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UNITED STATES

SECURITIES AND
EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 20-F/A

(Amendment No. 1)





(Mark One)



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2007

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

OR



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report.

For the transition period from
___________________________ to _______________________

Commission file number 001-14636

ABITIBI-CONSOLIDATED INC.

(Exact
name of Registrant as specified in its charter)

N/A

(Translation of Registrants name into English)



|                                                |  |                                                                   |  | 
|----------------------------------------------- |  | ----------------------------------------------------------------- |  | 
|Canada                                          |  | 1155 Metcalfe Street, Suite 800, Montreal, Quebec, Canada H3B 5H2
|(Jurisdiction of incorporation or organization) |  | (Address of principal executive offices)                         



Securities registered or to be registered
pursuant to Section 12(b) of the Act.



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered

None

(Title of Class)

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

SEC 1852 (03-07)

Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock
as of December 31, 2007.

440,174,994

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 ̈ Yes     x No

If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 ̈ Yes     x No

Note  Checking the box above
will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 ̈ Yes     x No

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check One):



|                           |  |                      |  |                         
|-------------------------- |  | -------------------- |  | ------------------------
|Large accelerated filer   ̈ |  | Accelerated filer   ̈ |  | Non-accelerated filer  x

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

 ̈ Item 17 x Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 ̈ Yes     x No

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

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

 ̈ Yes      ̈ No

*   See Explanatory Note on following page.









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EXPLANATORY STATEMENT

This Amendment is being filed to amend Items 3.A, 4, 6, 7.B, 10 and 11 in Part I, Items 15, 16A, 16B and 16C in Part II , Items 18 and 19 in Part III, the index to our financial statements, the independent
auditors report, the signature page and the Section 302 certifications. Except as expressly stated herein, this Form 20-F/A does not modify or update any of the disclosures contained in the original filing to reflect any events that occurred
at a later date.



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ABITIBI-CONSOLIDATED INC.

FORM 20-F/A

Amendment No. 1

For the year ended December 31, 2007

TABLE OF CONTENTS



|                                                                      |  |                                                            |  |   
|--------------------------------------------------------------------- |  | ---------------------------------------------------------- |  | --
|                                                                      |  | Part 1                                                     |  | 1 
|Item 3                                                                |  | Key Information                                            |  | 2 
|Item 4                                                                |  | Information on the Company                                 |  | 5 
|Item 6                                                                |  | Directors, Senior Management and Employees                 |  | 18
|Item 7                                                                |  | Major Shareholders and Related Party Transactions          |  | 27
|Item 10                                                               |  | Additional Information                                     |  | 28
|Item 11                                                               |  | Quantitative and Qualitative Disclosures about Market risk |  | 29
|                                                                      |  | Part II                                                    |  | 32
|Item 15                                                               |  | Controls and Procedures                                    |  | 32
|Item 16A                                                              |  | Audit Committee Financial Expert                           |  | 33
|Item 16B                                                              |  | Code of Ethics                                             |  | 34
|Item 16C                                                              |  | Principal Accountants Fees and Services                    |  | 34
|                                                                      |  | Part III                                                   |  | 35
|Item 18                                                               |  | Financial Statements                                       |  | 35
|Item 19                                                               |  | Exhibits                                                   |  | 35
|Section 302 President and Vice President and Treasurer Certifications |  |                                                           



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PART I

In this Annual Report unless otherwise noted or the context otherwise requires, the terms
we, our, ours, us,, ACI, Abitibi and Company refer to Abitibi-Consolidated Inc., a corporation amalgamated under the laws of Canada, and its direct and indirect subsidiaries.
All references to the Combination refer to the combination of Abitibi-Consolidated Inc. and Bowater Incorporated (Bowater) to form AbitibiBowater Inc. (AbitibiBowater).

In this Annual Report, unless otherwise stated, dollar amounts are expressed in Canadian dollars.

Unless we indicate otherwise, all information in this Annual Report is stated as of March 31, 2008.

Forward-Looking Statements

Statements in this Annual
Report that are not reported financial results or other historical information are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and forward-looking information within
the meaning of the Securities Act (Ontario), collectively referred to herein as forward-looking statements. They include, for example, statements relating to Abitibis current liquidity situation, the sale of our Snowflake, Arizona
Mill, industry conditions and trends, plans to achieve operational improvements and efficiencies, the effects of our reduction of newsprint and specialty paper capacity, including the closures of certain paper and sawmills, the ability to realize
synergies from the combination of Abitibi and Bowater, the anticipated timing and progress of integration efforts related to the combination, the ability to meet AbitibiBowaters $1 billion debt reduction target (including the success of its
program to sell non-core assets, consolidate operations and the success of other actions aimed at reducing its debt), the ability to maintain and improve customer service levels, and assessments of market conditions, anticipated future financial
performance and our business outlook generally. Forward-looking statements may be identified by the use of forward-looking terminology such as the words will, could, may, intend, expect,
believe, anticipate, and other terms with similar meaning indicating possible future events or potential impact on the business or security holders of Abitibi-Consolidated Company of Canada (ACCC), Abitibi and
AbitibiBowater.

The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of
future performance. These statements are based on managements current assumptions, beliefs and expectations, all of which involve a number of business risks and uncertainties that could cause actual results to differ materially. These risks
and uncertainties include, but are not limited to, our ability to derive additional liquidity in a timely fashion and on terms acceptable to us, if at all, our ability to sell the Snowflake, Arizona mill, the current state of the credit markets, the
ability to reduce newsprint and specialty paper capacity as quickly as anticipated, the continued strength of the Canadian dollar against the U.S. dollar, worsening industry conditions and further growth in alternative media, actions of competitors,
the demand for higher margin uncoated mechanical paper, our ability to realize announced price increases, and the costs of raw materials such as energy, chemicals and fiber. In addition, with respect to forward-looking statements relating to the
combination of Abitibi and Bowater, the following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: the risk that the businesses will not be integrated successfully or that
the improved financial performance, product quality and product development will not be achieved; the risk that other combinations within the industry or other factors may limit our ability to improve our competitive position; the risk that the cost
savings and other expected synergies from the combination may not be fully realized, may take longer to realize than expected or may not benefit Abitibi and Bowater to the same or similar extent; and disruption from the transaction making it more
difficult to maintain relationships with customers, employees or suppliers. The assumptions used to develop the forward-looking statements referred to below under the headings Business OverviewRecent Developments and elsewhere also
include the assumption that none of the identified material risk factors that could cause actual results to differ from forward-looking statements will occur.

Any forward-looking information contained in this Annual Report about prospective results of operations, financial position or cash flows that is based upon assumptions about future economic conditions and courses of
action is presented for the purpose of assisting prospective purchasers of securities in making their investment decision regarding the offering and may not be appropriate for other purposes. We undertake no obligation to



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publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Item 3. Key Information

A. Selected Financial Data

You should read the following selected financial data together with Item 5 Operating and Financial Review and Prospects, the Consolidated
Financial Statements in Item 18 and the other information in this Annual Report. The selected financial data is derived from the consolidated financial statements for the years we present.

The Consolidated Financial Statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian
GAAP). These principles differ in certain respects from United States generally accepted accounting principles (U.S. GAAP) as described in note 26 to the Consolidated Financial Statements in Item 18. For all the years
presented, the selected financial data is prepared in accordance with Canadian GAAP unless otherwise indicated.



2



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SELECTED FINANCIAL AND OTHER DATA

The following table sets forth consolidated historical financial data and operating data for Abitibi for the periods indicated. The consolidated
statements of earnings (loss) data for the years ended December 31, 2007, 2006 and 2005 and the consolidated balance sheet data at December 31, 2007 and 2006 is derived from our audited consolidated financial statements as at
December 31, 2007 and 2006 and for the three year period ended December 31, 2007, beginning on page F-1 of this Annual Report. The consolidated statements of earnings data for the two years ended December 31, 2004 and 2003 have been
derived from our audited financial statements and related notes thereto not included in this Annual Report. This information should also be read in conjunction with Operating and Financial Review and Prospects, which is included in Item 5 of
this Annual Report. The financial information has been derived from consolidated financial statements that have been prepared in accordance with Canadian GAAP. See note 26 to our audited consolidated financial statements beginning on page F-1 for a
description of the differences between U.S. GAAP and Canadian GAAP as it relates to Abitibi. All information provided below is in millions of Canadian dollars, except information related to volume, information per share and revenue per tonne.



|                                                                        |  |                         |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|----------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - |  | - | ----- | -
|                                                                        |  | Year Ended December 31, |       
|                                                                        |  | 2003                    |        |   | 2004 |   |       | 2005 |  |   | 2006  |   |  | 2007 |      
|Consolidated Statements of Earnings (loss) Data:                        |  |                         |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Sales                                                                   |  | $                       | 4,980  |   |      | $ | 5,299 |      |  | $ | 5,342 |   |  | $    | 4,851 |   |  | $ | 4,113 |  
|Distribution costs                                                      |  |                         | 555    |   |      |   | 592   |      |  |   | 581   |   |  |      | 509   |   |  |   | 461   |  
|Countervailing, anti-dumping and other duties                           |  |                         | 77     |   |      |   | 50    |      |  |   | 67    |   |  |      | 28    |   |  |   | 11    |  
|Cost of sales, excluding amortization                                   |  |                         | 3,809  |   |      |   | 3,777 |      |  |   | 3,910 |   |  |      | 3,616 |   |  |   | 3,491 |  
|Selling, general and administrative expenses                            |  |                         | 169    |   |      |   | 169   |      |  |   | 179   |   |  |      | 143   |   |  |   | 224   |  
|Closure costs, impairment and other related charges                     |  |                         | 155    |   |      |   | 396   |      |  |   | 431   |   |  |      | 5     |   |  |   | 503   |  
|Interest expense                                                        |  |                         | 370    |   |      |   | 363   |      |  |   | 374   |   |  |      | 330   |   |  |   | 333   |  
|Gain on translation of foreign currencies                               |  |                         | (739   | ) |      |   | (317  | )    |  |   | (101  | ) |  |      | (10   | ) |  |   | (446  | )
|Other expenses (income), net                                            |  |                         | 14     |   |      |   | (16   | )    |  |   | 48    |   |  |      | 5     |   |  |   | 14    |  
|Net gain on dilution of interest in subsidiary                          |  |                         |       |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   | (33   | )
|Earnings (loss) from continuing operations                              |  |                         | 152    |   |      |   | (126  | )    |  |   | (353  | ) |  |      | 54    |   |  |   | (714  | )
|Earnings from discontinued operations                                   |  |                         | 23     |   |      |   | 90    |      |  |   | 3     |   |  |      |      |   |  |   |      |  
|Net earnings (loss)                                                     |  |                         | 175    |   |      |   | (36   | )    |  |   | (350  | ) |  |      | 54    |   |  |   | (714  | )
|Earnings (loss) per share, basic and diluted(1)                         |  |                         | 0.40   |   |      |   | (0.08 | )    |  |   | (0.80 | ) |  |      | 0.12  |   |  |   | N/A   |  
|Consolidated Statements of Cash Flows Data:                             |  |                         |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Cash flows from (used in) continuing operating activities               |  | $                       | 19     |   |      | $ | (3    | )    |  | $ | 164   |   |  | $    | 232   |   |  | $ | (468  | )
|Cash flows from (used in) financing activities of continuing operations |  |                         | 145    |   |      |   | 161   |      |  |   | (789  | ) |  |      | 27    |   |  |   | 390   |  
|Cash flows from (used in) investing activities of continuing operations |  |                         | (279   | ) |      |   | (86   | )    |  |   | 566   |   |  |      | (123  | ) |  |   | 7     |  
|Dividends declared per share(1)                                         |  |                         | 0.175  |   |      |   | 0.100 |      |  |   | 0.100 |   |  |      | 0.050 |   |  |   | N/A   |  
|Other Financial Data (unaudited):                                       |  |                         |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Capital expenditures                                                    |  | $                       | 229    |   |      | $ | 256   |      |  | $ | 177   |   |  | $    | 165   |   |  | $ | 107   |  
|Selected Operations Data (unaudited):                                   |  |                         |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Newsprint volume sold (in tonnes)                                       |  |                         | 4,611  |   |      |   | 4,563 |      |  |   | 3,972 |   |  |      | 3,486 |   |  |   | 3,292 |  
|Newsprint revenue per tonne ($)                                         |  |                         | 599    |   |      |   | 613   |      |  |   | 714   |   |  |      | 740   |   |  |   | 660   |  
|Specialty papers sold (in tonnes)                                       |  |                         | 1,810  |   |      |   | 1,842 |      |  |   | 1,782 |   |  |      | 1,748 |   |  |   | 1,679 |  
|Specialty papers revenue per tonne ($)                                  |  |                         | 822    |   |      |   | 803   |      |  |   | 855   |   |  |      | 854   |   |  |   | 804   |  
|Wood products volume sold (in millions of board feet)                   |  |                         | 1,930  |   |      |   | 2,169 |      |  |   | 1,965 |   |  |      | 1,858 |   |  |   | 1,572 |  
|Wood products revenue per million board feet ($)                        |  |                         | 379    |   |      |   | 473   |      |  |   | 453   |   |  |      | 391   |   |  |   | 339   |  
|Consolidated Balance Sheet Data:                                        |  |                         |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Working capital(2)                                                      |  | $                       | 146    |   |      | $ | 346   |      |  | $ | 282   |   |  | $    | 605   |   |  | $ | 318   |  
|Property, plant and equipment, net                                      |  |                         | 5,709  |   |      |   | 5,005 |      |  |   | 4,260 |   |  |      | 3,984 |   |  |   | 3,015 |  
|Total assets                                                            |  |                         | 10,312 |   |      |   | 9,787 |      |  |   | 8,052 |   |  |      | 8,099 |   |  |   | 6,572 |  
|Long-term debt due within one year and short term debt                  |  |                         | 269    |   |      |   | 491   |      |  |   | 95    |   |  |      | 72    |   |  |   | 725   |  
|Long-term debt                                                          |  |                         | 4,504  |   |      |   | 4,121 |      |  |   | 3,675 |   |  |      | 3,805 |   |  |   | 3,001 |  
|Total debt                                                              |  |                         | 4,773  |   |      |   | 4,612 |      |  |   | 3,770 |   |  |      | 3,877 |   |  |   | 3,726 |  
|Total shareholders equity                                              |  |                         | 2,870  |   |      |   | 2,726 |      |  |   | 2,401 |   |  |      | 2,451 |   |  |   | 1,546 |  
|U.S. GAAP Consolidated Financial Data:                                  |  |                         |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Property, plant and equipment                                           |  |                         | 5,609  |   |      |   | 4,967 |      |  |   | 4,226 |   |  |      | 3,950 |   |  |   | 2,982 |  
|Total assets                                                            |  |                         | 9,871  |   |      |   | 9,263 |      |  |   | 7,902 |   |  |      | 7,532 |   |  |   | 5,954 |  
|Net earnings (loss)                                                     |  |                         | 191    |   |      |   | (38   | )    |  |   | (350  | ) |  |      | 55    |   |  |   | (908  | )
|Earnings (loss) per share, basic and diluted                            |  |                         | 0.44   |   |      |   | (0.09 | )    |  |   | (0.80 | ) |  |      | 0.12  |   |  |   | N/A   |  
|Shareholders equity                                                    |  |                         | 2,698  |   |      |   | 2,373 |      |  |   | 1,925 |   |  |      | 1,705 |   |  |   | 758   |  



|(1) | On October 29, 2007, pursuant to the Combination, Abitibi became a wholly-owned subsidiary of AbitibiBowater.
|--- | -------------------------------------------------------------------------------------------------------------

|(2) | Working capital excludes short-term debt and long-term debt within one year.
|--- | ----------------------------------------------------------------------------



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Exchange Rate Information

Exchanging Canadian Dollars. The following table sets forth, for each period indicated, the high and low exchange rates for one Canadian dollar during that period, the average of the exchange rates during that
period and the exchange rate at the end of that period, in each case expressed in U.S. dollars, based, from 2003 to October 2007, upon the inverse noon buying rate in New York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York, and from November 2007, on the end of day rate based on New York City composite as reported by Bloomberg:



|           |  |                         |  |       |  |       |  |       |  |      
|---------- |  | ----------------------- |  | ----- |  | ----- |  | ----- |  | -----
|           |  | Year ended December 31,
|           |  | 2007                    |  | 2006  |  | 2005  |  | 2004  |  | 2003 
|High       |  | 0.844                   |  | 0.910 |  | 0.869 |  | 0.849 |  | 0.774
|Low        |  | 1.086                   |  | 0.853 |  | 0.787 |  | 0.716 |  | 0.635
|Average    |  | 0.931                   |  | 0.882 |  | 0.826 |  | 0.769 |  | 0.714
|Period End |  | 1.002                   |  | 0.858 |  | 0.860 |  | 0.832 |  | 0.771

The following table sets forth, for each period indicated, the high and low exchange rates for one
Canadian dollar during that period, in each case expressed in U.S. dollars, based, from September to October 2007, upon the inverse noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York, and from November 2007, on the end of day rate based on New York City composite as reported by Bloomberg:



|     |  |               |  |             |  |              |  |              |  |             |  |             
|---- |  | ------------- |  | ----------- |  | ------------ |  | ------------ |  | ----------- |  | ------------
|     |  | September2007 |  | October2007 |  | November2007 |  | December2007 |  | January2008 |  | February2008
|High |  | 0.948         |  | 1.000       |  | 1.002        |  | 0.980        |  | 0.966       |  | 0.983       
|Low  |  | 1.004         |  | 1.061       |  | 1.087        |  | 1.020        |  | 1.011       |  | 1.025       

On March 28, 2008, the exchange rate for one Canadian dollar expressed in U.S.
dollars, based upon the inverse end of day rate in New York City composite as reported by Bloomberg, was US$0.978.

Exchanging
U.S. Dollars. The following table sets forth, for each period indicated, the high and low exchange rates for one U.S. dollar during that period, the average of the exchange rates during that period and the exchange rate at the end of that
period, in each case expressed in Canadian dollars, based, from 2003 to October 2007, upon the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York, and
from November 2007, on the end of day rate based on New York City composite as reported by Bloomberg:



|           |  |                         |  |       |  |       |  |       |  |      
|---------- |  | ----------------------- |  | ----- |  | ----- |  | ----- |  | -----
|           |  | Year ended December 31,
|           |  | 2007                    |  | 2006  |  | 2005  |  | 2004  |  | 2003 
|High       |  | 1.185                   |  | 1.173 |  | 1.270 |  | 1.397 |  | 1.575
|Low        |  | 0.920                   |  | 1.099 |  | 1.151 |  | 1.178 |  | 1.292
|Average    |  | 1.074                   |  | 1.134 |  | 1.211 |  | 1.301 |  | 1.401
|Period End |  | 0.998                   |  | 1.165 |  | 1.163 |  | 1.202 |  | 1.297

The following table sets forth, for each period indicated, the high and low exchange rates for one
U.S. dollar during that period, in each case expressed in Canadian dollars, based, from 2003 to October 2007, upon the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York, and from November 2007, on the end of day rate based on New York City composite as reported by Bloomberg:

|     |  |               |  |             |  |              |  |              |  |             |  |             
|---- |  | ------------- |  | ----------- |  | ------------ |  | ------------ |  | ----------- |  | ------------
|     |  | September2007 |  | October2007 |  | November2007 |  | December2007 |  | January2008 |  | February2008
|High |  | 1.055         |  | 1.000       |  | 0.999        |  | 1.021        |  | 1.035       |  | 1.017       
|Low  |  | 0.996         |  | 0.943       |  | 0.920        |  | 0.981        |  | 0.990       |  | 0.975       

On March 28, 2008 the exchange rate for one U.S. dollar expressed in Canadian dollars, based
upon the end of day rate in New York City composite as reported by Bloomberg, was CDN$1.023.



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Item 4. Information on the Company

A. History and Development of the Company

Our legal name and commercial name is Abitibi-Consolidated Inc. The Company results from the amalgamation under the Canada Business Corporations Act
of Abitibi-Price Inc. and Stone-Consolidated Corporation, another forest product company, pursuant to a certificate and articles of amalgamation dated May 30, 1997. We are a corporation domiciled in the Province of Quebec, Canada and operate under
the Canada Business Corporations Act. Our principal executive offices are located at 1155 Metcalfe Street, Suite 800, Montreal, Quebec, Canada H3B 5H2, and our telephone number is (514) 875-2160. Our information can be found on AbitibiBowaters
website at www.abitibibowater.com. Information on AbitibiBowaters website is not incorporated by reference in this Annual Report. Our United States contact person is Duane Owens, Vice President and Treasurer of AbitibiBowater, at
(864) 282-9488.



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##### Index to Financial Statements

Originally, Abitibi was formed by the merger of Abitibi-Price and Stone-Consolidated on May 29th,
1997. Both companies were Canadian-based, forest product companies. In 1998, Abitibi formed a joint-venture partnership, Pan Asia Paper Company Pte Ltd., with Norske Skog of Norway and Hansol Paper Co. of South Korea.

On April 18th, 2000, Abitibi acquired approximately 96% of the Class A Subordinated Voting Shares and approximately 92% of the Class B Shares
of Donohue Inc., a major Canadian integrated forest products company engaged in forest management and in the manufacture and sale of newsprint, specialty papers, market pulp and wood products with mills located in Québec, Ontario, British
Columbia and Texas. On August 16, 2002, Abitibi increased its stake in Pan Asia Paper Company Pte Ltd. from 33.3% to 50%. On November 17, 2005, Abitibi completed the sale of its 50% share ownership in Pan Asia Paper Company Pte Ltd. to
Norske Skog. The Company has reclassified its historical information to exclude PanAsias results from continuing operations.

On
October 29, 2007, we combined with Bowater in a merger of equals to form AbitibiBowater (the Combination). As a result of the Combination, we and Bowater became subsidiaries of AbitibiBowater. AbitibiBowater common stock trades on
the New York Stock Exchange and the Toronto Stock Exchange under the symbol ABH.

Immediately after the combination, AbitibiBowater began a
company-wide strategic review of its business. The AbitibiBowater Board of Directors approved an action plan to reduce the consolidated companys newsprint and specialty papers production capacity by almost 1 million tonnes per year by the
end of the first quarter of 2008. As part of these reductions, we permanently closed our Belgo (Shawinigan, Quebec) mill and indefinitely idled our Mackenzie (British Columbia) mill. We also indefinitely idled two sawmills that directly supported
the Mackenzie paper operation. These facilities in the aggregate represent capacity of approximately 311,000 tonnes of newsprint, 260,000 tonnes of specialty papers, and 500 million board feet of lumber, and were all cash flow negative.
Additionally, we permanently closed previously idled paper mills at Fort William (Thunder Bay, Ontario) and Lufkin (Texas). The previously idled operations had a total capacity of approximately 525,000 tonnes. These actions were completed by
February 18, 2008. These actions were taken in order to assist us in supplying our customers demand efficiently by manufacturing products on machines best positioned to produce the products and by taking specific actions designed to
ensure that our production is focused on our more profitable product lines from lower cost sites. During the implementation of the action plan generated during the first phase of our strategic review, we have simultaneously been working on phase
two, which is a comprehensive review of all aspects of our business in an effort to further reduce costs, improve our manufacturing platform and better position the combined companies in the global marketplace. We expect to announce the results and
detailed action steps from this second phase during the second quarter of 2008. We are also conducting an in-depth review of our wood products business with the objective of selling non-core assets, consolidating facilities, and curtailing or
closing non-contributing operations.

In connection with the review and approval of the Combination by the antitrust division of the U.S.
Department of Justice, the Company agreed, among other things, to sell its Snowflake newsprint mill and certain related assets and liabilities. The Company expects to complete the sale of this facility to Catalyst Paper Corporation in the second
quarter of 2008 for approximately $161 million, excluding trade accounts receivable of $19 million that it will retain.

B. Business Overview

Recent Developments

On
April 1, 2008, the Company, ACCC and AbitibiBowater completed a number of financing transactions (the Financing Transactions), each of which is described in more detail below, to address the Companys near-term liquidity
challenges.



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ACCC Senior Secured Note Offerings.ACCC issued and sold approximately $413 million aggregate
principal amount of 13.75% Senior Secured Notes due 2011 (the New Secured Notes) to Goldman Sachs & Co. and J.P. Morgan Securities Inc., as initial purchasers. The New Secured Notes were sold to qualified institutional buyers in
reliance on Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and to non-U.S. persons in reliance on Regulation S under the Securities Act. The New Secured Notes are guaranteed by Abitibi and certain of its
subsidiaries (the same subsidiaries guaranteeing the Exchange Notes) and secured by security interests on our and the guarantors fixed assets (subject to permitted liens) and certain other assets. The transaction closed on April 1, 2008.

ACCC Exchange Offers.On April 4, 2008, ACCC completed a private offer to exchange (the Exchange Offer) approximately
US$496 million in aggregate principal amount of three series of outstanding senior notes due in 2008 and 2009 issued by Abitibi, ACCC and another of our subsidiaries (the ACI Notes) for a combination of cash and new ACCC 15.5% senior
notes due 2010, guaranteed by Abitibi and certain of its subsidiaries (the Exchange Notes). Approximately 89.4% of the outstanding 6.95% Senior Notes due 2008, 92.1% of the outstanding 5.25% Senior Notes due 2008 and 94.8% of the
outstanding 7.875% Senior Notes due 2009 had been validly tendered. As a result, ACCC issued an aggregate of approximately US$293 million principal amount of Exchange Notes and approximately US$218 million in cash (including payment of accrued
interest) to tendering noteholders in connection with the Exchange Offer.

ACCC Senior Secured Term Loan.ACCC, Abitibi and certain
of its subsidiaries entered into a senior secured term loan on April 1, 2008 with a syndicate of lenders in an amount of US$400 million (the Senior Term Loan). The Senior Term Loan has maturity of 364 days with a coupon of LIBOR +
800 basis points, with a 3.5% LIBOR floor, at a price of 96% of par and is secured by a first lien on substantially all of Abitibis and ACCCs assets other than fixed assets, intellectual property and capital stock of subsidiaries and by
a first lien on substantially all of the assets of Donohue Corp., an indirect subsidiary of AbitibiBowater (D Corp.), including fixed assets and certain other assets. The Senior Term Loan ranks effectively senior to the New Secured
Notes to the extent of the collateral securing the Senior Term Loan.

AbitibiBowater Convertible Notes.AbitibiBowater issued and
sold US$350 million of unregistered convertible debentures due 2013 of AbitibiBowater (the Convertible Notes) to Fairfax and its designated subsidiaries in a private placement. The Convertible Notes bear interest at a rate of
8.0% per annum and are convertible into shares of AbitibiBowater common stock at an estimated conversion price of $10.00 per share, subject to standard antidilution adjustments. The Convertible Notes are not guaranteed by Abitibi or any of its
respective subsidiaries. The transaction closed on April 1, 2008.

D-Corp. Reorganization.Upon consummation of the Financing
Transactions, AbitibiBowater, through a newly created direct subsidiary, acquired from Abitibi, through a series of intercompany transactions, all of the common stock and all of the outstanding non-voting preferred stock of D Corp. D Corp.,
previously a subsidiary of Abitibi, indirectly owns the investment in Augusta Newsprint Company, which operates a newsprint mill, the Alabama River and Snowflake paper mills, and the U.S. Recycling Operations. As a result, D Corp. is now an indirect
subsidiary of AbitibiBowater. This transaction will have a material impact on the Companys results of operations going forward.

Our Company

Abitibi is a global leader in the production of newsprint and specialty papers as well as a major producer of wood products, and
generated sales of approximately $4.1 billion in 2007. Our operations are currently comprised of 15 pulp and paper mills, 19 sawmills, four remanufacturing facilities, two engineered wood facilities and eight hydroelectric plants in Canada, the
United States and the United Kingdom. We supply products to a diverse group of customers worldwide, marketing our products in over 70 countries. We are also among the worlds largest recyclers of newspapers and magazines and are responsible for
the forest management of approximately 16 million hectares of third-party certified sustainable forest land.



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##### Index to Financial Statements

Our Parent Corporation

On October 29, 2007, we combined with Bowater in a merger of equals to form AbitibiBowater. As a result of the Combination, we and Bowater became subsidiaries of AbitibiBowater. AbitibiBowater is the largest
producer of newsprint in the world by capacity and one of the largest publicly traded pulp and paper manufacturers in the world. AbitibiBowater currently owns or operates 28 pulp and paper facilities, 31 wood products facilities, located in Canada,
the United States, the United Kingdom and South Korea. AbitibiBowater produces a wide variety of newsprint coated and uncoated specialty papers, market pulp and wood products, which are marketed in over 90 countries. AbitibiBowater common stock
trades on the New York Stock Exchange and the Toronto Stock Exchange under the symbol ABH.

Following the consummation of the Combination
and a strategic review of the businesses, AbitibiBowater announced a number of significant strategic decisions on November 29, 2007, including (i) a reduction in newsprint and specialty papers production capacity by approximately one
million tonnes per year during the first quarter of 2008 and (ii) the idling of our sawmill operations in Mackenzie, British Columbia. These actions represent a reduction of approximately 600,000 tonnes of newsprint, 400,000 tonnes of specialty
papers, and 500 million board feet of lumber capacity. It also permanently closed pulp and paper operations that had previously been idled with a total capacity of approximately 650,000 tonnes.

AbitibiBowater expects to generate annualized synergies as a result of the Combination of approximately US$375 million by the end of 2009. These
synergies are expected to come from improvements in areas such as manufacturing; selling, general and administrative (SG&A); procurement; and logistics costs, as described below.



| |  |  | Approximately US$205 million from lower manufacturing costs.Since the Combination, AbitibiBowater has focused on reallocating production
of newsprint and paper grades across its combined machine base, improving asset performance by operating machines in narrower ranges around their peak production and sharing best practices among mills to enhance production efficiency and lower cost.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately US$90 million from reducing SG&A costs. Through the elimination of duplicative sales, marketing and customer service personnel
and centralization of corporate administration, management, finance and human resource functions, AbitibiBowater intends to lower fixed overhead costs and reduce headcount.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately US$50 million from reducing procurement costs. AbitibiBowater is seeking to lower prices of key raw materials through negotiation
of volume discounts, consolidation of raw materials collection and improvement in inventory management.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately US$30 million from improved logistics. AbitibiBowater also intends to realize cost reductions from improved logistics through an
optimization of freight rates as well as an enhancement of distribution facilities and timberland-mill and mill-customer pairings.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For a description of certain risks relating to the achievement of the synergies described above, see Risk Factors  Risks Related to Our Business  We may experience difficulties in integrating our
business with that of Bowater and may not realize the anticipated synergies, efficiencies and cost savings from the Combination. Additionally, any such synergies may not benefit Abitibi to the same or a similar extent to which they benefit
Bowater and some synergies that are beneficial to Bowater may be detrimental to Abitibi.

Product Lines

We manage our business based on the products that we manufacture and sell to external customers. Our reportable segments, which correspond to our primary
product lines, are newsprint, specialty papers and wood products. In general, our products are globally traded commodities. Pricing and the level of shipments of these products will continue to be influenced by the balance between supply and demand
as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in currency exchange rates.



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Newsprint. We own or operate 10 newsprint facilities in Canada, the United States and
the United Kingdom (after giving effect to the pending sale of our Snowflake mill). We are one of the largest producers of newsprint in the world, with annual capacity of approximately 3 million tonnes, or approximately 7% of worldwide
newsprint capacity. Our annual North American production capacity of approximately 2.8 million tonnes represents approximately 25% of North American newsprint capacity. We supply leading publishers in more than 70 countries with top-quality
newsprint, including varieties made of up to 100% recycled fiber. In 2007, approximately 37% of our total newsprint production was sold to markets outside North America and newsprint represented approximately 53% of our sales.

Specialty Papers. We are one of the worlds largest producers of uncoated mechanical papers with five facilities in North America
and annual capacity, including market pulp, of approximately 1.5 million tonnes. This tonnage represents approximately 23% of North American uncoated mechanical capacity and 32% of our total pulp and paper production capacity. We manufacture a
broad range of uncoated mechanical papers including supercalendered and super-brite specialty papers that are used in books, retail advertising, direct mail inserts, flyers, and other commercial printing applications. In 2007, specialty papers
represented approximately 33% of sales.

Wood Products. We operate sawmills in Canada that produce construction-grade
lumber that is sold in Canada and in the United States. Our sawmills have an annual capacity of approximately 1.9 billion board feet of lumber. Lumber products manufactured at our sawmills include studs, structural lumber and remanufactured wood
products such as furniture parts, fencing and bed frames. In addition, our sawmills are a major source of wood chips for our pulp and paper mills. In 2007, wood products represented approximately 13% of our sales.

Our Industry

Newsprint. The newsprint industry is a commodity market and newsprint prices are cyclical. The majority of newsprint demand comes from daily newspapers with the remainder of demand from weekly newspapers and commercial
printing. U.S. newsprint demand has declined from 11.9 million tonnes in 1999 to 7.7 million tonnes in 2007, representing an average annual decline of 5%. Key drivers for the decline in demand include: decreased grammage (metric measure of
paper weight), decreased advertising demand, decreased circulation and decreased web-width. However, according to a third party study, global newsprint demand reached its highest level since 2001 during the month of January 2008, driven largely by
strong demand in Asia and Latin America. According to Resource Information Systems, Inc. (RISI), North American newsprint prices have risen since the fourth quarter of 2007, as North American producers have separately announced a number of price
increases totaling US$145 per metric ton to be implemented by June 2008. According to RISI, North American newsprint capacity is expected to decrease by 958,000 tonnes (a decline of 8%) in 2008, while average newsprint prices are expected to
increase US$74 per tonne or 13% in 2008.

The following table shows prices per metric ton for newsprint (48.8 gram) for the periods
indicated below:

LOGO

Specialty Papers. The uncoated groundwood paper industry is a commodity market and paper
prices are cyclical. Specialty paper demand is primarily driven by advertising spending and print media usage, which tend to rise when gross domestic product in the United States is robust and typically decline in a sluggish economy. According to
RISI, prices for supercalendered grades (glossy grades) declined 4% in 2007 compared to 2006. However, prices are expected to rise 14% for supercalendered in 2008. We announced a US$60 per short ton



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##### Index to Financial Statements

increase in supercalendered and super-brite papers in the fourth quarter of 2007 and most North American producers have announced an additional US$60 per
short ton increase for uncoated mechanical papers, effective April 2008.

The following table shows prices per metric ton for uncoated
groundwood, supercalendered paper, 35lb. weight, for the periods indicated below:

LOGO

Wood Products. The softwood lumber industry is a commodity market and lumber prices are
cyclical. Lumber demand is primarily driven by U.S. and Canadian residential housing construction. According to Freddie Mac, total U.S. housing starts declined 25% in 2007 to approximately 1.36 million units, and housing starts are expected to
further decline 23% to 1.05 million units in 2008. According to RISI, U.S. softwood lumber demand decreased 7.1 billion board feet in 2007, representing a decline of 10% from 2006 levels and a decline of 13% from peak levels of 75.0 billion
board feet reached in 2005; demand is expected to decrease 5% in 2008. According to RISI, average Crows Framing Lumber index prices decreased 15% in 2007 to US$276 per thousand board feet and are expected to decrease 3% in 2008 to US$267 per
thousand board feet. As a result, we currently have idled annualized capacity of approximately 1.1 billion board feet of lumber.

The
following table shows prices of lumber per million board feet for the periods indicated below:

LOGO

Business Strategy

The key elements of our business strategy include the following:

Proactively manage our core
newsprint and specialty paper business. We intend to maintain our focus on the largest components of our business: newsprint and specialty papers. Additionally, we continue to focus on the faster growing export market by seeking to
export more newsprint from North America into Asia, South America and certain European countries, where market conditions are stronger. In 2007, we sold approximately 37% of our newsprint outside of North America.

Continue to reduce costs through synergies and further productivity improvements. As discussed above, our parent company,
AbitibiBowater, expects to generate annualized synergies as a result of the Combination of approximately US$250 million by the first quarter of 2009, with an anticipated increase to US$375 million by the end of 2009 (although these synergies may not
be realized equally by us and Bowater or at anticipated levels). We will seek to implement additional measures as we enhance our operating efficiency and productivity through continual systems analyses and operational improvements. In the second
quarter of 2008, AbitibiBowater plans to



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##### Index to Financial Statements

announce the specifics of an additional strategic review (Phase 2). As part of its Phase 2 review,
AbitibiBowater is continuing to review its business to further reduce costs, improve its manufacturing platform and better position itself for the global marketplace. As part of Phase 2, it may be necessary to curtail even more production or shut
down even more machines or facilities. We believe that the synergies resulting from the Combination and these additional measures will enhance our ability to further decrease production costs per ton and to increase operating cash flow and margins.
For a description of certain risks relating to the achievement of these synergies, see Risk Factors  Risks Related to Our Business  We may experience difficulties in integrating our business with that of Bowater and may not realize
the anticipated synergies, efficiencies and cost savings from the Combination.

Enhance product mix to improve margins, cash
flow and earnings. We continue to seek opportunities to increase sales of grades of uncoated groundwood papers and ultra hi-brite offset alternatives through grade improvements and optimizing grade shifts in mills. We intend to continue
to do so through increased sales to our existing customers as well as to new customers, in particular, printers, publishers and paper merchants. We also seek to increase our margins by focusing on more profitable customer categories.

Business Strengths

We believe that our core
strengths include the following:

One of the largest manufacturers of newsprint and specialty papers in the world. We
believe our size and scale, through AbitibiBowater, our parent company, affords us the opportunity to more effectively understand changing market dynamics and respond rapidly to industry trends. We have been able to leverage this strength
effectively by focusing our efforts in the faster growing overseas markets. Our international operations include a newsprint mill in the United Kingdom, which provides better access to the European markets. We plan to continue employing this
strength to seek and seize similar promising opportunities in the future.

Well positioned to benefit from strengthening pricing
environment. We believe that we are well positioned to benefit from price increases in the paper industry as a result of our product breadth and long-standing customer relationships. According to RISI, newsprint prices have risen since
the fourth quarter of 2007, as North American producers have separately announced a number of price increases totaling US$145 per metric ton to be implemented by June 2008. We also announced a $60 per short ton increase in supercalendered and
super-brite papers in the fourth quarter of 2007 and most North American producers have announced an additional US$60 per short ton increase for uncoated mechanical papers, effective April 2008.

Attractive cost position coupled with further profit improvement initiatives. Our newsprint and paper mills are among the most
cost-effective in North America. Based on a 2006 third party industry study (the most recent date for which such information is available), of our nine currently operating newsprint facilities in North America, two are in the top quartile and five
are in the top half in terms of cash cost. We plan to further enhance this strength through continual refinements and capacity adjustments to reduce production at our higher cost facilities and focus on continual improvements at our lower cost
mills, including manufacturing products on machines best positioned to produce the various grades.

Strong relationships with key
customers. We supply products to a diverse group of customers worldwide, marketing our products in over 70 countries. Our pulp and paper products are sold to leading publishers, commercial printers and advertisers. Our wood products are
sold to a diversified group of customers, including large retailers, buying groups, distributors, wholesalers and industrial accounts.

Experienced management team with proven track record. AbitibiBowaters senior management team is the combination of two world class management teams, with an average of over 21 years experience in the forest products
industry. John Weaver, Executive Chairman, has over 30 years of experience in the forest products industry and was formerly the Chief Executive Officer of Abitibi. David Paterson, President and Chief Executive Officer, has held various senior
positions within the forest products industry, including Chief Executive Officer of Bowater and Executive Vice President, Building Products Division at Georgia-Pacific Corporation. William Harvey, Chief Financial Officer, has held various executive
positions at Avenor Inc. and Bowater and was most recently Chief Financial Officer at Bowater.



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##### Index to Financial Statements

Raw Materials

Our operations consume substantial amounts of raw materials, such as wood, recovered paper and chemicals, and energy, including electricity, natural gas, fuel oil, coal and wood waste, in the manufacturing of our
pulp, paper and wood products. We purchase raw materials and energy sources primarily on the open market.

Wood

Our sources of wood include property we own or lease, property on which we possess cutting rights and purchases from local producers, including sawmills
that supply residual wood chips. At December 31, 2007, we owned approximately 1 million acres in Canada. We also have contractual cutting rights on approximately 37.1 million acres of Crown-owned land in Canada. The contractual
cutting rights contracts are approximately 20-25 years in length and automatically renew every 5 years, contingent upon our continual compliance with environmental performance and reforestation requirements.

In accordance with our values, our environmental vision statement and forestry policies and the interests of our customers and other stakeholders, we are
committed to environmental management systems with the goal of sustainable forest management. Approximately 99% of our Crown-owned land operations and our private land in Canada are certified to the Canadian Standards Association Z809 (CSA Z809)
forest management standard. This standard utilizes a continual improvement approach and requires public participation, practical demonstration of sustainable forest management practices, and management commitment.

Recovered Paper

We are among the largest
recyclers of newspapers and magazines in the world. We have a number of recycling plants that utilize advanced mechanical and chemical processes to manufacture high quality pulp from a mixture of old newspapers and old magazines (recovered
paper). The resulting products, which include recycled fiber newsprint and uncoated specialty paper, are comparable in quality to paper produced with 100% virgin fiber pulp. The Bridgewater and Thorold operations produce newsprint containing
100% recycled fiber. In 2007, we used 1.8 million tonnes of recovered paper worldwide. In 2007, our recycled fiber content in newsprint averaged 34%, which is above the industry average of 31%. We produce more than 40 grades with recycled
content.

Our North American recycling division collects or purchases
2.4 million tonnes of recovered paper per year. Our trademarked Paper Retriever® program collects recovered fiber through a combination of community drop-off containers and recycling
programs with businesses and commercial offices. The recovered paper we physically purchase is from suppliers generally within the region of our recycling plants, primarily under long-term agreements.

Our European recycling division focuses its efforts on Paper Retriever® and Paper Bank® programs, and curbside collection from over 1.7 million homes in the United Kingdom.

Energy

Steam and electrical power are the
primary forms of energy used in paper production. Process steam is produced in boilers using a variety of fuel sources. All of our mills produce all of their own steam requirements, except our Alabama and Bridgewater operations, which purchase their
steam from third-party suppliers. Our Alma, Baie-Comeau, Fort Frances, Grand Falls, Iroquois Falls, Kenogami, Mackenzie and Snowflake operations collectively produce approximately 46% of their own electrical requirements. The balance of our energy
needs is purchased from third parties. We have nine sites in Canada with cogeneration facilities which generate green energy from carbon-neutral biomass. In addition, we utilize alternative fuels, such as used oil, to reduce consumption
of virgin fossil fuels.

Competition

Competition is present in all markets for our products. Our main competitors are North American and Western European paper manufacturers and North American lumber producers. While selling prices, cost of production,
quality and customer service are generally the principal factors influencing competition, other factors such as risks related to foreign exchange, and cost of fiber supply, can also have an impact on our competitive position.



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In general, our products are globally traded commodities, and the markets in which we compete are highly
competitive. Pricing and the level of shipments of our products are influenced by the balance between supply and demand, global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations
in currency exchange rates. Any material decline in prices for our products or other adverse developments in the markets for our products could have a material adverse effect on our financial results, financial condition and cash flow. Prices for
our products have been and are likely to continue to be highly volatile.

Newsprint, one of our principal products, is produced by numerous
manufacturers worldwide. Aside from quality specifications to meet customer needs, the production of newsprint does not depend upon a proprietary process or formula. The five largest North American producers represent approximately 80% of the North
American capacity for newsprint. The five largest global producers represent approximately 41% of global newsprint capacity. Our annual production capacity is approximately 7% of worldwide capacity. We face actual and potential competition from both
large, global producers and numerous smaller regional producers. In recent years, a number of global producers of newsprint based in Asia, particularly China, have grown their production capacity substantially. Price, quality, customer relationships
and the ability to produce paper with recycled fiber are important competitive determinants.

Abitibi sold approximately 1.6 million
tonnes of specialty papers in 2007. This represented about 26% of North American specialty papers sales in 2007 and was comprised mainly of supercalendered, superbright, high bright, bulky book and directory papers. In addition to AbitibiBowater,
other producers of uncoated mechanical papers include Catalyst, New Page (formerly Stora Enso North America), Fraser, Irving, St Marys, Madison and Norpac. In addition, imports from overseas represented about approximately 10% of North American
sales in 2007. We compete primarily on the basis of price, quality and service.

As with other global commodities, the competitive position
of our products is significantly affected by the volatility of currency exchange rates. We have operations in Canada, the United States and the United Kingdom. Several of our primary competitors are located in Canada, Sweden, Finland and certain
Asian countries. Accordingly, the relative rates of exchange between those countries currencies and the Canadian dollar can have a substantial effect on our ability to compete. In addition, the degree to which we compete with foreign producers
depends in part on the level of demand abroad. Shipping costs and relative pricing generally cause producers to prefer to sell in local markets when the demand is sufficient in those markets.

Trends in advertising, electronic data transmission and storage, and the Internet have and could continue to adversely affect traditional print media,
including our products and those of our customers, but neither the timing nor the extent of those trends can be predicted with certainty. Our newspaper publishing customers in North America use and compete with businesses that use other forms of
media and advertising, such as direct mailings and newspaper inserts (both of which are end uses for several of our products), television and the Internet. U.S. consumption of newsprint declined in 2007 as a result of continued declines in newspaper
circulation, declines in newspaper advertising volume and publishers conservation measures which include increased usage of lighter basis-weight newsprint and web-width and page count reductions. Our magazine and catalog publishing customers
are also subject to the effects of competing media, including the Internet.

Environmental Policies

We are committed to protecting and enhancing the resources in our care. We have determined that integrating our vision and values and our Environmental,
Health and Safety (EH&S) Policy into our daily activities is the best way to meet our business objectives. Our Environmental Management System is used to plan activities, implement procedures and distribute resources among our
divisions to help them comply with the environmental aspects of the EH&S Policy and meet the requirements of our Environmental and Sustainable Forest Management Policy. To best achieve these objectives, we have set guidelines that are adapted to
the activities of our different divisions.

We are subject to a wide range of general and industry-specific laws and regulations relating
to the protection of the environment, including those governing air emissions, wastewater discharges, timber harvesting, the release, storage, management and disposal of, and exposure to, hazardous substances and waste, the clean-up of contaminated
sites, landfill operation and closure, forestry operations, threatened and endangered species habitats, and health and safety. We believe that we are in material compliance with all laws and regulations governing our



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##### Index to Financial Statements

activities, although we regularly incur environmental costs and liabilities as is typical for similar companies.
Environmental expenditures that will benefit us in future years are recorded at cost and capitalized as part of property, plant and equipment. Amortization is charged to income over the estimated future benefit period of the assets. Environmental
expenditures that are not expected to provide a benefit to us in future periods are accrued on a non-discounted basis and expensed to earnings, on a site-by-site basis, including when a requirement to remedy an environmental exposure is probable and
a cost can be reasonably estimated. See Risk Factors  Risks Related to Our Business  We are subject to environmental laws and regulations.

Geographic Market Information

The following table summarizes the total revenue for the newsprint
segment as well as geographic market for the last 3 years.



|          |  |                       |  |                                 |   |  |        |   |  |        |   |  |               |   |  |      |   |  |                 |  
|--------- |  | --------------------- |  | ------------------------------- | - |  | ------ | - |  | ------ | - |  | ------------- | - |  | ---- | - |  | --------------- | -
|Newsprint |  | In millions ofdollars |  | Distribution of Newsprint Sales |  
|          |  | Total ($)             |  | United States                   |   |  | Europe |   |  | Canada |   |  | Latin America |   |  | Asia |   |  | Other Countries |  
|2007      |  | 2,174                 |  | 53                              | % |  | 18     | % |  | 10     | % |  | 13            | % |  | 2    | % |  | 4               | %
|2006      |  | 2,579                 |  | 58                              | % |  | 12     | % |  | 10     | % |  | 12            | % |  | 4    | % |  | 4               | %
|2005      |  | 2,837                 |  | 57                              | % |  | 16     | % |  | 9      | % |  | 10            | % |  | 3    | % |  | 5               | %

The manufacturing and selling of Specialty Papers and a small volume of market pulp constitute the
Specialty Papers segment. Specialty Papers are used by commercial printers, converters, advertisers and publishers to produce advertising inserts, books, telephone directories, business forms, magazines, catalogues, envelopes,
instruction manuals and financial printing. The following table summarizes the total revenue for the specialty paper segment as well as geographic market for the last 3 years.



|                 |  |                       |  |                                       |   |  |        |   |  |                 |  
|---------------- |  | --------------------- |  | ------------------------------------- | - |  | ------ | - |  | --------------- | -
|Specialty Papers |  | In millions ofdollars |  | Distribution of Specialty Paper Sales |  
|                 |  | Total ($)             |  | United States                         |   |  | Canada |   |  | Other Countries |  
|2007             |  | 1,350                 |  | 82                                    | % |  | 12     | % |  | 6               | %
|2006             |  | 1,493                 |  | 83                                    | % |  | 12     | % |  | 5               | %
|2005             |  | 1,523                 |  | 86                                    | % |  | 9      | % |  | 5               | %

The following table summarizes the total revenue for the wood products segment as well as
geographic market for the last 3 years.



|              |  |                       |  |                               |   |  |        |  
|------------- |  | --------------------- |  | ----------------------------- | - |  | ------ | -
|Wood Products |  | In millions ofdollars |  | Distribution of Wood Products |  
|              |  | Total ($)             |  | United States                 |   |  | Canada |  
|2007          |  | 533                   |  | 45                            | % |  | 55     | %
|2006          |  | 726                   |  | 56                            | % |  | 44     | %
|2005          |  | 890                   |  | 63                            | % |  | 37     | %



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##### Index to Financial Statements

Governmental Regulation

The Company is subject to environmental laws and regulations relating to forest management, air emissions, wastewater discharge, waste
management, site operations and landfill sites, sawmills and woodlands operations. The environmental laws and regulations are enacted by federal, provincial, state and local authorities. The Company conducts environmental compliance audits,
generally performed by internal auditors, which cover all the Companys paper and wood products sites over a defined schedule of time. The Company has implemented an Environmental Management System in all of its operations. The Company has
implemented a certification process of its Environmental Management Systems, under the International Standards Organization (ISO ), for its pulp and paper mills. All the Companys operations in its pulp and paper mills are certified ISO
14001.

The virgin fiber supply required by the Company in Canada is mostly assured by cutting right agreements with
provincial governments. The agreements are granted for various terms, from 5 to 25 years, and are generally subject to regular renewal every 5 years. They incorporate commitments with respect to sustainable forest management, silvicultural work,
forest and soil renewal, as well as cooperation with other forest users. The Company believes that it is in material compliance with all applicable forest laws and regulations.

The wood products segment is also subject to regulatory decisions impacting the timber supply made by regulatory bodies. The regulations place
constraints on the Annual Allowable Cut (AAC) on Crown land in Québec and Ontario with thresholds dependent on the regions.

In
addition, under Canadas regulatory framework for greenhouse gas emissions proposed in April 2007, existing paper facilities would be required to reduce their greenhouse gas emissions intensity by 18% by 2010 from 2006 sector average levels,
and by an additional 2% annually thereafter.

The Companys ability to continue to internally generate hydroelectric power in some
cases is conditional upon its ability to maintain and renew its rights, granted by the Ministry of Natural Resources of Ontario, by the Ministère des ressources naturelles et de la Faune (the Ministry of Natural Resources and Wildlife)
and the Ministère du Développement durable, de lEnvironnement et des Parcs (the Ministry of Sustainability, Environment and Parks) of Québec and by the Minister of Environment and Conservation of Newfoundland and
Labrador, to utilize and manage provincial waterways. Some of its rights in respect of flow and levels are also subject to the jurisdiction of the International Rainey Lake Board of Control and Lake of the Woods Control Book. In addition, these
rights are subject to certain conditions and their renewal is subject to government discretion. The right to utilize and manage provincial waterways is granted by the provincial governments of Quebec, Ontario, Newfoundland and Labrador.

C. Organization Structure

On October 29,
2007, pursuant to a Combination Agreement and Agreement and Plan of Merger, dated as of January 29, 2007, Abitibi and Bowater became subsidiaries of AbitibiBowater.

We conduct our business through subsidiaries operating on a worldwide basis. The following companies are considered significant subsidiaries as of April 7, 2008:





|                                                            |  |                              
|----------------------------------------------------------- |  | -----------------------------
|Abitibi-Consolidated, Inc. Subsidiary
List                 
|Name                                                        |  | Jurisdiction of Incorporation
|1508756 Ontario Inc.                                        |  | Ontario                      
|3834328 Canada Inc.                                         |  | Canada                       
|6169678 Canada Incorporated                                 |  | Canada                       
|Abitibi-Consolidated Company of Canada                      |  | Quebec                       
|Abitibi-Consolidated Inc.                                   |  | Canada                       
|Abitibi-Consolidated Canadian Office Products Holdings Inc. |  | Canada                       
|Abitibi-Consolidated Hydro Inc.                             |  | Canada                       
|Abitibi-Consolidated Nova Scotia Incorporated               |  | Nova Scotia                  
|Abitibi Consolidated Europe                                 |  | Belgium                      
|Abitibi-Consolidated Finance LP                             |  | Canada                       
|ACH Calm Lake Inc.                                          |  | Canada                       
|ACH Fort Frances Inc.                                       |  | Canada                       
|ACH Iroquois Falls Inc.                                     |  | Canada                       
|ACH Island Falls Inc.                                       |  | Canada                       
|ACH Kenora Inc.                                             |  | Canada                       
|ACH Limited Partnership                                     |  | Manitoba                     
|ACH Norman Inc.                                             |  | Canada                       
|ACH Sturgeon Falls Inc.                                     |  | Canada                       
|ACH Twin Falls Inc.                                         |  | Canada                       
|Bridgewater Paper Leasing Ltd.                              |  | United Kingdom               
|Bridgewater Paper Company Limited                           |  | United Kingdom               
|Cheshire Recycling Ltd.                                     |  | United Kingdom               
|Donohue Malbaie Inc.(1)                                     |  | Quebec                       
|Donohue Recycling Inc.                                      |  | Ontario                      
|The International Bridge and Terminal Company               |  | Canada                       
|La Compagnie de Pulpe de Jonquiere                          |  | Quebec                       
|Manicouagin Power Company(2)                                |  | Quebec                       
|Marketing Donohue Inc.                                      |  | Quebec                       
|Produits Forestiers La Tuque Inc.(3)                        |  | Quebec                       
|Produits Forestiers Saguenay Inc.(4)                        |  | Quebec                       
|Scramble Mining Ltd.                                        |  | Ontario                      
|Star Lake Hydro Partnership(5)                              |  | Newfoundland                 
|St. Maurice River Drive Company Limited                     |  | Quebec                       
|Terra Nova Explorations Ltd.                                |  | Quebec                       

Note: Except as otherwise indicated, each of the above entities is a wholly owned direct or indirect subsidiary of
Abitibi. The names of certain other direct and indirect subsidiaries of Abitibi have been omitted from the list above because such unnamed subsidiaries in the aggregate as a single subsidiary would not constitute a significant subsidiary.

(1) 51 percent owned

(2) 60 percent owned

(3) 83 percent owned

(4) Approximately
86 percent owned

(5) 51 percent owned

D.
Description of Property



15



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##### Table of Contents

##### Index to Financial Statements

The location and capacity of each of our paper manufacturing and sawmill operations as of April 7,
2008 are set forth in the tables below.



|                               |  |                          |  |                    |  |                     |  |                                |  |                
|------------------------------ |  | ------------------------ |  | ------------------ |  | ------------------- |  | ------------------------------ |  | ---------------
|                               |  |                          |  |                    |  |                     |  | 2007 Production byProduct Line
|                               |  | Numberof PaperMachines   |  | 2008AnnualCapacity |  | 2007TotalProduction |  | Newsprint                      |  | SpecialtyPapers
|                               |  | (in thousands of tonnes)
|Canada                         |  |                          |  |                    |  |                     |  |                                |  |                
|Alma, Quebec                   |  | 3                        |  | 335                |  | 330                 |  |                               |  | 330            
|Amos, Quebec                   |  | 1                        |  | 207                |  | 200                 |  | 200                            |  |               
|Baie-Comeau, Quebec            |  | 4                        |  | 573                |  | 560                 |  | 560                            |  |               
|Beaupré, Quebec                |  | 2                        |  | 233                |  | 192                 |  |                               |  | 192            
|Clermont, Quebec(1)            |  | 2                        |  | 343                |  | 335                 |  | 335                            |  |               
|Fort Frances, Ontario          |  | 3                        |  | 387                |  | 391                 |  |                               |  | 275            
|Grand Falls, Newfoundland      |  | 2                        |  | 206                |  | 177                 |  | 170                            |  | 7              
|Iroquois Falls, Ontario        |  | 2                        |  | 280                |  | 260                 |  | 225                            |  | 35             
|Kénogami, Quebec               |  | 2                        |  | 206                |  | 209                 |  |                               |  | 209            
|Laurentide, Quebec             |  | 2                        |  | 364                |  | 341                 |  |                               |  | 341            
|Mackenzie, British Columbia(2) |  | 1                        |  | 195                |  | 174                 |  | 174                            |  |               
|Thorold, Ontario               |  | 2                        |  | 412                |  | 398                 |  | 398                            |  |               
|United Kingdom                 |  |                          |  |                    |  |                     |  |                                |  |                
|Bridgewater, England           |  | 2                        |  | 211                |  | 195                 |  | 195                            |  |               
|                               |  |                          |  |                    |  |                     |  |                                |  |                
|Total                          |  | 28                       |  | 3,952              |  | 3,762               |  | 2,257                          |  | 1,389          



|(1) | Donohue Malbaie Inc. (DMI), which owns one of Clermonts paper machines, is owned 51% by Abitibi and 49% by the New York Times. We manage the facility and wholly
own all of the other assets at the site. Manufacturing costs are transferred between Abitibi and DMI at agreed-upon transfer costs. DMIs paper machine produced 212,000 tonnes of newsprint in 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Indefinitely idled.
|--- | -------------------

Wood Products



|                                              |  |                                                |  |                     
|--------------------------------------------- |  | ---------------------------------------------- |  | --------------------
|                                              |  | 2008Annual Capacity                            |  | 2007Total Production
|                                              |  | (in million board feet, exceptwhere indicated)
|Sawmills                                      |  |                                               
|Comtois, Quebec                               |  | 144                                            |  | 143                 
|Girardville-Normandin, Quebec                 |  | 114                                            |  | 108                 
|La Doré, Quebec                               |  | 130                                            |  | 148                 
|La Tuque, Quebec(1)                           |  | 125                                            |  | 103                 
|Mackenzie, British Columbia (2 Facilities)(2) |  | 500                                            |  | 322                 
|Pointe-aux-Outardes, Quebec                   |  | 175                                            |  | 49                  
|Roberval, Quebec                              |  | 105                                            |  | 93                  
|Saguenay, Quebec (3 facilities)(3)            |  | 190                                            |  | 165                 
|Saint-Hilarion                                |  | 51                                             |  | 43                  
|Saint-Ludger-de-Milot, Quebec(4)              |  | 80                                             |  | 88                  
|Saint-Raymond, Quebec                         |  | 54                                             |  | 16                  
|Saint-Thomas, Quebec                          |  | 90                                             |  | 88                  



16



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##### Table of Contents

##### Index to Financial Statements

|                                                             |  |                                                |  |                     
|------------------------------------------------------------ |  | ---------------------------------------------- |  | --------------------
|                                                             |  | 2008Annual Capacity                            |  | 2007Total Production
|                                                             |  | (in million board feet, exceptwhere indicated)
|Senneterre, Quebec                                           |  | 85                                             |  | 113                 
|                                                             |  |                                                |  |                     
|Total Sawmills                                               |  | 1,843                                          |  | 1.479               
|Remanufacturing Wood Facilities                              |  |                                                |  |                     
|Château-Richer, Quebec                                       |  | 63                                             |  | 50                  
|La Doré, Quebec                                              |  | 15                                             |  | 14                  
|Manseau, Quebec                                              |  | 20                                             |  | 20                  
|Saint-Prime, Quebec                                          |  | 28                                             |  | 23                  
|                                                             |  |                                                |  |                     
|Total Remanufacturing Wood Facilities                        |  | 126                                            |  | 107                 
|Engineered Wood Facilities                                   |  |                                                |  |                     
|Larouche and Saint-Prime, Quebec (in million linear feet)(5) |  | 145                                            |  | 81                  



|(1) | Produits Forestiers La Tuque is owned 82% by AbitibiBowater and 18% by Coopérative Forestière du Haut Saint-Maurice. We manage the facility. The amounts in the above
table represent the mills total capacity and production.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Indefinitely idled.
|--- | -------------------

|(3) | Produits Forestiers Saguenay is owned 86% by Abitibi and 14% by Les Placements H.N.M.A. Inc. The amounts in the above table represent the mills total capacity and production.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Produits Forestiers Petit-Paris is located in Saint-Ludger-de-Milot, Quebec, and is an unconsolidated entity in which we have a 50% interest. The amounts in the above table
represent the mills total capacity and production.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Abitibi-LP Engineering Wood Inc. and Abitibi-LP Engineering Wood II Inc. are, respectively, located in Larouche and Saint-Prime, Quebec, and are unconsolidated entities in which we
have a 50% interest. We operate the facility, and our joint venture partner sells the products. The amounts in the above table represent the mills total capacity and production.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table provides a listing of our hydroelectric plants and their respective capacity and generation. For better illustrative purposes, we
have reflected the generation of these facilities for the full year of 2007. These hydroelectric facilities provide electricity primarily to a number of our paper manufacturing and sawmill operations. See Business Overview  Raw Materials
 Energy for more information regarding our use of energy produced at these facilities.



|                                    |  |           |   |  |                       |  |                      |  |                 |  |                         |  |                                
|----------------------------------- |  | --------- | - |  | --------------------- |  | -------------------- |  | --------------- |  | ----------------------- |  | -------------------------------
|                                    |  | Ownership |   |  | InstalledCapacity(MW) |  | Share ofCapacity(MW) |  | Generation(GWh) |  | Share ofGeneration(GWh) |  | Share ofGenerationReceived(GWh)
|Hydro Saguenay                      |  | 100       | % |  | 162                   |  | 162                  |  | 1,043           |  | 1,043                   |  | 1,043                          
|Grand Falls                         |  | 100       | % |  | 61                    |  | 61                   |  | 488             |  | 488                     |  | 488                            
|Fort Frances(1)(2)                  |  | 75        | % |  | 27                    |  | 20                   |  | 127             |  | 100                     |  | 100                            
|Kenora(1)(2)                        |  | 75        | % |  | 18                    |  | 14                   |  | 64              |  | 51                      |  | 51                             
|Iroquois Falls(1)(2)                |  | 75        | % |  | 92                    |  | 69                   |  | 509             |  | 423                     |  | 423                            
|Manicouagan Power Company(1)(3)     |  | 60        | % |  | 335                   |  | 201                  |  | 2,889           |  | 1,733                   |  | 632                            
|Star Lake Hydro Partnership         |  | 51        | % |  | 18                    |  | 9                    |  | 148             |  | 75                      |  | 75                             
|Exploits River Hydro Partnership(4) |  | 49        | % |  | 37                    |  | 18                   |  | 153             |  | 75                      |  | 75                             
|                                    |  |           |   |  |                       |  |                      |  |                 |  |                         |  |                                
|                                    |  |           |   |  | 750                   |  | 554                  |  | 5,421           |  | 3,988                   |  | 2,887                          
|                                    |  |           |   |  |                       |  |                      |  |                 |  |                         |  |                                



|(1) | The amounts in the above table represent the facilitys total installed capacity and power generation.
|--- | ------------------------------------------------------------------------------------------------------

|(2) | Prior to April 2, 2007, we owned 100% of these facilities.
|--- | ----------------------------------------------------------

|(3) | We are required to sell a portion of our share of the power generation back to Alcoa, Inc. through January 1, 2011; therefore, the power we receive is net of the amounts sold
under this contract with our partner.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Exploits River Hydro Partnership is a limited partnership and unconsolidated entity in which we have 49% interest. The amounts in the above table represent the facilitys total
installed capacity and power generation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See Operating and Financial Review of Prospects  Business Strategy and
Outlook for a discussion of the closing or idling of certain of our operations and History and Development of the Company for a discussion of the sale of our Snowflake Mill. In addition, the Company has granted a security
interest in its property, plants and equipment under its credit agreement with Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners.



17



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##### Table of Contents

##### Index to Financial Statements



|Item 6. | Directors, Senior Management and Employees
|------- | ------------------------------------------

Management

John W. Weaver, age 62, is President of Abitibi. He has also been Executive Chairman of AbitibiBowater since October 2007.Mr. Weaver held a number of senior executive positions in operations and sales prior to being appointed in his current positions with the Company and AbititiBowater. He has over 30 years of experience in the forest products industry.
Mr. Weaver is a member of the Abitibi-Consolidated Inc. board, the chair of both the Forest Products Association of Canada (FPAC) and FPInnovations, and a director of the U.S. Endowment for Forestry and Communities.

William G. Harvey, age 50, is a Vice President and Treasurer of Abitibi. Mr. Harvey served as Executive Vice President and Chief Financial Officer
of Bowater from August 2006 to October 2007, when he was appointed as Senior Vice President and Chief Financial Officer of AbitibiBowater. From 2005 to 2006, he was Senior Vice



18



---

##### Table of Contents

##### Index to Financial Statements

President and Chief Financial Officer and Treasurer of Bowater. From 1998 to 2005, he served as Vice President and Treasurer of Bowater. Previously, he was
Vice President and Treasurer of Avenor Inc., a pulp and paper company, until its acquisition by Bowater.

Pierre Rougeau, age 50, is a Vice
President of Abitibi. Mr. Rougeau served as Senior Vice President, Corporate Development and Chief Financial Officer of Abitibi from 2001 to October 2007, when he was appointed as Senior Vice President, North American Newsprint Division of
AbitibiBowater.

Alain Grandmont, age 52, is a Vice President of Abitibi. Mr. Grandmont served as Senior Vice President, Commercial
Printing Papers of Abitibi from 2005 to October 2007, when he was appointed as Senior Vice President, Commercial Printing Papers Division of AbitibiBowater. He served as Senior Vice President, Value-Added Operations and Sales of Abitibi in 2004.
Previously, he was Senior Vice President, Value-Added Operations of Abitibi.

The following table sets forth information concerning all
compensation paid during 2007 to our management.

SUMMARY COMPENSATION TABLE



|                                                   |  |           |  |             |  |                                             |  |                                                                          |  |                              |  |             
|-------------------------------------------------- |  | --------- |  | ----------- |  | ------------------------------------------- |  | ------------------------------------------------------------------------ |  | ---------------------------- |  | ------------
|Name and Principal Position                        |  | Salary($) |  | Bonus(1)($) |  | Non-EquityIncentive PlanCompensation (2)($) |  | Change inPension ValueandNonqualifiedDeferredCompensationEarnings (3)($) |  | All OtherCompensation (4)($) |  | Total (5)($)
|John W. Weaver, President                          |  | 1,353,158 |  |            |  | 353,848                                     |  | 783,035                                                                  |  | 47,601                       |  | 2,537,642   
|                                                   |  |           |  |             |  |                                            
|William G. Harvey,(6) Vice President and Treasurer |  |          |  |            |  |                                            |  |                                                                         |  |                             |  |            
|                                                   |  |           |  |             |  |                                            
|Pierre Rougeau Vice President                      |  | 463,005   |  | 286,266     |  | 102,946                                     |  | 211,246                                                                  |  | 21,137                       |  | 1,084,600   
|                                                   |  |           |  |             |  |                                            
|Alain Grandmont, Vice President                    |  | 432,949   |  | 198,760     |  | 127,027                                     |  | 272,297                                                                  |  | 13,485                       |  | 1,044,518   



|(1) | Amounts in this column reflect the compensation paid to the named individuals under the Retention Plan, which is discussed in detail under Directors, Senior Management and
EmployeesManagementRetention Plan. It also includes the Signing Bonus for Messrs. Rougeau and Grandmont. The Signing Bonus was paid in U.S. dollars on November 15, 2007, and converted into Canadian dollars using
the November 15, 2007, exchange rate of $1.0149.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts in this column reflect the cash awards to the named individuals under the Abitibi Annual Bonus Plan, which is discussed in significant detail under Directors, Senior
Management and EmployeesManagementAnnual Bonus Plan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Amounts shown in this column reflect the actuarial increase in the present value of the named individuals benefits under pension plans established by Abitibi using interest
rate and mortality rate assumptions consistent with those used in the Companys financial statements. There were no above-market or preferential earnings on non-qualified deferred compensation for management in 2007. A discussion of pension
benefits is provided below. The pension amounts were converted to Canadian dollars using the 2007 average exchange rate of $1.074.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Amounts in this column reflect, for each former Abitibi employee (except Mr. Rougeau), employer contributions to an employee stock ownership plan that was used to purchase
AbitibiBowater stock (the plan was terminated on January 1, 2008). Additional perquisites include (i) a car allowance, (ii) tax and financial planning, (iii) a physical, (iv) parking and (v) club dues and expenses.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | All amounts shown in this table also reflect amounts paid by AbitibiBowater for services rendered to AbitibiBowater after the closing of the Combination.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Mr. Harvey also serves as the Chief Financial Officer of Bowater Incorporated and AbitibiBowater Inc. and did not receive any compensation in his capacity as an officer of
Abitibi-Consolidated Inc.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



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##### Table of Contents

##### Index to Financial Statements

Bonus Plan

Abitibi administered a bonus plan during 2007, which was terminated as of the closing of the Combination and AbitibiBowater established a short term incentive plan for continuing employees. The new plan design applies
for the remainder of calendar year 2007 and all of 2008.

Abitibi Bonus Plan

The Human Resources and Compensation Committee (the HRCC on the Committee) of the Board of Directors of AbitibiBowater set 2007
annual bonus measures for its named management in January 2007. It included three design components, Corporate closely watched numbers, division objectives and strategic objectives. Abitibis human resource executive and Chief
Executive Officer made bonus recommendations to the HRCC, and each of the named management gave input on their bonus objectives. The Chief Executive Officer approved division and strategic objectives for the other officers. The Chief Executive
Officers bonus was based entirely on the performance of the Abitibi Corporate closely watched numbers, or CWNs. The CWNs are based on profit improvement, return on capital employed (ROCE) compared to
competitors and net earnings.

Abitibi only took its Corporate CWNs into account with respect to the first 10 months of 2007, since that
financial measure could no longer be measured as intended after the Combination was completed (for example, some of the performance measures measured Abitibis performance in comparison to Bowater (which didnt exist as a separate company
following the Combination), and the original targets were created for Abitibi as a stand-alone company).

Accordingly, Abitibi took into
account the results of its commercial printing paper business only through the first 10 months of the year, since that data was no longer available after the Combination. However, if meaningful data with respect to a performance target remained
available after the Combination, that is, if the target could still be measured after the Combination occurred, Abitibi took that measure into account for the full 12 months. Strategic objectives which were taken into account for some of the Abitibi
named executive officers bonuses remained relevant for all of 2007.

The amounts paid to our management under this plan are set forth
above in the Summary Compensation Table in the Non-Equity Incentive Compensation column.

Retention Bonus Plan

Because of the pending Combination transaction and the job insecurity created among employees, Abitibi established a Retention Bonus Plan. Abitibi
management (in addition to certain other employees reporting to headquarters) were eligible to receive a retention bonus if they stayed at Abitibi through the closing. The amounts were paid if the employee remained with Abitibi through the closing
and were determined in part based on contributions made by the employee to help facilitate the closing, in part as an incentive to motivate the executive to stay through the completion of the Closing, and, in part as a reflection of 50% of their
annual bonus target.



20



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##### Table of Contents

##### Index to Financial Statements

Equity Award Plans

STOCK AND OPTION AWARDS TABLE 2007



|                  |  |                                |     |  |                  |  |                  |  |                |  |              |  |                  |        
|----------------- |  | ------------------------------ | --- |  | ---------------- |  | ---------------- |  | -------------- |  | ------------ |  | ---------------- | -------
|Name              |  | RestrictedStock UnitAwards (1) |     |  | OptionAwards (2) |  | Option GrantDate |  | ExpirationDate |  | ExerciseDate |  | ExercisePrice(3)
|John W. Weaver    |  | 20,328                         |     |  | 31,305           |  | 3/6/2007         |  | 3/6/2017       |  |             |  | $                | 52.3878
|                  |  | 28,926                         | (4) |  |                 |  |                  |  |                |  |             |  |                  |        
|                  |  |                                |     |  |                  | 
|William G. Harvey |  |                               |     |  |                 |  |                 |  |               |  |             |  |                  |       
|                  |  |                                |     |  |                  | 
|Pierre Rougeau,   |  | 4,889                          |     |  | 7,513            |  | 3/6/2007         |  | 3/6/2017       |  |             |  | $                | 52.3878
|                  |  |                                |     |  |                  | 
|Alain Grandmont   |  | 4,065                          |     |  | 6,261            |  | 3/6/2007         |  | 3/6/2017       |  |             |  | $                | 52.3878



|(1) | The restricted stock unit awards have been adjusted as a result of the Combination
|--- | ----------------------------------------------------------------------------------

|(2) | The option awards have been adjusted as a result of the Combination.
|--- | --------------------------------------------------------------------

|(3) | The exercise price has been adjusted as a result of the Combination.
|--- | --------------------------------------------------------------------

|(4) | This grant represents a synergy award of RSU units to which Mr. Weaver will be entitled to receive upon meeting certain synergy targets within two years following the consummation
of the Combination.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior to the Combination, the Company maintained various incentive stock plans (pre-combination
plans) that provided for grants of Abitibi stock options, restricted stock units (RSU) and deferred stock units (DSU) to Company directors, officers and key employees. As a result of the Combination, the pre-combination
plans have been modified and replaced with stock options, RSUs and DSUs of AbitibiBowater (post-combination plans), under substantially the same terms and conditions that existed under the pre-combination Abitibi plans. As of the
Combination, outstanding grants under the pre-combination plans have been converted into equivalent grants of AbitibiBowater using the Abitibi conversion ratio of 0.06261.

Abitibi made annual equity grants in March 2007 to its management using stock options and RSUs as was done in the past. Traditionally, Abitibi
granted 50% of the annual award in the form of stock options and 50% of the award as RSUs. Abitibis compensation consultants reviewed the mix and discussed with management the market pressure to reduce dilution by using restricted stock units
instead of options. Management took this into consideration and recommended to the Abitibi Committee that the mix be changed, and in response, the HRCC granted awards in a mix of 40% stock options and 60% RSUs.

The RSUs Abitibi granted in March 2007 originally included three years of performance-based vesting. The RSUs would vest based on the extent to
which Abitibis cash ROCE exceeded the cash ROCE earned by Abitibis competitors during the same period. In November 2007, the HRCC decided that outstanding restricted stock unit awards granted in 2006 and 2007 would be subject only
to time-based vesting, and not performance-based vesting, because the performance targets selected for the outstanding restricted stock unit awards were no longer relevant. The competition against which the targets were to be measured included
Bowater, which was now part of AbitibiBowater. Stock options have always used time-based vesting, so the HRCC made no changes to the vesting of outstanding options as a result of the Combination.

While all Abitibi management received the same proportion of stock options and RSUs in their 2007 grants, the Abitibi President received an aggregate
award equal to 2.5 times his base salary, while the other Abitibi management received an aggregate award equal to 1.3 times their base salary. Abitibis consultant studied the grant practices of the companies against which Abitibi had been
benchmarking and determined that the chief executive officer needed a grant equal to 2.5 times his base salary in order for his grant to be market competitive. Adjustments were not necessary in this regard for the other Abitibi executives.

Mid- and Long-Term Incentive Compensation

Mid-term RSUs and long-term stock options incentive compensation comprised a significant portion of an Abitibi managements total direct compensation and was intended to retain and motivate the senior executives
and senior managers into taking actions that enhanced shareholder value. Abitibi determined the value of equity awards to management based on a percentage of salary for each salary grade based upon the advice of Mercer. For stock options, the number
of shares to be covered was determined using the Black-Scholes valuation methodology.



21



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##### Table of Contents

##### Index to Financial Statements

The table below summarizes the Abitibi 2007 mid- and long-term incentive plan designs:



|                                                |  |                                                                                                                                                                                                   |  |                                                                                  
|----------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------
|                                                |  | RSUs (Mid-term)                                                                                                                                                                                   |  | Stock Options (Long-term)                                                        
|                                                |  |                                                                                                                                                                                                  
|Performance Period                              |  | 36 months                                                                                                                                                                                         |  | Option life of 120 months                                                        
|                                                |  |                                                                                                                                                                                                  
|President (Mr. Weaver)                          |  | Annual grant based on 150% of position salary mid-point                                                                                                                                           |  | Annual grant based on 100% of position salary mid-point (using the Black-Scholes)
|                                                |  |                                                                                                                                                                                                  
|Vice-Presidents (Messrs. Rougeau and Grandmont) |  | Annual grant based on 78% of position salary mid-point                                                                                                                                            |  | Annual grant based on 52% of position salary mid-point (using the Black-Scholes) 
|                                                |  |                                                                                                                                                                                                  
|Vesting conditions                              |  | Units will vest based on the Companys relative 3-year average financial performance versus a selected comparator group. Value of units directly pegged to stock price. Payment in cash or
stock. |  | Options will vest 25% per year after first year and will expire in 10 years.     

Abitibi Stock Option Plan

In 2007, Abitibi granted stock options to key executive and management personnel at exercise prices equal to the market price of the common shares on the
date that the options were granted. Market price was defined as the average of the highest and lowest share price as reported for the five business days immediately preceding the grant date on the principal Canadian exchange on which the common
shares were traded. The number of options granted to each senior executive and senior manager was based on benchmarking within the North American industry peer group, on the advice of Mercer. To prevent significant fluctuations in the number of
options that were granted to senior executives from year to year, the number of options was derived from a formula that took into account the expected value of the options (pursuant to a three-year average under the Black-Scholes formula) and the
average price of the Companys common shares for each of the three years preceding the date of grant.

The 2007 nonqualified stock option awards provide for vesting in 1/4increments at the end of
each year during the four-year vesting period. If the employment of the individual is terminated, his or her option terminates, except that if employment is terminated by reason of death, retirement, involuntary termination or other reason approved
by the Company, then options are exercisable with respect to the number of shares the individual had the right to purchase at the time of the termination within five years after the date of the termination event, provided that in no event would any
option be exercisable after the original expiration date. All options are canceled upon termination of employment for cause. The options are immediately vested if the executive is terminated and is entitled to benefits under his change in control
severance agreement.

If the employment of the employee terminates for any reason other than those previously referred to above then
the option would be exercisable by the employee with respect to the number of common shares that he had the right to purchase at the time of the termination within three months after such termination (or, in the case of the death of the employee
within three months after such termination, then by his personal representative within one year after the date of his death).

Until
July 2002, certain members of management were entitled to receive a loan from the company to purchase optioned common shares under the Stock Option Plan. After the enactment of the Sarbanes-Oxley Act of 2002, the Company determined that members
of management were no longer eligible for personal loans under the Stock Option Plan and none of the outstanding loans granted under the Stock Option Plan could be modified or renewed. Common shares purchased through the former loan program are held
as security until the loan is repaid.

Abitibi Restricted Share Unit Plan

The Abitibi Restricted Share Unit Plan was established in 2004 and provided for the granting of RSUs to senior executive and senior managers, and, on an
exceptional basis, other selected high potential and/or high performing key employees. The RSUs represent phantom shares that vest on the basis of performance as opposed to pure time vesting and are generally paid out at the end of the performance
period, usually within three years from issuance. The vesting of RSUs is subject to the Companys relative average financial performance versus other companies that comprise the comparator group during a set period.



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On an annual basis, the Abitibi Committee approved the RSU grants, the financial benchmarks, the
composition of the comparator group, the period during which the companys performance was to be evaluated, and the vesting conditions. The number of RSUs granted to each executive was evaluated, as well as the specific vesting conditions. The
number of RSUs granted to each executive was based on the same methodology as the stock option grants, as described in the previous section, and the value was calculated based on the average price of the companys common shares for each of the
three years preceding the date of grant. The award payments are in cash and/or by the delivery of common shares purchased by the company on the open market. However, there is a mandatory withholding of shares from RSU payouts for executives until
share ownership guidelines are met.

For the 2007 award, Cash ROCE was set as the financial benchmark for senior executives. The
performance period for the 2007 grant was established at three years and the comparator group included four US companies (International Paper, Weyerhaeuser, Bowater, MeadWestvaco) and four Canadian companies (Domtar, Canfor, Tembec and Catalyst).
The table below summarizes the 2007 ranking schedule for award determination over the three-year period:



|                    |  |                                 
|------------------- |  | --------------------------------
|Company beats two   |  | 25% of granted units are earned 
|Company beats four  |  | 50% of granted units are earned 
|Company beats six   |  | 75% of granted units are earned 
|Company beats seven |  | 100% of granted units are earned

Because the combination made the determination of the performance criteria inappropriate, the
Abitibi Committee decided that all outstanding RSU awards would become time vested based on their original vesting schedule.

In addition,
Mr. Weaver has received a special grant of 28,926 AbitibiBowater RSUs as a synergy award to which he will be entitled upon the meeting of certain performance targets following the completion of the Combination related to achievement of levels
of synergies. Mr. Weaver may earn a lesser number of RSUs to the extent a lesser level of synergies is achieved, as follows:



|                                |  |         |   |  |         |   |  |         |  
|------------------------------- |  | ------- | - |  | ------- | - |  | ------- | -
|Synergies                       |  | US$200M |   |  | US$250M |   |  | US$300M |  
|Percentage Vested               |  | 80      | % |  | 100     | % |  | 120     | %
|# Restricted share Units Vested |  | 19,284  |   |  | 24,105  |   |  | 28,926  |  

Retirement Plans

We provide traditional defined benefit pension plans for our named management. Our mix of tax-qualified retirement plans and supplemental plans for select members of management is designed to attract and retain the
senior and experienced mid to late-career executive talent we think we need to be a competitive company in the forest products industry. The plans provide these management with a retirement benefit targeted to a competitive income replacement ratio
at normal retirement age.

Our executives are covered by a registered or qualified defined benefit retirement plan and a supplemental
executive plan. These plans are intended to provide a combined pension at the normal retirement age of 65 that is equal to 2% of the average annual compensation multiplied by the years of credited service, up to a maximum of 70% of such earnings.
Compensation is based on the average of the highest five consecutive years of base salary within the last 10 years of service plus the average of the five highest annual awards paid pursuant to the annual incentive awards plan within the last 10
years of service.

Pension Benefits

Retirement benefits for Mr. Weaver are payable under the following qualified and supplemental defined benefit pension plans: a qualified defined benefit plan covering all US salaried employees (Qualified Sales Plan) which
provides pension benefits based on earnings, service, and age; the Augusta Newsprint Company Retirement Plan (Augusta Plan), a qualified plan in which Mr. Weaver was formerly an active participant, which provides pension benefits
based on earnings and service; and a nonqualified Supplemental Plan covering designated senior executives including Mr. Weaver (the Supplemental Plan), which provides a target benefit offset by the value of benefits provided in
other qualified plans. The definition of compensation under the plans includes those categories of compensation under the salary and bonus headings in the Summary Compensation Table and does not include compensation in any of the other headings of
the Summary Compensation Table.

The Qualified Sales Plan is a cash balance retirement plan which provides an account balance based upon
accumulated interest and pay credits. The interest crediting rate is based upon the 30-year U.S. Treasury Rate for the month of November preceding the plan year. The pay credits are based upon a participants age and range from 4% to 8% of
compensation, which includes both base pay and bonuses. The Qualified Sales Plan allows for the payment of a lump sum at the time of termination. The Augusta Plan provides an age 65 benefit based upon 1.5% of



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##### Index to Financial Statements

average compensation times years of credited services. Compensation includes base pay only. The Augusta Plan allows for an unreduced early retirement benefit
at age 62 if the participant has at least 85 points (age plus service). The Augusta Plan also provides for a reduced early retirement benefit if the participant has attained age 55 and completed at least 15 years of service. The early retirement
reduction is 4.8% per year before age 65.

The Supplemental Plan provides an age 65 retirement benefit (if the participant has at
least two years of service) equal to 2% of average compensation times years of credited service up to 35 years (reduced by qualified plan amounts). Compensation includes base salary and bonus. Average compensation is based on the best 60 consecutive
months of base salary within the last 120 months, and the best five bonuses in the last 10 years. The total pension is payable unreduced if the executive retires at age 58 with at least 80 points (age plus service). A reduction of 6% per year
is applicable for retirement before such unreduced eligibility if the member has completed 20 years of service; if the member has less than 20 years of service the 6% per year reduction is calculated for each year prior to 65. The total pension
is initially paid for a two-year period under a joint and survivor 50% lifetime pension. The lump sum value of the benefit is paid at the end of such two-year period. The Abitibi Committee granted Mr. Weaver an additional five years of service
in the Supplemental Plan.

The accrued benefit amounts for Mr. Weaver are measured as of October 29, 2007, using a 6.5% discount
rate and the RP2000 mortality table projected to 2006 with white collar adjustments. Benefits were calculated assuming retirement at age 65.

Messrs. Grandmont and Rougeau will receive total pension benefits equal to 2% of average compensation times years of credited service under an unfunded Supplemental Plan. Compensation includes base salary and bonus. Average
compensation is based on the best 60 consecutive months of base salary within the last 120 months, and the best five bonuses in the last ten years. Total pension benefits are payable from a Registered Plan and a Supplemental Plan. The Supplemental
Plan provides benefits in excess of the maximum benefits payable under the Registered Plan.

The total pension is paid under a joint and
survivor 50% lifetime pension. The pension payable under the Supplemental Plan may be paid in a lump sum two years after termination or retirement at the discretion of the Company, with the approval of the executive.

The total pension is payable unreduced if the executive retires at age 58 with at least 80 points (age plus service). A reduction of 6% per year is
applicable for retirement before such unreduced eligibility if the member has completed 20 years of service; if the member has less than 20 years of service the 5% per year reduction is calculated for each year prior to 65.

The Abitibi granted five extra years of credited service under the Supplemental Plan to Mr. Rougeau. The extra years vest gradually and will be
fully vested on September 4, 2009.

Severance and Change in Control Arrangements

Severance Agreements

Mr. Weaver has a severance arrangement that entitles him to a lump sum payment equal to three times base salary plus bonus (based on the average of the last two bonuses), three years of pension credit, and welfare benefits and car use
for three years. The severance benefits are only payable upon termination of Mr. Weavers employment without just cause in a circumstance other than a circumstance involving a change of control of Abitibi.



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##### Index to Financial Statements

Change in Control Agreements

Abitibi granted change in control agreements to ten executives including Messrs. Weaver, Rougeau and Grandmont. Following a change in control, if the
executives employment is terminated within 24 months other than for just cause (defined as the willful failure of the executive to properly carry out the executives duties or theft, fraud or dishonesty or material misconduct
involving the property or affairs of the Company or the carrying out of his duties) or by the executive in response to a good reason, the executive will receive a cash amount equal to three times (1.5 times for Mr. Weaver) annual
compensation (defined as base salary plus bonus), group welfare benefits for three years, and three years of pension credit. Mr. Weaver would receive an additional 1.5 times base salary plus bonus as consideration for agreeing to the two year
noncompete obligation.

In the context of the Combination, the Board of Directors of Abitibi has agreed to vary the terms of such severance
arrangement to allow Mr. Weaver to be entitled to a lump sum payment equal to three years of annual compensation, less one-half of the compensation paid to Mr. Weaver between the completion of the Combination and the termination of his
employment, provided that Mr. Weaver remains in the employ of the Company for at least two years following the completion of the Combination (unless his employment is terminated by the Company at an earlier date for any reason other than
cause).

The Abitibi agreements define a change in control as (i) the acquisition of 35% of the voting shares,
(ii) election by any holders of voting shares, or a number of holders, of the Board of Directors equal to or greater than one-third of the Board of Directors, or (iii) transaction(s) whereby 50% of the assets are transferred. The
Combination was considered a change in control under this definition. If Messrs. Weaver, Rougeau or Grandmont are terminated within 24 months after the Closing, they will be entitled to the severance benefits described above.

The Abitibi agreements define good reason as (i) a material change in position, duties or responsibilities, (ii) reduction of the
executives salary, (iii) material reduction in benefits (iv) relocation or substantial increase in travel obligations, or (iv) any reason that would be considered constructive dismissal by a court of competent jurisdiction.

The Abitibi agreements generally provide that the Company will pay all legal fees and expenses incurred by the executive as a result of
the termination of employment in circumstances covered by the agreement. The agreement imposes confidentiality restrictions and a two-year noncompete obligation.

Directors

Current Abitibi Directors

John W. Weaver, age 62, has been a director since April 1999. He has been Executive Chairman of AbitibiBowater since October 2007.Mr. Weaver
presently serves as President of Abitibi-Consolidated Inc.Mr. Weaver held a number of senior executive positions in operations and sales prior to being appointed in his current positions with Abitibi-Consolidated Inc. and
AbitibiBowater. He has over 30 years of experience in the forest products industry. Mr. Weaver is a member of the Abitibi-Consolidated Inc. board, the chair of both the Forest Products Association of Canada (FPAC) and FPInnovations, and a
director of the U.S. Endowment for Forestry and Communities. Mr. Weaver did not receive fees in 2007 for his service on the Abitibi Board.

Allen Dea, age 53, has been a director since October 2007. Mr. Dea presently serves as the Vice-President, Finance  Operations since October 2007 of AbitibiBowater. Prior to his being appointed as such, Mr. Dea served as
Vice-President and Treasurer of Abitibi-Consolidated Inc., after having served previously as the Companys Vice-President Corporate Controller. He has been employed by the Company since 1976. Since consummation of the Combination, directors of
Abitibi no longer receive fees for their service on the Abitibi Board.

Alain Grandmont, age 52, has been a director since October 2007.
Mr. Grandmont served as Senior Vice President, Commercial Printing Papers of Abitibi from 2005 to October 2007, when he was appointed as Senior Vice President, Commercial Printing Papers Division of AbitibiBowater. He served as Senior Vice
President, Value-Added Operations and Sales of Abitibi in 2004. Previously, he was Senior Vice President, Value-Added Operations of Abitibi. Since consummation of the Combination, directors of Abitibi no longer receive fees for their service on the
Abitibi Board.

William G. Harvey, age 50, has been a director of the company since October 2007. Mr. Harvey served as Executive Vice
President and Chief Financial Officer of Bowater from August 2006 to October 2007, when he was



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##### Index to Financial Statements

appointed as Senior Vice President and Chief Financial Officer of AbitibiBowater. From 2005 to 2006, he was Senior Vice President and Chief Financial Officer
and Treasurer of Bowater. From 1998 to 2005, he served as Vice President and Treasurer of Bowater. Previously, he was Vice President and Treasurer of Avenor Inc., a pulp and paper company, until its acquisition by Bowater. Since consummation of the
Combination, directors of Abitibi no longer receive fees for their service on the Abitibi Board.

Pierre Rougeau, age 50, has been a
director since October 2007. Mr. Rougeau served as Senior Vice President, Corporate Development and Chief Financial Officer of Abitibi from 2001 to October 2007, when he was appointed as Senior Vice President, North American Newsprint
Division of AbitibiBowater. Since consummation of the Combination, directors of Abitibi no longer receive fees for their service on the Abitibi Board.

Former Abitibi Directors

John Q. Anderson, age 56, has been a director of AbitibiBowater Inc.
since October 2007. He is Chairman and Chief Executive Officer of BigWheel Partners Inc.Mr. Anderson served as a director of Abitibi-Consolidated Inc. from 2006 to October 2007. He is a member of the Board of Trustees of North American
Electric Reliability Corporation. He also serves as a director of Panther Expedited Services, Inc, Gemini Traffic Sales. Inc. and as Chairman of Board of Roadlink USA, Inc. Mr. Anderson received $71,234 in cash and other compensation for his
service on the Abitibi Board in 2007.

Hans P. Black, age 54, has been a director of AbitibiBowater Inc. since October 2007. Mr. Black
served as a director of Abitibi-Consolidated Inc. from 2005 to October 2007. He serves as a director of Amorfix Life Sciences Ltd., RPMH Global Marco Fund, Wi2Si Inc. Les Aliments SoYummi Inc., la Fondation de lInstitut de Cardiologie de
Montréal and is a member of the Advisory Council of The Paul H. Nitze School of Advanced International Studies of John Hopkins University. Mr. Black received $75,169 in cash and other compensation for his service on the Abitibi Board in
2007.

Jacques Bougie, age 60, has been a director of AbitibiBowater Inc. since October 2007. Mr. Bougie served as a director
of Abitibi-Consolidated Inc. from 2004 October 2007. He serves a director of Nova Chemicals Inc. and McCain Foods Ltd. From 1993 to 2001 he served as President and Chief Executive Officer of Alcan Inc. Mr. Bougie received $214,393 in cash
and other compensation for his service on the Abitibi Board in 2007.

William E. Davis, age 66, is a Director of Consol Energy Inc.Mr. Davis served as a director of Abitibi-Consolidated Inc. from 2003 to October 2007. From 2002 to 2003, he served as Chairman of National Grid USA and as an executive director of National Grid (UK) From 1993 to 2002, he served as Chairman
of the Board and Chief Executive Officer of Niagara Mohawk Power Corporation. He currently serves on the Board of Trustees of Syracuse University as Chairman and Chief Executive officer of the Metropolitan Development Foundation of Central New York.
Mr. Davis received $72,545 in cash and other compensation for his service on the Abitibi Board in 2007.

Marlene Davidge, age 57, was
a director of Abitibi-Consolidated Inc. from 2001 to October 2007. Ms. Davidge is a partner at Torys LLP, a law firm. She is also a member of the Advisory Committee of the University College, University of Toronto. Ms. Davidge received
$63,254 in cash and other compensation for her service on the Abitibi Board in 2007.

David A. Galloway, age 64, was a director of
Abitibi-Consolidated from 2006 to October 2007. Since 2004, Mr. Galloway has been Chairman of the Board of the Bank of Montreal. He also serves on the Board of Directors of E. W. Scripps Company, Shell Canada Limited and Toromont Industries
Ltd. He was President and CEO of Torstar Corporation from 1988 to 2002 and a founding partner of Canada Consulting Group. Mr. Galloway received $64,566 in cash and other compensation for his service on the Abitibi Board in 2007.

Lise Lachapelle, age 58, has been a director of AbitibiBowater Inc. since October 2007. Ms. Lachapelle served as a director of Abitibi-Consolidated
Inc. from 2002 to October 2007. Ms. Lachapelle is also a director of Industrielle Alliance, Insurance and Financial Services Inc., Russels Metals Inc., Innergex Poser Trust, BNP-Paribas (Canada) and Mirabaud Canada Inc. She is also a director



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##### Index to Financial Statements

of Export Development Canada. Ms. Lachapelle received $78,667 in cash and other compensation for her service on the Abitibi Board in 2007.

Gary J. Lukassen, age 67, has been a director of AbitibiBowater Inc. since October 2007. Mr. Lukassen served as a director of
Abitibi-Consolidated Inc. from 2002 to October 2007. He is a director of The North West Company and Spinrite Income Fund. From 1989 to 2001, he served as Executive Vice-President and Chief Financial Officer of the Hudson Bays Company.
Mr. Lukassen received $86,792 in cash and other compensation for his service on the Abitibi Board in 2007.

John A. Tory, age 78, was
a director of AbitibiBowater from 1965 to October 2007. He is a director of The Woodbridge Company Limited, the Thomson Corporation and Rogers Communications Inc. He was Deputy Chairman of The Thomson Corporation from 1978 to 1997 and President of
Woodbridge from 1973 to 1993. Mr. Tory received $79,869 in cash and other compensation for his service on the Abitibi Board in 2007.

Employees

As at December 31, 2007, the Company employed approximately 11,500 employees. Fourteen collective bargaining agreements covering
approximately 1,450 of our employees have been renewed in 2007 with one paper mill, six sawmills, and seven woodlands operations. Four collective bargaining agreements, covering approximately 500 of our employees, which expired on or before
December 31, 2007, are in the process of being renewed. The facilities covered by these collective agreements consist of one paper mills, two sawmills, and one group of woodlands operations. In 2008, five other collective bargaining agreements
will expire for one paper mill, two sawmills and two groups of woodlands operations, covering approximately 525 employees. A significant number of our collective bargaining agreements with respect to newsprint and specialty paper operations in
Eastern Canada will expire April 30, 2009. We began negotiations with the union representing the majority of our Eastern Canadian employees on the 2009 agreements in March 2008. The negotiations continued for a week without resolution and we
are not currently in negotiations. See Risk Factors  Risks Related to Our Business  We could experience disruptions in operations and/or increased labor costs due to labor disputes.

Set forth below is a chart with the number of employees employed at the end of fiscal years 2005, 2006 and 2007, classified by area of work and
geographic location.



|                   |  |       |  |       |  |      
|------------------ |  | ----- |  | ----- |  | -----
|                   |  | 2005  |  | 2006  |  | 2007 
|Pulp & Paper Mills |  |       |  |       |  |      
|Canada             |  | 7046  |  | 6013  |  | 5100 
|U.S.               |  | 948   |  | 931   |  | 925  
|U.K./Europe        |  | 350   |  | 274   |  | 300  
|                   |  |       |  |       |  |      
|Subtotal           |  | 8344  |  | 7218  |  | 6325 
|Wood Products      |  |       |  |       |  |      
|Canada             |  | 4718  |  | 4635  |  | 4475 
|U.S.               |  | 0     |  | 0     |  | 0    
|U.K./Europe        |  | 0     |  | 0     |  | 0    
|                   |  |       |  |       |  |      
|Subtotal           |  | 4718  |  | 4635  |  | 4475 
|Recycling          |  |       |  |       |  |      
|Canada             |  | 0     |  | 0     |  | 0    
|U.S.               |  | 160   |  | 186   |  | 205  
|U.K./Europe        |  | 37    |  | 37    |  | 35   
|                   |  |       |  |       |  |      
|Subtotal           |  | 197   |  | 223   |  | 240  
|Corporate          |  |       |  |       |  |      
|Canada             |  | 400   |  | 378   |  | 369  
|U.S.               |  | 126   |  | 120   |  | 107  
|U.K./Europe        |  | 15    |  | 16    |  | 13   
|                   |  |       |  |       |  |      
|Subtotal           |  | 541   |  | 514   |  | 489  
|Total              |  |       |  |       |  |      
|Canada             |  | 12164 |  | 11026 |  | 9944 
|U.S.               |  | 1234  |  | 1237  |  | 1237 
|U.K./Europe        |  | 402   |  | 327   |  | 348  
|                   |  |       |  |       |  |      
|Subtotal           |  | 13800 |  | 12600 |  | 11529



|Item 7. | Major Shareholders and Related Party Transactions
|------- | -------------------------------------------------

A. Major
Shareholders

Abitibi is a subsidiary of AbitibiBowater. AbitibiBowater owns 82% of our common stock, and AbitibiBowater Canada
Inc. (ABCI), a Canadian corporation and subsidiary of AbitibiBowater, owns the remaining 18% of our common stock. AbitibiBowaters common stock trades on the New York Stock Exchange and the Toronto Stock Exchange under the symbol
ABH.

B. Related Party Transactions

Upon consummation of the Financing Transactions, AbitibiBowater, through a newly created direct subsidiary, acquired through a series of intercompany transactions, all of the common stock and all of the outstanding non-voting preferred
stock of D Corp. D Corp., previously a subsidiary of Abitibi, indirectly owns the investment in Augusta Newsprint Company, which operates a newsprint mill, the Alabama River and Snowflake paper mills, and the U.S. Recycling Operations. As a result
of the intercompany transactions, D Corp. is now an indirect subsidiary of AbitibiBowater while ceasing to be a subsidiary of the Company. This transaction will have a material impact on the Companys results of operations, financial condition
and liquidity going forward.

Abitibi may also, from time to time, subject to any applicable restrictions contained in any indebtedness
documents, enter into transactions with related parties, including AbitibiBowater, Bowater and their subsidiaries and affiliates, for management and other services (such as IT, environmental, human resources and legal services) and inter-company
advances, loans and investments, intercompany product sales and purchases. Because the Combination with Bowater was completed on October 29, 2007, transactions with AbitibiBowater, Bowater and their subsidiaries and affiliates were not material as
of March 31, 2008, but this may change as we continue the integration of the businesses and operations of Abitibi and Bowater. Similarly, there were no material loans or guarantees with related entities, other than any such transactions with
entities whose results of operations are consolidated in the Companys consolidated financial statements from the period from January 1, 2008 to March 31, 2008.

C. Interests of Experts and Counsel

Not applicable.



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##### Index to Financial Statements



|Item 10. | Additional Information
|-------- | ----------------------

C. Material Contracts

Combination Agreement

On January 29,
2007, we entered into a Combination Agreement and Plan of Merger with Alpha-Bravo Holdings, Inc., Bowater Incorporated, Alpha-Bravo MergerSub, Inc. and Bowater Canada Inc. pursuant to which Abitibi and Bowater became subsidiaries of AbitibiBowater.

Third Amendment to Credit Agreement

On July 16 2007, we entered into a Third Amendment, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners, dated
October 3, 2005 (the Credit Agreement), to waive the interest coverage ratio requirement until the end of the second quarter of 2008 and also waived certain other provisions to permit the reorganization and rationalization of
AbitibiBowaters corporate structure. We also entered into a Fourth Amendment, dated August 14, 2007, to the Credit Agreement in order to reduce the aggregate amount of its Facility A by $40,000,000. In addition, we entered into a Fifth
Amendment, dated December 27, 2007, to the Credit Agreement to extend the deadline for the completion of the reorganization of AbitibiBowaters corporate structure, to permit borrowings to be made under Facility B even though Facility A is
not fully used at the time and to amend certain other sections to the Credit Agreement.

Receivables Purchase Agreement

In connection with our accounts receivable securitization programs, we entered into (i) an Amended and Restated Receivables Purchase Agreement among
Abitibi-Consolidated U.S. Funding Corp., Eureka Securitisation, PLC, Citibank, N.A., the Originators Named Herein, and Abitibi Consolidated Sales Corporation dated January 31, 2008, and (ii) Amended and Restated Purchase and Contributed
Agreement among Abitibi-Consolidated Inc., Abitibi Consolidated Sales Corporation, Abitibi Consolidated Sales Corporation and Abitibi-Consolidated U.S. Funding Corp., dated January 31, 2008.

Snowflake Mill Purchase Agreement

On
February 10, 2008, we entered into an agreement with Catalyst Paper Corporation pursuant to which we agreed to sell our Snowflake mill for approximately US$180 million, including US$161 million in cash and approximately US$19 million in
retained trade receivables. We expect this sale to close in April 2008.

Sale of 13.75% Senior Secured Notes due 2011

On April 1, 2008, ACCC and Abitibi completed their private sale of $413.0 million aggregate principal amount of 13.75% Senior Secured Notes due 2011
(the Secured Notes) pursuant to a purchase agreement by and among ACCC, as issuer of the Secured Notes, Abitibi and certain of its subsidiaries, as guarantors of the Secured Notes, and Goldman, Sachs & Co. and J.P. Morgan
Securities Inc., as initial purchasers of the Secured Notes.

The Secured Notes, which were issued pursuant to an Indenture dated
April 1, 2008, by and among, ACCC, Abitibi, the additional subsidiary guarantors named therein, and Wells Fargo, National Association, as trustee and collateral trustee (the Secured Notes Indenture), will mature on April 1,
2011, are guaranteed by Abitibi and all of Abitibis wholly owned restricted subsidiaries (other than certain immaterial subsidiaries) and any other restricted subsidiaries that guarantee the Senior Term Loan. ACCC will pay interest on the
notes on April 1 and October 1 of each year with the first such payment to be made on October 1, 2008.

The Secured Notes
(and the related guarantees) are secured on a first priority basis by a lien on certain fixed assets owned or acquired by ACCC or the guarantors (except D Corp. and its restricted subsidiaries). The collateral securing the notes consists primarily
of (i) mortgages on 11 pulp and paper mills, located in Canada and the United Kingdom and related rights of way; (ii) a pledge of ACCCs 60% equity interest in Manicouagan Power Company, which owns and operates a hydroelectric plant
on the Manicouagan river in Quebec, Canada; (iii) pledges of ACCCs 75% equity interests in each of ACH Limited Partnership and its general partner, Abitibi-Consolidated Hydro Inc.; (iv) substantially all of the equipment (other than
vehicles) and intellectual property of ACCC and the guarantors (other than Donohue Corp. and its restricted subsidiaries); (v) all records and documents of title relating to the above; and (vi) certain other rights incidental to the above
items. Additionally, ACCC has agreed to use its commercially reasonable efforts to obtain all consents necessary to provide a mortgage on its Iroquois Falls, Ontario paper mill, subject to the satisfaction of certain conditions.

The Secured Notes are ACCCs senior obligations and rank pari passu in right of payment with all of ACCCs
existing and future unsecured senior indebtedness, including the outstanding senior unsecured notes ACCC has issued, becomes a co-obligor under or guaranteed. The Secured Notes are effectively subordinated to obligations of ACCC under the Senior
Term Loan, to the extent of the value of the collateral securing the Senior Term Loan. The Secured Notes are senior in right of payment to any existing and future subordinated indebtedness of ACCC, if any.

If a change of control of ACCC occurs, ACCC must give holders of the Secured Notes the opportunity to sell their Secured Notes to ACCC at a
purchase price of 101% of their principal amount, plus accrued interest.

The Secured Notes Indenture contains covenants that limit
ACCCs and Abitibis ability and that of Abitibis restricted subsidiaries to: incur additional debt, create liens on assets, pay dividends or distributions on, or redeem or purchase, ACCCs capital stock, make investments,
engage in sale and leaseback transactions, engage in transactions with affiliates, transfer or sell assets, issue and sell equity interests in Abitibis wholly owned subsidiaries, guarantee debt, restrict dividends or other payments to ACCC,
consolidate, merge or transfer all or substantially all of ACCCs assets and the assets of its subsidiaries, and engage in unrelated businesses, subject to certain exceptions.

In connection with the sale of the Secured Notes, ACCC has also entered into a Registration Rights Agreement (the Secured Notes Registration Rights
Agreement) pursuant to which ACCC has agreed to conduct an exchange offer with respect to the Secured Notes pursuant to which the holders of the Secured Notes can exchange their Secured Notes for notes that are substantially similar to Secured
Notes that have been registered under the Securities Act of 1933, as amended (the Securities Act). In addition, in certain circumstances, ACCC has also agreed to file a resale registration statement with respect to the Secured Notes.

The foregoing descriptions of the Secured Notes Indenture and the Secured Notes Registration Rights Agreement do not purport to be
complete and are qualified in their entirety by reference to the Secured Notes Indenture and the Secured Notes Registration Rights Agreement, which are filed as Exhibits 4.15 and 10.38 respectively hereto, and are incorporated herein by reference.

Issuance of 15.5% Senior Notes due 2010

In connection with the private exchange offers by ACCC for (i) outstanding 6.95% Senior Notes due 2008 issued by Abitibi, (ii) outstanding 5.25% Senior Notes due 2008 issued by ACCC and (iii) outstanding 7.875% Senior Notes
due 2009 issued by Abitibi-Consolidated Finance L.P. (together with the notes listed in (i) and (ii) above, the Existing ACI Notes), on April 1, 2008, ACCC issued approximately $293 million principal amount of 15.5% Senior
Notes due 2010 (the Exchange Notes). The Exchange Notes were issued pursuant to an Indenture dated April 1, 2008, by and among, ACCC, Abitibi, the additional subsidiary guarantors named therein, and Wells Fargo, National
Association, as trustee (the Exchange Notes Indenture). The Exchange Notes, which unsecured and are guaranteed by Abitibi and all of Abitibis wholly owned restricted subsidiaries (other than certain immaterial subsidiaries) and any
other restricted subsidiaries that guarantee the Senior Term Loan will mature on July 15, 2010. ACCC will pay interest on the notes on January 15 and July 15 of each year with the first such payment to be made on July 15, 2008.

The Exchange Notes are ACCCs senior obligations and rank pari passu in right of payment with all of ACCCs existing and future
unsecured senior indebtedness, including the outstanding senior unsecured notes ACCC has issued, becomes a co-obligor under or guaranteed. The Exchange Notes are effectively subordinated to obligations of ACCC under the Senior Term Loan and the
Secured Notes, to the extent the value of the collateral securing the Senior Term Loan and the Secured Notes. The Exchange Notes are senior in right of payment to any existing and future subordinated indebtedness of ACCC, if any.

If a change of control of ACCC occurs, ACCC must give holders of the Exchange Notes the opportunity to sell their Exchange Notes to ACCC at a
purchase price of 101% of their principal amount, plus accrued interest.

The Exchange Notes Indenture governing the Exchange Notes
contains covenants that limit ACCCs and Abitibis ability and that of Abitibis restricted subsidiaries to: incur additional debt, create liens on assets, pay dividends or distributions on, or redeem or purchase, ACCCs capital
stock, make investments, engage in sale and leaseback transactions, engage in transactions with affiliates, transfer or sell assets, issue and sell equity interests in Abitibis wholly owned subsidiaries, guarantee debt, restrict dividends or
other payments to ACCC, consolidate, merge or transfer all or substantially all of ACCCs assets and the assets of its subsidiaries, and engage in unrelated businesses, subject to certain exceptions.

In connection with the issuance of the Exchange Notes, ACCC has also entered into a Registration Rights Agreement (the Exchange Notes Registration
Rights Agreement) pursuant to which ACCC has agreed to conduct an exchange offer with respect to the Exchange Notes pursuant to which the holders of the Exchange Notes can exchange their Exchange Notes for notes substantially similar to the
Exchange Notes that have been registered under the Securities Act. In addition, in certain circumstances, ACCC has also agreed to file a resale registration statement with respect to the Exchange Notes.

The foregoing descriptions of the Exchange Notes Indenture and the Exchange Notes Registration Rights Agreement do not purport to be complete and are
qualified in their entirety by reference to the Exchange Notes Indenture and the Exchange Notes Registration Rights Agreement, which are filed as Exhibits 4.16 and 10.39 respectively hereto, and are incorporated herein by reference.

As part of the exchange offers, in tendering their Existing ACI Notes, holders of the Existing ACI Notes also consented
to certain amendments to the indentures governing the Existing ACI Notes to eliminate from such indentures the covenants included therein with respect to the limitation on liens and sale and leaseback transactions. In addition, the tendering holders
of Existing ACI Notes, by tendering their Existing ACI Notes also agreed not to exercise or enforce any of their rights or remedies under the applicable Existing ACI Notes indentures with respect to the Existing ACI Notes until April 8, 2008.
Copies of the supplemental indentures entered into with respect to the remaining Existing ACI Notes outstanding are filed as Exhibits 4.17, 4.18 and 4.19 hereto and are incorporated herein by reference.

The 6.95% Senior Notes due 2008 matured on April 1, 2008 and on that date, the remaining 6.95% Senior Notes that were not tendered in the exchange
offers as of that date were paid in full. The exchange offers expired on April 4, 2008 and, in connection therewith, an additional $229,000 aggregate principal amount of Exchange Notes was issued on April 8, 2008 with respect to Existing ACI
Notes tendered between March 31, 2008 and the expiration date of the exchange offers.

Senior Secured Term Loan

On April 1, 2008, ACCC entered into a $400 million Senior Secured Senior Term Loan (the Senior Term Loan) with a syndicate of lenders.
The Senior Term Loan has a maturity of 364 days and is guaranteed by Abitibi, Donohue Corp. and certain of their respective subsidiaries. The Senior Term Loan is secured primarily by the personal property (including accounts receivable and
inventory, but excluding equipment, intellectual property and capital stock of subsidiaries) of ACCC, Abitibi and the other guarantors, as well as substantially all of the assets (including fixed assets) of D Corp. and its subsidiaries. The Senior
Term Loan is effectively senior to the Secured Notes and the Exchange Notes to the extent of the collateral securing the Senior Term Loan. ACCC expects to use approximately $3.1 million of the cash reserved for potential settlement of Existing ACI
Notes (which cash was not needed because no additional Existing ACI Notes were tendered in the exchange offers after March 31, 2008) to pay down the principal amount outstanding under the Senior Term Loan. In addition, ACCC will be required to
use $50 million of the proceeds it receives from the previously announced sale of its Snowflake, Arizona mill to further pay down the principal amount of the Senior Term Loan. Amounts borrowed under the Senior Term Loan accrue interest at a floating
rate based on LIBOR plus 800 basis points, with a 3.5% LIBOR floor, payable quarterly.

The Senior Term
Loan is subject to mandatory prepayment, in addition to those specific prepayment requirements discussed above, with, in general: (i) 100% of the net cash proceeds of the sale of any property or assets that secure the Senior Term Loan;
(ii) subject to certain reinvestment rights, 50% of the net cash proceeds of the sale of any property or assets of ACCC, the guarantors thereunder and their respective subsidiaries that do not secure the Senior Term Loan or the notes being
offered hereby; (iii) 100% of the net cash proceeds of certain insurance and condemnation payments, subject to certain exceptions and reinvestment rights; (iv) 100% of the net cash proceeds of debt incurrences (other than debt incurrences
permitted under the Senior Term Loan); and (v) any amount necessary so that the aggregate principal amount of the loans outstanding under the Senior Term Loan (net of any prepayments) shall not exceed the lesser of (a) $450 million and
(b) the Current Asset Amount. Current Asset Amount is defined as the sum of (i) a specified percentage of net eligible accounts receivable of ACCC and the guarantors, subject to certain exceptions and limitations, and
(ii) a specified percentage of the book value of net eligible inventory of ACCC and the guarantors, subject to certain exceptions and limitations, minus (iii) reserves established by the agents under the Senior Term Loan in their
commercially reasonable discretion. Consequently, decreases in the amount of net eligible accounts receivable or net eligible inventory could require ACCC to prepay amounts under the Senior Term Loan when it may not possess the cash required to do
so. Amounts prepaid under the Senior Term Loan may not be reborrowed.

The Senior Term Loan contains various customary affirmative and
negative covenants (subject to materiality thresholds, baskets, and customary exceptions and qualifications), including, but not limited to, restrictions on the ability of ACCC, the guarantors thereof and their subsidiaries to (i) incur
additional indebtedness and guarantee obligations, (ii) create liens on certain assets, (iii) make restricted junior payments, (iv) restrict distributions from subsidiaries, (v) make investments, loans or advances,
(vi) engage in mergers or consolidations, (vii) dispose of subsidiary interests or other assets, (viii) make acquisitions, (ix) enter into sale-leaseback transactions, (x) engage in certain transactions with shareholders and
affiliates, (xi) change the conduct of business, (xii) amend or waive organizational documents, (xiii) amend or waive certain indebtedness, (xiv) change the fiscal year, or (xv) engage in hedging transactions.

The Senior Term Loan contains customary events of default (subject to mutually agreed exceptions, thresholds and grace periods).

E. Taxation

The Company is a subsidiary of
AbitibiBowater, a Delaware corporation. AbitibiBowater owns 82% of our common stock, and AbitibiBowater Canada, Inc. (ABCI), a Canadian corporation and subsidiary of AbitibiBowater, owns the remaining 18% of our common stock. Therefore,
the tax considerations that would be applicable to AbitibiBowater and ABCI, as our only shareholders, are not the same as,



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##### Index to Financial Statements

and disclosure of such consequences is not as significant as it would be, if individuals or unaffiliated entities were the holders of our common shares.
AbitibiBowater and ABCI should consult with their own tax advisors with respect to the Canadian and U.S. income tax consequences that would be particular to their circumstances.



|Item 11. | Quantitative and Qualitative Disclosures about Market Risk
|-------- | ----------------------------------------------------------

Price, costs and exchange rate sensitivity

We purchase significant amounts of energy, chemicals, wood fiber and recovered
paper to supply our manufacturing facilities. These raw materials are market-priced commodities and, as such, are subject to fluctuations in market prices. Increases in the prices of these commodities will tend to reduce our reported earnings and
decreases will tend to increase our reported earnings.

The Companys pre-tax earnings and net earnings are impacted by fluctuations
in selling prices, input costs and foreign exchange to the extent shown in the following table, based on 2008 estimated volumes, prices, exchange rates and financial hedges in place as at December 31, 2007:



|                                                    |  |                 |    |             |   |   
|--------------------------------------------------- |  | --------------- | -- | ----------- | - | --
|                                                    |  | Impact on      
|                                                    |  | Pre-taxearnings |    | Netearnings
|                                                    |  | (in millions)  
|US$25 change in transaction price  per unit        |  |                 |    |             |   |   
|Newsprint (per ton)                                 |  | $               | 74 |             | $ | 50
|Specialty Papers (per ton)                          |  |                 | 39 |             |   | 26
|Wood Products (per thousand board feet)             |  |                 | 33 |             |   | 22
|                                                    |  |                
|US$0.01 change in relative value of Canadian dollar |  |                 |    |             |   |   



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##### Index to Financial Statements

|                                       |  |    |  |   
|-------------------------------------- |  | -- |  | --
|Cash impact(1)                         |  | 23 |  | 16
|Manufacturing costs                    |  |    |  |   
|Virgin fiber (2% on external source)   |  | 1  |  | 1 
|Recycled fiber (2% on external source) |  | 1  |  | 1 
|Energy                                 |  |    |  |   
|Natural Gas (US$1/Gj)                  |  | 10 |  | 7 
|Bunker C (US$1/Barrel)               |  | 1  |  | 1 
|Electricity ($1/MWh)                   |  |    |  |   
|Regulated markets                      |  | 9  |  | 6 
|Deregulated markets                    |  | 1  |  | 1 



|(1) | Cash impact offsets non-cash impact due to translation of foreign currencies.
|--- | -----------------------------------------------------------------------------

Financial instruments and other instruments

In the normal course of business, the Company is exposed to certain financial
risks. The Company does not hold financial instruments for speculative purposes but only to reduce the volatility of its results from its exposure to these risks. The market value of financial instruments contracted by the Company arises mostly from
changes in interest and exchange rates between the inception dates of these contracts and the balance sheet date.

The Company utilizes
certain derivative instruments to enhance its ability to manage risk relating to cash flow exposures. Derivative instruments are entered into for periods consistent with related underlying cash flow exposures and do not constitute positions
independent of those exposures. The Company does not enter into contracts for speculative purposes; however, it does, from time to time enter into interest rate, commodity and currency derivative contracts that are not accounted for as accounting
hedges.

For derivatives that qualify for hedge accounting, the Company designates the derivative as a hedge at its inception. The Company
formally documents all relationships between the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the various hedge transactions. The Company links all hedges that are designated as
cash flow hedges to forecasted transactions. Under the terms of its risk management policy, the Company may enter into derivative contracts to hedge forecasted transactions for a period not to exceed two years. The Company also assesses, both at the
inception of the hedge and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. If it is determined that a derivative is no longer highly
effective as a hedge, we discontinue hedge accounting prospectively.



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Information regarding the Companys outstanding contracts notional amount, fair market value,
and range of rates is summarized in the table below. The fair value of our derivative financial instruments is based on current termination values or quoted market prices of comparable contracts. The notional amount of these contracts represents the
amount to be purchased or sold at maturity and does not represent our exposure on these contracts. The counterparties to our derivative financial instruments are substantial and creditworthy multi-national financial institutions. The risk of
counterparty non-performance is considered to be remote.



|                                      |  |                                    |  |                                    |  |                                                      
|------------------------------------- |  | ---------------------------------- |  | ---------------------------------- |  | -----------------------------------------------------
|                                      |  | NotionalAmount ofDerivatives($USD) |  | Asset/(Liability)Fair Market Value |  | Range of InterestRates andU.S.$ in CDN$Exchange Rates
|As of December 31, 2007:              |  |                                    |  |                                    |  |                                                      
|Foreign Currency Exchange Agreements: |  |                                    |  |                                    |  |                                                      
|Buy US dollars due in 2008            |  | 70                                 |  | 6                                  |  | 1.04781.1988                                        
|Sell US dollars due in 2008           |  | 70                                 |  | (1)                                |  | 1.00491.1988                                        
|Interest Rate Swaps                   |  | 800                                |  | (4)                                |  | 2.53 4.73                                           

Foreign exchange

The Company uses various financial instruments such as U.S. dollar forward contracts as well as U.S. dollar and Euro zero cost option tunnels to reduce its exposure to foreign currency exchange risk. In 2007, the
Companys sales denominated in U.S. dollar and Euro represented 75% and 4% of total sales, respectively. The foreign exchange financial contracts only hedge a portion of the sales. This portion declines as the hedge horizon increases. The gains
and losses on foreign exchange contracts are recognized in earnings when the related hedged revenue is recorded.

Furthermore, the
long-term debt denominated in U.S. dollars is also considered an effective economic hedge against the exchange risk related to the future revenue streams originating from sales denominated in U.S. dollars.

Interest rate

The Company utilizes interest rate
swaps to manage its fixed and floating interest rate mix on its recourse debt portfolio and related cost of borrowing whereby it is committed to exchange with the contracting parties, at specific intervals, the difference between the fixed and
floating interest rates calculated by reference to the notional amounts. Interest expense on the debt is adjusted to include payments made or received under these agreements. The net related amount receivable or payable from counterparts is included
in the accounts receivable or accounts payable.

At year-end, 62% of the Companys recourse debt was at fixed rates taking into
account interest rate swap agreements designated as hedges. Based on our outstanding short and long-term variable rate debt at December 31, 2007, a 100 basis-point increase in interest rates would increase our interest expense in 2008 by
approximately $14 million before the impact of our interest rate swaps. The interest rate contracts are only for a portion of the Companys bond portfolio and mature in the years 2008 through 2011. A 100 basis point increase in short-term
interest rates would increase our cash disbursements for these swaps by approximately $8 million in 2008.

Credit risk

The Company is exposed to credit risk on the accounts receivable from its customers. In order to manage its credit risk, the Company has adopted policies,
which include the analysis of the financial position of its customers and the regular review of their credit limits. The Company also subscribes to credit insurance and, in some cases, requires bank letters of credit. As a result, the Company does
not have significant exposure to any individual customer. Its customers are mainly in the newspaper publishing, specialty, advertising and paper converting, as well as lumber wholesaling and retailing businesses.

The Company is exposed to credit risk on the favourable fair value of its derivative financial instruments. In order to mitigate this risk, the Company
contracts its derivative financial instruments with credit-worthy financial institutions and sets a limit on a percentage basis that it can contract with any given financial institution.



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PART II

Item 15. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) are our controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions
rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be



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##### Index to Financial Statements

disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our President and
Vice President and Treasurer, as appropriate to allow timely decisions regarding required disclosure.

We have evaluated the effectiveness
of the design and operation of our disclosure controls and procedures as of December 31, 2007. Based on that evaluation, the President and the Vice President and Treasurer concluded that our disclosure controls and procedures are effective in
recording, processing, summarizing, and timely reporting information required to be disclosed in our reports to the Securities and Exchange Commission.

Managements Annual Report on Internal Control Over Financial Reporting

The Companys management, more
specifically, the President and the Vice President and Treasurer, is responsible for establishing and maintaining adequate internal control over the financial reporting of the Company, as such term is defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934.

The Companys internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting as well as the preparation and the presentation of the Companys financial statements for external reporting purposes in accordance with Canadian generally accepted accounting principles,
including a reconciliation to United States generally accepted accounting principles.

The Companys management conducted an
assessment of the effectiveness of the Companys internal control over financial reporting as at December 31, 2007 based on the criteria established in Internal Control  Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Companys management has concluded that such internal control over financial reporting was effective at December 31, 2007 based on those criteria. There are no material weaknesses that
have been identified by management in this regard, as of December 31, 2007.

Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

This Annual Report does not include a report of the Companys
independent auditors regarding internal control over financial reporting pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this Annual Report.

Changes in internal control over financial reporting

On October 29, 2007, Abitibi and Bowater combined in a merger of equals under a newly formed holding company, AbitibiBowater, and Abitibi became a subsidiary of AbitibiBowater. Bowater is deemed to be the acquirer of
Abitibi for accounting purposes. After the consummation of the Combination, AbitibiBowater extended its Section 404 compliance program under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations under such Act to include the
internal controls over financial reporting of both Abitibi and Bowater.

Item 16A. Audit Committee Financial Expert

Since the Company has terminated its reporting requirements
under the Exchange Act, and is no longer subject to stock exchange listing requirements, it is no longer required to maintain an audit committee. Since the Company is no longer required to maintain an audit committee, the Companys Board of
Directors has not identified an audit committee financial expert. The Abitibi Board reviews and approves the Companys financial statements and related notes. The Audit Committee of AbitibiBowater oversees, internal controls and the
audit function process of AbitibiBowater and its consolidated subsidiaries, including Abitibi and Bowater on behalf of the AbitibiBowater Board. The AbitibiBowater Audit Committee is currently comprised



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##### Index to Financial Statements

of six outside directors, all of whom the AbitibiBowater Board has determined are independent as defined under the listing standards of the New York Stock
Exchange and the standards of the SEC adopted under the Sarbanes-Oxley Act. The AbitibiBowater Board has determined that Audit Committee Chairman John A. Rolls and members Gary L. Lukassen and Bruce W. Van Saun are each an audit committee
financial expert as defined by the SEC.

Item 16B. Code of Ethics

AbitibiBowater has adopted a Code of Business Conduct for all employees of
AbitibiBowater, its subsidiaries and divisions, including the employees of Abitibi. AbitibiBowater Code of Business Conduct, as well as the AbitibiBowater Board of Directors Code of Business Conduct and Ethics, are published on the website of
AbitibiBowater at www.abitibibowater.com. Both codes are in line with the requirements of the Sarbanes-Oxley Act and the NYSE Standards.

Item 16C. Principal Accountant Fees and Services

In 2007 and 2006 the aggregate amounts billed for
professional services rendered by the Companys independent auditors, PricewaterhouseCoopers LLP (PWC), to the Company and its subsidiaries were approximately as follows:



|                            |  |      |     |      |   |    
|--------------------------- |  | ---- | --- | ---- | - | ---
|FEES IN MILLIONS OF DOLLARS |  | 2007 |     | 2006
|Audit fees                  |  | $    | 2.5 |      | $ | 2.9
|Audit-related fees          |  | $    | 1.1 |      | $ | 0.6
|Tax fees                    |  | $    | 1.0 |      | $ | 0.2
|All other non-audit fees    |  | $    | 0.1 |      | $ | 0.0
|                            |  |      |     |      |   |    
|TOTAL                       |  | $    | 4.7 |      | $ | 3.7

Audit fees are fees for professional services for the audit of the Companys consolidated
financial statements, the Managements assessment on the effectiveness of internal control over financial reporting and on the effectiveness of the Companys internal control over financial reporting as of December 31, 2006, and
review of quarterly financial statements, services that are normally provided by PWC in connection with statutory and regulatory filings or engagements or any other services performed by PWC to comply with generally accepted auditing standards;
audit-related fees are fees for assurance and related services that are typically performed by the independent public accountant; tax fees are fees for tax compliance, tax advice and tax planning; and non-audit
fees are fees for any services not included in the first three categories.

Auditors Independence

The AbitibiBowater Audit Committee evaluates on a yearly basis the independence of the Companys auditors and has concluded that PWC is deemed
independent.

Policy and Procedures for Pre-Approval of Auditors Services

AbitibiBowaters Audit Committee has adopted a policy requiring that the AbitibiBowater Audit Committee pre-approve all audit and non-audit services
(including audit-related, tax and other services) performed by AbitibiBowaters independent registered public accounting firm for AbitibiBowater, Abitibi and Bowater. Under policies and procedures adopted by the AbitibiBowater Audit Committee,
the terms and fees of the annual audit services engagement are subject to approval by the AbitibiBowater Audit Committee prior to the rendering of the services. The AbitibiBowater Audit Committee also reviews and approves non-audit services prior to
the rendering of the services. The AbitibiBowater Audit Committee may not approve the provision of non-audit services that the SEC prohibits independent auditors from performing for their audit clients or that are otherwise inconsistent with the
independent auditors independence. The AbitibiBowater Audit Committee is required to establish annually a budget for services to be performed by AbitibiBowaters independent accountants, and AbitibiBowaters management is required to
track the independent auditors fees against the budget and report at least annually to the committee.



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##### Index to Financial Statements

AbitibiBowaters Chief Financial Officer, Controller or other officer designated by the Board must
submit, jointly with the independent registered public accounting firm, requests for the independent registered public accounting firm to provide services to the AbitibiBowater Audit Committee that require pre-approval. Each request must include a
statement as to whether both the independent registered public accounting firm and the submitting officer view the provision of the requested services as consistent with the SECs rules on auditor independence. The request must be sufficiently
detailed to enable the AbitibiBowater Audit Committee to precisely identify the services requested. The AbitibiBowater Audit Committee may delegate pre-approval authority to its chair or one or more other committee members but not to
AbitibiBowaters management. Any committee members with delegated authority must report all pre-approval decisions to the Audit Committee at its next scheduled meeting.

PART III

Item 18. Financial Statements



|                               |  |     
|------------------------------ |  | ----
|                               |  | Page
|Report of Independent Auditors |  | F-1 

Item 19. Exhibits

The following exhibits have been filed as part of this Annual Report:



|(1) | Exhibits (numbered in accordance with Item 601 of Regulation S-K):
|--- | ------------------------------------------------------------------



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|2.1*        |  | Combination Agreement and Agreement and Plan of Merger dated as of January 29, 2007 among Alpha-Bravo Holdings Inc., Abitibi-Consolidated Inc., Bowater Incorporated, Alpha-Bravo Merger Sub
Inc., and Bowater Canada Inc. (incorporated by reference to Exhibit 2.1 to Bowater Incorporateds Form 8-K filed January 29, 2007).                                                                                                    
|            | 
|2.1.1*      |  | First Amendment, dated as of May 7, 2007, to the Combination Agreement and Agreement and Plan of Merger dated as of January 29, 2007 among AbitibiBowater Inc., Abitibi-Consolidated
Inc., Bowater Incorporated, Alpha-Bravo Merger Sub Inc. and Bowater Canada Inc. (the First Amendment) (incorporated by reference to Exhibit 10.1 to Bowater Incorporateds Form 10-Q filed May 10, 2007 for the Period
ended March 31, 2007).



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 
|2.2*   |  | Form of Plan Arrangement (incorporated by reference to Annex E to the Joint Proxy Statement/Prospectus/Management Information Circular of AbitibiBowater Inc., filed pursuant to
Rule 424(b)(3) on June 25, 2007).                                                                                                                                                                                                                                                                                                                   
|       | 
|2.3*   |  | Asset and Stock Purchase Agreement dated as of February 10, 2008 between Abitibi Consolidated Sales Corporation and Catalyst Paper Corporation (incorporated by reference to Exhibit 2.3 to
AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                                                                                                                                                                                                                                 
|       | 
|3.1**  |  | Articles of Amalgamation of Abitibi-Consolidated, Inc. dated May 20, 1997.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       | 
|3.2**  |  | By-Law Number 1 of Abitibi-Consolidated, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | 
|4.1*   |  | Form of Provisions Attaching to the Exchangeable Shares (incorporated by reference to Schedule 1 of Annex F to the Joint Proxy Statement/Prospectus/Management Information Circular of
AbitibiBowater Inc., filed pursuant to Rule 424(b)(3) on June 25, 2007).                                                                                                                                                                                                                                                                      
|       | 
|4.2*   |  | Indenture, dated June 15, 2004, among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada (as Issuer) and the Bank of Nova Scotia Trust Company of New York (as Trustee)
(incorporated by reference to Exhibit 7.1 to Abitibi-Consolidated Inc.s Form F-10 filed July 26, 2004).                                                                                                                                                                                                                                      
|       | 
|4.3*   |  | Indenture, dated December 11, 2001, among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada (as Issuer) and the Bank of Nova Scotia Trust Company of New York (as Trustee)
(incorporated by reference to Exhibit 7.1 to Abitibi-Consolidated Inc.s Form F-9/A filed November 20, 2001).                                                                                                                                                                                                                             
|       | 
|4.4*   |  | Indenture, dated November 2001, among Abitibi-Consolidated Inc., Abitibi-Consolidated Finance L.P. (as Issuer) and the Bank of Nova Scotia Trust Company of New York (as Trustee)
(incorporated by reference to Exhibit 7.1 to Abitibi-Consolidated Inc.s Form F-9/A filed July 12, 2000).                                                                                                                                                                                                                                          
|       | 
|4.5*   |  | Purchase Agreement among Abitibi-Consolidated Company of Canada, Abitibi-Consolidated Inc., Banc of America Securities LLC, Citigroup Global Markets Inc., CIBC World Markets Corp., Scotia
Capital (USA) Inc., NBF Securities (USA) Corp., RBC Dominion Securities Corporation, ABN Amro Incorporated, SG Americas Securities, LLC, Credit Suisse First Boston LLC, Tokyo-Mitsubishi International PLC, dated June 10, 2004 (incorporated by
reference to Exhibit 3.1 to Abitibi-Consolidated Inc.s Form F-10 filed July 26, 2004).
|       | 
|4.6**  |  | Indenture, dated as of April 6, 1998, between Abitibi-Consolidated Inc. and Montreal Trust Company, as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | 
|4.7**  |  | First Supplemental Indenture to the April 6, 1998 Indenture, dated as of September 1, 2001, between Abitibi-Consolidated Inc., 3834328 Canada Inc., and Abitibi-Consolidated Inc as partner,
Abitibi-Consolidated General Partnership and Computershare Trust Company of Canada.                                                                                                                                                                                                                                                     
|       | 
|4.8**  |  | Second Supplemental Indenture to the April 6, 1998 Indenture, dated as of October 1, 2001, between Abitibi-Consolidated Inc., 3834328 Canada Inc., and Abitibi-Consolidated Inc as partner,
Abitibi-Consolidated General Partnership, Donohue Forest products Inc. and Computershare Trust Company of Canada.                                                                                                                                                                                                                        
|       | 
|4.9**  |  | Third Supplemental Indenture to the April 6, 1998 Indenture, dated as of December 1, 2001, between Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, Abitibi-Consolidated
General Partnership and Computershare Trust Company of Canada.                                                                                                                                                                                                                                                                            
|       | 
|4.10** |  | Indenture, dated as of July 26, 1999, between Abitibi-Consolidated Inc., Abitibi-Consolidated Finance L.P., and The Bank of Nova Scotia Trust Company of New York, as trustee.                                                                                                                                                                                                                                                                                                                                                       
|       | 
|4.11** |  | First Supplemental Indenture to the July 26, 1999 Indenture, dated as of September 1, 2001, between Abitibi-Consolidated Inc., Abitibi-Consolidated Finance L.P., 3834328 Canada Inc., and
Abitibi-Consolidated Inc as partner, Abitibi-Consolidated General Partnership and The Bank of Nova Scotia Trust Company of New York.                                                                                                                                                                                                      
|       | 
|4.12** |  | Second Supplemental Indenture to the July 26, 1999 Indenture, dated as of October 1, 2001, between Abitibi-Consolidated Inc., Abitibi-Consolidated Finance L.P., 3834328 Canada Inc., and
Abitibi-Consolidated Inc as partner, Abitibi-Consolidated General Partnership, Donohue Forest Products and The Bank of Nova Scotia Trust Company of New York.                                                                                                                                                                              
|       | 
|4.13** |  | Third Supplemental Indenture to the July 26, 1999 Indenture, dated as of December 1, 2001, between Abitibi-Consolidated Inc., Abitibi-Consolidated Finance L.P., Abitibi-Consolidated Company
of Canada, Abitibi-Consolidated General Partnership and The Bank of Nova Scotia Trust Company of New York.                                                                                                                                                                                                                             
|       | 
|4.14** |  | Fourth Supplemental Indenture to the July 26, 1999 Indenture, dated as of November 21, 2005, between Abitibi-Consolidated Inc., Abitibi-Consolidated Finance L.P., Abitibi-Consolidated Company
of Canada, The Bank of Nova Scotia Trust Company of New York.                                                                                                                                                                                                                                                                        
|       | 
|4.15*  |  | 13.75% Senior Secured Notes due 2011 Indenture, dated April 1, 2008, by and among Abitibi-Consolidated Company of Canada, the Guarantor Parties Named Therein and Wells Fargo, National
Association (incorporated by reference to Exhibit 10.1 to AbitibiBowater Inc.s Current Report on Form 8-K filed April 7, 2008).                                                                                                                                                                                                             
|       | 
|4.16*  |  | 15.5% Senior Notes due 2010 Indenture, dated April 1, 2008, by and among Abitibi-Consolidated Company of Canada, the Guarantor Parties Named Therein and Wells Fargo, National Association
(incorporated by reference to Exhibit 10.3 to AbitibiBowater Inc.s Current Report on Form 8-K filed April 7, 2008).                                                                                                                                                                                                                      
|       | 
|4.17*  |  | Fourth Supplemental Indenture, dated April 1, 2008, to the Indenture Governing the 6.95% Senior Notes due 2008 (incorporated by reference to Exhibit 10.5 to AbitibiBowater Inc.s Current
Report on Form 8-K filed April 7, 2008).                                                                                                                                                                                                                                                                                                  
|       | 
|4.18*  |  | First Supplemental Indenture, dated April 1, 2008, to the Indenture Governing the 5.25% Senior Notes due 2008 (incorporated by reference to Exhibit 10.6 to AbitibiBowater Inc.s Current
Report on Form 8-K filed April 7, 2008).                                                                                                                                                                                                                                                                                                   
|       | 
|4.19*  |  | Fifth Supplemental Indenture, dated April 1, 2008, to the Indenture Governing the 7.875% Senior Notes due 2009 (incorporated by reference to Exhibit 10.7 to AbitibiBowater Inc.s Current
Report on Form 8-K filed April 7, 2008).                                                                                                                                                                                                                                                                                                  
|       | 
|10.1* |  | Severance Compensation Agreement between Abitibi-Consolidated Inc. and Pierre Rougeau, dated April 1, 2002 (incorporated by reference to Exhibit 10.2 to AbitibiBowater Inc. Form 10-KA filed
on March 20, 2008).                                                                                                                                                                                                                                                                                                                    
|       | 
|10.2* |  | Severance Compensation Agreement between Abitibi-Consolidated Inc. and John W. Weaver, dated February 18, 2006 (incorporated by reference to Exhibit 10.9 to AbitibiBowater Inc. Form 10-KA
filed on March 20, 2008).                                                                                                                                                                                                                                                                                                                
|       | 
|10.3* |  | Severance Entitlements Letter between Abitibi-Consolidated Inc. and John W. Weaver, dated September 25, 2000 (incorporated by reference to Exhibit 10.10 to AbitibiBowater Inc. Form 10-KA
filed on March 20, 2008).                                                                                                                                                                                                                                                                                                                 
|       | 
|10.4* |  | Severance Compensation Agreement between Abitibi-Consolidated Inc. and Alain Grandmont, dated April 1, 2002 (incorporated by reference to Exhibit 10.11 to AbitibiBowater Inc. Form 10-KA
filed on March 20, 2008).                                                                                                                                                                                                                                                                                                                  
|       | 
|10.5* |  | Severance Compensation Agreement between Abitibi-Consolidated Inc. and Thor Thorsteinson, dated April 1, 2002 (incorporated by reference to Exhibit 10.13 to AbitibiBowater Inc. Form 10-KA
filed on March 20, 2008).                                                                                                                                                                                                                                                                                                                



36



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##### Table of Contents

##### Index to Financial Statements

|        |  |                                                                                                                                                                                                                                                                                                                                                                                 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.6*  |  | Supplemental Executive Retirement Plan of AbitibiBowater Inc.s subsidiary, Abitibi-Consolidated Inc. (formerly Donohue Inc.) dated December 1999 (incorporated by reference to Exhibit 10.15
to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                                                                       
|        | 
|10.7*  |  | Supplement Retirement Plan between Donohue Inc. and Yves Laflamme, dated January 27, 2000 (incorporated by reference to Exhibit 10.16 to AbitibiBowater Inc. Form 10-KA filed on March 20,
2008).                                                                                                                                                                               
|        | 
|10.8*  |  | Severance Compensation Agreement Letter between Abitibi-Consolidated and Yves Laflamme, dated December 11, 2006 (incorporated by reference to Exhibit 10.17 to AbitibiBowater Inc. Form 10-KA
filed on March 20, 2008).                                                                                                                                                         
|        | 
|10.9*  |  | Severance Compensation Agreement between Abitibi-Consolidated and Yves Laflamme, dated September 1, 2006 (incorporated by reference to Exhibit 10.18 to AbitibiBowater Inc. Form 10-KA filed
on March 20, 2008).                                                                                                                                                                
|        | 
|10.10* |  | Severance Compensation Agreement between Abitibi-Consolidated and Jacques Vachon, dated November 10, 1998 (incorporated by reference to Exhibit 10.19 to AbitibiBowater Inc. Form 10-KA filed
on March 20, 2008).                                                                                                                                                               
|        | 
|10.20* |  | Abitibi-Consolidated Executive Deferred Share Units Plan, effective date as of January 1, 2000 (incorporated by reference to Exhibit 10.24 to AbitibiBowater Inc. Form 10-KA filed on March
20, 2008).                                                                                                                                                                          
|        | 
|10.21* |  | Abitibi-Consolidated Inc. Restricted Share Unit Plan, undated (incorporated by reference to Exhibit 10.25 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                                                                                                                                                           
|        | 
|10.22* |  | Abitibi-Consolidated Deferred Share Unit Plan (Stock plan for non-employee directors), dated March 11, 1998 (incorporated by reference to Exhibit 10.26 to AbitibiBowater Inc. Form 10-KA
filed on March 20, 2008).                                                                                                                                                             
|        | 
|10.23* |  | Abitibi-Consolidated U.S. Supplement Executive Retirement Plan (SERP), as Amended and Restated, dated January 1, 2007 (incorporated by reference to Exhibit 10.27 to AbitibiBowater Inc. Form
10-KA filed on March 20, 2008).                                                                                                                                                   
|        | 
|10.24* |  | Canadian Supplement Executive Retirement Plan (SERP) for Executive Employees of Abitibi-Consolidated Inc., dated January 1, 1999 (incorporated by reference to Exhibit 10.28 to
AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                                                                                        
|        | 
|10.25* |  | Amended and Restated Receivables Purchase Agreement among Abitibi-Consolidated U.S. Funding Corp., Eureka Securitisation, PLC, Citibank, N.A., the Originators Named Herein, Abitibi Consolidated
Sales Corporation and Abitibi-Consolidated Inc. dated January 31, 2008 (incorporated by reference to Exhibit 10.40 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).
|        | 
|10.26* |  | Amended and Restated Purchase and Contributed Agreement among Abitibi-Consolidated Inc., Abitibi Consolidated Sales Corporation, Abitibi Consolidated Sales Corporation and Abitibi-Consolidated
U.S. Funding Corp., dated January 31, 2008 (incorporated by reference to Exhibit 10.41 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                             
|        | 
|10.27* |  | Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman Sachs Credit Partners, dated October 3, 2005
(incorporated by reference to Exhibit 10.42 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                              



37



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##### Table of Contents

##### Index to Financial Statements

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 
|10.28* |  | First Amendment, dated September 28, 2006, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and
Goldman Sachs Credit Partners, dated October 3, 2005 (incorporated by reference to Exhibit 10.43 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                               
|        | 
|10.29* |  | Second Amendment, dated November 24, 2006, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and
Goldman Sachs Credit Partners, dated October 3, 2005 (incorporated by reference to Exhibit 10.44 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                               
|        | 
|10.30* |  | Third Amendment, dated July 16, 2007, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman
Sachs Credit Partners, dated October 3, 2005 (incorporated by reference to Exhibit 10.45 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                                    
|        | 
|10.31* |  | Fourth Amendment, dated August 14, 2007, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and Goldman
Sachs Credit Partners, dated October 3, 2005 (incorporated by reference to Exhibit 10.46 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                                 
|        | 
|10.32* |  | Fifth Amendment, dated December 27, 2007, to the Credit Agreement among Abitibi-Consolidated Inc., Abitibi-Consolidated Company of Canada, the Bank of Nova Scotia, Citibank, N.A. and
Goldman Sachs Credit Partners, dated October 3, 2005 (incorporated by reference to Exhibit 10.47 to AbitibiBowater Inc. Form 10-KA filed on March 20, 2008).                                                                                
|        | 
|10.33** |  | Amended and Restated Agreement between Reynolds Aluminum Company of Canada, LTD. and Donohue Forest Products Inc., dated December 20, 1996.                                                                                                                                                                                                                                                                                        
|        | 
|10.34** |  | Unitholders Agreement, dated April 2, 2007, amongst Abitibi-Consolidated Hydro Inc., Abitibi-Consolidated Company of Canada, CDP Investissements Inc. and ACH Limited
Partnership.                                                                                                                                                                                                                                                
|        | 
|10.35** |  | Shareholders Agreement, dated April 2, 2007, amongst Abitibi-Consolidated Hydro Inc., Abitibi-Consolidated Company of Canada, Caisse de Depot et Placement du Quebec and ACH Limited
Partnership.                                                                                                                                                                                                                                 
|        | 
|10.36** |  | Amended and Restated Limited Partnership Agreement, dated March 30, 2007, amongst Abitibi-Consolidated Hydro Inc. and Abitibi-Consolidated Company of Canada (initial agreement was dated June 1,
2006).                                                                                                                                                                                                                           
|        | 
|10.37** |  | Credit Agreement, dated as of March 31, 2007, amongst ACH Limited Partnership, as Borrower, and Caisse de Depot et Placement du Quebec, for a $250,000,000 loan.                                                                                                                                                                                                                                                                   
|        | 
|10.38*  |  | 13.75% Senior Secured Notes due 2011 Exchange and Registration Rights Agreement, dated April 1, 2008 (incorporated by reference to Exhibit 10.2 to AbitibiBowater Inc.s Current Report on
Form 8-K filed April 7, 2008).                                                                                                                                                                                                          
|        | 
|10.39*  |  | 15.5% Senior Notes due 2010 Exchange and Registration Rights Agreement, dated April 1, 2008 (incorporated by reference to Exhibit 10.4 to AbitibiBowater Inc.s Current Report on Form 8-K
filed April 7, 2008).                                                                                                                                                                                                                   
|        | 
|10.40*  |  | Credit and Guaranty Agreement, dated April 1, 2008, by and among Abitibi-Consolidated Company of Canada, Abitibi-Consolidated Inc., Certain Subsidiaries and Affiliates of Abitibi-Consolidated
Inc., Goldman Sachs Credit Partners L.P., Wachovia Capital Markets, LLC and the Various Lenders Named Therein (incorporated by reference to Exhibit 10.10 to AbitibiBowater Inc.s Current Report on Form 8-K filed April 7, 2008).
|        | 
|21.1**  |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 
|31.1**  |  | Certification of President Pursuant to Section 302.                                                                                                                                                                                                                                                                                                                                                                                
|        | 
|31.2**  |  | Certification of Vice President and Treasurer Pursuant to Section 302.                                                                                                                                                                                                                                                                                                                                                             



|* | Previously filed and incorporated herein by reference
|- | -----------------------------------------------------

|** | Filed with this Form 20-F/A.
|-- | ----------------------------

| | This is a management contract or compensatory plan or arrangement.
|- | ------------------------------------------------------------------





38



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##### Table of Contents

##### Index to Financial Statements

SIGNATURES

The Company hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.



Abitibi-Consolidated Inc.Per:

/s/ John W. WeaverPresidentDate: April 9, 2008Per:

/s/ William G. HarveyVice President and TreasurerDate: April 9, 2008




39



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##### Table of Contents

##### Index to Financial Statements

INDEX TO FINANCIAL STATEMENTS



|                               |  |    
|------------------------------ |  | ---
|Report of Independent Auditors |  | F-1



---

##### Table of Contents

##### Index to Financial Statements

Independent Auditors report

To the Shareholders of Abitibi-Consolidated Inc.

We have audited the accompanying consolidated balance sheets of Abitibi-Consolidated Inc. as at December 31, 2007 and 2006, and the related
consolidated statements of earnings (loss), comprehensive income (loss), changes in shareholders equity and cash flows for each of the years in the three year period ended December 31, 2007. Our audits also included the financial
statement schedule II. These financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and on the financial statement
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006 and the results of its operations and its cash
flows for each of the years in the three year period ended December 31, 2007 in accordance with Canadian generally accepted accounting principles. In addition, in our opinion, the financial statement schedule II presents fairly, in all material
respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

(Signed PricewaterhouseCoopers
LLP)

Chartered Accountants

Montréal, Canada

March 21, 2008

Comments by Auditor
for U.S. Readers on Canada-U.S. Reporting Difference

In the United States, reporting standards for auditors require the addition of an
explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Companys ability to continue as a going concern, such as those described in
Note 1 to the financial statements. Our report to the shareholders dated March 21, 2008 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors report
when these are adequately disclosed in the financial statements.

(Signed PricewaterhouseCoopers LLP)

Chartered Accountants

Montréal, Canada

March 21, 2008



F-1