**Exhibit13.1**

 

 

 

 

 

 

# ANNUALINFORMATION FORM

For the year endedDecember 31, 2006

 

 

 

 

 

 

March 28, 2007

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** **
| **Table of contents**                                                            |       |     |
|----------------------------------------------------------------------------------|------------|----------|
|                                                                             |       |     |
| Annual  Information Form for the year ended December 31, 2006                    |       |     |
|                                                                             | ** ** | **Page** |
|                                                                             |       |     |
| Documents  incorporated by reference                                             |       |     |
| Forward  Looking Statements                                                      |       |     |
|                                                                             |       |     |
|                                                                             |       |     |
| 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 Three Year History                                                           |       | 3        |
| 3.2 Significant Acquisitions                                                     |       | 3        |
|                                                                             |       |     |
| Item 4 - Description of the Business                                             |       | 3        |
| 4.1 General                                                                      |       | 3        |
| 4.2 Industry sector information                                                  |       | 4        |
| 4.2.1 Packaging Products Sector                                                  |       | 4        |
| 4.2.1.1  Boxboard Group                                                          |       | 4        |
| 4.2.1.2 Containerboard Group - Norampac                                          |       | 5        |
| 4.2.1.3 Specialty Products Group                                                 |       | 7        |
| 4.2.2  Tissue Papers Sector                                                      |       | 10       |
| 4.3 Research and development                                                     |       | 12       |
| 4.4 Competitive conditions                                                       |       | 12       |
| 4.5 Cycle components                                                             |       | 13       |
| 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                                                      |       | 14       |
| 6.1 General description of capital structure                                     |       | 14       |
| 6.2 Ratings                                                                      |       | 14       |
|                                                                             |       |     |
| Item  7 - Market for Securities                                                  |       | 15       |
| 7.1 Trading price and volume                                                     |       | 15       |
|                                                                             |       |     |
| Item 8 - Directors and Officers                                                  |       | 15       |
| 8.1 Information concerning Directors                                             |       | 15       |
| 8.2 Information concerning Executive Officers                                    |       | 17       |
|                                                                             |       |     |
| Item  9 - Legal Proceedings                                                      |       | 17       |
|                                                                             |       |     |
| Item 10 - Transfer Agent and Registrar                                           |       | 18       |
|                                                                             |       |     |
| Item  11 - Material Contracts                                                    |       | 18       |
|                                                                             |       |     |
| Item  12 - Interests of Experts                                                  |       | 19       |
|                                                                             |       |     |
| Item  13 - Audit Committee                                                       |       | 19       |
| 13.1 Composition and mandate                                                     |       | 19       |
| 13.2 Relevant education and experience of the members                            |       | 19       |
| 13.3 External auditors services fees                                             |       | 19       |
| 13.4 Policies and procedures for the engagement of  audit and non-audit services |       | 20       |
|                                                                             |       |     |
| Item 14 - Additional Information                                                 |       | 20       |
|                                                                             |       |     |
| Schedule A —  Charter of the Audit Committee                                |       |     |

 

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| **In this Annual Information Form, the terms “We”, “Us”, “Our”, and  “Cascades” refer to Cascades Inc., its subsidiaries, divisions and its  interests in joint ventures. Except as otherwise indicated, all dollar  amounts are expressed in Canadian dollars. The information in this Annual  Information Form  is stated as at  December 31, 2006, except as otherwise indicated, and except for information  in documents incorporated by reference that have a different date.**                                                                                                                                                                                                                                                                                             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ** ** |
| **DOCUMENTS INCORPORATED BY REFERENCE**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | ** ** |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ** ** |
| The documents in  the table below contain information that is incorporated by reference into  this annual information form.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ** ** |
| **Documents**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | **Where they are incorporated in this Annual  Information Form** |
| Cascades Inc.’s  2006 Annual Report — Management’s discussion and analysis of financial  position and operating results, Risk management, pages 32 and 33.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Item 4.9 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
| **FORWARD-LOOKING STATEMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
| Securities laws encourage companies to disclose forward-looking  information so that investors can better understand the Company’s future  prospects and make informed investment decisions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
| Certain statements in this Annual Information Form or in documents  incorporated by reference are forward-looking statements within the meaning  of the “safe Harbour” provision of the United States Private Securities  Litigation Reform Act of 1995 based on current expectations. The accuracy of  such statements is subject to a number of risks, uncertainties and  assumptions that 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  material costs, changes in the relative values of certain currencies,  fluctuations in selling prices, adverse changes in general market and  industry conditions. (See heading Business risks). |

** **

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

#  

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

This Annual InformationForm (the “AIF ) is dated as at  March28, 2007.  Except as otherwise indicated,the information contained in this AIF is stated as at December 31, 2006.

# **ITEM 2 —CORPORATE STRUCTURE**

## 2.1           NAMEAND 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 Québec by letters patent issued on March 26,1964.  Supplementary letters patent wereissued on March 11, 1968, July 4, 1979 and October 19, 1979 toamend the authorized capital stock and the restrictions and privileges attachedto certain classes of shares of the Company.

Cascades wascontinued under the name Cascades Inc. under Part 1A of the *Companies Act* (Quebec) by Certificate of Continuance datedOctober 26, 1982.  Certificates ofAmendment 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 with Article 123.129 of the *Companies Act*(Québec), Cascades, by simplifiedamalgamation, merged with 9135-2591 Québec Inc., a wholly owned subsidiary ofthe Company.  The articles ofamalgamation and schedules as well as the composition of the Board of Directorsof the new company following the amalgamation are exactly the same as those ofCascades Inc. prior to the amalgamation.

The head office andcorporate offices of Cascades are located at 404 Marie-Victorin Blvd.,Kingsey Falls, Québec, J0A 1B0. Cascades also has administrative offices located at 772 SherbrookeStreet West, Suite 100, Montréal, Québec, H3A 1G1.

## 2.2           INTERCORPORATERELATIONSHIPS

The following list sets out the principal wholly-owned subsidiaries ofCascades and their respective jurisdiction of incorporation as at  December 31, 2006:

| **Corporate Name**                                | ** ** | **Jurisdiction  of  Incorporation** |
|---------------------------------------------------|------------|-------------------------------------|
| ** **                                        |       |                                |
| Cascades  Arnsberg GmbH                           |       | Germany                             |
| Cascades Canada  Inc.                             |       | Canada                              |
| Cascades Fine  Papers Group Inc.                  |       | Canada                              |
| Cascades S.A.                                     |       | France                              |
| Cascades Tissue  Group — North Carolina Inc. |       | North Carolina                      |
| 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 Holding  US Inc.                         |       | Delaware                            |
| Norampac  Industries Inc.                         |       | New York                            |

 

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

3.1           THREEYEAR HISTORY

On December 2,2004, the Company completed a private placement of US$125 million of 7.25%senior notes due in 2013, which are treated as part of the same series of 7.25%senior notes due in 2013 that were issued in February 2003.  The issuance of these senior notes wascompleted at a price of 105.50%, or an effective interest rate of 6.376%.  The net proceeds of $156 million of thisfinancing were used to reduce indebtedness under the Company’s revolving creditfacility.

On October 31,2005, Cascades completed the refinancing of its $500 million revolving creditfacility originally put in place in February 2003. This new $550 million creditfacility included a $450 million five-year revolving facility maturing in 2010and a seven-year $100 million term facility maturing in 2012, reimbursablewithout penalty, at the Company’s option any time prior to maturity. OnDecember 29, 2006, in connection with the acquisition of the remainingoutstanding shares (50%) from Domtar Inc. (“Domtar”) in Norampac Inc. (“Norampac”),the Company completed the refinancing of its $550 million credit facility originallyput in place in 2005 to provide for new $875 million (including $325 million ofNorampac) credit facilities consisting of a $650 million five-year securedrevolving credit facility maturing in December 2011, a $100 millionsecured term facility maturing in October 2012 and a six-month $100 millionsenior unsecured revolving credit facility which should be converted into thesecured revolving facility in 2007. Subject to certain conditions, the Companyalso has the option to request an increase of the secured revolving creditfacility by an additional amount of up to $150 million. The six-year termfacility can be reimbursed without penalty at the Company’s option any timeprior to maturity. Its obligations under this new revolving credit facility aresecured by all inventory and receivables of the Company and its North Americansubsidiaries and by the property, plant, and equipment of three of its mills.

On December 5,2006, Cascades announced that it had reached an agreement in principle withDomtar to purchase Domtar’s 50% interest in Norampac, for a cash considerationof $560 million. The Company also announced that it had secured commitments forthe financing

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necessary tocomplete the transaction, namely a renewed credit facility the terms of whichare described hereinabove. Concurrently, the Company announced that it hadlaunched a $150 million Subscription Receipt offering through a syndicate ofunderwriters to be issued to the public pursuant to a short form prospectus tobe filed with securities regulators in each province of Canada with closing tooccur on or about December 20, 2006. Each subscription receipt gives the rightto its holder to receive one Common Share on closing of the transaction. Theaggregate gross proceeds of the public offering together with the proceeds fromthe $50 million private placement at the public issue price to be used tofinance the acquisition.

On December 20, 2006, Cascades closed it’s a public offering of15,095,000 Subscription Receipts at a unit price of $13.25, for a totalconsideration of $200,008,750 held in escrow pending closing of the acquisitionof the outstanding shares (50%) held by Domtar in Norampac.  The completion of this transaction occurredon December 29, 2006, following  asatisfactory response from the Competition Bureau on December 14, 2006.Concurrently, the Company also closed a $50 million private placement of 3,773,585Subscription Receipts at a price of $13.25 each. Each Subscription Receipt wasconverted into an equivalent number of Common Shares of the Company,concurrently with the closing of the acquisition of the remaining 50% interestin Norampac, on December 29, 2006.

***Boxboard Group***

On August 24,2004, the Company acquired the remaining outstanding shares (50%) of Dopaco,Inc., a U.S. producer of packaging products for the quick service restaurantindustry, for an approximate consideration of $139 million (US$106.5million), of which $82 million (US$63 million) had been paid in cashat the closing date and a balance of $57 million (US$43.5 million) was paid inJune 2005, based on a financial formula. This acquisition allowed the Company to benefit from increasedintegration opportunities for its packaging and tissue operations.

On January 14,2005, the Company  acquired certainassets of the packaging division of Dover Industries Limited, located inBurlington (Ontario) for a cash consideration of $8 million.  The closing of the transaction occurred onJanuary 27, 2005 and on October 14, 2005, the Company paid $6 million toacquire certain assets of the paperboard division of Fraser Papers Inc.,located in Edmunston (New Brunswick). Both units are part of the convertingsector of the Boxboard Group.

On December 13, 2005, Cascades announced a restructuring of itsfolding carton facility situated in Montréal (Québec), essentially closing oneof two production lines and on December 11, 2006, as part of the ongoingreorganization and optimization of its converting  activities, Cascades announced that it would definitely cease operations at thisplant by the end of the first quarter of 2007. Approximately 118 employees willbe affected by this closure.

On April 21, 2006, Cascades announced that it had reached an agreementwith Caraustar Industries, Inc., to acquire the assets of its coated recycledboard mill located in Sprague (Connecticut) for an amount of US$14.5 million,subject to the approval of the environmental authorities of the State ofConnecticut. The annual production capacity of this mill is approximately180,000 short tons, which represents an estimated 7% of the North Americancoated recycled boxboard manufacturing capacity.

On April 25, 2006, Cascades announced that it had acquiredcertain of the assets of the paperboard division of Simkins Industries locatedin Ridgefield (New Jersey) and in New Haven (Connecticut), in an amount of$14 million (US$12.5 million). These two mills were shut down by Simkins Industries.

On June 29, 2006, Cascades announced the shut down of itsFjordCell pulp mill for an indefinite period of time. The mill, whichspecializes in the production of bleached softwood kraft pulp, is located inJonquière (Québec). The closure affected approximately 70 employees.  The mill produced annually 82,000 tons ofkraft pulp and sold all of its production to other Cascades facilities, namely,Cascades Boxboard Group — Jonquière (Québec), and the Rolland Division of theCascades Fine Papers Group Inc. (Québec).

On July 19 and August7, 2006, Cascadescompleted the acquisition of the assets of two Caraustar Industries, Inc.’scoated recycled boxboard mills located in Sprague (Connecticut) and in Rittman(Ohio), for a purchase price of $18 million (US$15 million). Sincethe acquisition, the Sprague mill operates under the name Cascades BoxboardGroup-Connecticut LLC, Versailles Mill. Caraustar closed the Rittman plant.

On October 6, 2006, Cascades announced the temporary shut down ofthe Scierie Lemay Inc. sawmill, including its facilities, in L’Ascension(Québec) as well as those of its subsidiary Rabotage Lemay Inc. inSaint-François-de-Sales (Québec). The shutdown affected 200 workers.

On January 25, 2007, Cascades announced the sale of its 40% interest inGSD Packaging, LLC, a U.S. food pail manufacturing company to Rock-TennCompany. The proceeds of this transaction, which amount to$US 32 million, will be used to reduce Cascades’ debt.

***Containerboard Group — Norampac***

On April 5, 2004,Norampac announced the acquisition of the shares of Johnson Corrugated ProductsCorp., a corrugated products plant located in Thompson (Connecticut), for anapproximate cash consideration of $8 million (US$5.9 million).  This investment allowed Norampac to increaseits integration level and its North American presence.

On August 27,2004, Norampac acquired the assets of AIM Corrugated Container Corp., acorrugated products plant located in Lancaster (New York), for an approximatecash consideration of $10 million (US$8 million).  This investment allowed Norampac to increaseits presence in the northeastern United States.

On May 12, 2005, Norampacannounced its intention to close its corrugated products plant located onMolson Street, in Montréal (Québec) during the second quarter of 2006. Thisclosure was part of a global reorganization plan of Norampac’s Québecactivities, which included an investment plan totalling close to $30million.  The closure of this divisionwhich occurred in December 2005, affected some 215 employees and had becomenecessary in an effort to adjust to the reality of the Québec marketplace.

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On July 19, 2005,Norampac’s management announced its decision to close its corrugated productsplant located in Buffalo (New York), in August 2005.  All plant operations were transferred to theLancaster (New York) plant, which was acquired by Norampac in 2004.  This reorganization enabled the Company toinvest in the Lancaster Division in order to offer to its customers betterquality service and products.

On September 21,2005, Norampac announced the permanent closure of paper machine no. 1 at itslinerboard mill located in Red Rock (Ontario). This mill had two papermachines.  Machine no. 1 was used tomanufacture kraft linerboard and was producing approximately 150,000 short tonsyearly. On August 30,2006, Norampac announced the shutdown of its Red Rock mill, for an indefiniteperiod of time due to unfavorable economic factors.  Close to 300 employees were affected by thisclosure.  The Red Rock mill manufacturedunbleached kraft linerboard and produced 300,000 short tons annually. 

On October 11,2005, Norampac announced that it had completed the acquisition of threecorrugated products converting plants from SPB Canada Inc., located in Montréal(Québec), Le Gardeur (Québec) and Belleville (Ontario), for an approximateconsideration of $38 million. In 2006, the Company finalized theallocation of the purchase price relating to the acquisition of these threeplants, which resulted in a reduction of the purchase price by $3 million.  These three plants have a combined annualproduction capacity of approximately 2 billion square feet.  This acquisition has allowed Norampac tobroaden the scope of its specialised products, benefit from economies of scalewhile optimizing its equipment use.

***Specialty Products Group***

On February 18 andJune 3, 2004, the Company acquired the 50% interest held by its partners inCascades Sonoco S.A. for an amount of nil, and in Greenfield S.A.S., for a cashconsideration of $2 million (€1.5 million).

On November 17, 2005, theCompany  reached an agreement for thesale of its paper merchant division known as Cascades Resources, a Division ofCascades Fine Papers Group Inc., to Coast Paper Limited, now known as Spicers,a division of PaperlinX Canada Limited. On February 28, 2006, the Companycompleted the transaction for an approximate amount of $86 million.

On November 22,2005, Cascades announced a rationalization plan for its fine papers sector withthe permanent shut down of the operations of its Cascades Fine Papers GroupInc., Thunder Bay Division (Ontario) plant which specialized in  the manufacturing of coated papers.Approximately 375 employees were affected by this closing, which occurred onJanuary 21, 2006.

On December 8,2005, Cascades announced the last stage of its strategic recovery plan for itsFine Papers Group plant located in Saint-Jérôme (Québec), involving arestructuring of operations, and the closure of the smallest of the four papermachines, which produced 8,000 short tons per year, an amount equivalent to 5%of the plant’s annual capacity.  Therestructuring affected nearly 100 employees.

On August 24, 2006, Cascades announced the definitive closure ofone of its two mills, which produced backing for vinyl flooring located inBoissy le Châtel (France) at the end of October 2006. The mill, which operatedunder the name Cascades Ste-Marie S.A.S., was acquired in 1999 and employed 34people.

***Tissue Group***

On March 11, 2004,the Company acquired the assets of a tissue mill in Memphis (Tennessee), from AmericanTissue or  affiliates thereof,  for a cash consideration of $15 million(US$11.4 million), extending its presence in the southern United States.

On March 31, 2005,Cascades sold the sanitation products distribution and the chemical productsmanufacturing assets of its Wood Wyant Inc. subsidiary to a subsidiary ofGroupe Sani-Marc, located in Victoriaville (Québec), for a total netconsideration of $15.7 million, in order to focus operations on its coresectors namely the manufacturing and the processing of tissue paper andpackaging products.  The Wood Wyant inc.assets related to the manufacturing of tissue paper finished products, locatedin Pickering (Ontario), were excluded from the transaction.

OnMarch 9, 2006, as part of the ongoing rationalization process of its activitiesand in an effort to optimize its effectiveness and profitability, Cascadesdecided to permanently close its tissue conversion plant in Pickering(Ontario). Approximately 66 employees were affected by this closure. The equipmentwas redeployed in different Cascades Tissue Group plants and mills in theUnited States and Canada.

3.2           SIGNIFICANTACQUISITIONS

On December 29, 2006, Cascades completed the purchaseof the outstanding Common Shares of Norampac that the Company did not alreadyown, representing 50% of the outstanding Common Shares, for a cashconsideration of $560 million (the “Acquisition”).  Norampac is among the top ten manufacturersof containerboard in North America and the largest in Canada. Norampac is alsoan industry leader in corrugated products in North America and one of thelargest producers of corrugated products in Canada in terms of capacity.Norampac has 34 production facilities in Canada, the United States and France.As part of the transactions  undertakenin connection with the Acquisition, Cascades, as sole shareholder of Norampac,wound up and will dissolve Norampac, such that all of the assets andliabilities previously belonging to Norampac, including Norampac’s 6.75%senior notes, maturingin 2013 and its credit facility will be assumed by Cascades who will hold allof the shares of Norampac’s subsidiaries directly. On December 29, 2006, theCompany filed on SEDAR, form 51-102F4, namely, the Business Acquisition Reportin accordance with National Instrument 51-102 of the Canadian SecuritiesAdministrators.

# **Item 4 —****Description of the Business**

## 4.1           GENERAL

Established in1964, Cascades is the parent company of a North American and European group ofcompanies involved in the production, conversion and marketing of packagingproducts and tissue papers principally composed of recycled fibre. Cascadesconducts its business principally through two operating sectors, namely:

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1) The **Packaging Products**sector which includes :

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

ii) *Norampac*,a manufacturer of containerboard and leading converter of corrugated products;and

iii)The *Specialty Products Group*, whichspecializes**in the manufacturingand marketing of products such as moulded pulp, plastic, papermill packaging,honeycomb, specialty paper and board, and fine papers.  The group also specializes in waste paperrecovery and de-inked pulp.

2) The **Tissue****Papers**sector operates units that manufacture and convert tissue paper forthe commercial and institutional, and retail markets.

Thesetwo sectors include over 100 operating units located in Canada, the UnitedStates, France, England, Germany and Sweden, and employ over 14,000 people.This structure decentralizes authority while allowing continuous exchangesbetween sectors and a better coordination of all of the operations.  Cascades sets strategic guidelines andensures that corporate policies concerning acquisition and financing strategies,legal affairs, human resources management and environmental protection areapplied by the subsidiaries, divisions and affiliated companies.

4.2**          **INDUSTRY SECTORINFORMATION

### 4.2.1        PACKAGING PRODUCTSSECTOR

The packagingproducts sector is divided into three groups of activities: the Boxboard Group,the Containerboard Group — Norampac, and the Specialty Products Group.

#### 4.2.1.1     BOXBOARD GROUP

The Boxboard Groupis a leading manufacturer of coated boxboard and folding cartons inCanada.  The Boxboard Group operateseight mills that produce coated boxboard for conversion into folding cartonsand micro-flute packaging, with a total annual production capacity of 1,055,000metric tons.  Three of these mills arelocated in Canada, one in the United States, two in France, one in Sweden, andone in Germany.

Approximately 67%of the Boxboard Group’s production of boxboard is made of entirely recycledfibre, and 15% of its output is produced with a high content of recycled fibreand the balance of virgin fibre. Vertically integrated upstream, the BoxboardGroup operates two de-inking units, one in Canada and the other in France, andobtains its supply of wastepaper through its own recovery networks, jointventures and affiliates, as well as through long-term agreements withindependent suppliers.  To secure itssupply of virgin fibre, the Boxboard Group operates three mechanical pulp millsin Québec, France and Sweden. It also operated one chemical pulp mill inJonquière (Québec), Cascades FjordCell, as well as a sawmill, Scierie LemayInc., the operations of which ceased in 2006, for an indefinite period of timeas described in heading 3.1 “Three Year History”.

In North America,the Boxboard Group is also vertically integrated downstream via its FoldingCarton Division. The division’s six plants, two in Québec, two in Ontario, onein Manitoba and one in Kentucky in the United States annually convert some175,000 metric tons of boxboard or 3.1 billion boxes per year, suppliedmainly by its Canadian boxboard mills. These plants design, develop and producepackaging solutions that meet the specific needs of companies operating mainlyin the food, fast food, cosmetics, pharmaceutical and distillation industries.Dopaco, Inc. operates seven plants (two in Ontario and five in the UnitedStates) converting some 200,000 tons of boxboard a year, which mostly comesfrom the Canadian boxboard mills, into folding cartons and cups.  It also has interests in two joint venturesin the United States, having sold its 40% interest in GSD Packaging, LLC at thebeginning of the year 2007, as described in the heading 3.1 “Three Year History”.

In 2006, theBoxboard Group had sales of $1.4 billion as compared to $1.3  billionin 2005.  The sales of cartonboardgeographically were as follows: i) for the European mills: 93% in France,Germany and Sweden, and 7% elsewhere; ii) for the North American mills: 39% inCanada, 60% in the United States and 1% elsewhere.  Globally in 2006, 28%, 27%, 42% and 3% of thesales of this Group were generated in Europe, Canada, the United States and othercountries.

As at December 31,2006, the Boxboard Group employed more than 4,400 people in 23 facilities and10 sales offices throughout the world.

The followingtable lists the plants owned by the Boxboard Group, the approximate annualproduction capacity of the facilities and the products manufactured or theoperations carried out therein, as the case may be, in 2006:
| **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  Thermo mechanical pulp |       | 140,000   60,000              |
| East Angus  (Québec)     |       | 100% recycled coated boxboard De-inked pulp                                 |       |   65,000   10,000        |
| Versailles  (Connecticut)     |       | 100% recycled coated boxboard                                               |       | 165,000                            |
| Cascades  LaRochette (France) |       | Coated grease resistant boxboard, virgin fibre Thermo  mechanical pulp      |       | 130,000   80,000              |

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| 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 Thermo  mechanical pulp            |   |   60,000   50,000 |
| Cascades  Arnsberg GmbH (Germany)                                              |   | Coated boxboard, recycled fibre                                               |   | 185,000                     |
| Cascades  FjordCell Jonquière (Québec)                               |   | Bleached softwood kraft pulp                                                  |   |   82,000(1)            |
| Scierie Lemay  Inc. Ascension (Québec)                                    |   | Sawmill                                                                       |   |    N/A(2)         |
| Rabotage Lemay  Inc. Saint-François-de-Sales (Québec)                |   | Planing                                                                       |   |    N/A(2)         |
| **Converting**                                                                 |   |                                                                          |   |                        |
| Montréal  (Québec)                                                   |   | Printing, embossing, debossing, thermo bossing,  ultra-violet drying services |   | 35,000(3)                   |
| 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 the quick-service restaurant  industry                 |   | 200,000                     |
| **Distribution**                                                               |   |                                                                          |   |                        |
| Cascades  Cartonboard UK Ltd  (Great Britain)                                  |   | Sheeting, distribution and resale services                                    |   |   N/A                  |

----

(1)             Shut down in June2006 for an indefinite period of time.

(2)             Shut down in October2006 for an indefinite period of time.

(3)             Permanentclosure in 2007.

#### 4.2.1.2     CONTAINERBOARDGROUP  — NORAMPAC

Norampac employsmore than 4,900 people in its 34 containerboard mills and corrugated productsconverting plants in Canada, the United States and France.

Norampac has eightlinerboard and corrugated medium mills in Canada, the United States andFrance.  These facilities have a combinedannual production capacity of 1.45 million short tons, dedicated tospecialty papers such as white-top or colored-top linerboard. The productsmanufactured by the eight manufacturing mills consist of 47% linerboard and 53%corrugating medium. Approximately 61% of their North American output isconverted by Norampac’s 26 corrugated products plants, strategically locatedacross Canada and the United States.

In 2006,consolidated sales of this group remained unchanged compared to 2005 at$1.3 billion, mainly allocated as follows: 61% in Canada, 31% in theUnited States and 8% outside of North America. Its own sales force carries outthe sales of this group together with sales agents for export purposes.Cascades’ share represented $600 million for the year.

The ContainerboardGroup purchases all of its needs in virgin fibre in Québec and Ontario, and purchasesits recycled fibre equally in the United States and in Canada.  The corrugated products group purchasesnearly all of its raw material needs directly from the Containerboard Group’smills.

The followingtable lists the mills and converting plants of the Containerboard andCorrugated Products Group and the approximate annual production capacity orshipments of each facility as well as the products manufactured or, whereapplicable, their activities in 2006:
| **Facilities**           | ** ** | **Products / Services**          | ** ** | **Annual capacity or Shipments** |
|--------------------------|------------|----------------------------------|------------|----------------------------------|
| **Containerboard**       | ** ** | ** **                       | ** ** | **Capacity in short tons**       |
| Niagara Falls (New York) |       | 100% recycled corrugating medium |       | 249,000                          |

5

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| Norampac Avot Vallée SAS (France)                |       | 100% recycled corrugating medium and linerboard             |   | 140,000                       |
|-------------------------------------------------------|------------|-------------------------------------------------------------|--------|-------------------------------|
| Kingsey Falls (Québec)                           |       | 100% recycled linerboard                                    |   |   97,000                 |
| Cabano (Québec)                                  |       | Corrugating medium                                          |   | 229,000                       |
| Trenton (Ontario)                                     |       | Corrugating medium in various basis weights                 |   | 196,000                       |
| Mississauga (Ontario)                                 |       | 100% recycled linerboard                                    |   | 166,000                       |
| Red Rock (Ontario)                                    |       | Unbleached kraft linerboard                                 |   | 300,000(1)                    |
| Burnaby (British Columbia)                            |       | 100% recycled corrugating medium and gypsum paper           |   | 124,000                       |
| **Corrugated Products**                               | ** ** | ** **                                                  |   | **Shipments in  Square feet** |
| Newfoundland Containers St-John’s (Newfoundland) |       | Corrugated sheets and products                              |   | 190,000,000                   |
| Moncton (New Brunswick)                               |       | Corrugated packaging                                        |   | 514,000,000                   |
| Québec (Québec)                             |       | Variety of corrugated packaging containers                  |   | 524,000,000                   |
| Drummondville (Québec)                           |       | Corrugated packaging containers for medium or heavy  volume |   | 850,000,000                   |
| Victoriaville (Québec)                           |       | Corrugated packaging of all sizes                           |   | 375,000,000                   |
| Vaudreuil (Québec)                               |       | Variety of corrugated packaging containers                  |   | 810,000,000                   |
| SPB, Montréal (Québec)                      |       | Variety of corrugated packaging containers                  |   | 856,000,000                   |
| Le Gardeur (Québec)                              |       | Corrugated sheets, packaging and pallets                    |   |   59,000,000             |
| Belleville (Ontario)                                  |       | Variety of corrugated packaging containers                  |   | 223,000,000                   |
| Etobicoke (Ontario)                                   |       | Variety of corrugated packaging containers                  |   | 539,000,000                   |
| Jellco, Barrie (Ontario)                              |       | Variety of corrugated packaging containers                  |   | 115,000,000                   |
| Peterborough (Ontario)                                |       | Corrugated sheets, packaging and pallets                    |   |   92,000,000             |
| St-Mary’s (Ontario)                              |       | Corrugated packaging                                        |   | 873,000,000                   |
| OCD, Mississauga (Ontario)                            |       | Corrugated packaging                                        |   | 977,000,000                   |
| Vaughan (Ontario)                                     |       | Corrugated sheets                                           |   |  1,908,000,000           |
| North York (Ontario)                                  |       | Single face sheets, co-packaging and display  operations    |   |   41,000,000             |
| Lithotech, Scarborough (Ontario)                      |       | Single face laminate                                        |   | 245,000,000                   |
| Winnipeg (Manitoba)                                   |       | Waxed corrugated containers                                 |   | 473,000,000                   |
| Saskatoon (Saskatchewan)                              |       | Corrugated product packaging                                |   |   21,000,000             |
| Calgary (Alberta)                                     |       | Die cut boxes                                               |   | 621,000,000                   |
| Richmond (British Columbia)                           |       | Corrugated packaging                                        |   | 446,000,000                   |
| Norampac New York City Inc.  (New York)               |       | Graphic packaging and industrial box mix                    |   | 991,000,000                   |
| Norampac Leominster Inc.  (Massachusetts)             |       | Industrial box mix                                          |   | 599,000,000                   |
| Norampac Schenctady Inc.  (New York)                  |       | Variety of corrugated packaging containers                  |   | 647,000,000                   |
| Lancaster (New York)                                  |       | Variety of corrugated packaging containers                  |   | 423,000,000                   |

 

6

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| Norampac Thompson Inc. (Connecticut)                                                         |       | Variety of corrugated packaging containers |       | 182,000,000              |
|----------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|--------------------------|
|                                                                                         |       |                                       |       |                     |
| Montcorr Packaging Ltd. (Québec)                                                        |       | Corrugated sheets                          |       | 151,000,000(2)           |
| ** **                                                                                   | ** ** | ** **                                 | ** ** | ** **               |
| **Services**                                                                                 | ** ** | ** **                                 | ** ** | ** **               |
|                                                                                         |       |                                       |       |                     |
| Art & Die, Etobicoke (Ontario)                                                           |       | Graphic art and printing plates            |       | 4,261,000 square inches  |
|                                                                                         |       |                                       |       |                     |
| Metro Waste Paper Recovery Inc. (Ontario, Manitoba,  Alberta, British Columbia and New York) |       | Recovery of recycled fibres                |       | 1,109,941 metric tons(3) |

----

(1) Shut down on August 30, 2006for an indefinite period of time.

(2) The annual shipments indicated are calculated according to Norampac’smanufactured volume at year-end.

(3) Cascades holds 73% of Metro Waste Paper RecoveryInc. At the end of 2006, the activities of Metro Waste Paper Recovery Inc. werereclassified within the Specialty Products Group. The indicated tonnage  represents the total tonnage for  the year.

#### 4.2.1.3     SPECIALTY PRODUCTS GROUP

The SpecialtyProducts Group specializes in the manufacturing and marketing of products suchas moulded pulp, plastic, papermill packaging, honeycomb, specialty paper andboard, and fine papers.  The group isalso active in waste paper recovery and de-inked pulp.  The group has 28 manufacturing units locatedin North America and Europe and employs more than 2,000 people. In 2006, salesof this group amounted to $773 million, compared with $756 million in 2005.

##### *a)            Moulded pulpproducts*

Cascades Forma-Pakin Kingsey Falls (Québec), Cascades Moulded Pulp, Inc., in North Carolina(United States) and Cascades Moulded Pulp-Brantford (Ontario), manufacturemoulded pulp products of 100% recycled material,  primarily destined for poultry farms and thequick-service restaurant business in Canada (45%) and the United States (55%).  This subgroup of the Specialty Products Groupproduces mainly filler flats designed for egg processors, trays and specialtypackaging products.  Salesrepresentatives and a network of sales agents serve customers; five of thempurchase 65% of sales.   Raw material forthese moulded pulp products is composed of 100% recycled material.    Competition comes principally from Canadaand the United States.

The followingtable lists the mills in the moulded pulp products subgroup and the approximateannual production capacity of each facility as well as the products manufacturedor, where applicable, their activities in 2006:
| **Facilities**                                            | ** ** | **Products**                                       | ** ** | **Annual  capacity  in units** |
|-----------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------|
|                                                      |       |                                               |       |                           |
| Cascades Forma-Pak Kingsey Falls, (Québec)           |       | Filler flats,  trays, specialty packaging products |       | 220,000,000                    |
|                                                      |       |                                               |       |                           |
| Cascades Moulded Pulp, Inc., Rockingham (North  Carolina) |       | Trays and  specialty packaging products            |       | 140,000,000                    |
|                                                      |       |                                               |       |                           |
| Cascades Moulded Pulp – Brantford (Ontario)          |       | Trays                                              |       | 100,000,000                    |
| ** **                                                | ** ** | ** **                                         | ** ** | ** **                     |

 

##### *b)            Plastic products*

This subgroupmanufactures a variety of plastic products in four plants, three located inQuébec and one in the United States. These plants specialize in industrial andfood packaging products. The packaging is manufactured using extrusion, thermalcompression, and thermal moulding by injection.

PlastiquesCascades, located in Kingsey Falls (Québec), and Cascades Plastics Inc.,located in Warrenton (Missouri), specialize in the food industry, notably,packaging for the quick-service restaurant business and specialized containersfor the meat processing industry.  Theprincipal raw material used is polystyrene. Sales representatives and a network of sales agents serve Canada and theUnited States.

PlastiquesCascades - Re-Plast, located in Notre-Dame-Du-Bon-Conseil (Québec),recycles waste plastic generated by selective collection and industrial waste.The principal products are buildingconstruction boards, 100% recycled plastic or wood-plastic compositecommercialized under the name Permadeck®, manufactured from post-consumer andpost-industrial recycled plastic and wood residue.  A variety of outdoor furnishings for outdooruse, commercialized under the name Urbain Design®, completes this list.  Products are sold through sales agents,manufacturing agents and distributors. Competition comes mainly from the United States and Ontario.

Cascades Inopaklocated in Drummondville (Québec), specializes in the thermo moulding of rigidsheets of plastic and moulding by injection. Its principle products arewrappers for packaging coins sold under the trade name Plastichange® and acomplete line of multi-use containers known under the trade marks BenpacTM andVuPackTM for the retail sale and packaging of food and industrial products suchas products under the trade mark Frig-O-Seal®. Products are sold through distributors and agents.  The principal raw materials used are P.E.T.,polypropylene, clear polystyrene, PVC and the new compostable plasticP.L.A.  Competitively, five principalplayers in the United States and Canada share in a highly consolidated marketwhile pressure is being felt from Asia.

7

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Sales for thissubgroup are allocated as follows:

| Territory           | ** ** | **2005** | ** ** | **2006** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Québec         |       | 43       | %          | 44       | %          |
| Ontario             |       | 17       | %          | 17       | %          |
| The rest of  Canada |       | 4        | %          | 4        | %          |
| United States       |       | 36       | %          | 35       | %          |

 

The followingtable lists the mills in the plastic products subgroup and the approximateannual production capacity of each facility as well as the productsmanufactured or, where applicable, their activities in 2006:
| **Facilities**                                                               | ** ** | **Products**                                              | ** ** | **Annual  capacity  in kilograms_** |
|------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|-------------------------------------|
|                                                                         |       |                                                      |       |                                |
| Plastiques  Cascades Kingsey Falls (Québec)                             |       | Polystyrene foam containers                               |       | 9,500,000                           |
|                                                                         |       |                                                      |       |                                |
| Plastiques  Cascades — Re-Plast Notre-Dame-du-Bon-Conseil (Québec) |       | Park furniture, patio and balcony planks, plastic  lumber |       | 5,925,000                           |
|                                                                         |       |                                                      |       |                                |
| Cascades Inopak  Drummondville (Québec)                                 |       | Coin wrappers, multi-use packaging                        |       | 5,000,000                           |
|                                                                         |       |                                                      |       |                                |
| Cascades Plastics  Inc. Warrenton (Missouri)                                 |       | Polystyrene foam containers                               |       | 5,000,000                           |

 

##### *c)            Papermill packaging*

The three NorthAmerican joint ventures of this subgroup, Cascades Conversion Inc., ConverdisInc. and Cascades Sonoco Inc., convert uncoated board, obtained in part withinthe Cascades network, into industrial packaging materials for the pulp andpaper industry, such as roll headers and paperboard packaging from rolls ofpaper.  Cascades Conversion Inc.manufactures as well a unique model of heat plate for sealing roll edges. Thissubgroup of the Specialty Products Group is the leader in the North Americanmarket.  The sales for these mills aremade either through an independent agent or by their own sales force.  In 2006, one customer accounted for 17% of salesand the principal geographic market is the United States with 60%, followed bythe province of Québec at 28% and by other Canadian provinces at 12%.

Cascades Rollpack S.A.S.,a wholly owned subsidiary of the Company, operates two plants in France at Saulcy-sur-Meurtheand Châtenois, which manufacture roll headers made of linerboard and uncoatedpaperboard obtained from within European papermills.  The sales of these mills are made throughtheir own sales force.  In 2006, onecustomer accounted for 15.3% of the products sold in France (43%), in Germany(24%) and in Sweden (8%).

The followingtable lists the main mills in the papermill packaging subgroup and theapproximate annual production capacity of each facility as well as the productsmanufactured or, where applicable, their activities in 2006:
| **Facilities**                                                           | ** ** | **Products**                        | ** ** | **Annual  capacity in metric  tons or square feet** |
|--------------------------------------------------------------------------|------------|-------------------------------------|------------|-----------------------------------------------------|
|                                                                     |       |                                |       |                                                |
| Cascades  Conversion Inc. Kingsey Falls (Québec)                    |       | Roll headers and packaging products |       | 60,000                                              |
|                                                                     |       |                                |       |                                                |
| Converdis inc.  Berthierville (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., Saucy-sur-Meurthe and Châtenois (France) |       | Roll headers and reams              |       | 20,000                                              |

 

##### *d)            Honeycomb products*

This subgroup ofthe Specialty Products Group’s operations mainly consists in convertinguncoated board, obtained principally from within the Cascades network intoindustrial packaging materials for the pulp and paper industry.  Cascades Multi-Pro, located in Drummondville(Québec) manufactures laminated boards used in many industrial sectors as wellas honeycomb paperboard. The Cascades Enviropac Berthierville (Québec) andToronto (Ontario) plants manufacture honeycomb paperboard used as industrialpackaging in general.  The sales forthese mills are made either through an independent agent or by their own salesforce.  In 2006, one customer accountedfor 7.7% of

8

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sales and theprincipal geographic market is the province of Ontario with 42%, followed bythe province of Québec at 26%, the United States at 24% and by other Canadianprovinces with 8%.

The followingtable lists the mills in the honeycomb subgroup and the approximate annualproduction capacity of each facility as well as the products manufactured or,where applicable, their activities in 2006:
| **Facilities**                                   | ** ** | **Products**                                                          | ** ** | **Annual  capacity in metric  tons or square feet** |
|--------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-----------------------------------------------------|
| Cascades  Multi-Pro Drummondville (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                                          |       | 5,000                                               |

 

##### *e)            S**pecialty paper and board*

Cascades Lupel,located in Trois-Rivières (Québec) manufactures backing for vinyl flooring soldunder the trademarks Endorex®, Absorbak® and Guardflo®.  Sales for these units were made primarily inthe United States (56.6%), in Canada (42.7%) and in Mexico (0.7%).  The products are delivered principally bytruck and rail. Two major customers represent respectively 49% and 43% ofsales.  The mill’s annual productioncapacity is 55,000 metric tons.  The rawmaterials are easily available and the mill sources 85% of its needs from theUnited States, the remainder is sourced in Canada.

CascadesSainte-Marie, located in Boissy-Le-Châtel (France), principally manufacturedbacking for vinyl flooring primarily for the North-America market (84%).  Due to the weakness in sales, this millclosed in 2006.  The production wastransferred to the Trois-Rivières mill in Québec.

Cascades PapierKingsey Falls (Québec) produces uncoated board using 100% recycled fibre. Thisboard is used mainly by converters specializing in commercial and industrialpackaging such as headers and wrappers for the paper industry as well asspacers and partitions used to package products. This division producesapproximately 92,000 metric tons of which 36% is sold to affiliated companieswhile the balance is sold to third parties of which three representrespectively 35%, 5% and 4% of sales. 75% of total sales are made to customerslocated in the province of Québec.  Rawmaterial is sourced principally in the province of Québec (72%), in Ontario(22%) and in the United States.  Productsare delivered principally by, in order of importance: by truck, rail, andships.

The Cascades EastAngus (Québec) mill manufactures many types of specialized kraft paper such asbutcher paper, paper for envelopes, paper for asphalt coating, antifungal paperand many others, such as paper, which withstands grease or moisture.  These types of specialty paper allow the unitto maintain a competitive share within the kraft paper market.  Theannual capacity of this mill is 95,000 metric tons.  The majority of its sales are in the UnitedStates (69% in 2005 and 2006). Products are delivered principally by truck andrail. Its most important customer accounts for almost 12% of sales. Itsproducts may contain 0% to 100% of recycled fibre depending on customerrequirements.  The supply of treated andrecycled fibres, which is stable, comes from Canada (69%) of which 44% comesfrom Québec and 31% from the United States. Most of the natural fibre comes from Québec’s private forests.  By increasing its bark steam production(59%), this mill substantially reduces its costs, compared to natural gas andoil production users.

The followingtable lists the mills and the approximate annual production capacity of eachfacility as well as the products manufactured or, where applicable, theiractivities in 2006:
| **Facilities**                                    | ** ** | **Products**               | ** ** | **Annual  capacity in metric  tons or square feet** |
|---------------------------------------------------|------------|----------------------------|------------|-----------------------------------------------------|
| Cascades Lupel  Trois-Rivières (Québec) |       | Backing for vinyl flooring |       | 55,000                                              |
|                                              |       |                       |       |                                                |
| Cascades Papiers  Kingsey Falls (Québec)     |       | Uncoated board             |       | 92,000                                              |
|                                              |       |                       |       |                                                |
| Cascades East  Angus (Québec)                |       | Kraft paper                |       | 95,000                                              |

 

##### *f)             Fine Papers*

Cascades FinePapers Group Inc., Rolland Division operates a plant in Saint-Jérôme (Québec)and manufactures over 100 types of uncoated fine paper.  Aside from paper destined for copying,business forms and envelopes, this division is increasingly involved in theniche markets for high-end recycled paper and specialty paper for commercial andsecurity printing. The Rolland Division paper products are made from virginfibre (66 %) and recycled fibre (34 %). The products are sold undersuch names as Superfine Linen RecordTM, Colonial BondTM, ReproPlusTM,RocklandTM, Rolland OpaqueTM, New Life OpaqueTM, Rolland InspirationTM,Rolland Laser Hi-TechTM, New Life DP100TM, ST Generation IITM, Make YourMarkTM, Enviro 30, 50 and 100TM and Rolland Digital CCTM.  The Rolland Division sells 52% of itsproducts in Canada through sales representatives located in Saint-Jérôme(Québec) and Toronto (Ontario), and 44% in the American northeast and Midwestthrough Cascades Fine Papers Group (Sales) Inc. This division restructured its operations with the closing of one of itspaper machines, as described in heading 3.1 “ Three Year History ”.

9

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The Breakey FibresDivision, located in Breakeyville (Québec) operates a mill specializing in theproduction of high-end de-inked kraft pulp, a product that meets an increasingdemand for uncoated fine papers containing recycled fibre. The Breakey FibresDivision is supplied with waste paper coming from Eastern Canada and from theUnited States.  In 2006, almost 64% ofthe output of this facility was used at the Saint-Jérôme mill and 27% bycompanies within the Cascades Group. The remaining production is sold on theopen market.

The ConvertingCentre Division, located in Saint-Jérôme (Québec), owns and operates a sheetingcentre with an annual capacity of 110,000 short tons.  The Centre offers warehousing services with acapacity of 7,000 short tons.  It offerssheeting, warehousing and distribution services to the other divisions of theFine Papers Group as well as outside customers.

In light ofEuropean and Asian imports, the Canadian and American markets for fine papersproducts are extremely competitive.  Theuncoated fine papers segment experienced sales prices in 2005 clearly below thelast ten year average.  Pricesstraightened out in 2006, due to reductions in capacity in the industry.

In 2006, fibrerepresented approximately 39% of total operating costs in its plants.  The Fine Papers Group is fully integrated forrecycled pulp.  Its primary source forsoftwood and hardwood kraft pulp needs is Canada.

The pulp and paperindustry is recognized for its cyclical character.  The coated and uncoated fine papers segmentis no exception.

The followingtable lists the mills of the Fine Papers Group and the approximate annualproduction capacity of each facility as well as the products manufactured or,where applicable, their activities in 2006:
| **Facilities**                                                   | ** ** | **Products /  Services**  | ** ** | **Annual capacity  in short tons** |
|------------------------------------------------------------------|------------|---------------------------|------------|------------------------------------|
| ** **                                                       |       |                      |       |                               |
| **Manufacturing**                                                |       |                      |       |                               |
|                                                             |       |                      |       |                               |
| Rolland Division  Saint-Jérôme (Québec)           |       | Uncoated fine paper       |       | 150,000(1)                         |
|                                                             |       |                      |       |                               |
| Breakey Fibres  Division Breakeyville (Québec)              |       | De-inked kraft pulp       |       | 53,000 (metric tons)               |
| ** **                                                       |       |                      |       |                               |
| **Distribution  / Converting**                                   |       |                      |       |                               |
|                                                             |       |                      |       |                               |
| Converting  Center Division Saint-Jérôme (Québec) |       | Converting of fine papers |       | 110,000                            |

----

(1) One machineshut down in December 2005.

##### *g)           **Waste paper**recovery*

In 2006, Cascades Recovery handled more than 210,000 metric tons ofpaper and cartons.  In this same period,90% of its sales were in Canada, with 10% in export, principally to the UnitedStates and Asia.  Most of its business isdone within the Cascades Group or its partners. Waste paper is obtained from industrial and commercial users as well ascurbside collection in municipalities.

##### *h)            D**e-inking*

The mill in Auburn(Maine), with an annual capacity of 70,000 metric tons, manufactures from wastepaper material a high-gloss de-inked pulp used for the production of tissue andfine paper.  69% of sales are made in theUnited States and 31% are made in Canada. The three most important customers account for 26%, 24 %, and 9% ofsales respectively.

Greenfield’splant, located at Château-Thierry, in France, manufactures from waste papermaterial a high gloss de-inked pulp used for the production of fine paper andtissue.  This plant has an annualcapacity of 130,000 metric tons.  Theproducts are distributed in the European market (98%), in Japan and inAustralia.  The three principal customersaccounted for 15%, 13%, and 13% of sales, respectively.

##### 4.2.2        TISSUE PAPERS SECTOR

The tissue paperssector manufactures, converts and markets a vast array of products mainly madewith recycled fibre and intended for the commercial and industrial and retail markets.  Its lines of bathroom tissue, facial tissue,paper towels, paper hand towels, paper napkins and other related products aresold under the labels Decor®, Horizon® North River® and Wiping Solutions® inthe commercial and industrial Canadian and American markets.  In the retail market, products areprincipally marketed under private labels and under the label Cascades® inCanada and Pert® and Best Value® in the United States.  In 2006, two clients accounted for 41.4% ofretail sales with 25.9% and 15.5%. In addition, the Tissue Group also sellsparent rolls of bathroom tissue, paper towels, paper hand towels and specialtypapers to a large number of converters. One client accounted for 83% of parent roll sales.  In 2006, one client accounted for 21% ofoverall sales in the retail, commercial and industrial markets, and parentrolls.  Products are sold through salesrepresentatives and trucks deliver the merchandise.

The Tissue Groupsales for 2006 amounted to $727 million compared to $708  million in 2005.  In 2006, Tissue Group’s production was soldas follows: in the United States, 71% and in Canada, 29%. The Canadian millsgenerated 78% of the total revenue in Canada and 22% in the United States.  The American mills generated 98% of the totalrevenue in the United States.  15manufacturing and converting plants employ more than 1,900 people.

The Candiac plantin Québec manufactures tissue paper made from recycled fibres and converts itinto 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 the

10

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UnitedStates.  The production not converted atthe Candiac mill is transferred to the Laval (Québec) and Waterford (New York)plants or is sold in parent rolls to other converters.

The Lachute plantin Québec specializes in the manufacturing and converting of industrial usepaper hand towels.  These products aremainly destined to the Canadian and American commercial and industrial markets. The production not converted istransferred to the Rockingham (North Carolina) plant.

The Laval plant inQuébec specializes in the converting of tissue paper into paper napkins for theCanadian and American fast food and food industries.

The Kingsey Fallsplant in Québec manufactures tissue paper made from recycled fibres andconverts it into bathroom tissue, paper towels, paper hand towels and facialtissue. These products are mainly sold in the retail market as well as thecommercial and industrial markets, both in Canada and the United States.  The production not converted is transferredto the Laval (Québec), Calgary (Alberta) and Waterford (New York) plants or issold in parent rolls to other converters.

The Calgary plantin Alberta converts tissue papers into bathroom tissue and paper towels for theCanadian retail and commercial and industrial markets.

Cascades TissueGroup — North Carolina Inc., with its Rockingham plant, manufacturestissue paper made from recycled fibres and converts it into bathroom tissue,paper towels, paper hand towels, paper napkins and facial tissue.  These products are mainly sold in theAmerican commercial and industrial markets.  The production not converted is sold in parent rolls to other converters.

Cascades TissueGroup — IFC Disposables Inc.’s plant is located in Brownsville(Tennessee) and specializes in the converting of tissue papers into industrialwiping products as well as the distribution of bathroom tissue, paper towelsand incontinence products.  These productsare sold in the commercial and industrial markets in the United States.

Cascades TissueGroup — Wisconsin Inc.’s plant, in Eau-Claire, manufactures tissuepaper made from recycled fibres and converts it into bathroom tissue, papertowels, facial tissue and paper napkins. These products are mainly sold in the retail market in the UnitedStates.  The non-converted production issold in parent rolls to other converters.

CascadesTissue Group — Pennsylvania Inc., which has plants in Ransom andPittston, manufactures tissue paper made from recycled fibres and converts itinto bathroom tissue, paper towels, facial tissue and paper napkins.  These products are mainly sold in the retailmarket in the United States.  Thenon-converted production is transferred to the Waterford (New York) plant or issold in parent rolls to other converters.

CascadesTissue Group — Oregon Inc., in St-Helens, produces parent rolls madeof 100% virgin fibres.  The production istransferred to the Arizona plant or is sold to other converters.

TheWaterford Division of Cascades Tissue Group - New York Inc.specializes in the conversion of tissue paper into bathroom tissue, papertowels, paper napkins and industrial use paper hand towels.  These products are mainly sold in the retailmarket as well as the commercial and industrial markets in the United States.The Mechanicville (New York) Division produces parent rolls made from recycledfibres. The production is transferred to the Waterford Division (New York) oris sold to other converters.

CascadesTissue Group — Arizona Inc. operates a plant in Kingman, andspecializes in the conversion of tissue paper into bathroom tissue, papertowels, paper hand towels and paper napkins. These products are mainly sold in the commercial and industrial marketand in the retail market in the United States.

TheMemphis plant of Cascades Tissue Group - Tennessee Inc. producesparent rolls made from recycled fibres and specializes in the conversion oftissue paper into bathroom tissue. The production is sold to other converters.

Cascades TissueGroup — Pickering Inc. (Ontario) divested the sanitation products distributionand the chemical products manufacturing assets on March 31, 2005, specializedin the converting of tissue paper into bathroom tissue, paper towels and paperhand towels, sold in the commercial and industrial markets throughoutCanada.  This unit was closed in March2006 as described in the heading 3.1 “Three Year History”.

The followingtable lists the plants and mills of the Tissue Group and the approximate annualproduction capacity of each facility as well as the products manufactured or,where applicable, their activities in 2006:
| **Facilities**                  | ** ** | **Products**                                                     | ** ** | **Annual  capacity  In short tons** |
|---------------------------------|------------|------------------------------------------------------------------|------------|-------------------------------------|
| **Manufacturing  / Converting** |       |                                                             |       |                                |
|                            |       |                                                             |       |                                |
| Candiac (Québec)           |       | Paper towels, bathroom tissue, paper napkins                     |       | 73,000                              |
|                            |       |                                                             |       |                                |
| Lachute (Québec)           |       | Paper hand towels                                                |       | 48,000                              |
|                            |       |                                                             |       |                                |
| Kingsey Falls  (Québec)    |       | Paper towels, facial tissue, bathroom tissue, paper  hand towels |       | 104,000                             |

 

11

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| Cascades Tissue  Group —North Carolina Inc. (Rockingham)               |   | Paper towels, facial tissue, bathroom tissue, paper  napkins, paper hand towels             |   | 65,000 |
|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|--------|
|                                                                        |   |                                                                                        |   |   |
| Cascades Tissue  Group — Wisconsin Inc. (Eau Claire)                   |   | Paper towels, bathroom tissue, facial tissue and  paper napkins                             |   | 56,000 |
|                                                                        |   |                                                                                        |   |   |
| Cascades Tissue Group  — Pennsylvania Inc. (Ransom and Pittston)       |   | Paper towels, bathroom tissue, facial tissue and  paper napkins                             |   | 67,000 |
|                                                                        |   |                                                                                        |   |   |
| Cascades Tissue  Group — Tennessee Inc. (Memphis)                      |   | Parent rolls, bathroom tissue,                                                              |   | 40,000 |
|                                                                        |   |                                                                                        |   |   |
| **Manufacturing**                                                           |   |                                                                                        |   |   |
|                                                                        |   |                                                                                        |   |   |
| Cascades Tissue  Group — Oregon Inc. (St-Helens)                       |   | Parent rolls                                                                                |   | 71,000 |
|                                                                        |   |                                                                                        |   |   |
| Cascades Tissue  Group — New York Inc. (Mechanicville)                 |   | Parent rolls                                                                                |   | 65,000 |
|                                                                        |   |                                                                                        |   |   |
| **Converting**                                                              |   |                                                                                        |   |   |
|                                                                        |   |                                                                                        |   |   |
| Calgary  (Alberta)                                                          |   | Paper towels, bathroom tissue                                                               |   | N/A    |
|                                                                        |   |                                                                                        |   |   |
| Laval (Québec)                                                         |   | Paper napkins                                                                               |   | N/A    |
|                                                                        |   |                                                                                        |   |   |
| Cascades Tissue  Group — Arizona Inc. (Kingman)                        |   | 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    |
|                                                                        |   |                                                                                        |   |   |
| **Converting  Distribution**                                                |   |                                                                                        |   |   |
|                                                                        |   |                                                                                        |   |   |
| Cascades Tissue  Group — IFC Disposables Inc., Brownsville (Tennessee) |   | Industrial wipes  Distribution bathroom tissue, paper hand towels and incontinence products |   | N/A    |

 

4.3           RESEARCHAND DEVELOPMENT

Cascades has itsown research and development centre («the Centre») located in Kingsey Falls(Québec), with a staff of 50 people.  TheCentre provides the Cascades group with product design and development ofproducts and processes in addition to providing technical support for solvingproduction problems and improving quality. In addition to these services, the Centre also provides environmentalconsultation and expertise.

The InformationTechnology Centre, in operation since February 2004, develops software in manyspheres of activity for the Cascades group such as accounting, finance, humanresources, warehousing logistic, transport management and productionmanagement.  It has a team of 115employees.

4.4           COMPETITIVECONDITIONS

The markets forCascades’ products are highly competitive. In some of the markets in whichCascades competes, particularly in boxboard, tissue and specialty products, theCompany competes with a small number of other producers.  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 the Company’s packaging products segment,it also faces competition from alternative packaging materials, such as plasticand styrofoam, which can lead to excess capacity, decreased demand and pricingpressures.

Competition inCascades’ markets is primarily based upon price as well as customer service andthe quality, breadth and performance characteristics of its products.  The Company’s ability to compete successfullydepends upon a variety of factors, including: 1) its ability to maintain highplant efficiencies and operating rates and lower manufacturing costs; 2) theavailability, quality and cost of raw materials, particularly recycled andvirgin fibre, and labor; and 3) the cost of energy.

Some of theCompany’s competitors may, at times, have lower fibre, energy and labour costsand less restrictive environmental and governmental regulations to comply withthan Cascades does.  For example, fullyintegrated manufacturers, which are those manufacturers whose requirements forpulp or other fibre are met fully from their internal sources, may have somecompetitive advantages over manufacturers that are not fully integrated, suchas Cascades, in periods of relatively high prices for raw materials, in thatthe former are able to ensure a steady source of these raw materials at coststhat may be lower than prices in the prevailing market.  In contrast, competitors that are less integratedthan Cascades may have cost advantages in periods of relatively low pulp orfibre prices because they may be able to purchase pulp or fibre at prices lowerthan the costs the Company incurs in the production process.  Other competitors may be larger in

12

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size or scope thanCascades is, which may allow them to achieve greater economies of scale on aglobal basis or allow them to better withstand periods of declining prices andadverse operating conditions.

In addition, therehas been an increasing trend among the Company’s customers towardsconsolidation. With fewer customers in the market for the Company’s products,the strength of its negotiating position with these customers could beweakened, which could have an adverse effect on pricing, margins andprofitability.

4.5           CYCLECOMPONENTS

Cascades is a diversified producer of packaging products, and tissuepaper with 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 the adverse effectsof industry conditions, the markets for some of its products, notably,containerboard and fine papers are highly cyclical. These markets are heavilyinfluenced by changes in the North American and global economies, industrycapacity and inventory levels maintained by customers, all of which affect sellingprices and profitability. The Company is also affected by the variation of theCanadian dollar against the U.S. dollar and the euro.

4.6           ENVIRONMENT

The Company issubject to environmental laws and regulations imposed by various governmentaland regulatory authorities in all the countries where it operates.  The Company is in compliance, in all materialrespects, with all applicable environmental legislation and regulations.  However, ongoing capital and operatingexpenses are expected to be incurred to achieve and maintain compliance withapplicable environmental requirements.

In 2006,environmental protection requirements and the application of Cascades’environmental mission required capital expenditures and led to operating costsin the following amounts:

| Country       | ** ** | **Capital Expenses** | ** ** | **Operating Costs** | ** ** |
|---------------|------------|---------------------------|------------|--------------------------|------------|
| Canada        |       | 1,054,898                 |       | 22,533,355               |       |
| United States |       | 3,574,658                 |       | 43,062,766               |       |
| Europe        |       | 1,631,553                 |       | 25,647,333               |       |
| **Total**     |       | 6,261,109                 | (1)        | 91,243,454               | (1)        |

----

(1) These amountsinclude 100% investments and costs of Norampac

Cascadesconsumes  more than 2.7 millionshort tons of recycled fibre and its products are made of close to 70% ofrecycled fibre.

4.7           REORGANIZATIONS

On December 29,2006, in the context of the acquisition of the outstanding shares (50%) held byDomtar in Norampac, the Company proceeded, by way of transfer of assets, sharesand through mergers, to a corporate reorganization whereby all of the Canadianactivities of Norampac., were consolidated under a division of Cascades CanadaInc.

4.8           SOCIALPOLICIES

The Company has adopted aCode of Ethics (the “Code”), which is meant to provide directors, officers, andemployees with general guidelines for acceptable behaviour in all relationshipswith each other, customers, suppliers, partners, and the communities where theCompany operates its activities.  A copyof the Code is available upon written request to the Corporate Secretary at thefollowing address:

**Cascadesinc.**

*CorporateSecretariat*

404, Marie-VictorinBlvd., P.O. Box 30

KingseyFalls (Québec) J0A 1B0

The Code and thecorporate policies referred to in the document are also available on theCompany’s website at www.cascades.com.

4.9           BUSINESSRISKS

We refer thereader to Management’s Discussion and Analysis of Financial Position andOperating Results in the 2006 Annual Report, specifically under the heading “Riskmanagement” on pages 32 and 33 incorporated by reference herein.

# **ITEM 5 -DIVIDENDS**

In 2004, 2005 and 2006, Cascades paid dividends on its Common Shares atthe current rate of $0.04 per Common Share per quarter.  Other than pursuant to the Indentures, whichgovern its 7.25% senior note indenture and Norampac’s 6.75% senior noteindenture and the Credit Facilities, there are no material contractualrestrictions on Cascades’ ability to declare and pay dividends on its CommonShares.

The dividend amount is reviewed annually by the Board of Directors and isdetermined taking into account Cascades’ financial situation, its results fromoperations, its capital requirements and any other factor deemed pertinent bythe Board.

13

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# **Item 6 — Capital Structure**

6.1           GENERAL DESCRIPTION OF CAPITAL STRUCTURE

Theshare capital of the Company is composed of an unlimited number of CommonShares without par value, an unlimited number of Class “A” Preferred Shareswithout par value which may be issued in series and an unlimited number ofClass “B” Preferred Shares without par value which may be issued in series.

The holders ofcommon shares are entitled to the right to vote on the basis of one vote pershare at any meetings of shareholders and the right to receive dividends and toshare in the remaining assets in the event of a liquidation of theCompany.  As at March 9, 2007, 99,401,789 Common Shareswere issued and outstanding.

The Class “A” and “B”Preferred Shares are issuable in series and rank equally within theirrespective classes as to dividends and capital. Registered holders of any series of Class “A” or Class “B” are entitledto receive, in each fiscal year of the Company or on any other basis,cumulative or non-cumulative preferred dividends payable at the time, at therates 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 eventof the liquidation, winding-up or dissolution of the Company or any otherdistribution of its assets to its shareholders, the holders of Class “A” and “B”preferred shares are entitled to receive, out of the assets of the Company, theamount paid in consideration of each share held by them.  The holders of Class “A” and “B” preferredshares are not entitled as such to receive notice of or to attend or to vote atany meetings of shareholders.  None ofthe Class “A” or “B” Preferred Shares of the capital stock of the Company are,as of the date hereof, issued and outstanding.

6.2           RATINGS

Credit ratings areintended to provide investors with an independent measure of credit quality ofan issue of securities.  Rating for debtinstruments are presented in ranges by each of the rating agencies.  The highest quality of securities are ratedAAA in the case of Standard & Poor’s (“S&P”) or Dominion Bond RatingService (“DBRS”), or Aaa in the case of Moody’s Investors Service  (“Moody’s”). The lowest quality of securitiesare rated D in the case of S&P and DBRS, or C in the case of Moody’s.

According to theS&P rating system, notes rated BB, B, CCC, CC, and C are regarded as havingsignificant speculative characteristics. A BB rating indicates the least degree of speculation and C the highest.While such notes will likely have some quality and protective characteristics,these may be outweighed by large uncertainties or major exposures to adverseconditions.  Notes rated BBB are lessvulnerable for non-payment than other speculative economic conditions, whichcould lead to the obligor’s inadequate capacity to meet its financialcommitment on the obligation.  Theratings 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 theMoody’s rating system, notes, which are rated Ba, are judged to havespeculative elements; their future cannot be considered as well assured.  Often the protection of interest andprincipal payments may be very moderate, and thereby not well safeguardedduring both good and bad times over the future. Uncertainty of position characterizes bonds in this class. Moody’sapplies numerical modifiers 1, 2, and 3 in each generic rating classificationfrom Aa through Caa.  The modifier 1 indicatesthat the obligation ranks in the higher end of its generic rating category; themodifier 2 indicates a mid-range ranking and the modifier 3 indicates a rankingin the lower end of that generic rating category.

According to theDBRS rating system, notes rated BBB are of adequate credit quality.  Protection of interest and principal isconsidered acceptable, but the entity is fairly susceptible to adverse changesin financial and economic conditions, or there may be other adverse conditionspresent which reduce the strength of the entity and its rated securities.  Each rating category from AA to C is denotedby the sub-categories high and low.  Theabsence of either a high or low designation indicates the rating is in themiddle of the category.
| ****Credit Risk****                                  | **** **** | ****Moody’s***** | **** **** | ****S & P ***** | ** ** | **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 DBRS

Cascades’outstanding senior notes had received the following ratings by DBRS, Moody’sand S&P at the dates mentioned below:
| **Rating agency** | ** ** | **Rating** | ** ** | **Qualitative** | ** ** | **Most recent update** |
|-------------------|------------|------------|------------|-----------------|------------|------------------------|
| DBRS              | ** ** | BB**+**    |       | Stable outlook  |       | December 15, 2006      |
| S&P           |       | BB -       |       | Stable outlook  |       | January 16, 2007       |
| Moody’s      |       | Ba3        |       | Stable outlook  |       | December 20, 2006      |

 

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It isto be noted that the credit ratings accorded to the notes by the ratingagencies are not recommendations to purchase, hold or sell the notes as such,given these ratings do not comment as to market price or suitability for aparticular investor.  There is noassurance that any rating will remain in effect for any given period of time orthat any rating will not be revised or withdrawn entirely by a rating agency inthe future if in its judgement circumstances so warrant.

# **Item 7 —Market for Securities**

7.1           TRADINGPRICE AND VOLUME

Cascades’ CommonShares are traded on the Toronto Stock Exchange under the “CAS” symbol.  The following table sets forth the marketprice range, in Canadian dollars, and trading volumes of the Company’s Common Shareson the Toronto Stock Exchange for each month of the most recently completedfinancial year:

**Toronto StockExchange — Market price range — Year 2006**
| **Month** | ** ** | **High** | ** ** | **Low** | ** ** | **Closing Price** | ** ** | **Trading Volumes** | ** ** |
|-----------|------------|----------|------------|---------|------------|------------------------|------------|--------------------------|------------|
| January   |       | 10,49    |       | 9,94    |       | 9,95                   |       | 2,248,800                |       |
| February  |       | 10,89    |       | 9,66    |       | 10,55                  |       | 1,465,300                |       |
| March     |       | 11,99    |       | 10,33   |       | 11,76                  |       | 1,750,300                |       |
| April     |       | 11,99    |       | 11,30   |       | 11,30                  |       | 1,156,900                |       |
| May       |       | 11,76    |       | 10,51   |       | 11,02                  |       | 2,291,300                |       |
| June      |       | 11,34    |       | 10,81   |       | 11,06                  |       | 1,746,400                |       |
| July      |       | 11,92    |       | 11,09   |       | 11,53                  |       | 1,898,600                |       |
| August    |       | 12,85    |       | 11,55   |       | 12,20                  |       | 4,343,000                |       |
| September |       | 12,40    |       | 11,50   |       | 12,19                  |       | 2,339,200                |       |
| October   |       | 13,71    |       | 12,14   |       | 13,57                  |       | 4,583,700                |       |
| November  |       | 14,78    |       | 13,37   |       | 13,88                  |       | 4,306,500                |       |
| December  |       | 13,87    |       | 12,61   |       | 13,23                  |       | 3,435,600                |       |

 

In2005, the Company renewed its normal course issuer bid.  Purchases began on March 11, 2005 andcontinued until March 10, 2006.  Thenotice enabled Cascades to acquire up to 4,068,707 Common Shares, representingapproximately 5% of the issued and outstanding Common Shares as at March 9,2005.  On March 10, 2006, Cascades hadredeemed 537,900 Common Shares for a consideration of $5,677,000.

In 2006, in thenormal course of business, the Company renewed its redemption program.  Purchases began on March 13, 2006 andcontinued until March 12, 2007.  Thenotice enabled Cascades to acquire up to 4,040,417 Common Shares representingapproximately 5% of the issued and outstanding shares as at March 9, 2006. OnMarch 12, 2007, the Company had redeemed 468,000 Common Shares  for a consideration of $6,312,868.

On March 9, 2007,Cascades announced that the Toronto Stock Exchange accepted its notice ofintention to begin a normal course issuer bid in respect of its CommonShares.  Purchases pursuant to the normalcourse issuer bid will not commence prior to March 13, 2007 and will not continuebeyond March 12, 2008.  The Common Sharespurchased shall be cancelled.  The noticewill enable Cascades to acquire up to 4,970,094 Common Shares, which representsapproximately 5% of the 99,401,889 issued and outstanding Common Shares as atMarch 8, 2007.

# **Item 8 —Directors and Officers**

The Directors ofthe Company are elected annually to hold office until the next annual generalmeeting or until a successor is elected or appointed.

## 8.1           INFORMATION CONCERNING DIRECTORS

***Mr. Bernard Lemaire***, Québec (Canada),one of the founders of Cascades, is the Chairman of the Company and has been aDirector since 1964.  He serves as amember of the Administrative Committee. He is also Executive Chairman of the Board of Directors of Boralex Inc.,a producer of green and renewable energy, an affiliate of Cascades.

***Mr. Laurent Lemaire***, Québec (Canada),one of the founders of Cascades, is the Executive Vice-Chairman of the Board ofthe Company and has been a Director since 1964. He was President and Chief Executive Officer of the Company from 1992 to2004.  He serves as a member of theAdministrative Committee and is a member of the Board of Directors of JunexInc. and Scotia Bank.

***Mr. Alain Lemaire***, Québec (Canada),one of the founders of Cascades, has been a Director of the Company since 1967and is the President and Chief Executive Officer.  He was Executive Vice-President of theCompany from 1992 to 2004 and President and Chief Executive Officer of NorampacInc. 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 Director of the Companysince 1982.  Mr. Pelletier wasVice-President and Chief Operating Officer, Containerboard of Norampac Inc.,from 1997 to 2000 and held the position of President and Chief ExecutiveOfficer of Rolland Inc. (now known as Cascades Fine Papers Group Inc.) from2000 to 2002.  He serves as Chairman  of the Environmental,Health and Safety Committee. He sits on the Board of Directors of CO2 Solution.

15

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***Mr. Paul R. Bannerman***,Québec (Canada), has been a memberof the Board of Cascades since 1982.  Heis the founder and the Chairman of the Board of Directors of EtcanInternational Inc., a sales agency involved in the sale of finished products ofthe East Angus kraft paper mill as well as the purchase of virgin pulp forseveral other Cascades mills.  Mr.Bannerman is a graduate of McGill University in political science and economicsand holds an MBA from Harvard University.

***Mr. André Desaulniers***, Andorre (Europe), has been a Director ofCascades since 1982.  He serves as amember of the Audit Committee and is the Chair of the Corporate Governance andNominating Committee.  His principaloccupation is director of Companies and he acquired his knowledge and expertisewhile acting as Chairman of the Board of Directors of McNeil, Mantha, Inc., anInvestment dealer, for 17 years. He also was a member of several auditcommittees, such as, among others, Chairman of the Audit Committee of theMontréal Stock Exchange. He sits on the Audit Committee and chairs theCorporate Governance and Nominating Committee.

***Mr. Louis Garneau***,Québec (Canada), is President of Louis Garneau Sports Inc., a manufacturer anddistributor of sports clothing and accessories throughout the world.  He has been a Director since 1996 and servesas member of the Human Resources Committee. An international cycle racer, Mr.Garneau participated in the 1984 Olympic games in Los Angeles. He is a Chevalierde l’Ordre National of Québec and an Officer of the Order of Canada.

***Ms. Sylvie Lemaire***,Québec (Canada), has been a Director of Cascades since 1999.  She is President of Fempro Inc., amanufacturer of absorbent products.  Sheserves as a member of the Environmental,Health and Safety Committee.  Ms. Lemaireholds the degree of Bachelor in Industrial Engineering from the Montréal Écolepolytechnique.

***Mr. Michel Desbiens***,Québec (Canada), a consultant and director of companies, joined the Board ofDirectors of the Company in 2001.  He isthe Chair of the Human Resources Committee and serves as a member of the Environmental, Health and Safety Committee. Heheld the positions of President and Chief Executive Officer of Donohue Inc.,and Chairman of the Board of Directors of Abitibi-Consolidated Inc.

***Mr. Laurent Verreault***,Florida (United States), is Chairman of the Board of Directors and ChiefExecutive Officer of Groupe Laperrière & Verreault Inc., a manufacturer ofengineered equipment.  He has been aDirector of Cascades since 2001 and serves as a member of the Audit and of theHuman Resources Committees.  Mr.Verreault sits on the Board of Directors of TVA Group Inc. and the MontréalExchange.

***Mr. Robert Chevrier***,Québec (Canada), has been a Director of Cascades since 2003.  He is President of Société de Gestion RocheInc., a holding and investment company. Mr. Chevrier sits on the Board ofDirectors of Groupe CGI Inc., Bank of Montréal, Transcontinental Inc.,Richelieu Hardware Ltd and Addenda Capital Inc. He is former Chairman of the Board of Directors and President and ChiefExecutive Officer of Rexel Canada Inc. (formerly Westburne inc.)  Mr. Chevrier is Chairman of the AuditCommittee and also acts as lead Director.

***Mr. David McAusland***,Québec (Canada), has been a Director of the Company since 2003.  He is Executive Vice-President, Corporate Development, andChief Legal Officer of Alcan Inc., an aluminum and packaging products company.  He serves as a member of the CorporateGovernance and Nominating Committee.  Mr.McAusland sits on the Board of Directors of Cogeco Inc. and Cogeco Câble Inc.

***Mr. James B.C. Doak***,Ontario (Canada), was appointed a Director of Cascades in February 2005.  Mr. Doak is President and Managing Directorof Megantic Asset Management Inc., a Toronto investment company, since2002.  He was President of EnterpriseCapital Management Inc. from 1997 to 2002. Mr. Doak serves as a member of the Audit and of the Corporate Governanceand Nominating Committees and sits on the Board of Directors of Khan ResourcesInc. and Purepoint Uranium Group Inc.

16

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8.2           INFORMATION CONCERNING EXECUTIVEOFFICERS
| **Executive  Officers**    | ** ** | **Occupation in the Company**                                                      |
|----------------------------|------------|------------------------------------------------------------------------------------|
| ** **                 | ** ** | ** **                                                                         |
| Bernard Lemaire            |       | Chairman of the Board of Directors                                                 |
|                       |       |                                                                               |
| Laurent Lemaire            |       | Executive Vice-Chairman of the Board of Directors                                  |
|                       |       |                                                                               |
| Alain Lemaire              |       | President and Chief Executive Officer                                              |
|                       |       |                                                                               |
| Alain Ducharme             |       | Corporate Vice-President                                                           |
|                       |       |                                                                               |
| Christian Dubé        |       | Vice-President and Chief Financial Officer                                         |
|                       |       |                                                                               |
| Maryse Fernet              |       | Vice-President, Human Resources                                                    |
|                       |       |                                                                               |
| Claude Cossette            |       | Vice-President, Organizational Development                                         |
|                       |       |                                                                               |
| 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          |
|                       |       |                                                                               |
| Marc-André Dépin |       | President and Chief Executive Officer, Norampac                                    |
|                       |       |                                                                               |
| Stéphane Thiollier    |       | Vice-President and Managing Director, Cascades S.A.,  Boxboard Group — Europe |

 

All the Executive Officers of the Company are Canadian residents anddomiciled in the province of Québec (Canada), except for Stéphane Thiollier whois a resident of France, domiciled in Paris.

During the past five years, each of the Executive Officers of theCompany have been engaged in their present principal occupations or in otherexecutive capacities for the Company or with related or affiliated companiesindicated opposite their name, except for the following senior officers:

Mr. Christian Dubé is Vice-President and Chief Financial Officer sinceMay 17, 2004.  He was Vice-President andChief Financial Officer of Domtar inc. and a Director of Norampac Inc.

Mr. Hubert Bolducholds the position opposite his name since October 25, 2004.  He was Press Secretary, Office of the DeputyMinister and Minister for State for the Economy and Finance and Press Secretaryfor the Premier of Québec.

As at December 31, 2006, the Directors and Executive Officers of theCompany beneficially owned as a group, or exercised control or direction over,directly or indirectly, 30,876,453 Common Shares representing 31% of the CommonShares issued and outstanding.

# **Item 9 —Legal Proceedings**

In 2003, theCompany was informed that one of its divisions, Cascades Resources, was thesubject of an inquiry by the Canadian Commissioner of Competition as to whetherCascades Resources and its competitors had colluded to unduly reduce marketcompetition between paper merchants in Canada. On January 9, 2006, the Company entered a guilty plea to two infractions(the “Infractions”) under the Competition Act in Ontario Superior Court inrelation to sales in Ontario and Québec of carbonless sheet paper by its paper merchantdivision, Cascades Resources.  Pursuantto the plea, the Company has agreed to pay a total of $12.5 million, payable inequal instalments over a period of six and a half years.  The first payment will be due in January2008.

OnJanuary 10, 2006, the Company was informed that a class action based on theInfractions had been filed against Cascades Fine Papers Group Inc., Domtar Inc.and Unisource Canada Inc. before the Québec Superior Court claiming damagestotalling $10 million.  On January12, 2006, the Company was informed that a second class action had been filedin  Québec Superior Court against thesame defendants 

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basedon the Infractions claiming damages for an undetermined amount.  On February 6, 2006, the Company was informedthat a third class action based on the Infractions was filed against the samedefendants as well as Coast Paper Ltd. in Ontario Superior Court for damages totalling $25 million.  Cascades Fine Papers Group Inc. intends tovigorously defend itself against these claims.  The Company is unable to predict the outcomeof these claims at this time.

An action wasfiled against the Company on October 4, 2004, in the Supreme Court of the Stateof New York, Niagara County, by ServiceCore, Inc., alleging that the Companybreached a Finder Agreement in respect of gypsum board dated April 1999**and seeking damages in excess ofUS$9 million.  The Company removedthe action to the United States District Court for the Western District of NewYork and filed an answer denying the allegations of breach of the Finder’sAgreement.  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’ transferagent and registrar is ComputershareInvestor Services Inc. (“Computershare”), having its place of business inMontréal, Québec, Canada at 1500 University Street, 7th Floor. 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 materialcontracts entered into during the year ended December 31, 2006 or in prioryears that are still in effect and filed on SEDAR are:

On February 5,2003, the Company completed a series of transactions to refinance substantiallyall of its existing credit facilities, except those of its joint ventures. OnOctober 31, 2005, Cascades completed the refinancing of its $500 millionrevolving credit facility originally put in place in February 2003. This new$550 million credit facility included a $ 450 million five-year revolvingfacility maturing in 2010 and a seven-year $100 million term facility maturingin 2012, reimbursable without penalty, at the Company’s option any time priorto maturity. On December 29, 2006, in connection with the acquisition of theremaining outstanding shares (50%) from Domtar in Norampac, the Companycompleted the refinancing of its $550 million credit facility originally put inplace in 2005 to provide for new $850 million credit facilities (including $325million of Norampac) consisting of a $650 million five year secured revolvingcredit facility maturing in December 2011, a $100 million secured term facilitymaturing in October 2012 and a six-month $100 million senior unsecuredrevolving credit facility which should be converted into the secured revolvingfacility in 2007. Subject to certain conditions, the Company also has theoption to request an increase of the secured revolving credit facility by anadditional amount of up to $150 million. The six-year term facility can bereimbursed without penalty at the Company’s option at any time prior tomaturity. Its obligations under this new revolving credit facility are securedby all inventory and receivables of the Company and its North Americansubsidiaries and by the property, plant, and equipment of three of its mills.

In addition, onFebruary 5, 2003, the Company issued new unsecured 7.25% senior notes, maturingin 2013, for an aggregate amount of US$450 million which were subsequentlyregistered with the Securities and Exchange Commission of the United States andredeemable as of February 2008, all or in part at the option of the Companyunder certain conditions subject to payment of a premium. The aggregateproceeds of these two transactions, combined with its additional cash on hand,were used by the Company to repay substantially all of the existing creditfacilities.

On May 28, 2003,Norampac issued new unsecured 6.75% senior notes, maturing in 2013, for anaggregate amount of US$250 million which were subsequently registered withthe Securities and Exchange Commission of the United States and redeemable asof June 2008, all or in part at the option of the Company under certainconditions subject to payment of a premium. The proceeds of this transaction,combined with a new revolving credit facility, were used to refinancesubstantially all of its outstanding credit facilities and credit lines as wellas to redeem its then outstanding senior notes.

On July 8, 2003,the Company completed a private placement of US$100 million 7.25% seniornotes, maturing in 2013, at a price of 104.50%, or an effective interest rateof 6.61%. These senior notes are treated as part of the same series of 7.25%senior notes issued in February 2003 and were subsequently registered with theSecurities and Exchange Commission of the United States. The proceeds of thisfinancing were used to reduce indebtedness under the revolving credit facilityof the Company.

On December 2,2004, the Company completed a private placement of US$125 million of 7.25%senior notes due in 2013, which are treated as part of the same series of 7.25%senior notes due in 2013 that were issued in February 2003.  These senior notes were subsequently registeredwith the Securities and Exchange 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%.  The net proceeds of $156 million of thisfinancing were used to reduce indebtedness under the Company’s revolving creditfacility.

On November 17, 2005, theCompany 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 Spicers, a division of PaperlinX Canada Limited. OnFebruary 28, 2006, the Company completed the transaction for an approximateamount of $86 million.

On December 28,2006, the Company entered into a Share Purchase Agreement with Domtar toacquire the outstanding CommonShares of Norampac that the Company did not already own, representing 50% ofthe outstanding Common Shares, for a cash consideration of $560 million.  The Company entered into a Cost SharingAgreement with respect to Norampac’s mill located in Red Rock (Ontario), pursuantto which, in the event that the Company decides to permanently shut down theRed Rock mill within two years of the closing of the transaction, and thisclosure results in environmental remediation costs, the parties have agreedthat the Company will be responsible for the first $10 million of such costs,Domtar and the Company shall be equally responsible for any such costs inexcess of $10 million but not greater than $40 million and the Company will beresponsible for any amount in excess of $40 million.  Domtar’s obligation to assume any such costswill apply only to costs engaged prior to the fifth anniversary of the date onwhich it is announced that the mill has been permanently shut down.

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**Item 12 — Interests of Experts**

The Company’sauditors are PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., CharteredAccountants (“PWC”), who have prepared an auditors’ report dated March 2, 2007 in respect of the Company’sconsolidated financial statements with accompanying notes as at and for theyears ended December 31, 2006 and 2005 and for each of the periods  in the three- year period ended December 31,2006.  PWC has advised that they areindependent with respect to the Company within the meaning of the Rules ofProfessional Conduct of the Institute of Chartered Accountants of Québec.

# **Item 13 —Audit Committee**

13.1         COMPOSITION AND MANDATE

TheCompany has an Audit Committee (the “Committee”), which is composed of Messrs.Robert Chevrier (Chairman), André Desaulniers, Laurent Verreault and James B.C.Doak.  The Committee is governed by acharter which is attached to this AIF as Schedule A.  The Company also adopted a Code of Ethics(the “Code”) that applies to all directors, officers and employees. The Code isposted on Cascades’ website at www.cascades.com.  All the members of the Committee areindependent in accordance with the definition provided in section 1.4 ofMultilateral Instrument 52-110 of the Canadian Securities Administrators  and have financial expertise.

13.2         RELEVANTEDUCATION AND EXPERIENCE OF THE MEMBERS

The following is abrief summary of the education and experience of each member of the AuditCommittee that is relevant to the performance of their responsibilities,including any education or experience that has provided the member with anunderstanding of the accounting principles used by the Company to prepare itsannual and interim financial 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 the Company 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  the Company’s 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 TVA Group Inc. and the Montréal 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., an investment dealer, for 17 years. He  also served on several audit committees, namely as Chairman of the Audit  Committee of the Montréal Stock 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         EXTERNALAUDITORS SERVICE FEES

The following table sets out the fees paid to PricewaterhouseCoopersLLP/s.r.l./s.e.n.c.r.l. in Canadian dollars in the past two fiscal years forvarious services provided to the Company and its subsidiaries :
| ** **              | ** ** | **Fees**                        | ** ** |
|-------------------------|------------|---------------------------------|------------|
| **Services**            | ** ** | **December 31, 2005** | ** ** | **December 31, 2006** | ** ** |
|                    | ** ** | ** **                      | ** ** | ** ** | ** ** |
| Audit Fees (1)          |       | $                               | 1,617,005  |   | $ | 1,527,933 |   |
| Audit-Related  Fees (2) |       | $                               | 411,407    |   | $ | 295,392 |   |
| Tax Fees (3)            |       | $                               | 130,152    |   | $ | 313,146 |   |
| Other Fees (4)          |       | N/A                             |       | N/A |   |
| Total                   |       | $                               | 2,158,564  |   | $ | 2,136,471 |   |

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(1)             Professional servicesprovided in connection with statutory and regulatory filings and audit of theannual financial statements of the Company.

(2)             Professional servicesprovided in connection with the Company’s issuance of senior notes as well asconsultations on accounting and regulatory matters.

(3)             Professional servicesmainly for tax compliance.

(4)             Variousother services.

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13.4         POLICIESAND PROCEDURES FOR THE ENGAGEMENT OF AUDIT AND NON-AUDIT SERVICES

The Company’sAudit Committee (the “Committee”) has adopted a Pre-approval Policy andProcedures for services provided by external auditors, (the “Policy”) whichsets forth the procedures and the conditions pursuant to which permissibleservices proposed to be performed by external auditors are pre-approved.  Under the terms of the Policy, services,which involve annual fees of less than $35,000, are pre-approved.  The Committee has delegated to the Chairmanof the Committee pre-approval authority for any services not previouslyapproved by the Committee, which involve the payment of unbudgeted fees inexcess of $35,000 up to a maximum of $50,000. Services, which involve fees of more than $50,000, require pre-approvalof all the members of the Committee.

# **Item 14 —Additional information**

Additionalinformation, including Directors’ and Senior Officers’ remuneration andindebtedness, principal holders of the securities of Cascades and options topurchase securities, and interests of insiders in material transactions, ifany, is contained in the Management Proxy Circular dated March 9, 2007 for theannual general shareholders meeting.

Also, additionalfinancial information pertaining to the fiscal year ended December 31, 2006including Management’s Discussion and Analysis is presented in the Company’s 2006**Annual Report.

In addition, thefollowing documents may be obtained, upon written request, from the Company’sCorporate Secretary:

(a)           When Cascades is in the course of adistribution of its securities pursuant to a short form prospectus or has fileda preliminary short form prospectus in respect of a proposed distribution ofits securities:

i) one copyof the latest Annual Information Form of the Company, together with one copy ofany document, or the pertinent pages of any document, incorporated by referencein the Annual Information Form;

ii) one copyof the latest Annual Report of the Company, a copy of the comparative financialstatements of the Company for its most recently completed financial year forwhich financial statements have been filed together with the accompanyingAuditors’ report, and the Management’s Discussion and Analysis of FinancialPosition and Operating Results and one copy of any interim financial statementsof the Company that have been filed, if any, for any period after the end ofits most recently completed financial year;

iii) one copyof the Company’s Management Proxy Circular in respect of its most recent Annual General Meeting of Shareholdersthat involved the election of  Directors; and

iv) one copyof any other documents which are incorporated by reference into the preliminaryshort form prospectus or the short form prospectus; or

(b)           at any other time, a copy of thedocuments referred to in a) i) to iii) above, may be obtained from theCorporate Secretary of the Company, at the address indicated below, providedthat the Company may require the payment of a reasonable fee if the request ismade by a person or company who is not a security holder of Cascades.

Most of theabove-mentioned information relating to the Company may be found on SEDAR atwww.sedar.com and on the Company’s website at www.cascades.com.
| ** ** | **Cascades Inc.**                           |
|------------|---------------------------------------------|
|       | Corporate  Secretary                        |
|       | 404  Marie-Victorin Blvd., P.O. Box 30 |
|       | Kingsey Falls,  Québec J0A 1B0         |
|       | Telephone: (819)  363-5100                  |
|       | Telecopier:  (819) 363-5127                 |

 

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**SCHEDULE A**

**CHARTEROF THE AUDIT COMMITTEE**

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

### **1.             PURPOSE**

Thepurpose of this charter is to describe the role of the Audit Committee (the« Committee ») as well as its duties and responsibilities delegatedby the Board of Directors (« the Board »).  The main duty of the Committee is to assistthe Board in fulfilling its oversight responsibilities with respect to thefollowing issues: the quality and integrity of the Company’s financialstatements;

·            accountingand financial reporting process;

·            systemsof internal accounting and financial controls;

·            externalauditors qualifications, independence and performance;

·            internalaudit function and  process;

·            theCompany’s compliance with legal and regulatory requirements;

·            fulfillany other responsibilities assigned to it from time to time by the Board.

##### **2.             DIVISION OF RESPONSIBILITIES**

Incarrying out the duties of the Committee described in this charter, the membersof the Committee recognize that its function is to oversee the Company’sfinancial reporting process on behalf of the Board as well as to report itsactivities regularly to the Board. Management of the Company is responsible for the preparation, thepresentation and the integrity of the Company’s financial statements and forthe effectiveness of internal control over financial reporting.

Managementand the internal audit service are responsible for maintaining appropriateaccounting and financial reporting principles and policies as well as internalcontrols and procedures that provide for compliance with accounting standardsand 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.

Inperforming their duties, the members of the Committee must have open and freediscussions with the Board, the external auditors, the internal auditor andmanagement of the Company.

**3.             COMPOSITION ANDORGANIZATION**

TheCommittee shall be composed of a minimum of three directors, as appointed by the Board at its first meetingfollowing the annual shareholders meeting. Each member must be an unrelated or independent director.

EachCommittee member must be financially literate and at least one member must haveaccounting or related financial management expertise, as determined by theBoard.

TheCommittee will appoint one of its members as Chairman and the Secretary orAssistant-Secretary of the Company or the person designated as Secretary willbe secretary for all meetings of the Committee and will keep minutes of theCommittee’s deliberations.

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

The Committee shall meet at least four times a year,or more frequently if circumstances so dictate. By virtue of its mandate tofoster open relations, the Committee shall also meet separately and *in camera* for discussions with theinternal auditor, management and with the external auditors, as required.

TheCommittee shall establish its own rules and procedures (subject to any specificguidelines from the Board) and shall meet at the place and in accordance withthe terms prescribed by its rules. A quorum shall not be less than a majorityof  the members of the Committee.

TheChairperson of the Committee determines the agenda for each meeting inconsultation with the Vice-President and Chief Financial Officer, the Secretaryand the Internal Auditor.  The agenda andsupporting documentation are distributed to the members of the Committee withina reasonable timeframe prior to the meetings.

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The Chairman of theCommittee shall report quarterly and when required  to the Board on the Committee’s activitiesand will make recommendations concerning all matters it deems necessary orappropriate.

TheCommittee shall at all times have direct access to management, to the internalauditor and to the external auditors in order to seek explanations orinformation on specific questions.

TheCommittee shall have the resources and the authority appropriate to carry outits duties, including the authority to retain, as it deems necessary, counseland other external consultants and to set and pay their compensation, withoutfurther Board approval.

In carrying out its duties and to meet itsresponsibilities, the Committee shall examine the books and relevant accountsof the Company, its divisions and its subsidiaries.

**5.             DUTIES ANDRESPONSIBILITIES**

In addition to, the above-mentioned responsibilities,the Committee shall address the following questions:

##### 5.1                                 Financialreporting 

·                  Monitorthe quality and integrity of the Company’s accounting and financial reportingsystem through discussions with management, the external auditors and theinternal auditor;

·                  Reviewwith management and the external auditors the annual audited financialstatements of the Company, including the information contained in management’sdiscussion and analysis, related press releases and the external auditors reporton the annual financial statements prior to public disclosure and filing withthe Securities Administrators;

·                  Reviewthe unaudited interim financial statements, including management’s discussionand analysis for each interim period of the fiscal year and related pressreleases prior to public disclosure and filing with the SecuritiesAdministrators;

·                  Reviewthe financial information contained in prospectuses, offering memoranda, the annual information form and otherreports   that include audited or unauditedfinancial information submitted for approval by the Board;

·                  Reviewwith the external auditors and management, the quality, appropriateness  and disclosure of the Company’s accountingprinciples and policies, the underlying assumptions and reporting practices,and any proposed changes thereto;

·                  Reviewfinancial analyses and other written communications prepared bymanagement,  the internal auditor orexternal auditors, setting forth significant financial reporting issues andjudgments made in connection with the preparation of the financial statements,including analyses of the effects of alternative generally accepted accountingprinciples methods (« GAAP ») on the financial statements;

·                  Verifythe compliance of management certification of financial reports with applicablelegislation;

·                  Reviewimportant litigation and any regulatory or accounting initiatives that couldhave a material effect upon the Company’s financial situation or operatingresults and the appropriateness of the disclosure thereof in the documents  reviewed by the Committee;

·                  Reviewthe results of the external audit, and any significant problems encountered inthe performance of the audit, and management’s response or action plan relatedto any management letter issued by the external auditors.

##### 5.2                                 Riskmanagement and internal control

·                  Periodicallyreceive management’s report assessing the adequacy and effectiveness of theCompany’s disclosure controls and procedures and systems of  internal control;

·                  Reviewinsurance coverage for the Company annually and as may otherwise beappropriate;

·                  Reviewthe Company’s risk assessment and risk management policies, including the 

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Company’s policiesregarding hedging, investment and credit; review significant capital costs andother major expenditures, related party transactions and any other transactionswhich could alter the Company’s financial or corporate structure, includingoff-balance sheet items;

·                  Assistthe Board in carrying out its responsibility for ensuring that the Company iscompliant with applicable legal and regulatory requirements;

·                  Whileensuring confidentiality and anonymity, establish procedures for the receipt,retention and treatment of complaints received by the Company regardingaccounting, internal accounting controls or auditing matters, includingemployee concerns regarding accounting or auditing matters.

·                  Periodically review with the Board, theexternal and internal auditors, and members of management, the Company’santi-fraud program and practices.

##### 5.3                                 InternalAudit Function

·                  Reviewwith management, the internal audit staff qualifications and experience and, ifrequired, recommend the appointment or replacement of the internal auditor;

·                  Regularlyassess the internal audit function’s performance, its responsibilities, itsstaffing, budget and the compensation of its members;

·                  Annuallyreview the internal audit plan;

·                  Undertakeprivate discussions with the internal auditor to establish internal auditindependence, the level of co-operation received from management, the degree ofinteraction with the external auditors, and any unresolved differences ofopinion or disputes.

5.4           External Auditors

·                  Recommendto the Board, the appointment of the external auditors and, if appropriate,their removal (in both cases, subject to shareholder approval), evaluate andcompensate them and assess their qualifications, performance and independence;

·                  Ensurethat as representatives of the shareholders, the external auditors report tothe Committee and to the Board;

·                  Approveall auditing services provided by the external auditors and determine andapprove in advance non audit services provided, in compliance with applicablelegal and regulatory requirements;

·                  Discuss with the external auditors the quality and not just the acceptabilityof the Company’s accounting principles but also the quality of thoseprinciples, including: i) all critical accounting policies and practices used ;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 external auditors, including anydisagreement or unresolved differences of opinion between management and theexternal auditors that could have an impact on the financial statements;

·                  Reviewat least once a year the external auditors report stating all relationships theexternal auditors have with the Company and confirming their independence, andholding discussions with the external auditors as to any relationship orservices that may impact the quality of the audit services or their objectivityand independence;

·                  Reviewthe Company’s hiring policies for employees or former employees of the external auditors.

5.5           Performance Evaluation of theCommittee

·                  Prepareand review, with the Board, an annual performance evaluation of the Committeeand its members and assess once a year, the adequacy of its mandate and, ifrequired, make recommendations to the Board.

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