**Exhibit 13.1**

 

 

 

# **ANNUAL INFORMATION FORM**

#  

For the yearended December 31, 2005

 

 

March 24, 2006

 

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**Table of contents**

 

Annual Information Form for theyear ended December 31, 2005

 

Documents incorporated byreference

Forward Looking Statements

 
|                                                                             | **Page** |
|----------------------------------------------------------------------------------|----------|
|                                                                             |     |
| Item 1 - Date of the Annual  Information Form                                    | 1        |
|                                                                             |     |
| Item 2 - Corporate Structure                                                     | 1        |
| 2.1  Name and Incorporation of the Company                                       | 1        |
| 2.2  Intercorporate Relationships                                                | 1        |
|                                                                             |     |
| Item 3 - General Development  of the Business                                    | 1        |
| 3.1  Company’s activities over the last three years                         | 1        |
|                                                                             |     |
| Item 4 - Description of the  Business                                            | 3        |
| 4.1  General                                                                     | 3        |
| 4.2  Industry sectors information                                                | 3        |
| 4.2.1  Packaging                                                                 | 3        |
| 4.2.1.1  Boxboard Group                                                          | 3        |
| 4.2.1.2  Containerboard and Corrugated Products Group                            | 5        |
| 4.2.1.3  Specialty Products Group                                                | 6        |
| 4.2.2  Fine Papers                                                               | 9        |
| 4.2.3  Tissue Papers                                                             | 10       |
| 4.3  Research and development                                                    | 12       |
| 4.4  Competitive conditions                                                      | 12       |
| 4.5  Cycle components                                                            | 12       |
| 4.6  Environment                                                                 | 13       |
| 4.7  Reorganizations                                                             | 13       |
| 4.8  Social policies                                                             | 13       |
| 4.9  Business Risks                                                              | 13       |
|                                                                             |     |
| Item 5 - Dividends                                                               | 13       |
|                                                                             |     |
| Item 6 - Capital  Structure                                                      | 13       |
| 6.1  General description of capital structure                                    | 13       |
| 6.2  Ratings                                                                     | 14       |
|                                                                             |     |
| Item 7 - Market for Securities                                                   | 14       |
| 7.1  Trading price and volume                                                    | 14       |
|                                                                             |     |
| Item 8 - Directors and  Officers                                                 | 15       |
| 8.1  Information concerning Directors                                            | 15       |
| 8.2  Information concerning Executive Officers                                   | 16       |
|                                                                             |     |
| Item 9 - Legal Proceedings                                                       | 16       |
|                                                                             |     |
| Item 10 - Transfer Agent and  Registrar                                          | 17       |
|                                                                             |     |
| Item 11 - Material Contracts                                                     | 17       |
|                                                                             |     |
| Item 12 - Interests of Experts                                                   | 17       |
|                                                                             |     |
| Item 13 - Audit Committee                                                        | 18       |
| 13.1  Composition and mandate                                                    | 18       |
| 13.2  Relevant education and experience of the members                           | 18       |
| 13.3  External auditor service fees                                              | 18       |
| 13.4  Policies and procedures for the engagement of audit and non-audit services | 18       |
|                                                                             |     |
| Item 14 – Effectiveness of  Disclosure Procedures and Controls              | 19       |
|                                                                             |     |
| Item 15 - Additional  Information                                                | 19       |

 

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**In this Annual Information Form,the terms “We”, “Us”, “Our”, and “Cascades” refer to Cascades Inc., itssubsidiaries, divisions and joint ventures. All dollar amounts are expressed inCanadian dollars, unless stated otherwise. The information in this AIF is as ofMarch 24, 2006, unless stated otherwise, and except for information indocuments incorporated by reference that have a different date.**

 

# **DOCUMENTS INCORPORATED BY REFERENCE**

#  

The documents in thetable below contain information that is incorporated by reference into thisannual information form. (AIF)

 
| **Documents**                                                                                                                                      | ** ** | **Where they are incorporated in this Annual Information Form** |
|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                         | ** ** | ** **                                                                                              |
| 2005 Annual Report –  Management’s discussion and analysis of financial position and operating results,  Risk management, pages 34 to 36 |       | Item 4.9                                                                                                |

 

**FORWARD-LOOKINGSTATEMENTS**

 

**Securities lawsencourage companies to disclose forward-looking information so that investorscan better understand the Company’s future prospects and make informedinvestment decisions.**

 

**Certain statementsin this notice or in documents incorporated by reference are forward-lookingstatements (as such term is defined under the United States Private SecuritiesLitigation Reform Act of 1995) based on current expectations. The accuracy ofsuch statements is subject to a number of risks, uncertainties and assumptionsthat may cause actual results to differ materially from those projected,including, but not limited to, the effect of general economic conditions,decreases in demand for the Company’s products, increases in raw materialcosts, changes in the relative values of certain currencies, fluctuations inselling prices, adverse changes in general market and industry conditions. (SeeBusiness risks).**

 

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| **** | ***Annual Information Form*** |
|------|-------------------------------|

* *

# **ITEM 1 –DATE OF THE ANNUAL INFORMATION FORM**

#  

This Annual Information Form(the “Form”) is dated as of March 24, 2006. Except as otherwise indicated, theinformation contained in this Form is stated as at December 31, 2005.

 

# **ITEM 2 -CORPORATE STRUCTURE**

#  

## **2.1          NAME AND INCORPORATION OF THE COMPANY**

Cascades Inc. (hereinafter referred to as “Cascades” or the “Company”)was incorporated under the name Paper Cascades Inc./Cascades Paper Inc. underthe laws of the Province of Quebec by letters patent issued on March 26,1964. Supplementary letters patent were issued on March 11, 1968,July 4, 1979 and October 19, 1979 to amend the authorized capitalstock and the restrictions and privileges attached to certain classes of sharesof the Company.

 

Cascades was continued under the nameCascades Inc. under Part 1A of the *Companies Act*(Quebec) by Certificate of Continuance dated October 26, 1982. Certificatesof Amendment were issued on July 5, 1984, September 16, 1985 andMay 13, 1986 to permit the subdivision of the Company’s Common Shares, aswell as on July 15, 1992, July 24, 1992, December 17, 1992 and July 20, 1993 inorder to modify the authorized share-capital and the restrictions andprivileges of certain classes of shares of the Company.

 

On December 30, 2003, in accordance withArticle 123.129 of the *Companies Act*(Québec),Cascades, by simplified amalgamation, merged with 9135-2591 Québec Inc., awholly owned subsidiary of the Company. The articles of amalgamation andschedules as well as the composition of the Board of Directors of the newcompany following the amalgamation are exactly the same as those of CascadesInc. prior to the amalgamation.

 

The headoffice and corporate offices of Cascades are located at 404 Marie-VictorinBlvd., Kingsey Falls, Québec, J0A 1B0. Cascades also has administrativeoffices located at 772 Sherbrooke West, Suite 100, Montréal, Québec,H3A 1G1.

 

## **2.2          INTERCORPORATE RELATIONSHIPS**

The following list sets out the principal subsidiaries and jointventures of Cascades and their respective jurisdiction of incorporation as ofDecember 31, 2005 :

 

| **Corporate Name**                           | ** ** | **Jurisdiction of********Incorporation** | ** ** |
|---------------------------------------------------|------------|-----------------------------------------------|------------|
|                                              |       |                                          |       |
| Cascades Arnsberg GmbH                            |       | Germany                                       |       |
| Cascades Canada Inc.                              |       | Canada                                        |       |
| Cascades Conversion Inc.                          |       | Canada                                        |       |
| Cascades Djupafors AB                             |       | Sweden                                        |       |
| Cascades Fine Papers Group  Inc.                  |       | Canada                                        |       |
| Cascades S.A.                                     |       | France                                        |       |
| Cascades  Tissue Group – North Carolina Inc. |       | North Carolina                                |       |
| Cascades  Tissue Group – Oregon Inc.         |       | Delaware                                      |       |
| Cascades  Tissue Group - Pennsylvania Inc.        |       | Delaware                                      |       |
| Cascades  Tissue Group - Wisconsin Inc.           |       | Delaware                                      |       |
| Cascades USA  Inc.                                |       | Delaware                                      |       |
| Conference  Cup Ltd.                              |       | Ontario, Canada                               |       |
| Dopaco, Inc.                                      |       | Pennsylvania                                  |       |
| Norampac  Inc.                                    |       | Canada                                        |       |

 

All the entities arewholly-owned subsidiaries of the Company, except Cascades Conversion Inc. andNorampac Inc. which are joint ventures.

 

# **ITEM 3 -GENERAL DEVELOPMENT OF THE BUSINESS**

#  

**3.1          COMPANY****’S ACTIVITIES OVERTHE LAST THREE YEARS**

On February 5, 2003, the Companycompleted a series of transactions to substantially refinance all of its creditfacilities, excluding those of its joint ventures. The Company secured a newfour-year revolving credit facility for $500 million. The obligationsunder this facility are secured by all inventory and receivables of the Companyand its North American subsidiaries, excluding its joint ventures, and by theproperty, plant and equipment of three of its mills. In addition, the Companyissued new unsecured 7.25% Senior Notes, maturing in 2013, for an aggregateamount of US$450 million. As well, the Company also redeemedUS$125 million 8.375% Senior Notes, due in 2007, issued by a subsidiaryfor a total consideration of $192 million. Finally, on July 8, 2003, theCompany completed a private placement of US$100 million 7.25% SeniorNotes, maturing in 2013, at a price of 104.50%, for an effective interest rateof 6.61%.

 

On December 2, 2004, the Companycompleted a private placement of US$125 million of 7.25% Senior Notes duein 2013, which are treated as part of the same series of 7.25% Senior Notes duein 2013 that were issued in February 2003. The issuance of these Senior Noteswas completed at a price of 105.50%, or an effective interest rate of 6.376%. Thenet proceeds of $156 million of this financing were used to reduceindebtedness under the Company’s revolving credit facility.

 

On October 31, 2005, Cascadescompleted the refinancing of its $500 million revolving credit facilityoriginally put in place in February 2003. This new $550 million credit facilityincludes a $450 million five-year revolving facility maturing in 2010 and aseven-year $100 million term facility maturing in 2012. The seven-year facilitycan be reimbursed without penalty, at the Company’s option any time prior tomaturity. Its

 

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obligations under this newrevolving credit facility are secured by all inventory and receivables ofCascades and its North American subsidiaries and by the property, plant andequipment of three of its mills.

 

***BoxboardGroup***

 

On October 1, 2003, Cascadesincreased from 40% to 50% its investment in Dopaco, Inc. (“Dopaco”), a North Americanleader in packaging for the quick-service restaurant industry for aconsideration of $17 million (US$ 12.4 million). On August 24, 2004,the Company acquired the remaining outstanding shares (50%) of Dopaco for anapproximate consideration of $139 million (US$106.5 million) of which$82 million (US$63 million) had been paid in cash at the closing date.In June 2005, the Company made its final payment amounting to $57 million(US$46 million). This acquisition allowed the Company to benefit fromincreased integration opportunities for its packaging and tissue operations.

 

On January 14, 2005, Cascadesacquired certain assets of the packaging division of Dover Industries Limited,located in Burlington (Ontario) representing annual folding carton sales ofapproximately $35 million, for a cash consideration of $8 million. Theclosing of the transaction occurred on January 27, 2005.

 

On October 14, 2005, Cascadesannounced that it had acquired certain assets of the paperboard division ofFraser Papers Inc., located in Edmundston, New Brunswick for $6 million. Withan annual production capacity of 52,000 metric tonnes, the assets of Fraser’spaperboard operations generate annual sales of approximately $40 million.

 

On December 13, 2005, Cascadesannounced a restructuring of its folding carton facility in Montreal,essentially closing one of two production lines. The reorganization will cost$2 million, which be will offset by annual savings of approximately $3.5million.

 

***Containerboard andCorrugated Products Group***

 

On April 14, 2003, Norampac Inc.(“Norampac”), a joint venture of the Company, announced the purchase of GeorgiaPacific’s converting plant in Schenectady, New York. The monetary considerationfor this transaction, subject to adjustments, amounted to $32 million(US$22 million) in cash in addition to all of the operating assets of itsunit situated in Dallas, Fort Worth, Texas, evaluated at $12 million (US$8million). The 50% share of the Company in the acquisition price represents anamount of $10 million (US$7 million). Through this acquisition,Norampac increased its presence in the corrugated packaging market in thenorth-eastern United States.

 

On April 2, 2004, Norampac announced the acquisition of a corrugatedproducts plant from Johnson Products Corrugated Corp. situated in Thompson,Connecticut, for an approximate cash consideration of $15 million(US$ 11.7 million). The 50% share of the Company in the acquisition priceamounts to $8 million (US$5.9 million). This investment allowedNorampac to increase its integration level and its North American presence.

 

On August 27, 2004, Norampacacquired the assets of AIM Corrugated Container Corp., a corrugated productsplant situated in Lancaster, New York, for an approximate monetaryconsideration of $21 million (US$16 million).  The 50% share of the Company in theacquisition price amounts to $10 million (US$8 million). Thisinvestment allowed Norampac to increase its presence in the north easternUnited States.

 

On May 12, 2005, the management of Norampac announced the closing ofits Montréal corrugated products plant, located on Molson Street, during thesecond quarter of 2006. This closure is part of a global reorganization plan ofNorampac’s Québec activities, which included an investment plan totalling closeto $30 million. The closure of the Montréal division, which occurred inDecember 2005, affected some 215 employees and had become necessary in aneffort to adjust to the Québec marketplace.

 

On July 19, 2005, Norampac’s management announced its decision to closeits corrugated products plant located in Buffalo NY, in August 2005. All plantoperations have been transferred to the Lancaster plant, in New York State,which was acquired by Norampac last year. This reorganization will enable theCompany to invest in the Lancaster Division in order to offer to its customersbetter quality service and products.

 

On September 21, 2005, Norampac announced the permanent closure ofpaper machine no. 1 at its linerboard mill located in Red Rock, Ontario. Thismill currently has two paper machines. Machine no. 1 was used to manufactureKraft linerboard and was producing approximately 150,000 short tons yearly.

 

On October 11, 2005, Norampac announced that it had completed theacquisition of three corrugated products converting plants from SPB CanadaInc., respectively located in Montreal, Quebec, Le Gardeur, Quebec andBelleville, Ontario, for an approximate consideration of $75 million (theCompany’s share amounted to $38 million). This acquisition allows Norampacto broaden the scope of its specialised products, such as five and six colouredcorrugated products. Furthermore, it gives Norampac some flexibility withrespect to the previously announced investments in Quebec as this transactionwill permit the Company to benefit from economies of scale while improvingequipment use.

 

***SpecialtyProducts Group***

 

On February 18, 2004 and June 3,2004, the Company acquired the 50% participations held by its partners inCascades Sonoco S.A. for a nominal consideration and in Greenfield S.A.S. for acash consideration of $2 million (€1.5 million).

 

2

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***FinePapers Group***

 

On November 17, 2005, Cascadesreached an agreement for the sale of its paper merchant division known asCascades Resources, a Division of Cascades Fine Papers Group Inc., to CoastPaper Limited, now known as PaperlinX Canada Limited, for a purchase price ofapproximately $CA85 million. On march 1, 2006, the Company announced theclosing of the transaction at $81 million, the final selling price to beadjusted during the year 2006. An amount of $77 million has already beenreceived and applied towards the reduction of Cascades’ debt.

 

On November 22, 2005  Cascades announced a rationalization plan forits fine papers sector with the closing of the operations of its Cascades FinePapers Group Inc., Thunder Bay Division (Ontario) plant which specializes inthe manufacturing of coated papers. Approximately 375 employees were affectedby this closing which occurred on January 21, 2006.

 

On December 8, 2005, Cascadesannounced the last stage in the strategic recovery plan for its Fine PapersGroup plant located in Saint-Jérôme. This rationalization will involve arestructuring of operations, including the closing of the smallest of the fourpaper machines, which produced 8,000 short tonnes per year, an amountequivalent to 5% of the plant’s annual capacity. This restructuring graduallycomes into force in 2006, and affects nearly 100 employees.

 

***TissueGroup***

 

On March 11, 2004, the Companyacquired the assets of a tissue mill in Memphis, Tennessee, from AmericanTissue or some of its affiliated companies for a monetary consideration of$15 million (US$11.4 million), extending its presence in the southernUnited States.

 

On March 31, 2005, Cascades soldthe sanitation products distribution and the chemical products manufacturingassets of its Wood Wyant Inc. subsidiary to a subsidiary of Groupe Sani-Marc,located in Victoriaville, Québec, for a total net consideration of$15.7 million. Cascades’ decision to withdraw from the sanitation productdistribution business aligns with the Company’s strategic goal of focusingoperations on its core sectors namely the manufacturing and the processing oftissue paper and packaging products. As such, the Wood Wyant inc. assetsrelated to the manufacturing of tissue paper finished products, located inPickering, Ontario, are excluded from the transaction.

 

On March 9, 2006, as part of its ongoingrationalization process of its activities and in an effort to optimize itseffectiveness and profitability, Cascades has decided to close its tissueconversion plant in Pickering, Ontario. Approximately 66 employees will beaffected by this closure. This plant converts paper towels and bathroom tissuefor the commercial and industrial market. The equipment will be redeployed indifferent Cascades Tissue Group plants and mills in the United States andCanada.

 

# **ITEM 4 -DESCRIPTION OF THE BUSINESS**

#  

## **4.1          GENERAL**

Established in 1964, Cascades is the parentcompany of a North American and European group of companies involved in theproduction, conversion and marketing of packaging products, fine specialtypapers and tissue papers principally composed of recycled fibres. Cascadesconducts its business principally through three operating sectors: Packaging,Fine Papers and Tissue Papers.

 

The **Packaging**sector includes :

The *BoxboardGroup*, a manufacturer of premium coated boxboard and foldingcartons;

The *Containerboardand Corrugated Products Group*, held through Norampac Inc., a jointventure company, is a maker of containerboard and a leading converter ofcorrugated carton; and

The *SpecialtyProducts Group* specializes in the manufacturing and marketing ofproducts such as moulded pulp, plastic, papermill packaging, honeycomb andspecialty paper and board. The group also specializes in waste paper recoveryand de-inked pulp.

 

The **FinePapers** sector manufactures and markets high-end uncoated finepapers, the content of which is in large part recycled.

 

The **Tissue****Paper**sector is a major producerof tissue paper for the retail, commercial and institutional markets.

 

These three sectors include 120 operating units located in Canada,Unites States, France, England, Germany, Sweden and, through joint ventures, inAustralia, China and Indonesia and employ approximately 14,300 people. Thisstructure decentralizes authority while allowing continuous exchanges betweensectors and a better coordination of all of the operations. Cascades setsstrategic guidelines and ensures that corporate policies concerning acquisitionand financing strategies, legal affairs, human resources management andenvironmental protection are applied by the subsidiaries, divisions andaffiliated companies.

 

**4.2          INDUSTRY SECTORS INFORMATION**

 

### **4.2.1       PACKAGING**

This sector includes three industrialgroups : the Boxboard Group, the Containerboard and Corrugated ProductsGroup and the Specialty Products Group.

 

#### **4.2.1.1   BOXBOARDGROUP**

The Boxboard Group is a leading maker ofcoated boxboard and folding cartons in Canada. The Boxboard Group operatesseven mills that produce coated boxboard for conversion into folding cartonsand micro-flute packaging, with a total annual production capacity of 890,000metric tons. Three of these mills are located in Canada, two in France, one inSweden, and one in Germany.

 

Approximately 63% of the Boxboard Group’sproduction of boxboard is made of entirely recycled fibre, and 15% of itsoutput is produced with a high content of recycled fibre and the balance ofvirgin fibre. Vertically integrated upstream, the Boxboard Group operates twode-inking units, one in Canada and the other in France, and obtains its supplyof wastepaper through its own recovery networks, joint ventures and 

 

3

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affiliates, as well as through long-termagreements with independent suppliers. To secure its supply of virgin fibre,the Boxboard Group operates three mechanical pulp mills in Québec, France andSweden and one chemical pulp mill in Québec as well as a sawmill, Scierie LemayInc.

 

In North America, the Boxboard Group is alsovertically integrated downstream via its Folding Carton Division. The division’ssix plants, two in Québec, two in Ontario, one in Manitoba and one in Kentuckyin the United States annually convert some 175,000 metric tons of boxboard or2.4 billion boxes per year, supplied mainly by its boxboard mills. Theseplants design, develop and produce packaging solutions that meet the specificneeds of companies operating mainly in the food, fast food, cosmetics,pharmaceutical and distillation industries. Dopaco, Inc. operates seven plants(two in Ontario and five in the United States) converting some 200,000 tons ofboxboard a year, which mostly comes from the Canadian boxboard mills, intofolding cartons and cups. It also has joint venture interests in the UnitedStates, Australia, Indonesia and China.

 

In 2005, the Boxboard Group had net sales of$1.4 billion as compared to $1.2 billion in 2004. The sales ofcartonboard geographically were as follows: i) for the European mills : 93% in France, Germany and Sweden, and7% elsewhere; ii) for the North American mills : 46% in Canada, 52% in theUnited States and 2% elsewhere. Globally in 2005, 30%, 31%, 35% and 4% of thesales of this Group were generated in Europe, Canada, the United States andother countries.

 

As of December 31, 2005, the Boxboard Groupemployed more than 4,300 people in 24 facilities and 10 sales officesthroughout the world.

 

The following table lists the major plantsowned by the Boxboard Group, the approximate annual production capacity of thefacilities and the products manufactured or the operations carried out therein,as the case may be, in 2005 :

 
| **Facilities**                                                                 | ** ** | **Products / Services**                                               | ** ** | **Annual capacity in********metric tons** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                                     | ** ** | ** **                                                                      | ** ** | ** **                                               | ** ** |
| **Manufacturing**                                                              | ** ** | ** **                                                                      | ** ** | ** **                                               | ** ** |
| ** **                                                                     | ** ** | ** **                                                                      | ** ** | ** **                                               | ** ** |
| Toronto (Ontario)                                                              |       | 100% recycled coated boxboard                                                   |       | 165,000                                                  |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Jonquière (Québec)                                                   |       | Coated (from 100% virgin to 100% recycled) boxboard  Thermomechanical pulp |       | 140,000  60,000                                          |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| East Angus (Québec)                                                       |       | 100% recycled coated boxboard  De-inked pulp                               |       | 65,000  10,000                                           |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Cascades LaRochette (France)                                                   |       | Coated grease resistant boxboard, virgin fibre  Thermomechanical pulp      |       | 130,00080,000                                            |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Cascades Blendecques (France)                                                  |       | Coated, non  coated grease resistant boxboard, recycled fibre De-inked pulp     |       | 145,000  60,000                                          |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Cascades Djupafors A.B. (Sweden)                                               |       | Light-weight coated boxboard, virgin fibre  Thermomechanical pulp          |       | 60,000  50,000                                           |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Cascades Arnsberg GmbH (Germany)                                               |       | Coated boxboard, recycled fibre                                                 |       | 185,000                                                  |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Cascades FjordCell (Québec)                                               |       | Bleached softwood kraft pulp                                                    |       | 82,000                                                   |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Scierie Lemay Inc. (Québec)                                               |       | Sawmill                                                                         |       | N/A                                                      |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| **Converting**                                                                 |       |                                                                            |       |                                                     |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Montréal (Québec)                                                    |       | Printing, embossing, debossing, thermobossing, ultra-violet drying  services    | ** ** | 35,000                                                   | (1)        |
|                                                                           |       |                                                                            | ** ** | ** **                                               | ** ** |
| Mississauga (Ontario)                                                          |       | Printing and infrared drying services                                           |       | 40,000                                                   |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Cobourg (Ontario)                                                              |       | Processing and printing of boxboard for folding cartons                         |       | 15,000                                                   |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Winnipeg (Manitoba)                                                            |       | Processing and printing of boxboard for folding cartons                         |       | 30,000                                                   |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Lachute (Québec)                                                          |       | Processing and printing of boxboard for folding cartons                         |       | 15,000                                                   |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Hebron (Kentucky)                                                              |       | Processing and printing of boxboard for folding cartons                         |       | 40,000                                                   |       |
|                                                                           |       |                                                                            |       |                                                     |       |
| Dopaco, Inc. (Pennsylvania, California, North  Carolina, Illinois and Ontario) |       | Packaging products for quick-service  restaurant industry                       |       | 200,000                                                  |       |

 

4

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|                                              |   |                                       |   |   |   |
|---------------------------------------------------|--------|--------------------------------------------|--------|--------|--------|
| Cascades Cartonboard UK Ltd  (Great Britain) |   | Sheeting, distribution and resale services |   | N/A    |   |

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## **(1) Closing of one production line.**

## ** **

#### **4.2.1.2   CONTAINERBOARDAND CORRUGATED PRODUCTS GROUP**

The Containerboard and Corrugated ProductsGroup, represented by Norampac Inc. (“Norampac”), a joint venture company ownedequally with Domtar Inc., employs more than 4,900 people in its 34containerboard mills and corrugated products converting plants in Canada, theUnited States and France.

 

Norampac has a total of eight linerboard andcorrugated medium mills in Canada, the United States and France. These facilitieshave a combined annual production capacity of 1.45 million short tons, agrowing percentage of which is dedicated to specialty papers such as white-topor colored-top linerboard. The products manufactured by the eight manufacturingmills consist of 47% linerboard and 53% corrugating medium. Approximately 61%of their North American output is converted by Norampac’s 26 corrugatedproducts plants, strategically located across Canada and the United States.

 

In 2005, consolidated sales of this groupremained unchanged compared to 2004 which amounted to $1.3 billion, mainlyallocated as follows : 61% in Canada, 31% in the United States and 8%outside of North America. The sales of this group are carried out by its ownsales force and sales agents for export purposes. Cascades’ share represented$639 million for the year.

 

The containerboard group purchases all of itsneeds in virgin fibre in Québec and Ontario, and purchases its recycled fibreequally in the United States and in Canada. The corrugated products grouppurchases nearly all of its raw material needs directly from the containerboardgroup’s mills.

 

The following table lists the mills andconverting plants of the Containerboard and Corrugated Products Group and theapproximate annual production capacity or shipments of each facility as well asthe products manufactured or, where applicable, their activities in 2005 :

 
| **Facilities**                                  | ** ** | **Products / Services**                           | ** ** | **Annual capacity or********Shipments** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                      | ** ** | ** **                                                  | ** ** | ** **                                        | ** ** |
| **Containerboard**                              | ** ** | ** **                                                  | ** ** | **Capacity in short  tons**                       | ** ** |
| ** **                                      | ** ** | ** **                                                  | ** ** | ** **                                        | ** ** |
| Niagara Falls Division (New  York)              |       | 100% recycled corrugating  medium                           |       | 225,000                                           |       |
|                                            |       |                                                        |       |                                              |       |
| Norampac Avot Vallée SAS  (France)         |       | 100% recycled corrugating  medium and linerboard            |       | 140,000                                           |       |
|                                            |       |                                                        |       |                                              |       |
| Division Kingsey Falls  (Québec)           |       | 100% recycled linerboard                                    |       | 94,000                                            |       |
|                                            |       |                                                        |       |                                              |       |
| Division Cabano (Québec)                   |       | Corrugating medium                                          |       | 233,000                                           |       |
|                                            |       |                                                        |       |                                              |       |
| Trenton Division (Ontario)                      |       | Corrugating medium in various  basis weights                |       | 175,000                                           |       |
|                                            |       |                                                        |       |                                              |       |
| Mississauga Division (Ontario)                  |       | 100% recycled linerboard                                    |       | 156,000                                           |       |
|                                            |       |                                                        |       |                                              |       |
| Red Rock Division (Ontario)                     |       | Unbleached kraft linerboard                                 |       | 300,000                                           | (1)        |
|                                            |       |                                                        |       |                                              |       |
| Burnaby Division (British  Columbia)            |       | 100% recycled corrugating  medium and gypsum paper          |       | 127,000                                           |       |
|                                            |       |                                                        |       |                                              |       |
| **Corrugated Products**                         | ** ** |                                                        |       | **Shipments in Square feet**                      |       |
| ** **                                      | ** ** |                                                        |       | ** **                                        |       |
| Newfoundland Containers  Limited (Newfoundland) |       | Corrugated sheets and products                              |       | 204,000,000                                       |       |
|                                            |       |                                                        |       |                                              |       |
| Moncton Division (New  Brunswick)               |       | Corrugated packaging                                        |       | 517,000,000                                       |       |
|                                            |       |                                                        |       |                                              |       |
| Division Québec  (Québec)             |       | Variety of  corrugated packaging containers                 |       | 515,000,000                                       |       |
|                                            |       |                                                        |       |                                              |       |
| Division Drummondville  (Québec)           |       | Corrugated packaging  containers for medium or heavy volume |       | 767,000,000                                       |       |
|                                            |       |                                                        |       |                                              |       |
| Division Victoriaville  (Québec)           |       | Corrugated packaging of all  sizes                          |       | 351,000,000                                       |       |
|                                            |       |                                                        |       |                                              |       |
| Division Montréal (Québec)            |       | Variety of corrugated  packaging containers                 |       | 530,000,000                                       | (2)        |
|                                            |       |                                                        |       |                                              |       |
| Division Vaudreuil (Québec)                |       | Variety of corrugated  packaging containers                 |       | 753,000,000                                       |       |
|                                            |       |                                                        |       |                                              |       |
| Division SPB (Québec)                      |       | Variety of corrugated  packaging containers                 |       | 180,000,000                                       | (3)        |
|                                            |       |                                                        |       |                                              |       |
| Division Le Gardeur (Québec)               |       | Corrugated sheets, packaging  and pallets                   |       | 16,000,000                                        | (3)        |

 

5

----

 
| Division Belleville (Ontario)              |       | Variety of corrugated  packaging containers              |       | 78,000,000               | (3)        |
|--------------------------------------------|------------|----------------------------------------------------------|------------|--------------------------|------------|
|                                       |       |                                                     |       |                     |       |
| Etobicoke Division (Ontario)               |       | Variety of corrugated  packaging containers              |       | 535,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Jellco Division (Ontario)                  |       | Variety of corrugated  packaging containers              |       | 140,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Peterborough Division  (Ontario)           |       | Corrugated sheets, packaging  and pallets                |       | 97,000,000               |       |
|                                       |       |                                                     |       |                     |       |
| St-Mary’s  Division (Ontario)         |       | Corrugated  packaging                                    |       | 867,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| OCD Division (Ontario)                     |       | Corrugated packaging                                     |       | 1,042,000,000            |       |
|                                       |       |                                                     |       |                     |       |
| Vaughan Division (Ontario)                 |       | Corrugated sheets                                        |       | 1,983,000,000            |       |
|                                       |       |                                                     |       |                     |       |
| Concord Division (Ontario)                 |       | Variety of corrugated  packaging containers              |       | 42,000,000               | (4)        |
|                                       |       |                                                     |       |                     |       |
| North York Division (Ontario)              |       | Single face sheets,  co-packaging and display operations |       | 40,000,000               |       |
|                                       |       |                                                     |       |                     |       |
| Lithothech Division (Ontario)              |       | Single face laminate                                     |       | 237,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Winnipeg Division (Manitoba)               |       | Waxed corrugated containers                              |       | 568,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Saskatoon Division  (Saskatchewan)         |       | Corrugated product packaging                             |       | 30,000,000               |       |
|                                       |       |                                                     |       |                     |       |
| Calgary Division (Alberta)                 |       | Die cut boxes                                            |       | 611,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Richmond Division (British  Columbia)      |       | Corrugated packaging                                     |       | 473,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Norampac New York City Inc. (New  York)    |       | Graphic packaging and  industrial box mix                |       | 994,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Norampac Leominster Inc. (Massachusetts)   |       | Industrial box mix                                       |       | 692,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Norampac Schenectady Inc. (New  York)      |       | Variety of corrugated  packaging containers              |       | 705,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Lancaster Division (New York)              |       | Variety of corrugated  packaging containers              |       | 584,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Buffalo Division (New York)                |       | Custom boxes, specialized  packaging                     |       | N/A                      | (5)        |
|                                       |       |                                                     |       |                     |       |
| Norampac Thompson Inc. (Connecticut)       |       | Variety of corrugated  packaging containers              |       | 183,000,000              |       |
|                                       |       |                                                     |       |                     |       |
| Montcorr  Packaging Ltd. (Québec)     |       | Corrugated sheets                                        |       | 128,000,000              | (6)        |
|                                       |       |                                                     |       |                     |       |
| **Services**                               | ** ** | ** **                                               | ** ** | ** **               | ** ** |
| ** **                                 | ** ** | ** **                                               | ** ** | ** **               | ** ** |
| Art & Die Division  (Ontario)          |       | Graphic art and printing  plates                         |       | 4,318,000  square inches |       |
|                                       |       |                                                     |       |                     |       |
| Metro Waste Paper Recovery  Inc. (Ontario) |       | Recovery of recycled fibres                              |       | 461,173 metric tons      | (7)        |

 

----

(1) Machine No 1 closed onSeptember 2005.

(2) Plant closed in December2005.

(3) Acquired on October 7,2005. The shipments indicated are estimates for the period between October 7,2005 and December 31, 2005.

(4) Plant closed in March2005.

(5) Plant closed in August2005 and the shipments for 2005 are included in the results of the LancasterDivision.

(6) Norampac’s investment inMontcorr Packaging Ltd. varied over the course of the year and stood at 17% onDecember 31, 2005. The annual shipments indicated are calculated according toNorampac’s investment at year end.

(7) Norampac holds 46% andCascades holds 27% of Metro Waste Paper Recovery Inc. Consequently, Norampacaccounts for 46% of the total annual shipments of 1,002,550 metric tonnes.

 

#### **4.2.1.3   SPECIALTYPRODUCTS GROUP**

The Cascades Specialty Products Group isdiversified into seven areas of activity which specialize in the marketing ofproducts such as moulded pulp, plastic, papermill packaging, honeycomb, andspecialty paper and board. The group also specializes in waste paper recoveryand de-inked pulp. The group has 26 manufacturing units located in NorthArmerica and Europe and employs approximately 1,500 people. In 2005, consolidatedsales of this group remained unchanged compared to 2004 which amounted to $509million.

 

6

----

 

##### ***a)            Moulded pulp products***

Cascades Forma-Pak in KingseyFalls (Québec), Cascades Moulded Pulp, Inc., in North Carolina (United States)and Cascades Moulded Pulp-Brantford (Ontario), manufacture moulded pulpproducts of 100% recycled material and are primarily destined for poultry farmsand the quick-service restaurant business in Canada (40%) and the United States(60%). This subgroup of the Specialty Products Group produces mainly fillerflats designed for egg processors, trays and specialty packaging products. Salesrepresentatives and a network of sales agents serve customers; five of thempurchase 70% of sales. Raw material for these moulded pulp products is composedof 100% recycled material. The availability on the market is stable due to thecorporate purchasing program. Competition in this subgroup comes principallyfrom Canada and the United States.

 

The following table lists theprincipal mills in the moulded pulp products subgroup and the approximateannual production capacity of each facility as well as the productsmanufactured or, where applicable, their activities in 2005 :

 
| **Facilities**                                    | ** ** | **Products**                                             | ** ** | **Annual capacity****in units** | ** ** |
|---------------------------------------------------|------------|----------------------------------------------------------|------------|-------------------------------------------|------------|
|                                              |       |                                                     |       |                                      |       |
| Cascades  Forma-Pak (Québec)            |       | Disposable  products for medical sector and filler flats |       | 220,000,000                               |       |
|                                              |       |                                                     |       |                                      |       |
| Cascades Moulded Pulp, Inc.  (North Carolina)     |       | Trays and specialty packaging  products                  |       | 140,000,000                               |       |
|                                              |       |                                                     |       |                                      |       |
| Cascades Moulded Pulp –  Brantford (Ontario) |       | Trays                                                    |       | 100,000,000                               |       |

 

##### ***b)            Plastic products***

This subgroup manufactures avariety of plastic products in four plants, three located in Québec and one inthe United States. These plants specialize in industrial and food packagingproducts. The packaging is manufactured using extrusion, thermal compressionand thermal molding by injection. The principal raw material used ispolystyrene.

 

Plastiques Cascades, located inKingsey Falls, Québec and Warrenton, Missouri specializes in the food industry,notably, and packaging for the quick-service restaurant business andspecialized containers for the meat processing industry. Sales representativesand a network of sales agents serve Canada and the United States.

 

PlastiquesCascades - Re-Plast, located in Notre-Dame-Du-Bon-Conseil, Québec,recycles waste plastic generated by selective collection and industrial waste.The supply of raw materials is becoming increasingly difficult due to exportprices (Asia). The principal products are buildingconstruction boards, 100% recycled plastic or wood-plastic composite commercialized under the namePermadeck® are manufactured from post-consumer recycled plastic and industrialraw materials. A variety of outdoor furnishings for outdoor use, commercializedunder the name Urbain Design®, completes this list. Products are sold throughsales agents, manufacturing agents and distributors. Competition comes mainlyfrom the United States and Ontario.

 

Cascades Inopak located inDrummondville, Québec, specializes in the thermo moulding of rigid sheets ofplastic and moulding by injection. Its principle products are wrappers forpackaging coins sold under the trade name Plastichange® and a complete line ofmulti-use containers known under the trade name BenpacTM and Vu PackTM for theretail sale and packaging of food and industrial products such as productsunder the trade name Frig-O-Seal®. Products are sold through distributors andagents. The principal raw materials used are P.E.T., polypropylene, clearpolystyrene, PVC and the new compostable plastic P.L.A. Competitively, fiveprincipal players in the United States and Canada share in a highlyconsolidated market while pressure is being felt from Asia.

 

Sales are as follows :

 

| **Territory**       | ** ** | **2004** | ** ** | **2005** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Quebec              |       | 39       | %          | 43       | %          |
| Ontario             |       | 18       | %          | 17       | %          |
| The rest of  Canada |       | 4        | %          | 4        | %          |
| United  States      |       | 39       | %          | 36       | %          |

 

The following table lists themain mills in the plastic products subgroup and the approximate annualproduction capacity of each facility as well as the products manufactured or,where applicable, their activities in 2005 :

 
| **Facilities**                                     | ** ** | **Products**                                              | ** ** | **Annual capacity****in kilograms** | ** ** |
|----------------------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                         | ** ** | ** **                                                | ** ** | ** **                                    | ** ** |
| Plastiques  Cascades (Québec)                 |       | Polystyrene foam containers                               |       | 9,500,000                                     |       |
|                                               |       |                                                      |       |                                          |       |
| Plastiques  Cascades – Re-Plast (Québec) |       | Park furniture, patio and balcony planks, plastic lumbers |       | 5,925,000                                     |       |
|                                               |       |                                                      |       |                                          |       |
| Cascades  Inopak (Québec)                     |       | Coin wrappers, multi-use packaging                        |       | 5,000,000                                     |       |
|                                               |       |                                                      |       |                                          |       |
| Cascades  Plastics Inc. (Missouri)                 |       | Polystyrene foam containers                               |       | 5,000,000                                     |       |

 

7

----

 

##### ***c)            Papermill packaging***

The three North American jointventures of this subgroup, Cascades Conversion Inc., Converdis Inc. andCascades Sonoco Inc., convert uncoated board, obtained principally within theCascades network, into industrial packaging materials for the pulp and paperindustry, such as roll headers and paperboard packaging for rolls of paper. CascadesConversion Inc. manufactures as well a unique model of heat plate for sealingroll edges. This subgroup of the Specialty Products Group is the leader in the NorthAmerican market. The sales for these mills are made either through anindependent agent or by their own sales force. In 2005, one customer accountedfor 15.04% of sales and the principal geographic market is the United Stateswith 55%, followed by the province of Québec at 30% and by other Canadianprovinces at 15%.

 

Cascades Rollpack, a wholly owned subsidiary of the Company, operatestwo plants in France at Saulcy-sur-Meurthe and Chatenois, which manufacturesroll headers and wrapping papers made of linerboard and uncoated paperboardobtained within European papermills. The sales of these mills are made throughtheir own sales force. In 2005, one customer accounted for 8.5% of the productssold in France (42%), in Germany (26%) and in Sweden (8%).

 

The following table lists themain mills in the papermill packaging subgroup and the approximate annualproduction capacity of each facility as well as the products manufactured or,where applicable, their activities in 2005 :

 
| **Facilities**                                    | ** ** | **Products**                        | ** ** | **Annual capacity in metric  tons or square feet** | ** ** |
|---------------------------------------------------|------------|-------------------------------------|------------|-----------------------------------------------------------------------------|------------|
| ** **                                        | ** ** | ** **                          | ** ** | ** **                                                                  | ** ** |
| Cascades  Conversion Inc. (Québec)           |       | Roll headers and packaging products |       | 60,000                                                                      |       |
|                                              |       |                                |       |                                                                        |       |
| Converdis  inc. (Québec)                     |       | Packaging products                  |       | 55,000                                                                      |       |
|                                              |       |                                |       |                                                                        |       |
| Cascades  Sonoco Inc. – Birmingham (Alabama) |       | Roll headers and packaging products |       | 44,000                                                                      |       |
|                                              |       |                                |       |                                                                        |       |
| Cascades  Sonoco Inc. – Tacoma (Washington)  |       | Roll headers and packaging products |       | 30,000                                                                      |       |
|                                              |       |                                |       |                                                                        |       |
| Cascades  Rollpack S.A.S. (France)                |       | Roll headers and reams              |       | 20,000                                                                      |       |

 

*d)            Honeycomb*

This subgroup of the SpecialtyProducts Group’s operations mainly consists in converting uncoated board,obtained principally within the Cascades network into industrial packagingmaterials for the pulp and paper industry. Cascades Multi-Pro, located in Drummondville,Québec manufactures laminated boards used in many industrial sectors as well ashoneycomb paperbord. The Cascades Enviropac Berthierville, Québec and Toronto,Ontario plants manufacture honeycomb paperboard used as industrial packaging ingeneral. The sales for these mills are made either through an independent agentor by their own sales force. In 2005, one customer accounted for 7.4% of salesand the principal geographic market is the province of Ontario with 49%,followed by the province of Québec at 23%, the United States at 20% and byother Canadian provinces with 8%.

 

The following table lists themain mills in the honeycomb subgroup and the approximate annual productioncapacity of each facility as well as the products manufactured or, whereapplicable, their activities in 2005 :

 
| **Facilities**                                         | ** ** | **Products**                                                               | ** ** | **Annual capacity in metric  tons or square feet** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                             | ** ** | ** **                                                                 | ** ** | ** **                                                                       | ** ** |
| Cascades  Multi-Pro (Québec)                      |       | Sheeting, dividers, laminated board and honeycomb packaging  products |       | 13,000                                                                           |       |
|                                                   |       |                                                                       |       |                                                                             |       |
| Cascades  Enviropac - Berthierville (Québec) |       | Honeycomb packaging products                                               |       | 5,000                                                                            |       |
|                                                   |       |                                                                       |       |                                                                             |       |
| Cascades  Enviropac - Toronto (Ontario)           |       | Honeycomb packaging products                                               |       | 5,200                                                                            |       |

##### ** **

##### ***e)            S****pecialtypaper and board*

Cascades Lupel, located inCap-de-la-Madeleine, Québec, manufactures backing for vinyl flooring sold underthe trademarks Endorex®, Absorbak® and Guardflo®. Sales for these units weremade primarily in the United States (61.5%), in Canada (38%) and in Mexico(0.5%). The products are delivered principally by trucks and rail. Two majorcustomers represent respectively 55% and 38% of sales. The mill’s annualproduction capacity is 55,000 metric tons. The raw materials are easilyavailable and the mill sources 70% of its needs from the United States, theremainder is sourced in Canada.

 

Cascades Sainte-Marie, locatedin Boissy-Le-Châtel, France, principally manufactures backing for vinylflooring primarily for the North-America market (84%), which represents 78% ofthe sales. This unit also manufactures mineral bases to make fireproof andfacing for insulation panels. Its annual capacity is 30,000 metric tons.

 

8

----

 

Cascades Papier Kingsey Falls(Québec) produces uncoated board using 100% recycled fibre. This board is usedmainly by converters specializing in commercial and industrial packaging suchas headers and wrappers for the paper industry as well as spacers andpartitions used to package products. This division produces approximately92,000 metric tons of which 37% is sold to affiliated companies while thebalance is sold to third parties of which three represent respectively 30%, 4%and 4% of sales. 63% of total sales are made to customers located in theprovince of Québec. Raw material is sourced principally in the province of Québec(66%), in Ontario (20.4%) and in United States. Products are deliveredprincipally by, in order of importance : trucks, rail and ships.

 

The Cascades East Angus (Québec)mill manufactures many types of specialized kraft paper such as butcher paper,paper for envelopes, paper for asphalt coating and paper which withstandsgrease or moisture. These types of specialty paper allow the unit to maintain acompetitive share in this market. The annual capacity of this mill is 95,000metric tons. The majority of its sales are in the United States (69% in 2005compared to 71.9% in 2004). Products are delivered principally by trucks andrail. Its most important customer accounts for almost 11% of sales. A new kindof fireproof paper is in development while the antifungal paper is now marketed.Its products may contain 0% to 100% of recycled fibre depending on customerrequirements. The supply of treated and recycled fibres, which is stable, comesfrom Québec (25%) and the United States (75%) and the natural fibre comesmostly from Québec private forests. By increasing its bark steam production(60%), this mill reduces substantially its costs, compared to the natural gazand oil production user.

 

f)             *Waste paper recovery*

In 2005,Cascades Recovery has handled more than 235,000 metric tons of waste paper. Inthis same period, 84% of its sales were in Canada, with 16% in export,principally in Asia. 86% of its business is done within the Cascades Group. Wastepaper is obtained from industrial and commercial users as well as curbsidecollection in municipalities.

 

*g)            De-inking*

The mill in Auburn, Maine, withan annual capacity of 75,000 metric tons, manufactures from waste papermaterial a high-gloss de-inked pulp used for the production of tissue and finepaper. 56% of sales are made in the United States and 44% are made in Canada. Thethree most important customers account for 32%, 29% and 6% of salesrespectively.

 

Greenfield’s plant, situated atChâteau-Thierry, in France, manufactures from waste paper material a high glossde-inked pulp used for the production of fine paper and tissue. This plant hasan annual capacity of 120,000 metric tons. The products are distributed in theEuropean market (98%), in Japan and in Australia. The three principal customersaccounted for 15%, 11% and 10% of sales respectively.

 

### **4.2.2**                     FINE PAPERS

Cascades Fine Papers Group Inc., with salesof $707 million in 2005 compared to $714 million in 2004, regroupsfive divisions which employ more than 1,700 people.In 2005, theconsolidated sales of the Fine Papers Group were 76% in Canada and 23% in theUnited States.

 

The Rolland Division operates a plant inSt-Jérôme, Québec, and manufactures over 100 types of uncoated fine paper. Asidefrom paper destined for copying, business forms and envelopes, this division isincreasingly involved in the niche markets for high-end recycled paper andspecialty paper for commercial and security printing. The Rolland Divisionpaper products are made principally from recycled material. The products aremarketed under such names asSuperfine Linen RecordTM, Colonial BondTM, ReproPlusTM,RocklandTM, Rolland OpaqueTM, New Life OpaqueTM,Rolland InspirationTM, Rolland Laser Hi-TechTM, New Life DP100TM,ST Generation IITM, Make Your MarkTM, Enviro 30, 50 and 100TM andRolland Digital CCTM. The Rolland Division sells 47% of its products in Canadathrough sales representatives located in St-Jérôme (Québec) and Toronto(Ontario), and 43% in the American northeast and midwest through Cascades FinePapers Group (Sales) Inc. This division has restructured its operations withthe closing of the smallest of the four paper machines, which gradually comes intoforce in 2006, as mentioned hereinabove at item 3.1.

 

The Breakey Fibres Division, located inBreakeyville, Québec operates a mill specializing in the production of high-endde-inked kraft pulp, a product that meets an increasing demand for uncoatedfine papers containing recycled fibre. Breakey Fibres Division is supplied withwaste paper coming from Eastern Canada and from the United States. In 2005,almost 57% of the output of Breakey Fibres’ facility was used at the St-Jérômemill, approximately 3% at the Thunder Bay, Ontario facility and 29% atdifferent Cascades Group companies. The remaining production is sold on theopen market.

 

The Converting Centre Division,located in St-Jérôme, Québec, owns and operates a sheeting centre having anannual capacity of 110,000 short tons. The Centre offers warehousing serviceswith a capacity of 7,000 short tons. It offers sheeting, warehousing anddistribution services to other divisions of the Fine Papers Group as well asoutside customers.

 

The Thunder Bay Division, whichclosed its operations in January 2006, operated a coated fine paper mill, withan annual production capacity of 175,000 short tons. The paper mill providedfor 100% of its hardwood mechanical pulp needs, manufacturing some 40,000metric tons annually on its own premises. About 63% of its sales were in theUnited States and the remainder in Canada.

 

Cascades Resources, sold on February 28, 2006as mentioned in Item 3.1, is one of the largest Canadian distributors of finepapers and graphic art products.

 

In light of European and Asian imports, the Canadian and Americanmarkets for fine papers products are extremely competitive. The coated anduncoated fine papers segment has experienced sales prices in 2004 and 2005clearly below the last ten years average.

 

In 2005, fibre representedapproximately 34% of total operating costs in its plants. The Fine Papers Groupis fully integrated for mechanical and recycled pulp and partially integratedfor softwood kraft pulp. Its primary source for softwood and hardwood kraftpulp needs is Canada.

 

The pulp and paper industry isrecognized for its cyclical character. The coated and uncoated fine paperssegment is no exception.

 

The fine papers sector hasbecome a global market. Important additional capacity emanating from Europe andAsia and a decline in exports are responsible for the imbalance in demand onthe North American continent.

 

9

----

 

The following table lists themajor plants of the Fine Papers Group and the approximate annual productioncapacity of each facility as well as the products manufactured or, whereapplicable, their activities in 2005 :

 
| **Facilities**                                 | ** ** | **Products / Services**                                                             | ** ** | **Annual capacity  in short tons** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                     | ** ** | ** **                                                                                    | ** ** | ** **                                        | ** ** |
| **Manufacturing**                              |       |                                                                                          |       |                                              |       |
| ** **                                     |       |                                                                                          |       |                                              |       |
| Rolland  Division (Québec)                |       | Uncoated fine paper                                                                           |       | 166,000                                           | (1)        |
|                                           |       |                                                                                          |       |                                              |       |
| Breakey  Fibres Division (Québec)         |       | De-inked kraft pulp                                                                           |       | 51,000 (metric tons)                              |       |
|                                           |       |                                                                                          |       |                                              |       |
| Thunder Bay  Division (Ontario)                |       | Coated fine papers                                                                            |       | 175,000                                           | (2)        |
|                                           |       |                                                                                          |       |                                              |       |
| **Distribution  / Converting**                 |       |                                                                                          |       |                                              |       |
| ** **                                     |       |                                                                                          |       |                                              |       |
| Converting  Center Division (Québec)      |       | Converting of fine papers                                                                     |       | 110,000                                           |       |
|                                           |       |                                                                                          |       |                                              |       |
| Cascades  Resources (Canada)                   |       | Distribution of fine papers and graphic arts Products; converting,  packaging and warehousing |       | N/A                                               | (3)        |
|                                           |       |                                                                                          |       |                                              |       |
| Cascades  Fine Papers Group (Sales) Inc. (USA) |       | Sales                                                                                         |       | N/A                                               |       |

 

----

(1) One machine closed in December 2005.

(2) Plant closed in January 2006.

(3) Unit sold in February 2006.

 

### **4.2.3       TISSUEPAPERS**

The Tissue Group manufactures, converts andmarkets a vast array of products mainly made with recycled fibre and intendedfor the commercial, industrial and retail markets. Its lines of bathroomtissue, facial tissue, paper towels, paper hand towels, paper napkins and otherrelated products are sold under the labels Decor®, HorizonTM, NorthRiver®, Collection Moka® and Wiping Solutions® in the commercial and industrialCanadian and American markets. In the retail market, products are principallymarketed under private labels and under the label Cascades® in Canada and Pert®and Best Value® in the United States. In 2005, two clients accounted for 40.9%of retail sales with 24.5% and 16.4%. In addition, Tissue Group also sellsparent rolls of bathroom tissue, paper towels, paper hand towels and specialtypapers to a large number of converters. One client accounts for 88.2% of parentroll sales. In 2005, one client accounted for 21% of overall sales in theretail, commercial and industrial markets and parent rolls. Products are sold throughdistributors and agents in the United States and in Canada primarily throughsales representatives and the merchandise is delivered by trucks and by rail.

 

The Tissue Group consolidatedsales for 2005 amounted to $724 million compared to $717 million in2004. In 2005,Tissue Group’s production was sold as follows : in the United States, 70% andin Canada, 30%. The Canadian mills generated 70% of the total revenue in Canadaand 30% in the United States. The American mills generated 97% of the total revenue in the UnitedStates. 15 manufacturing and converting plants employmore than 1,900 people.

 

The Candiac plant in Québec manufacturestissue paper made from recycled fibres and converts it into bathroom tissue,paper towels and paper napkins. These products are mainly sold in the retailmarket as well as the commercial and industrial markets, both in Canada and theUnited States. The production not converted at the Candiac mill is transferredto the Laval and Waterford plants or is sold in parent rolls to otherconverters.

 

The Lachute Plant in Québec specializes inthe manufacturing and converting of industrial use paper hand towels. Theseproducts are mainly destined to the Canadian and American commercial andindustrial markets. The production not converted is transferred to the NorthCarolina and Pickering (Ontario) plants.

 

The Laval Plant in Québec specializes in theconverting of tissue paper into paper napkins for the Canadian and Americanfast food and food industries.

 

The Kingsey Falls plant in Québecmanufactures tissue paper made from recycled fibres and converts it intobathroom tissue, paper towels, paper hand towels and facial tissue.  These products are mainly sold in the retailmarket as well as the commercial and industrial markets, both in Canada and theUnited States. The production not converted is transferred to the Laval,Calgary, Pickering and Waterford plants or is sold in parent rolls to otherconverters.

 

The Calgary plant in Alberta converts tissuepapers into bathroom tissue and paper towels for the Canadian retail,commercial and industrial markets.

 

Cascades Tissue Group - NorthCarolina Inc. with its Rockingham plant manufactures tissue paper made fromrecycled fibres and converts it into bathroom tissue, paper towels, paper handtowels, paper napkins and facial tissue. These products are mainly sold in thecommercial and industrial markets, both in Canada and the United States. Theproduction not converted is transferred to the Waterford plant or is sold inparent rolls to other converters.

 

10

----

 

Cascades Tissue Group - IFCDiposables Inc.’s plant is located in Brownsville, Tennessee and specializes inthe manufacturing of industrial wiping products as well as the distribution ofbathroom tissue, paper towels and incontinence products. These products aresold in the commercial and industrial markets in the United States.

 

Cascades Tissue Group - WisconsinInc.’s plant, in Eau-Claire, manufactures tissue paper made from recycledfibres and converts it into bathroom tissue, paper towels, facial tissue andpaper napkins. These products are mainly sold in the retail market in theUnited States. The non converted production is transferred to the Pennsylvaniaplant or is sold in parent rolls to other converters.

 

Cascades TissueGroup - Pennsylvania Inc which has plants in Ransom and Pittstonmanufactures tissue paper made from recycled fibres and converts it into papernapkins, facial tissue, paper towels and bathroom tissue. These products aremainly sold in the retail market in the United States. The non convertedproduction is transferred to the Waterford and IFC Disposables plants or issold in parent rolls to other converters.

 

At the plant of St.Helens, Cascades TissueGroup - Oregon Inc. produces parent rolls made of 100% virgin fibres.The production is transferred to the Arizona plant or is sold to otherconverters.

 

The Waterford Division of Cascades TissueGroup - New York Inc. specializes in the conversion of tissue paperinto bathroom tissue, paper towels, paper napkins and industrial use paper handtowels. These products are mainly sold in the retail market as well as thecommercial and industrial markets in the United States. The production notconverted is transferred to the Waterford and Calgary plants or is sold inparent rolls to other converters. The Mechanicville Division produces parentrolls made from recycled fibres. The production is transferred to the WaterfordDivision, Pickering and Arizona or is sold to other converters.

 

Cascades Tissue Group - ArizonaInc. that operates a plant in Kingman, specializes in the conversion of tissuepaper into bathroom tissue, paper towels, paper hand towels and paper napkins. Theseproducts are mainly sold in the retail market in the United States.

 

The Memphis plant of Cascades TissueGroup - Tennessee Inc. produces parent rolls made from recycledfibres and specializes in the conversion of tissue paper into bathroom tissue.The production is sold to other converters.

 

Cascades Tissue Group – Pickering Inc.(Ontario) specializes in the converting of tissue paper into bathroom tissue,paper towels and paper hand towels. These products are sold in the commercialand industrial markets throughout Canada. The assets related to the sanitationproducts distribution and the chemical products manufacturing were sold inMarch 2005, and in March 2006, Cascades announced the closing of this unit, asmentioned in item 3.1 of this Form.

 

The following table lists the major plants ofthe Tissue Group and the approximate annual production capacity of eachfacility as well as the products manufactured or, where applicable, theiractivities in 2005 :

 
| **Facilities**                                              | ** ** | **Products**                                                   | ** ** | **Annual capacity  In short tons** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                  | ** ** | ** **                                                     | ** ** | ** **                                        | ** ** |
| **Manufacturing / Converting**                              |       |                                                           |       |                                              |       |
|                                                        |       |                                                           |       |                                              |       |
| Candiac (Québec)                                       |       | Paper towels, bathroom tissue                                  |       | 73,000                                            |       |
|                                                        |       |                                                           |       |                                              |       |
| Lachute  (Québec)                                      |       | Paper hand towels                                              |       | 48,000                                            |       |
|                                                        |       |                                                           |       |                                              |       |
| Kingsey  Falls (Québec)                                |       | Paper towels, facial tissue, bathroom tissue                   |       | 104,000                                           |       |
|                                                        |       |                                                           |       |                                              |       |
| Cascades  Tissue Group –North Carolina Inc.            |       | Paper towels, facial tissue, bathroom tissue                   |       | 65,000                                            |       |
|                                                        |       |                                                           |       |                                              |       |
| Cascades  Tissue Group – Wisconsin Inc.                |       | Paper towels, bathroom tissue, facial tissue and paper napkins |       | 56,000                                            |       |
|                                                        |       |                                                           |       |                                              |       |
| Cascades  Tissue Group – Pennsylvania Inc.             |       | Paper towels, bathroom tissue, facial tissue and paper napkins |       | 67,000                                            |       |
|                                                        |       |                                                           |       |                                              |       |
| Cascades  Tissue Group – Tennessee Inc.                |       | Parent rolls, bathroom tissue                                  |       | 40,000                                            |       |
|                                                        |       |                                                           |       |                                              |       |
| **Manufacturing**                                           |       |                                                           |       |                                              |       |
|                                                        |       |                                                           |       |                                              |       |
| Cascades  Tissue Group – Oregon Inc.                   |       | Parent rolls                                                   |       | 71,000                                            |       |
|                                                        |       |                                                           |       |                                              |       |
| Cascades  Tissue Group – New York Inc. (Mechanicville) |       | Parent rolls                                                   |       | 65,000                                            |       |

 

11

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| **Converting**                                                 |   |                                                                                                    |   |   |   |
|----------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|--------|--------|
|                                                           |   |                                                                                                    |   |   |   |
| Calgary  (Alberta)                                             |   | Paper towels, bathroom tissue                                                                           |   | N/A    |   |
|                                                           |   |                                                                                                    |   |   |   |
| Laval  (Québec)                                           |   | Paper napkins                                                                                           |   | N/A    |   |
|                                                           |   |                                                                                                    |   |   |   |
| Cascades  Tissue Group – Arizona Inc.                     |   | Paper towels, bathroom tissue, paper hand towels, paper napkins                                         |   | N/A    |   |
|                                                           |   |                                                                                                    |   |   |   |
| Cascades  Tissue Group – New York Inc. (Waterford)        |   | Paper towels, bathroom tissue, paper hand towels, paper napkins                                         |   | N/A    |   |
|                                                           |   |                                                                                                    |   |   |   |
| Cascades  Tissue Group - Pickering Inc. (Ontario)              |   | Paper towels, paper hand towels and bathroom tissue                                                     |   | N/A    | (1)    |
|                                                           |   |                                                                                                    |   |   |   |
| **Manufacturing  Distribution**                                |   |                                                                                                    |   |   |   |
|                                                           |   |                                                                                                    |   |   |   |
| Cascades  Tissue Group – IFC Disposables Inc. (Tennessee) |   | Manufacturing industrial wipes   Distribution incontinence products, bathroom   tissue and paper towels |   | N/A    |   |

 

----

(1) Plant closed in March 2006.

 

**4.3          RESEARCH AND DEVELOPMENT**

Cascades has its own research and developmentcentre («the Centre») in Kingsey Falls, Québec, with a staff of 48. The Centreprovides the Cascades Group with product design and development services inaddition to technical support for solving production problems and improvingquality. In addition to these services, the Centre also supplies environmentalconsultation and expertise.

 

The Information Technology Centre (the “ITCentre”), in operation since February 2004, develops its own software in manyspheres of activity such as accounting, finance, human resources, warehouselogistics, transport management and production management. The IT Centrepresently employs 115 people.

 

**4.4          COMPETITIVE CONDITIONS**

The markets for the products arehighly competitive. In some of the markets in which Cascades competes,particularly in boxboard, tissue and specialty products, the Company competeswith a small number of other producers. Other markets, such as forcontainerboard, are extremely fragmented. In some businesses, such as in thecontainerboard and fine papers industries, competition tends to be global. Inothers, such as the tissue industry, competition tends to be regional. In thepackaging products activities, Cascades also faces competition from alternativepackaging materials, such as vinyl, plastic and styrofoam, which can lead toexcess capacity, decreased demand and pricing pressures.

 

Competition in the markets isprimarily based upon the quality, breadth and performance characteristics ofthe products, customer service and price. The ability to compete successfullydepends upon a variety of factors, including : 1) the ability to maintain highplant efficiencies and operating rates and lower manufacturing costs; 2) theavailability, quality and cost of raw materials, particularly recycled and virginfibre, and labor; and 3) the cost of energy.

 

Some competitors may, at times,have lower fibre, energy and labor costs and less restrictive environmental andgovernmental regulations to comply with in comparison to Cascades. For example,fully integrated manufacturers, which are those manufacturers whoserequirements for pulp or other fibre are met fully from their internal sources,may have some competitive advantages over manufacturers that are not fullyintegrated, such as Cascades, in periods of relatively high prices for rawmaterials, in that the former are able to ensure a steady source of these rawmaterials at costs that may be lower than prices in the prevailing market. Incontrast, competitors that are less integrated than the Company may have costadvantages in periods of relatively low pulp and fibre prices because they maybe able to purchase pulp or fibre at prices lower than the costs Cascadesincurs in the production process. Other competitors may be larger in size orscope than is the Company, which may allow them to achieve greater economies ofscale on a global basis or allow them to better withstand periods of decliningprices and adverse operating conditions.

 

In addition, there has been anincreasing trend among Cascades’ customer towards consolidation. With fewercustomers in the market for products, the strength of negotiating position withthese customers could be weakened, which could have an adverse effect onpricing, margins and profitability

 

**4.5          CYCLE COMPONENTS**

Cascadesis a diversified producer of packaging products, tissue paper and fine paperswith operations in Canada, the United States and Europe. The Company hasleading market positions for many of its products in North America and is oneof the foremost producers of coated boxboard in Europe.

 

Although the Company believes that its product,integration level, market and geographical diversification help to mitigate theadverse effects of industry conditions, the markets for some of its productsare highly cyclical. These markets are heavily influenced by changes in theNorth American and global economies, industry capacity and inventory levelsmaintained by customers, all of which affect selling prices and profitability.The Company is also affected by the variation of the Canadian dollar againstthe U.S. dollar and the euro.

 

12

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**4.6          ENVIRONMENT**

The Company is subject to environmental laws and regulations imposed byvarious governmental and regulatory authorities in all the countries where itoperates. The Company complies with all applicable environmental legislationand regulations. However, ongoing capital and operating expenses are expectedto be incurred to achieve and maintain compliance with applicable environmentalrequirements.

 

In 2005, environmentalprotection requirements and the application of the business’ environmentalmission required investments and led to operating costs in the followingamounts :

 

| **Country**    | ** ** | **Investments** | ** ** | **Operating Costs** | ** ** |
|----------------|------------|-----------------|------------|--------------------------|------------|
| Canada         |       | 7,435,306       |       | 48,619,893               |       |
| United  States |       | 17,995,498      |       | 20,240,669               |       |
| Europe         |       | 2,852,169       |       | 20,441,584               |       |
| **Total**      |       | 28,282,973      | (1)        | 89,302,146               | (1)        |

 

----

(1)These amounts include 100%investments and costs of Norampac Inc.

 

Cascades recycles more than2.5 million of short tons of waste paper, which represents more than twothirds of its total sourcing in fibre.

 

**4.7          REORGANIZATIONS**

During the year ended December31, 2003, the Company reorganized its Canadian subsidiaries. At the end ofDecember 2003, the Company proceeded by way of asset and share transfers andamalgamation to regroup into one entity its subsidiaries and divisions relatedto its Canadian production activities, Cascades Canada Inc. Following thereorganization, the Company’s subsidiaries and divisions were given new names,reflecting their activities, namely : Cascades Boxboard Group, Cascades TissueGroup and Cascades Specialty Products Group. Cascades Fine Papers Group Inc.was excluded from this reorganization. Cascades also transferred its transportactivities to a new company, Cascades Transport Inc.

 

On September 30, 2005, CascadesFine Papers Group Thunder Bay Inc. rolled its assets into its parent company,Cascades Fine Papers Group Inc., and became a Division of this entity.

 

**4.8          SOCIAL POLICIES**

The Company has adopted a Code of Ethics (the “Code”) which is meant toprovide directors, officers and employees with general guidelines foracceptable behaviour in all relationships with each other, customers,suppliers, partners and the communities where the Company operates itsactivities. A copy of the Code is available upon written request to theCorporate Secretary at the following address :

 

**Cascades Inc.**

*Corporate Secretary*

404, Marie-Victorin Street, P.O.Box 30

Kingsey Falls (Québec) J0A 1B0

 

The Code and the Corporatepolicies referred to in the document are also available on the Company’sWebsite at www.cascades.com.

 

**4.9          BUSINESS RISKS**

We refer the reader toManagement’s Discussion and Analysis of Financial Position and OperatingResults in the 2005 Annual Report, specifically under the heading “Riskmanagement” on pages 34 to 36 incorporated by reference herein.

 

# **ITEM 5 -DIVIDENDS**

#  

In2003, 2004 and 2005, Cascades has paid dividends on its common shares at thecurrent rate of $0.04 per common share per quarter. Other than pursuant to theCompany’s Indenture, which governs the 7.25% Senior Notes due 2013, and theCredit Agreement, there are no material contractual restrictions on Cascades’ability to declare and pay dividends on its common shares.

 

The dividendamount is reviewed annually by the Board of Directors and is determined takinginto account Cascades’ financial situation, its results from operations, itscapital requirements and any other factor deemed pertinent by the Board.

 

# **ITEM 6 - CAPITAL STRUCTURE**

#  

**6.1          GENERAL DESCRIPTION OF CAPITALSTRUCTURE**

The share capital of the Company is composedof an unlimited number of Common Shares without par value, an unlimited numberof Class “A” Preferred Shares without par value which may be issued in seriesand an unlimited number of Class “B” Preferred Shares without par value whichmay be issued in series.

 

The holders of common shares are entitled tothe right to vote on the basis of one vote per share at any meetings ofshareholders and the right to receive dividends and to share in the remainingassets in the event of a liquidation of the Company. As at March 10, 2006,80,808,340 Common Shares were issued and outstanding.

 

The Class “A” and “B” Preferred Shares areissuable in series and rank equally within their respective classes as todividends and capital. Registered holders of any series of Class “A” or Class “B”are entitled to receive, in each fiscal year of the Company or on any otherbasis, cumulative or non-cumulative preferred dividends payable at the time, atthe rates and for such amounts and at the place or places determined by thedirectors with respect to each series prior to the issuance of any Class “A” orClass “B” Preferred Shares. In the event of the liquidation, winding-up ordissolution of the Company or any other distribution of its assets to itsshareholders, the holders of Class “A”

 

13

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and “B” preferred shares are entitled toreceive, out of the assets of the Company, the amount paid in consideration ofeach share held by them. The holders of Class “A” and “B” preferred shares arenot entitled as such to receive notice of or to attend or to vote at anymeetings of shareholders. None of the Class “A” or “B” Preferred Shares of thecapital stock of the Company are, as of the date hereof, issued andoutstanding.

 

**6.2          RATINGS**

Cascades outstanding SeniorNotes have been rated BBB(low) (negative trend) by Dominion Bond Rating Service(“DBRS”), Ba3 by Moody’s Investor Service Inc. (“Moody’s”) and BB- by Standard’s& Poor’s Corporation (“S&P”) (each a “Rating Agency”).

 

Credit ratings are intended toprovide investors with an independent measure of credit quality of an issue ofsecurities. Rating for debt instruments are presented in ranges by each of theRating Agencies. The highest quality of securities are rated AAA, in the caseof S&P, DBRS, or Aaa, in the case of Moody’s. The lowest quality ofsecurities are rated D, in the case of S&P, DBRS, or C, in the case ofMoody’s.

 

According to the S&P ratingsystem, notes rated BB, B, CCC, CC, and C are regarded as having significantspeculative characteristics. BB indicates the least degree of speculation and Cthe highest. While such notes will likely have some quality and protectivecharacteristics, these may be outweighed by large uncertainties or majorexposures to adverse conditions. Notes rated BBB are less vulnerable fornon-payment than other speculative economic conditions, which could lead to theobligor’s inadequate capacity to meet its financial commitment on theobligation. The ratings from AAA to B may be modified by the addition of a plus(+) or minus (-) to show relative standing within the major rating categories.

 

According to the Moody’s ratingsystem, notes which are rated Ba are judged to have speculative elements; theirfuture cannot be considered as well-assured. Often the protection of interestand principal payments may be very moderate, and thereby not well safeguardedduring both good and bad times over the future. Uncertainty of positioncharacterizes bonds in this class. Moody’s applies numerical modifiers 1, 2 and3 in each generic rating classification from Aa through Caa. The modifier 1indicates that the obligation ranks in the higher end of its generic ratingcategory; the modifier 2 indicates a mid-range ranking; and the modifier 3indicates a ranking in the lower end of that generic rating category.

 

According to the DBRS ratingsystem, notes rated BBB are of adequate credit quality. Protection of interestand principal is considered acceptable, but the entity is fairly susceptible toadverse changes in financial and economic conditions, or there may be otheradverse conditions present which reduce the strength of the entity and itsrated securities. Each rating category from AA to C is denoted by thesubcategories high and low. The absence of either a high or low designationindicates the rating is in the middle of the category.

 

The credit ratings accorded tothe notes by the Rating Agencies are not recommendations to purchase, hold orsell the notes inasmuch as such ratings do not comment as to market price orsuitability for a particular investor. There is no assurance that any ratingwill remain in effect for any given period of time or that any rating will notbe revised or withdrawn entirely by a Rating Agency in the future if in itsjudgement circumstances so warrant.

 

| ****Credit Risk****                             | **** **** | ****Moody’s***** | **** **** | ****Standard  & Poor’s***** | ** ** | **DBRS** | ** ** |
|------------------------------------------------------|----------------|-----------------------|----------------|-------------------------------------------|------------|----------|------------|
| Highest  quality                                     |           | Aaa                   |           | AAA                                       |       | AAA      |       |
| High quality  (very strong)                          |           | Aa                    |           | AA                                        |       | AA       |       |
| Upper medium  grade (strong)                         |           | A                     |           | A                                         |       | A        |       |
| Medium grade                                         |           | Baa                   |           | BBB                                       |       | BBB      |       |
| Lower medium  grade (somewhat speculative)           |           | Ba                    |           | BB                                        |       | BB       |       |
| Low grade  (speculative)                             |           | B                     |           | B                                         |       | B        |       |
| Poor quality  (may default)                          |           | Caa                   |           | CCC                                       |       | CCC      |       |
| Most  speculative                                    |           | Ca                    |           | CC                                        |       | CC       |       |
| No interest  being paid or bankruptcy petition filed |           | C                     |           | C                                         |       | C        |       |
| In default                                           |           | C                     |           | D                                         |       | D        |       |

 

Source: The Bond Market Association and Dominion Bond Rating Services

 

# **ITEM 7 -MARKET FOR SECURITIES**

#  

**7.1          TRADING PRICE AND VOLUME**

Cascades’ Common Shares are traded on theToronto Stock Exchange under the “CAS” symbol. The following table sets forththe market price range, in Canadian dollars, and trading volumes of the Company’sCommon Shares on the Toronto Stock Exchange for each month of the most recentlycompleted financial year :

 

14

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**Toronto StockExchange – Market price range – Year 2005**

** **

| **Month** | ** ** | **High** | ** ** | **Low** | ** ** | **Closing Price** | ** ** | **Trading Volumes** | ** ** |
|-----------|------------|----------|------------|---------|------------|------------------------|------------|--------------------------|------------|
| January   |       | 13.40    |       | 12.63   |       | 13.00                  |       | 2,127,245                |       |
| February  |       | 13.35    |       | 12.25   |       | 12.88                  |       | 1,915,420                |       |
| March     |       | 13.95    |       | 12.60   |       | 12.95                  |       | 2,342,258                |       |
| April     |       | 13.15    |       | 12.51   |       | 12.85                  |       | 2,934.465                |       |
| May       |       | 12.77    |       | 11.13   |       | 11.73                  |       | 1,019,481                |       |
| June      |       | 11.99    |       | 11.15   |       | 11.49                  |       | 1,230,529                |       |
| July      |       | 11.65    |       | 11.21   |       | 11.49                  |       | 917,186                  |       |
| August    |       | 11.40    |       | 9.55    |       | 9.85                   |       | 2,253,637                |       |
| September |       | 10.16    |       | 8.05    |       | 8.24                   |       | 2,991,977                |       |
| October   |       | 8.60     |       | 7.35    |       | 7.80                   |       | 2,293,729                |       |
| November  |       | 9.50     |       | 7.60    |       | 9.25                   |       | 2,079,754                |       |
| December  |       | 10.61    |       | 9.10    |       | 9.10                   |       | 1,507,204                |       |

 

In 2004, in the normal course of business, the Company renewed itsredemption program of a maximum of 4,086,964 Common Shares with the TorontoStock Exchange which represent approximately 5% of issued and outstandingcommon shares. The redemption authorization was valid from March 11, 2004 toMarch 10, 2005. During this period, the Company redeemed 542,600 common sharesunder this program for a consideration of $7,334,000.

 

In 2005, the Company renewed its redemption program. Purchases began onMarch 11, 2005 and continued until March 10, 2006. The notice enabled Cascadesto acquire up to 4,068,707 common shares, representing approximately 5% of theissued and outstanding common shares as of March 9, 2005. During this period,Cascades redeemed 537,900 common shares under this program for a considerationof $5,677,00.

 

On March 10, 2006, Cascades announced thatthe Toronto Stock Exchange accepted its notice of intention to begin a normalcourse issuer bid in respect of its Common Shares. Purchases pursuant to thenormal course issuer bid will not commence prior to March 13, 2006 and will notcontinue beyond March 12, 2007. The Common Shares purchased shall be cancelled.The notice will enable Cascades to acquire up to 4,040,417 Common Shares whichrepresent approximately 5% of the 80,808,340 issued, and outstanding CommonShares as of March 9, 2006.

 

# **ITEM 8 –DIRECTORS AND OFFICERS**

#  

The Directors of the Company are electedannually to hold office until the next annual meeting or until a successor iselected or appointed.

 

## **8.1          INFORMATION CONCERNING DIRECTORS**

*** ***

***Mr.Bernard Lemaire***, Québec (Canada), one of the founders of Cascades, is the Chairman ofthe Company and has been a Director since 1964. He serves as a member of theAdministrative Committee. He is also Chairman and Chief Executive Officer ofBoralex Inc., an affiliate of Cascades.

 

***Mr.Laurent Lemaire***, Québec (Canada), one of the founders of Cascades, is the ExecutiveVice-Chairman of the Board of the Company and has been a Director since 1964. Hewas President and Chief Executive Officer of the Company from 1992 to 2004. Heserves as a member of the Administrative Committee. Mr. Lemaire is a member ofthe Board of Directors of Junex Inc. and Scotia Bank.

 

***Mr.Alain Lemaire***,Québec (Canada), one of the founders of Cascades, has been a Director of theCompany since 1967 and is the President and Chief Executive Officer of Cascades.He was Executive Vice-President of the Company from 1992 to 2004 and Presidentand Chief Executive Officer of Norampac Inc. from 1998 to 2004. He serves as amember of the Administrative Committee.

 

***Mr.Martin P. Pelletier***, Québec (Canada), a consultant in pulp and paper, has been a Directorof the Company since 1982. Mr. Pelletier was Vice-President and Chief OperatingOfficer, containerboard of Norampac inc., from 1977 to 2000 and held theposition of President and Chief Executive Officer of Cascades Fine Papers GroupInc. (formerly Rolland Inc.) from 2000 to 2002. He serves as President of the Environmental, Health and Safety Committee.

 

***Mr. Paul R. Bannerman***, Québec(Canada), has been a Director of Cascades since 1982. He is the founder and theChairman of the Board of Etcan International inc., a sales agency.

 

***Mr. AndréDesaulniers***, Andorre (Europe), has been a Director of Cascades since 1982. Heserves as a member of the Audit Committee and is Chair of the CorporateGovernance Committee. His principal occupation is director of Companies.

 

***Mr. Louis Garneau***, Québec (Canada), is President of Louis Garneau Sports Inc., amanufacturer and distributor of sports clothing and accessories throughout theworld. He has been a Director since 1996 and serves as member of the HumanResources Committee.

 

***Ms. Sylvie Lemaire***, Québec (Canada), has been a Director of Cascades since 1999. She isPresident of Fempro Inc., a manufacturer of absorbent products. She serves as amember of the Environmental,Health and Safety Committee.

 

***Mr. Michel Desbiens***, Québec (Canada), a consultant and director of companies, joined theBoard of Directors of the Company in 2001. He is Chair of the Human ResourcesCommittee and serves as a member of the Environmental, Health and Safety Committee.

 

15

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***Mr. Laurent Verreault***, Florida (United States), is Chairman of the Board and Chief ExecutiveOfficer of Groupe Laperrière & Verreault Inc., a manufacturer of engineeredequipment. He has been a Director of Cascades since 2001 and serves as a memberof the Audit and of the Human Resources Committees. Mr. Verreault sits on theBoard of Directors of Groupe TVA Inc. and the Montreal Exchange.

 

***Mr. Robert Chevrier***, Québec (Canada), has been a Director of Cascades since 2003. He isPresident of Société de Gestion Roche Inc., a holding and investment company.Mr. Chevrier sits on the Board of Directors of Groupe CGI Inc., Bank ofMontreal, Transcontinental Inc., Richelieu Hardware Ltd and Addenda Capital Inc.He is former Chairman of the Board and President and Chief Executive Officer ofRexel Canada Inc. (formerly Westburne inc.) Mr. Chevrier is Chairman of the Audit Committee.

 

***Mr. David McAusland***, Québec (Canada), has been a Director of the Company since 2003. He is Vice-President Director, BusinessDevelopment, and Chief Legal Officer of Alcan Inc., an aluminum and packagingcompany. He serves as a member of the CorporateGovernance Committee. Mr. McAusland sits on the Board of Directors of CogecoInc. and Cogeco Cable Inc.

 

***Mr. James B.C. Doak***, Ontario (Canada), was appointed a Director of Cascades in February 2005.Mr. Doak is President and Managing Director of Megantic Asset Management Inc.,a Toronto investment company, since 2002. He was President of EnterpriseCapital Management Inc. from 1997 to 2002. Mr. Doak serves as a member of theAudit and of the Corporate Governance Committees and sits on the Board ofDirectors of Norwood Resources Ltd. and Purepoint Uranium Ltd.

 

**8.2          INFORMATION CONCERNING EXECUTIVEOFFICERS**

** **
| **Executive Officers** | ** ** | **Occupation in the Company**                                                                                                               |
|-----------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                  | ** ** | ** **                                                                                                                                                 |
| Alain Ducharme              |       | Corporate Vice-President                                                                                                                                   |
|                        |       |                                                                                                                                                       |
| Christian Dubé         |       | Vice-President and Chief  Financial Officer                                                                                                                |
|                        |       |                                                                                                                                                       |
| Claude Cossette             |       | Vice-President, Human  Resources                                                                                                                           |
|                        |       |                                                                                                                                                       |
| Norman Boisvert             |       | Vice-President, Administration                                                                                                                             |
|                        |       |                                                                                                                                                       |
| Jean-Luc Bellemare          |       | Vice-President, Information  Technologies and Purchasing                                                                                                   |
|                        |       |                                                                                                                                                       |
| Hubert Bolduc               |       | Vice-President, Communications  and Public Affairs                                                                                                         |
|                        |       |                                                                                                                                                       |
| Léon Marineau          |       | Vice-President, Environment                                                                                                                                |
|                        |       |                                                                                                                                                       |
| Robert F. Hall              |       | Vice-President, Legal Affairs  and Corporate Secretary                                                                                                     |
|                        |       |                                                                                                                                                       |
| Allan Hogg                  |       | Corporate Controller and  Treasurer                                                                                                                        |
|                        |       |                                                                                                                                                       |
| Suzanne Blanchet            |       | President and Chief Executive  Officer, Cascades Tissue Group                                                                                              |
|                        |       |                                                                                                                                                       |
| Eric Laflamme               |       | President and Chief Operating  Officer, North America, Cascades Boxboard Group                                                                             |
|                        |       |                                                                                                                                                       |
| Mario Plourde               |       | President and Chief Operating  Officer, Cascades Specialty Products Group, and President and Chief Executive  Officer, Cascades Fine Papers Group Inc. (1) |

 

----

(1) Mr. Plourde was appointed as officer of theFine Papers Group in October 2005 in addition to his duties in the Specialty ProductsGroup

 

All the Executive Officers of the Company are CanadianResidents and domiciled in the province of Québec, Canada.

 

During the past five years, each of the ExecutiveOfficers of the Company have been engaged in their present principaloccupations or in other executive capacities for the Company or with related oraffiliated companies indicated opposite their name, except for the followingsenior officers :

 

Mr. Christian Dubé is Vice-President and ChiefFinancial Officer since May 17, 2004. He was Vice-President and Chief ExecutiveOfficer of Domtar inc. and a Director of Norampac inc.

 

Mr. Hubert Bolduc holds theposition opposite his name since October 25, 2004. He was Press Secretary,Office of the Deputy Minister and Minister for State for the Economy andFinance and Press Secretary for the Premier of Québec.

 

As of March 10, 2006, the Directors and ExecutiveOfficers of the Company beneficially own as a group, or exercised control ordirection over, directly or indirectly, approximately 30,800,000 Common Sharesrepresenting 38.11% of the Common Shares issued and outstanding.

 

# **ITEM 9 –LEGAL PROCEEDINGS**

#  

In 2003, the Company was informed that one of its divisions, CascadesResources, is the subject of an inquiry by the Canadian Commissioner ofCompetition as to whether Cascades Resources and its competitors had colludedto unduly reduce market competition between paper merchants in Canada. OnJanuary 9, 2006, the Company entered a guilty plea to two infractions (the “Infractions”)under the 

 

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Competition Act in Ontario Superior Court in relation to sales inOntario and Quebec of carbonless sheet paper by its paper merchant division,Cascades Resources. Pursuant to the plea, the Company has agreed to pay a totalof $12.5 million, payable in equal instalments over a period of six and a halfyears. The first payment will be due in January 2008.

 

On January 10, 2006,the Company was informed that a class action based on the Infractions had beenfiled against Cascades Fine Papers Group Inc., Domtar Inc. and Unisource CanadaInc. before the Quebec Superior Court claiming damages totalling $10 million.On January 12, 2006, the Company was informed that a second class action hadbeen filed in the Quebec Superior Court against the same defendants based onthe Infractions claiming damages for an undetermined amount. On February 6,2006, the Company was informed that a third class action based on theInfractions was filed against the same defendants as well as Coast Paper Ltd.in the Ontario Superior Court for damages totalling $25 million. CascadesFine Papers Group Inc. intends to vigorously defend itself against these claims.The Company is unable to predict the outcome of these claims at this time.

 

An action was filed against theCompany on October 4, 2004, in the Supreme Court of the State of New York,Niagara County, by ServiceCore, Inc., alleging that the Company breached aFinder Agreement in respect of gypsum board dated April 1999**and seeking damages in excess ofUS$9 million. The Company removed the action to the United States DistrictCourt for the Western District of New York and filed an answer denying theallegations of breach of the Finder’s Agreement. The Company is vigorouslycontesting the claim but is unable to determine the outcome of the action atthis time.

 

# **ITEM 10 –TRANSFER AGENT AND REGISTRAR**

#  

Cascades’ transfer agent andregistrar is Computershare Investor Services Inc. (“Computershare”),having its place of business in Montréal at 1500 University Street, 7thFloor. The register of transfers of the Common Shares of the Company maintainedby Computershare is located in the same office.

 

# **ITEM 11 –MATERIAL CONTRACTS**

#  

The only material contractsentered into during the year ended December 31, 2005 or in prior years that arestill in effect and filed on SEDAR are :

 

On February 5, 2003, the Companycompleted a series of transactions to refinance substantially all of itsexisting credit facilities, except those of its joint ventures. It secured anew four-year revolving credit facility of $500 million (the “CreditAgreement”). Its obligations under this new revolving credit facility aresecured by all inventory and receivables of Cascades and its North Americansubsidiaries and by the property, plant and equipment of three of its mills. Inaddition, it issued new unsecured senior notes for an aggregate amount ofUS$450 million which were subsequently registered with the Securities andExchange Commission of the United States (the “Indenture”). These notes,bearing a 7.25% coupon, will mature in 2013 and are redeemable all or in partat the option of the Company under certain conditions and subject to payment ofa redemption premium. The aggregate proceeds of these two transactions,combined with its available cash on hand, were used by the Company to repaysubstantially all of the existing credit facilities. On March 12, 2003, the Companyalso redeemed the $125 million 8.375% senior notes originally due in 2007issued by its subsidiary, Cascades Boxboard Group Inc.

 

On July 8, 2003, the Companycompleted a private placement of US$100 million of 7.25% senior notes duein 2013, which are treated as part of the same series of 7.25% senior notes duein 2013 issued in February, as described above. These senior notes weresubsequently registered with the Securities and Exchange Commission of theUnited States. The issuance of these senior notes was completed at a price of104.50% or an effective interest rate of 6.61%. The proceeds of this financingwere used to reduce indebtedness under the revolving credit facility of theCompany.

 

On December 2, 2004, the Company completed a private placement ofUS$125 million of 7.25% senior notes due in 2013, which are treated aspart of the same series of 7.25% senior notes due in 2013 that were issued inFebruary 2003. These senior notes were subsequently registered with the Securities andExchange Commission of the United States. The issuance of these senior notes wascompleted at a price of 105.50%, or an effective interest rate of 6.376%. Thenet proceeds of $156 million of this financing were used to reduceindebtedness under the Company’s revolving credit facility.

 

On October 31, 2005,the Company completed the refinancing of its $500 million credit facilityoriginally put in place in February 2003. The new $550 million credit facilityincludes a $450 million five-year revolving facility and a seven-year $100million term facility. The seven-year facility can be reimbursed withoutpenalty, at the company’s option any time prior to maturity.

 

On November 16, 2005,Cascades reached an agreement for the sale of its paper merchant division knownas Cascades Resources, a Division of Cascades Fine Papers Group Inc., to CoastPaper Limited, now known as PaperlinX Canada Limited, for a purchase price ofapproximately $CA85 million. The transaction closed on February 28, 2006 andthe final selling price will be adjusted during the year 2006. An amount of$77 million has already been received and applied towards the reduction ofCascades’ debt.

 

# **ITEM 12 –INTERESTS OF EXPERTS**

#  

The Company’s auditors arePricewaterhouseCoopers LLP, Chartered Accountants (“PWC”), who have prepared anindependent auditor’s report dated February 22, 2006 in respect of the Company’sconsolidated financial statements with accompanying notes as at December 31,2005 and 2004 and for each of the years in the three-year period ended December31, 2005. PWC has advised that they are independent with respect to the Companywithin the meaning of the Code of Ethics of the Ordre des comptables agréés duQuébec.

 

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# **ITEM 13 –AUDIT COMMITTEE**

#  

**13.1        COMPOSITION AND MANDATE**

The Company has an AuditCommittee (the “Committee”) which is composed of Messrs. Robert Chevrier(Chairman), André Desaulniers, Laurent Verreault and James B.C. Doak. TheCommittee is governed by a mandate which is attached to this Annual InformationForm as Schedule 1. The Company also adopted a Code of Ethics (the “Code”) thatapplies to all directors, officers and employees. The Code is posted onCascades’ website at www.cascades.com. All the members of the Committee areindependent on the basis of the definition provided in section 1.4 ofMultilateral Instrument 52-110 of the Canadian Securities Regulators.

 

**13.2        RELEVANT EDUCATION AND EXPERIENCE OF THEMEMBERS**

The following is a brief summaryof the education and experience of each member of the Audit Committee that isrelevant to the performance of their responsibilities, including any educationor experience that has provided the member with an understanding of theaccounting principles used by the Company to prepare its annual and interimfinancial statements.

 
| **Name of Committee Member** | ** ** | **Relevant Experience and Education**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                  | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Robert Chevrier                             |       | Mr. Chevrier is a Fellow of the Institute  of Chartered Accountants. He sits on the Boards of other Canadian listed  companies and on other Audit Committees. His education and experience allows  him to have a good understanding of the accounting principles used by  Cascades and he has the ability to read and understand a set of financial  statements that present a breadth and level of complexity of accounting  issues that are generally comparable to those issues that can reasonably be  expected to be raised by Cascades financial statements.                |
|                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Laurent Verreault                           |       | As Chairman of the Board of Directors and  Chief Executive Officer of Groupe Laperrière & Verreault Inc., a  manufacturer of engineered equipment, primarily focused on the production of  equipment for the pulp and paper industry, Mr.Verreault is both financially  and operationally literate and understands the breadth and complexity of accounting  issues that can reasonably be expected to be raised in the course of  reviewing the Company’s financial statements. He is a member of the Board of  Directors of Groupe TVA and the Montreal Exchange. |
|                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| André Desaulniers                      |       | Mr. Desaulniers is a director of companies  and has acquired his knowledge and experience by acting as Chairman of the  Board of Directors of McNeil, Mantha, Inc., a stock brokerage firm for 17  years. He also served on several audit committees, namely as Chairman of the  Audit Committee of the Montreal Exchange.                                                                                                                                                                                                                                                        |
|                                        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| James B.C. Doak                             |       | An economist, Mr. Doak has more than 20  years of experience as a chartered financial analyst and is a past President  and Director of the Toronto CFA Society. He has been a Board member of  several public companies, namely, PetroKazahstan Inc., Superior Propane Inc.,  and Spar Aerospace Inc. He has held senior positions with ScotiaMcLeod Inc.,  First Marathon Securities Ltd. and McLeod Young Weir Ltd., and was the  founder of Enterprise Capital Management Inc., where he served as President  until 2002.                                                      |

 

**13.3        EXTERNAL AUDITOR SERVICE FEES**

The following table shows feespaid to PricewaterhouseCoopers LLP in Canadian dollars in the past two fiscalyears for various services provided to the Company and its subsidiaries :

 
| ** **              | ** ** | **Fees**                        | ** ** |
|-------------------------|------------|---------------------------------|------------|
| **Services**            | ** ** | **December 31, 2004** | ** ** | **December 31, 2005** | ** ** |
|                    |       |                            |       |   |   |
| Audit Fees  (1)         |       | $                               | 1,525,000  |   | $ | 1,617,005 |   |
| Audit-Related  Fees (2) |       | $                               | 288,267    |   | $ | 411,407 |   |
| Tax Fees (3)            |       | $                               | 293,370    |   | $ | 130,152 |   |
| Other Fees  (4)         |       | N/A                             |       | N/A |   |
| Total                   |       | $                               | 2,106,637  |   | $ | 2,158,564 |   |

 

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(1)  Professional services provided inconnection with statutory and regulatory filings and audit of the annualstatements of the Company.

(2)  Professional services provided inconnection with the Company’s issuance of Senior Notes as well as consultationson accounting and regulatory matters.

(3) Professional services mainly fortax compliance.

(4) Otherservices : non applicable

 

**13.4        POLICIES AND PROCEDURES FOR THEENGAGEMENT OF AUDIT AND NON-AUDIT SERVICES**

The Company’s Audit Committee(the “Committee”) has adopted a Pre-approval Policy and Procedures for servicesprovided by external auditors which sets forth the procedures and theconditions pursuant to which permissible services proposed to be performed byexternal auditors are pre-approved. Under the terms of the policy, serviceswhich involve annual fees of less than $35,000 are pre-approved. The Committeehas delegated to the Chairman of the Committee pre-approval authority for anyservices not previously approved by the Committee which involve the payment ofunbudgeted fees in excess of $35,000 up to a maximum of $50,000. Services whichinvolve fees of more than $50,000 require pre-approval of all the members ofthe Committee.

 

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# **ITEM 14 –EFFECTIVENESS OF DISCLOSURE PROCEDURES AND CONTROLS**

#  

Having assessed theeffectiveness of disclosure controls and procedures used by Cascades,management concludes that these controls and procedures provide reasonableassurance that the financial information contained in the consolidatedfinancial statements, management’s report and annual information form for thefiscal year ended December 31, 2005 is relevant, reliable and accurate.

 

# **ITEM 15 -ADDITIONAL INFORMATION**

#  

Additional information,including Directors’ and Senior Officers’ remuneration and indebtedness,principal holders of the securities of Cascades and options to purchasesecurities, and interests of insiders in material transactions, if any, iscontained in the Management Proxy Circular dated March 10, 2006 for the annualshareholders meeting.

 

Also, additional financialinformation pertaining to the fiscal year ended December 31, 2005 is containedin Cascades’ *2005 Annual Report.*

 

In addition, the followingdocuments may be obtained, upon written request, from the Company’s CorporateSecretary:

 

(a)           When Cascades is inthe course of a distribution of its securities pursuant to a short formprospectus or has filed a preliminary short form prospectus in respect of aproposed distribution of its securities:

 

i)  one copy of the latest AnnualInformation Form of the Company, together with one copy of any document, or thepertinent pages of any document, incorporated by reference in the AnnualInformation Form;

 

ii)  onecopy of the latest Annual Report of the Company, a copy of the comparativefinancial statements of the Company for its most recently completed financialyear for which financial statements have been filed together with theaccompanying Auditors’ report, and the Management’s Discussion and Analysis ofFinancial Position and Operating Results and one copy of any interim financialstatements of the Company that have been filed, if any, for any period afterthe end of its most recently completed financial year;

 

iii)  onecopy of the Company’s Management Proxy Circular in respect of its most recentAnnual Meeting of Shareholders during which Directors were elected; and

 

iv)  one copy of any otherdocuments which are incorporated by reference into the preliminary short formprospectus or the short form prospectus; or

 

(b)           at any other time, the documents referred to above,provided the Company reserves the right to request the payment of a reasonablefee if the request is made by a person or company who is not a security holderof Cascades.

 

The documents mentioned aboveare available from the Corporate Secretary of the Company at the followingaddress:

 

**CascadesInc.**

Corporate Secretary

404 Marie-Victorin Blvd., P.O.Box 30

Kingsey Falls, Québec

J0A 1B0

Telephone:  (819) 363-5100

Telecopier:  (819) 363-5127

or on the Company’s web siteaddress: www.cascades.com

or on SEDAR: www.sedar.com

 

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**SCHEDULE 1**

 

**CHARTER OF THE AUDIT COMMITTEE**

 

**OF THE BOARD OF DIRECTORS OF CASCADES INC. ( ****the “ Company »)**

 

### **1.            PURPOSE**

### ** **

The purpose of this charter is to describe the role of the AuditCommittee (the « Committee ») as well as its duties andresponsibilities delegated by the Board of Directors (« the Board »).The main duty of the Committee is to assist the Board in fulfilling itsoversight responsibilities with respect to the following issues: the qualityand integrity of the Company’s financial statements;

 

•            accounting and financial reporting process;

 

•            systems of internal accounting and financial controls;

 

•            external auditors qualifications, independence and performance;

 

•            internal audit function and process;

 

•            the Company’s compliance with legal and regulatory requirements;

 

•            fulfill any other responsibilities assigned to it from time to time bythe Board.

 

##### **2.            DIVISIONOF RESPONSIBILITIES**

##### ** **

In carrying out the duties of the Committee described in this charter,the members of the Committee recognize that its function is to oversee theCompany’s financial reporting process on behalf of the Board as well as toreport its activities regularly to the Board. Management of the Company isresponsible for the preparation, the presentation and the integrity of theCompany’s financial statements and for the effectiveness of internal controlover financial reporting.

 

Management and the internal audit service are responsible formaintaining appropriate accounting and financial reporting principles andpolicies as well as internal controls and procedures that provide forcompliance with accounting standards and applicable laws and regulations. Theauditors are responsible for planning and carrying out audits of the Company’sannual and interim financial statements and annually auditing management’sassessment of the effectiveness of internal control over financial reportingand other auditing procedures.

 

In performing their duties, the members of the Committee must have openand free discussions with the Board, the external auditors, the internalauditor and management of the Company.

 

**3.            COMPOSITION ANDORGANIZATION**

 

The Committee shall be composed of a minimum of three directors, asappointed by the Board at its first meeting following the annual shareholdersmeeting. Each member must be an unrelated or independent director.

 

Each Committee member must be financially literate and at least onemember must have accounting or related financial management expertise, asdetermined by the Board.

 

The Committee will appoint one of its members as Chairman and theSecretary or Assistant-Secretary of the Company or the person designated asSecretary will be secretary for all meetings of the Committee and will keepminutes of the Committee’s deliberations.

 

**4.****                                     ****MEETINGS AND RESOURCES**

 

The Committeeshall meet at least four times a year, or more frequently if circumstances sodictate. By virtue of its mandate to foster open relations, the Committee shallalso meet separately and *in camera*for discussions with the internal auditor, management and with the externalauditors, as required.

 

The Committee shall establish its own rules andprocedures (subject to any specific guidelines from the Board) and shall meetat the place and in accordance with the terms prescribed by its rules. A quorumshall not be less than a majority of the members of the Committee.

 

The Chairperson of the Committee determines the agenda for each meetingin consultation with the Vice-President and Chief Financial Officer, theSecretary and the Internal Auditor. The agenda and supporting documentation aredistributed to the members of the Committee within a reasonable timeframe priorto the meetings.

 

 

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The Chairmanof the Committee shall report quarterly and when required to the Board on theCommittee’s activities and will make recommendations concerning all matters itdeems necessary or appropriate.

 

The Committee shall at all times have direct access tomanagement, to the internal auditor and to the external auditors in order toseek explanations or information on specific questions.

 

The Committee shall have the resources and the authority appropriate tocarry out its duties, including the authority to retain, as it deems necessary,counsel and other external consultants and to set and pay their compensation,without further Board approval.

 

In carryingout its duties and to meet its responsibilities, the Committee shall examinethe books and relevant accounts of the Company, its divisions and itssubsidiaries.

 

**5.            DUTIES ANDRESPONSIBILITIES**

 

In additionto, the above-mentioned responsibilities, the Committee shall address thefollowing questions:

 

##### **5.1**                                 Financialreporting 

##### ** **

•                  Monitor the quality and integrity of the Company’s accounting andfinancial reporting system through discussions with management, the externalauditors and the internal auditor;

 

•                  Review with management and the external auditors the annual auditedfinancial statements of the Company, including the information contained inmanagement’s discussion and analysis, related press releases and the externalauditors report on the annual financial statements prior to public disclosureand filing with the Securities Administrators;

 

•                  Review the unaudited interim financial statements, includingmanagement’s discussion and analysis for each interim period of the fiscal yearand related press releases prior to public disclosure and filing with the SecuritiesAdministrators;

 

•                  Review the financial information contained in prospectuses, offeringmemoranda, the annual information form and other reports that include auditedor unaudited financial information submitted for approval by the Board;

 

•                  Review with the external auditors and management, the quality,appropriateness and disclosure of the Company’s accounting principles andpolicies, the underlying assumptions and reporting practices, and any proposedchanges thereto;

 

•                  Review financial analyses and other written communications prepared bymanagement, the internal auditor or external auditors, setting forthsignificant financial reporting issues and judgments made in connection withthe preparation of the financial statements, including analyses of the effectsof alternative generally accepted accounting principles methods(« GAAP ») on the financial statements;

 

•                  Verify the compliance of management certification of financial reportswith applicable legislation;

 

•                  Review important litigation and any regulatory or accounting initiativesthat could have a material effect upon the Company’s financial situation oroperating results and the appropriateness of the disclosure thereof in thedocuments reviewed by the Committee;

 

•                  Review the results of the external audit, and any significant problemsencountered in the performance of the audit, and management’s response oraction plan related to any management letter issued by the external auditors.

 

##### **5.2**                                 Risk managementand internal control

##### ** **

•                  Periodically receive management’s report assessing the adequacy andeffectiveness of the Company’s disclosure controls and procedures and systemsof internal control;

 

•                  Review insurance coverage for the Company annually and as may otherwisebe appropriate;

 

•                  Review the Company’s risk assessment and risk management policies,including the Company’s policies regarding hedging, investment and credit;review significant capital costs and other major expenditures, related partytransactions and any other transactions which could alter the Company’sfinancial or corporate structure,

 

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including off-balance sheet items;

 

•                  Assist the Board in carrying out its responsibility for ensuring thatthe Company is compliant with applicable legal and regulatory requirements;

 

•                  While ensuring confidentiality and anonymity, establish procedures forthe receipt, retention and treatment of complaints received by the Companyregarding accounting, internal accounting controls or auditing matters,including employee concerns regarding accounting or auditing matters.

 

5.3                                Internal Audit Function

 

•                  Review with management, the internal audit staff qualifications andexperience and, if required, recommend the appointment or replacement of the internalauditor;

 

•                  Regularly assess the internal audit function’s performance, itsresponsibilities, its staffing, budget and the compensation of its members;

 

•                  Annually review the internal audit plan;

 

•                  Undertake private discussions with the internal auditor to establishinternal audit independence, the level of co-operation received frommanagement, the degree of interaction with the external auditors, and anyunresolved differences of opinion or disputes.

 

5.4           External Auditors

 

•                  Recommend to the Board, the appointment of the external auditors and, ifappropriate, their removal (in both cases, subject to shareholder approval),evaluate and compensate them and assess their qualifications, performance andindependence;

 

•                  Ensure that as representatives of the shareholders, the externalauditors report to the Committee and to the Board;

 

•                  Approve all auditing services provided by the external auditors anddetermine and approve in advance non audit services provided, in compliancewith applicable legal and regulatory requirements;

 

•                  Discuss with the external auditors the quality and not just theacceptability of the Company’s accounting principles but also the quality ofthose principles, including: i) all critical accounting policies and practicesused ; ii) any alternative treatments of financial information that have beendiscussed with management, the ramification of their use as well as; iii) anyother material written communications between the Company and the externalauditors, including any disagreement or unresolved differences of opinionbetween management and the external auditors that could have an impact on thefinancial statements;

 

•                  Review at least once a year the external auditors report stating allrelationships the external auditors have with the Company and confirming theirindependence, and holding discussions with the external auditors as to anyrelationship or services that may impact the quality of the audit services ortheir objectivity and independence;

 

•                  Review the Company’s hiring policies for employees or former employeesof the external auditors.

 

5.5           PerformanceEvaluation of the Committee

 

•                  Prepare and review, with the Board, an annual performance evaluation ofthe Committee and its members and assess once a year, the adequacy of itsmandate and, if required, make recommendations to the Board.

 

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