification of items within the statements and as regards the definition of cash and cash
equivalents. Under US GAAP, cash would not include bank overdrafts. The movements on such bank overdrafts are required to be included in financing activities under SFAS No. 95. Under
US GAAP only short term investments with a maturity of three months or less at the date of acquisition are included in cash equivalents. Under Irish GAAP movements in short term investments are
classified as management of liquid resources. Under Irish GAAP, cash flows are presented separately for operating activities, dividends received from associates, returns on investments and servicing
of finance, taxation, capital expenditure and financial investment, acquisitions and disposals, equity dividends paid, management of liquid resources and financing. US GAAP, however, requires
only three categories of cash flow activity to be reported: operating, investing and financing.

Cash
flows from taxation and returns on investments and servicing of finance shown under Irish GAAP would be included as operating activities under US GAAP. Cash flows from
capital expenditure, financial investment and acquisitions and disposals would be included as investing activities under US GAAP. The payment of dividends would be included as a financing
activity under US GAAP. Under US GAAP, capitalized interest is treated as part of the cost of the asset to which it relates and is thus included as part of investing cash flows; under
Irish GAAP all interest is treated as part of returns on investments and servicing of finance.

The
categories of cash flow activity under US GAAP are summarized as follows:

|                                                 |  | Successor |   | Predecessor |  
|------------------------------------------------ |  | --------- | - | ----------- | -
|
|
|Cash inflow from operating activities            |  | 318,827   |   | 334,868     |  
|Cash (outflow) on investing activities           |  | (174,770  | ) | (333,626    | )
|Cash (outflow)/inflow from financing activities  |  | (85,896   | ) | 11,039      |  
|                                                 |  |           |   |             |  
|Increase/(decrease) in cash and cash equivalents |  | 58,161    |   | 12,281      |  
|Currency adjustment on cash and cash equivalents |  | (3,611    | ) | (8,810      | )
|Cash and cash equivalents at beginning of period |  | 176,323   |   | 172,852     |  
|                                                 |  |           |   |             |  
|Cash and cash equivalents at end of period       |  | €230,873  |   | €176,323    |  
|                                                 |  |           |   |             |  

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Deferred taxationadditional information required by SFAS 109

The analysis of the US GAAP deferred taxation liability required by SFAS 109 is as follows:

|                                                    |  | 2004     |   | 2003     |  
|--------------------------------------------------- |  | -------- | - | -------- | -
|
|Deferred taxation liabilities:                      |  |          |   |          |  
|Excess of book value over tax value of fixed assets |  | 295,702  |   | 302,859  |  
|Other timing differences                            |  | 83,526   |   | 101,069  |  
|                                                    |  |          |   |          |  
|                                                    |  | 379,228  |   | 403,928  |  
|                                                    |  |          |   |          |  
|Deferred taxation assets:                           |  |          |   |          |  
|Net operating loss carry forwards                   |  | (61,422  | ) | (65,120  | )
|Valuation allowances                                |  | 29,631   |   | 49,546   |  
|Retirement benefits(1)                              |  | (45,679  | ) | (93,690  | )
|Other timing differences                            |  | (42,447  | ) | (74,238  | )
|                                                    |  |          |   |          |  
|                                                    |  | (119,917 | ) | (183,502 | )
|                                                    |  |          |   |          |  
|                                                    |  | €259,311 |   | €220,426 |  
|                                                    |  |          |   |          |  
|Split as follows:                                   |  |          |   |          |  
|Current                                             |  | (20,177  | ) | (31,930  | )
|Non current                                         |  | 279,488  |   | 252,356  |  
|                                                    |  |          |   |          |  
|                                                    |  | €259,311 |   | €220,426 |  
|                                                    |  |          |   |          |  

---

Valuation allowances are set up for losses carried forward in those jurisdictions in which it is more likely than not that the losses carried
forward will not be utilized to offset future taxable income or in which there is no deferred tax liability against which the related asset can be offset prior to expiry.

Share option schemesadditional information required by SFAS No. 123

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation" and amended by SFAS No. 148, "Accounting for Stock-Based
CompensationTransition and Disclosure," the Group has elected to account for shares to be issued under the Management Participation Agreement under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and adopt the disclosure only provisions of SFAS No. 123 and SFAS No. 148. Under SFAS No. 123,
options are valued at the grant date using the Black-Scholes valuation model and compensation expenses are recognized ratably over the vesting period. Had compensation expenses been determined as
prescribed by SFAS No. 123, the Group's net income for the period presented would have been as shown in the table below.

Under
Predecessor's 1987 Option Schemes, the 1999 Executive Share Option Plan and the 2000 United Kingdom Executive Approved Share Option Plan (the "Schemes"), selected employees of JSG
and its subsidiaries were granted non-qualified options to acquire ordinary shares of JSG. The share

F-136

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options
were exercisable at a price equal to the market price, as defined, of JSG's ordinary shares at the time of grant. The options became exercisable upon the occurrence of certain trigger events,
as defined, within 10 years from the date of grant. The options were to expire not later than 10 years from the date of grant.

Predecessor
elected to follow APB 25 and related interpretations in accounting for its share options because the alternative fair value accounting provided for under
SFAS No. 123 requires use of option valuation models that were not developed for use in valuing employee share options. SFAS No. 123 requires pro forma information
regarding net income. This information has been determined as if JSG had accounted for those employee share options issued subsequent to December 31, 1994 under the fair value method of that
statement. Due to the recognition of option expense over the vesting period, the pro forma net income information required by SFAS No. 123 is not likely to be representative of the
effects on the reported pro forma net income for future years. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model.

The
Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the expected share price volatility. Because the Group's employees share options have characteristics significantly
different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee share options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period (see "Stock based employee compensation expense" above for a description of the vesting period).

|                                                                                                                                            |  | Successor |   | Predecessor |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Net (loss)/income attributable to common shareholders under US GAAP                                                                         |  |           |   |             |  
|As reported                                                                                                                                 |  | (30,869   | ) | (36,085     | )
|Add: Stock based employee compensation expense                                                                                              |  |           |   |             |  
|included in reported net income, net of related tax effects                                                                                 |  | 259       |   | 394         |  
|Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  | (1,073    | ) | (769        | )
|                                                                                                                                            |  |           |   |             |  
|Pro forma                                                                                                                                   |  | €(31,683  | ) | €(36,460    | )
|                                                                                                                                            |  |           |   |             |  

JSG's
Performance Share Plan allowed participating executives to receive annual allocations that could result in the award of rights to acquire ordinary shares in JSG for a nominal
consideration.

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Awards
were granted over a proportion of the shares over which an allocation was made to the extent that pre-set performance targets were achieved over a performance period of not less
than four years.

Under
the Special Long Term Incentive Plans adopted in 2000, the Chairman & Chief Executive Officer, President & Chief Operations Officer and Chief Financial Officer each
received an allocation that could result in the award of rights to acquire ordinary shares in JSG for a nominal consideration. Awards were granted over a proportion of the shares over which an
allocation was made to the extent that pre-set performance targets were achieved over a performance period of three years.

During
2000, JSG introduced save as you earn share option schemes for eligible employees in both Ireland (the "Irish SAYE Scheme") and the UK (the "UK SAYE Scheme"). Under these schemes,
employees could opt to save fixed amounts on a regular basis, over a three-year, five-year or seven-year period, subject to a maximum monthly saving of
€320 (Irish SAYE Scheme) or Stg£250 (UK SAYE Scheme). The participants could use the amounts saved plus interest earned to acquire shares under options granted by JSG at
the start of the savings period.

A
summary of the Group's share options and related activity is as follows:

|                                 |  | Shares under
option |   | Option Price
Range |  | Weighted Average
Exercise Price
|-------------------------------- |  | ------------------- | - | ------------------ |  | -------------------------------
|Outstanding at December 31, 2001 |  | 76,084,708          |   | €0.00€2.62        |  | €1.64                          
|Exercised                        |  | (55,601,020         | ) | €0.00€2.62        |  | €1.63                          
|Cancelled                        |  | (20,483,688         | ) | €0.00€2.62        |  | €1.66                          
|                                 |  |                     |   |                    |  |                                
|Outstanding at September 2, 2002 |  |                    |   |                   |  |                               
|                                 |  |                     |   |                    |  |                                

No
options were outstanding at September 2, 2002. Successor had no options outstanding at December 31, 2002, December 31, 2003 or December 31, 2004.

F-138

---





Pension costs and termination indemnitiesinformation required by SFAS No. 87 and SFAS No. 132

The components of the defined benefit net pension expense for the Group's defined benefit plans, termination indemnities and post retirement healthcare defined
benefit plans for the years ended December 31, 2004 and 2003 and the periods ended September 2, 2002 and December 31, 2002 under SFAS No. 87 amended by SFAS No. 132
are estimated to be as follows:

|                                                            |  | Successor |   | Predecessor |  
|----------------------------------------------------------- |  | --------- | - | ----------- | -
|
|
|Service cost                                                |  | 38,470    |   | 36,885      |  
|Interest cost                                               |  | 56,282    |   | 55,573      |  
|Expected return on plan assets                              |  | (40,627   | ) | (39,669     | )
|Amortization of unrecognized transition obligation or asset |  |          |   |            |  
|Recognized gains and losses                                 |  | 61        |   | 4,118       |  
|Recognized prior service cost                               |  | 57        |   | 655         |  
|Loss due to settlement or curtailment                       |  | (636      | ) |            |  
|                                                            |  |           |   |             |  
|                                                            |  | €53,607   |   | €57,562     |  
|                                                            |  |           |   |             |  

The defined benefit net pension expense for 2004 and 2003 includes all of the Group's pension plans. Because of the difficulty in obtaining the
information for 2002, the defined benefit net pension expense for 2002 includes only the Group's principal pension plans.

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The
estimated fund status of the Group's defined benefit plans, termination indemnities and post retirement healthcare defined benefit schemes under SFAS No. 87 amended by SFAS
No. 132 was as follows:

|                                                                                    |  | 2004      |   | 2003      |  
|----------------------------------------------------------------------------------- |  | --------- | - | --------- | -
|
|Change in benefit obligation                                                        |  |           |   |           |  
|Benefit obligation at beginning of period                                           |  | 1,081,891 |   | 1,051,246 |  
|Service cost                                                                        |  | 38,470    |   | 36,885    |  
|Interest cost                                                                       |  | 56,282    |   | 55,573    |  
|Contributions by plan participants                                                  |  | 7,908     |   | 7,455     |  
|Actuarial gains and losses                                                          |  | 8,486     |   | (10,996   | )
|Benefits paid                                                                       |  | (60,748   | ) | (52,682   | )
|Divestitures, curtailments or settlements                                           |  | (542      | ) |          |  
|Plan amendments                                                                     |  | (1,793    | ) | 655       |  
|Reclassification                                                                    |  | 2,291     |   |          |  
|Fair value adjustments                                                              |  |          |   | 70,685    |  
|Acquisitions                                                                        |  |          |   | 133,967   |  
|Disposals                                                                           |  | (101      | ) | (159,426  | )
|Currency adjustments                                                                |  | (8,872    | ) | (51,471   | )
|                                                                                    |  |           |   |           |  
|Benefit obligation at end of period                                                 |  | 1,123,272 |   | 1,081,891 |  
|                                                                                    |  |           |   |           |  
|Change in plan assets                                                               |  |           |   |           |  
|Fair value of plan assets at beginning of period                                    |  | 621,833   |   | 684,468   |  
|Actual return on assets                                                             |  | 40,999    |   | 61,640    |  
|Contributions by employer                                                           |  | 51,921    |   | 52,253    |  
|Contributions by plan participants                                                  |  | 7,908     |   | 7,455     |  
|Benefits paid                                                                       |  | (60,748   | ) | (52,682   | )
|Fair value adjustments                                                              |  |          |   | 2,254     |  
|Acquisitions                                                                        |  |          |   | 830       |  
|Disposals                                                                           |  |          |   | (99,812   | )
|Currency adjustment                                                                 |  | (6,808    | ) | (34,573   | )
|                                                                                    |  |           |   |           |  
|Fair value of plan assets at end of period                                          |  | 655,105   |   | 621,833   |  
|                                                                                    |  |           |   |           |  
|Funded status of the plans                                                          |  | (468,167  | ) | (460,058  | )
|Amounts available to be applied as an increase/(reduction) of future pension costs: |  |           |   |           |  
|Unrecognized actuarial gains or losses                                              |  | (13,162   | ) | (21,218   | )
|Unrecognized prior service cost                                                     |  | (1,680    | ) |          |  
|Minimum pension liability                                                           |  | (6,694    | ) |          |  
|                                                                                    |  |           |   |           |  
|(Accrued) pension costs                                                             |  | €(489,703 | ) | €(481,276 | )
|                                                                                    |  |           |   |           |  

F-140

---



The
Group's postretirement healthcare defined benefit schemes are in the US and, up to the date of the asset swap, Canada. The estimated fund status of these schemes at
December 31, 2004 were €2,245,000 (2003: €2,620,000).

Plan
assets less than projected benefit obligations include overfunded plans at December 31, 2004, nil (2003: €730,000) and underfunded plans at
December 31, 2004 of €468,167,000 (2003: €460,788,000).

The
following assumptions were used to determine the defined benefit expense for the Group.

|                                                                   |  | 2004 |  | 2003 |  | 2002
|------------------------------------------------------------------ |  | ---- |  | ---- |  | ----
|Weighted average assumed discount rate                             |  | 5.5% |  | 5.4% |  | 5.9%
|Weighted average rates of compensation increase                    |  | 3.3% |  | 3.2% |  | 3.6%
|Weighted average expected long term rates of return on plan assets |  | 6.7% |  | 6.5% |  | 7.1%

The
calculation of the projected benefit obligation at December 31, 2004 assumed a discount rate of approximately 5.1% (2003: 5.5%).

The
assets of the plans are invested primarily in equities, fixed interest securities, insurance contracts and real estate.

The
weighted-average asset allocations at December 31, 2004 and 2003 by asset category of the defined benefit pension schemes is shown below:

|                  |  | Plan assets
|----------------- |  | -----------
|
|
|Equity securities |  | 1580%     
|Debt securities   |  | 2085%     
|Real Estate       |  | 010%      
|Other             |  | 010%      
|                  |  |            
|Total             |  |            
|                  |  |            

The
Group maintains target allocation percentages among various asset classes based on an investment policy established for the pension plans which is designed to achieve long term rate
of return objectives, while mitigating against downside risk and considering expected cash flows. Our investment policy is reviewed from time to time to ensure consistency with our long term objective
of funding 100% of the projected benefit obligation.

The
expected long term rate of return on plan assets reflects the average return rates expected on the funds invested or to be invested to provide for the benefits included in the
projected benefit obligation. In estimating those rates, appropriate consideration is given to the current returns being earned by the plan assets in the fund and the rates of return expected to be
available for reinvestment.

The
Group's expected return on assets of the defined benefit schemes is based on recommendations from the plan actuary, having considered anticipated future long term performance of
individual asset classes. Consideration is also given to the appropriate asset allocation strategy, given

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the
anticipated requirements of the plan to determine the average rate of return expected on the funds invested to provide for the pension plan benefits. While appropriate consideration is given to
recent fund performance and historical returns, the assumption is primarily a long-term, prospective rate. Based on our most recent study, the expected long term return assumption
effective January 1, 2005 will be 6.4%.

The
expected contributions to the defined benefit plans is anticipated to be €49,842,000 in the year ended December 31, 2005. The accumulated benefit obligation of
all schemes at December 31, 2004 is €968,427,000.

Expected
future benefit payments for each of the next five fiscal years and in the aggregate for the five fiscal years thereafter are shown below:

|Year      |  | Benefit Payments
|--------- |  | ----------------
|
|2005      |  | 62,045          
|2006      |  | 63,445          
|2007      |  | 64,982          
|2008      |  | 66,533          
|2009      |  | 68,079          
|20102014 |  | 365,935         

38 New Accounting Standards

On December 17, 2003 the Financial Accounting Standards Board ("FASB") issued revised FASB Interpretation No. 46 ("FIN 46R"). FIN 46R delayed the
effective date for variable interest entities created before February 1, 2003, with the exception of special-purpose entities, until the first fiscal year or interim period after
December 15, 2003. As of January 1, 2004, we adopted FIN 46R. We performed a review to identify any variable interest entities on the adoption of FIN 46R. The adoption of FIN 46R
did not have a material effect on our US GAAP reconciliations of net income and shareholders' equity.

On
January 12, 2004, the FASB issued Staff Position No. FAS 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003" ("FSP 106-1"). The FSP 106-1 permits employers that sponsor post retirement benefit plans that provide prescription drug benefits to
retirees to make a one-time election to defer accounting for any effects of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the "Medicare Act"). The Medicare
Act only affects post retirement benefit plans of our employees based in the United States and is not expected to have a material effect on our results of operations or financial condition.

In
November 2004, the FASB issued SFAS No. 151, "Inventory CostsAn Amendment of ARB No. 43, Chapter 4." SFAS No. 151 amends the guidance
in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other
provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period

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charges
regardless of whether they meet the criterion of "so abnormal" as stated in ARB No. 43. Additionally, SFAS No. 151 requires that the allocation of fixed production overheads to
the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005 and is required to be
adopted by us in the first quarter of fiscal 2006, beginning on January 1, 2006. We are currently evaluating the effect that the adoption of SFAS No. 151 will have on our consolidated
results of operations and financial condition but we do not expect SFAS No. 151 to have a material impact.

In
December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"), which replaces SFAS No. 123, "Accounting for
Stock-Based Compensation," and supercedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123R requires all share-based payments to employees, including grants
of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first fiscal year beginning after June 15, 2005, with early adoption
encouraged. The pro forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition. Under SFAS No. 123R, we must determine
the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition
methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods
presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of
SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. We are
evaluating the requirements of SFAS No. 123R and have not yet determined the method of adoption or the effect of adopting SFAS No. 123R, and we have not determined whether the adoption
will result in amounts that are similar to the current pro forma disclosures under SFAS No. 123.

In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary AssetsAn Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions." SFAS No. 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29,
"Accounting for Nonmonetary Transactions," and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for the fiscal periods beginning after
June 15, 2005 and is required to be adopted by us in the first quarter of fiscal 2006, beginning on January 1, 2006. We are currently evaluating the effect that the adoption of
SFAS No. 153 will have on our consolidated results of operations and financial condition but we do not expect it to have a material impact.

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39 Organizational Structure

Each of JSG Packaging, JSG Holdings, JSL, JSG Funding, JSG Acquisitions and JSG are holding companies with no operations of their own.
A listing of JSG's principal subsidiaries is set out below.

|Subsidiaries                                                                                                                |  | Principal Activities                                                                                            |  | Country of Incorporation |  | Holding %
|--------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | ---------
|Carton de Colombia, S.A.Apartado Aereo 219,
Cali, Colombia                                                                  |  | Manufacture of paperboard and packaging products                                                                |  | Colombia                 |  | 70       
|Carton de Venezuela, S.A.Apartado Aereo 609,
Caracas, Venezuela                                                             |  | Manufacture of paperboard and packaging products                                                                |  | Venezuela                |  | 88       
|Grupo Smurfit Mexico, S.A. de C.V.Jaime Balmes, No. 11 Torre D. 7 Piso,
Col. Los Morales Polanco 11510,
Mexico D.F., Mexico |  | Manufacture of paperboard and packaging products                                                                |  | Mexico                   |  | 100      
|Nettingsdorfer Papierfabrik AG & Co KGA-4054 Nettingsdorf-Fabrik, Austria                                                   |  | Manufacture of containerboard and holding company for Austrian operations which manufacture corrugated board    |  | Austria                  |  | 100      
|Smurfit, S.A.Paque Saenz Pena 3088th Floor,
Buenos Aires, Argentina                                                        |  | Manufacture of paperboard and packaging products                                                                |  | Argentina                |  | 100      
|Smurfit Capital Funding LimitedBeech Hill, Clonskeagh,
Dublin 4, Ireland                                                    |  | Finance company                                                                                                 |  | Ireland                  |  | 100      
|Smurfit Deutschland GmbH & Co KGTilsiter Strasse 144,
22047 Hamburg, Germany                                                |  | Holding company for German operations which manufacture paperboard and packaging products                       |  | Germany                  |  | 100      
|Smurfit International B.V.Fred Roeskestraat 123,
1076 EE Amsterdam,
The Netherlands                                         |  | Principal international holding company                                                                         |  | The Netherlands          |  | 100      
|Smurfit International France S.A.2 rue Goethe,
75116 Paris, France                                                          |  | Holding company for French operations whose activities are the manufacture of paperboard and packaging products |  | France                   |  | 100      
|                                                                                                                            |  |                                                                                                                 |  |                          |  |          

F-144

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|Smurfit Investments UK LimitedDarlington Road, West Auckland,
Bishop Auckland, Co. Durham
DL14 9PE, United Kingdom |  | Holding company for UK operations whose principal activities are the manufacture of paperboard and packaging products                                                                                |  | United Kingdom |  | 100
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | ---
|Smurfit Ireland LimitedBeech Hill, Clonskeagh,
Dublin 4, Ireland                                                   |  | Manufacture of paperboard and packaging products and printing                                                                                                                                        |  | Ireland        |  | 100
|Smurfit Munksjö AB(1)Box 624,
SE-551 18 Jönköping, Sweden                                                          |  | Holding company for operations in Sweden and other countries which manufacture specialty papers and packaging products                                                                               |  | Sweden         |  | 100
|Smurfit Nervion, S.A.B Arriandi s/n, 48215 lurreta,
Vizcaya, Spain                                                 |  | Manufacture of sack paper and holding company for Spanish, Portuguese and sack converting operations whose principal activities are the manufacture of paperboard, packaging and paper sack products |  | Spain          |  | 99 
|Smurfit SISA, S.p.AStrada Serravalle 30,
15067 Novi Ligure (AL), Italy                                             |  | Manufacture of paperboard and packaging products                                                                                                                                                     |  | Italy          |  | 90 

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F-145

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Schedule II

JSG Funding plc and Subsidiary Companies
Valuation and Qualifying Accounts

Description

|                                                        |  | Acquired on
September 3,
2002 |  | Additions
charged to
costs and
expenses |  | Exchange
differences |   | Acquisitions
and
Deductions |  | Balance at
end of
year
|------------------------------------------------------- |  | ----------------------------- |  | --------------------------------------- |  | -------------------- | - | --------------------------- |  | ----------------------
|
|Period from September 3, 2002 through December 31, 2002 |  |                               |  |                                         |  |                      |   |                             |  |                       
|Provision for bad and doubtful debts                    |  | €41,812                       |  | €1,430                                  |  | €(585                | ) |                            |  | €42,657               

|                                     |  | Balance at
beginning of
year |  | Additions
charged to
costs and
expenses |  | Exchange
differences |   | Acquisitions
and
Deductions |  | Balance at
end of
year
|------------------------------------ |  | ---------------------------- |  | --------------------------------------- |  | -------------------- | - | --------------------------- |  | ----------------------
|
|Year ended December 31, 2003         |  |                              |  |                                         |  |                      |   |                             |  |                       
|Provision for bad and doubtful debts |  | €42,657                      |  | €10,493                                 |  | €(1,408              | ) | €3,098                      |  | €54,840               

|                                     |  | Balance at
beginning of
year |  | Additions
charged to
costs and
expenses |  | Exchange
differences |   | Acquisitions
and
Deductions |   | Balance at
end of
Year
|------------------------------------ |  | ---------------------------- |  | --------------------------------------- |  | -------------------- | - | --------------------------- | - | ----------------------
|
|Year ended December 31, 2004         |  |                              |  |                                         |  |                      |   |                             |   |                       
|Provision for bad and doubtful debts |  | €54,840                      |  | €4,048                                  |  | €(385                | ) | €(5,593                     | ) | €52,910               

S-1

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Schedule II

JSG Acquisitions and Subsidiary Companies
Valuation and Qualifying Accounts

Description

|                                                        |  | Acquired on
September 3,
2002 |  | Additions
charged to
costs and
expenses |  | Exchange
differences |   | Acquisitions
and
Deductions |  | Balance at
end of
year
|------------------------------------------------------- |  | ----------------------------- |  | --------------------------------------- |  | -------------------- | - | --------------------------- |  | ----------------------
|
|Period from September 3, 2002 through December 31, 2002 |  |                               |  |                                         |  |                      |   |                             |  |                       
|Provision for bad and doubtful debts                    |  | €41,812                       |  | €1,430                                  |  | €(585                | ) |                            |  | €42,657               

|                                     |  | Balance at
beginning of
year |  | Additions
charged to
costs and
expenses |  | Exchange
differences |   | Acquisitions
and
Deductions |  | Balance at
end of
year
|------------------------------------ |  | ---------------------------- |  | --------------------------------------- |  | -------------------- | - | --------------------------- |  | ----------------------
|
|Year ended December 31, 2003         |  |                              |  |                                         |  |                      |   |                             |  |                       
|Provision for bad and doubtful debts |  | €42,657                      |  | €10,493                                 |  | €(1,408              | ) | €3,098                      |  | €54,840               

|                                     |  | Balance at
beginning of
year |  | Additions
charged to
costs and
expenses |  | Exchange
differences |   | Acquisitions
and
Deductions |   | Balance at
end of
year
|------------------------------------ |  | ---------------------------- |  | --------------------------------------- |  | -------------------- | - | --------------------------- | - | ----------------------
|
|Year ended December 31, 2004         |  |                              |  |                                         |  |                      |   |                             |   |                       
|Provision for bad and doubtful debts |  | €54,840                      |  | €4,048                                  |  | €(385                | ) | €(5,593                     | ) | €52,910               

S-2

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