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                                    EXHIBIT 1

                           NORSKE SKOG CANADA LIMITED

                             ANNUAL INFORMATION FORM

                                 MARCH 21, 2005

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                                TABLE OF CONTENTS

Incorporation.........................................................     3
Corporate Profile.....................................................     4
Competitive Strengths ................................................     4
Business Strategy.....................................................     6
Lines of Business.....................................................     7
Fibre Supply..........................................................    14
Competition...........................................................    15
Properties............................................................    15
Human Resources.......................................................    15
Environment...........................................................    15
Research and Development..............................................    18
Capital Expenditures .................................................    18
Capital Structure.....................................................    18
Foreign Operations....................................................    18
Risk Factors..........................................................    19
Legal Proceedings.....................................................    19
Dividends.............................................................    19
Ratings...............................................................    19
Market for Securities.................................................    20
Material Contracts....................................................    20
Transfer Agent and Registrar..........................................    21
Audit Committee Information...........................................    21
Corporate Governance..................................................    24
Directors and Officers................................................    25
Additional Information................................................    26
Summary of Financial Information......................................    28

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                           NORSKE SKOG CANADA LIMITED

                             ANNUAL INFORMATION FORM

               (WITH RESPECT TO THE YEAR ENDED DECEMBER 31, 2004)

                                GLOSSARY OF TERMS

Unless otherwise indicated, dollars or $ refers to Canadian dollaras.

AOX or ADSORBABLE ORGANIC HALIDES - the measurement of total chlorinated organic
compounds in pulp mill effluents.

BASIS WEIGHT - the weight of paper per specified area, such as gsm.

CAPACITY - the number of units which can be produced in a year based on
operating with the normal number of shifts and maintenance interruptions.

COATED PAPER - paper which is coated with clay and treated to impart a smooth
glossy surface.

DIOXINS - chlorinated chemical compounds, of which certain members have been
identified as carcinogens.

DIRECTORY PAPER - lightweight uncoated groundwood paper suitable for printing
telephone and commercial directory books.

EFFLUENT - outflowing waste discharge from a pulp and paper mill.

FURANS - toxic contaminants associated with the formation of dioxins in the
bleaching of pulps with chlorine compounds.

FURNISH - a blend of different types of pulps and additives which are provided
to the paper machine for making paper.

GROUNDWOOD SPECIALTY PAPER - coated and uncoated printing papers, with
mechanical pulp as their major component, which differ from newsprint in
brightness, surface characteristics and end uses.

HI-BRITE or HIGHBRIGHTNESS PAPER - a group of uncoated groundwood papers with
brightness levels greater than standard newsprint.

HOG FUEL - wood waste, a by-product from sawmilling and log sorting activities,
used in boilers as an energy source.

KRAFT PAPER - any type of single and multi-ply liner used to make boxes and
other containers for shipping materials, and the type of paperboard used to make
them up.

LIGHTWEIGHT COATED PAPER or LWC PAPER - coated paper having a basis weight
generally below 72 gsm and used principally for magazine and mail order
catalogues, inserts, flyers, coupons and direct mail. The term is often used
interchangeably with coated groundwood paper.

LINERBOARD - a type of kraft paperboard, generally unbleached, used to line or
face corrugated core board (on both sides) to form shipping boxes and various
types of containers.

NEWSPRINT - a printing paper whose major use is in newspapers. It is made
largely from groundwood or mechanical pulp reinforced to varying degrees with
chemical pulp.

PARTICULATE EMISSIONS - the discharge of all airborne solid or liquid materials
other than uncombined water.

PRINTABILITY - the ease with which paper can be printed to high quality
standards with the least amount of spoilage.

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PRINTING PAPERS - a general term used to describe those grades of paper used by
the printing trades, including job, book, magazine, and newspaper printers.

PULP - the generic term describing the fibres derived from wood. Pulp can result
from a variety of pulping processes including cooking, refining, grinding or the
processing and cleaning of waste paper. Pulp can be either in a wet or dry
state. Types of pulp include:

      BLEACHED PULP - pulp that has been purified or whitened by chemical
      treatment to alter colouring matter and has taken on a higher brightness
      characteristic.

      CHEMICAL PULP - obtained by cooking wood in solutions of various
      chemicals. The principal chemical processes are sulphite and sulphate
      (kraft).

      DE-INKED PULP - obtained by removing inks, clays and coatings, bindings
      and other additives from waste papers (primarily old newspapers and office
      waste) so that it can be reused as a source of papermaking furnish.

      KRAFT PULP - chemical pulp produced by an alkaline cooking process using
      sodium sulphate.

      MARKET PULP - pulp sold on the open market.

      NORTHERN BLEACHED SOFTWOOD KRAFT (NBSK) PULP - kraft pulp produced from
      slow-growing coniferous trees indigenous to the forests of Canada, the
      northern United States and Scandinavian countries. NBSK pulp is noted for
      its strength and length of fibre.

      THERMOMECHANICAL PULP - pulp produced from wood chips using heated
      mechanical processes to break the bonds between the wood fibres.

PULPWOOD - logs which are used for making pulp as opposed to those used for
making lumber and panel products.

RUNNABILITY - the ease with which paper can be run through presses with the
least amount of breakages.

SOFT-CALENDER - a machine which improves the smoothness and gloss of paper by
running it through a combination of steel rolls and proprietary synthetic rolls.

TOTAL REDUCED SULPHUR or TRS - the four reduced sulphur compounds that
contribute to the typical odour emitted by kraft pulp mills.

TWIN-WIRE - refers to a paper machine with forming wires on both sides of the
paper surface which provide a more uniform quality of sheet for both printing
surfaces. Older machines typically only have a forming wire on the lower
surface.

UNCOATED SPECIALTY PAPER - uncoated printing papers, with mechanical pulp as
their major component, which differ from newsprint in brightness and surface
characteristics and are used for magazines, catalogues, supplements, inserts and
flyers.

WOODFREE - paper grades manufactured almost entirely with kraft pulp, and
containing less than 10 per cent groundwood or mechanical pulp.

MEASUREMENTS

      GSM - grams per square metre.

      KG/ADBT - kilograms per air-dried bleached tonne of production.

      TONNE - metric ton - 1,000 kilograms or 2,204 pounds (1.1023 tons).

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                             ANNUAL INFORMATION FORM

               (WITH RESPECT TO THE YEAR ENDED DECEMBER 31, 2004)

                              AS OF MARCH 21, 2005

                                  INCORPORATION

We were formed on September 1, 2001 by the amalgamation under the Canada
Business Corporations Act of Norske Skog Canada Limited and Pacifica Papers Inc.

Norske Skog Canada Limited's principal predecessor was British Columbia Forest
Products Limited, which was a company formed by the amalgamation under the laws
of the Province of British Columbia on December 30, 1971 of its predecessor
company, incorporated by certificate of incorporation, with memorandum and
articles, under the laws of the Province of British Columbia on January 31,
1946, and 24 of its wholly owned subsidiaries. On September 2, 1988, British
Columbia Forest Products Limited changed its name to Fletcher Challenge Canada
Limited. Prior to July 2000, 50.76% of Fletcher Challenge Canada Limited was
owned by Fletcher Challenge Limited of New Zealand ("Fletcher Challenge New
Zealand"). In July 2000, Norske Skogindustrier ASA completed a transaction with
Fletcher Challenge New Zealand whereby all of the business and assets of
Fletcher Challenge New Zealand's paper division worldwide were acquired by
Norske Skogindustrier ASA. As part of this transaction, Norske Skogindustrier
ASA acquired Fletcher Challenge New Zealand's 50.76% interest in Fletcher
Challenge Canada Limited. On December 15, 2000, Fletcher Challenge Canada
Limited changed its name to Norske Skog Canada Limited.

As a result of the amalgamation with Pacifica Papers Inc. and subsequent equity
issues, Norske Skogindustrier ASA's interest in Norske Skog Canada Limited has
decreased to 29.4%.

Pacifica Papers Inc.'s predecessor was Pacifica Papers Limited Partnership. On
June 8, 1998 Pacifica Papers Limited Partnership, through its indirect wholly
owned subsidiary, Pacifica Papers Acquisition Company Ltd., acquired all the
shares of MB Paper Limited from MacMillan Bloedel Limited. On March 12, 1999 the
unitholders of Pacifica Papers Limited Partnership approved a reorganization
pursuant to which Pacifica Papers Limited Partnership changed its corporate form
from a partnership to a corporation. As part of this reorganization, 28,750,000
common shares of Pacifica Papers Inc. were distributed to all the unitholders of
Pacifica Paper Limited Partnership in exchange for their partnership units on a
one for one basis.

Our principal office is located at 250 Howe Street, 16th Floor, Vancouver,
British Columbia, V6C 3R8.

We own all the issued and outstanding shares of the following principal
subsidiaries (each of which is established under the laws of British Columbia
unless otherwise noted): Elk Falls Pulp and Paper Limited, Norske Skog Canada
Finance Limited, Norske Skog Canada (Japan) Ltd. (Japan), Norske Skog Canada
Pulp Operations Limited, Norske Skog Canada Pulp Sales Inc., Norske Skog Canada
Sales Inc., Norske Skog Canada (USA) Inc. (California), NSCL Holdings Inc.
(Delaware), Pacifica Papers Sales Ltd., Pacifica Papers Sales Inc. (Delaware),
Pacifica Poplars Ltd., Pacifica Poplars Inc. (Delaware), and Pacifica Papers
U.S. Inc. (Delaware). We are, along with our subsidiary Norske Skog Canada Pulp
Operations Limited, a partner of the general partnership NorskeCanada.

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                                CORPORATE PROFILE

We are the third largest newsprint and uncoated groundwood specialty paper
manufacturer based in North America measured by production capacity. We are the
largest producer of coated and uncoated specialty papers and newsprint, and the
only producer of lightweight coated paper, on the west coast of North America.
We are also the largest producer of lightweight uncoated groundwood (directory)
paper in the world. We also produce market pulp and kraft paper and we operate
the largest paper recycling operation in Western Canada.

Our four integrated pulp and paper operations are located in British Columbia,
at Crofton and Campbell River (Elk Falls) on the east coast of Vancouver Island,
Port Alberni on the west coast of Vancouver Island, and Powell River on the west
coast of the British Columbia mainland. Our paper recycling operation is located
in Coquitlam, British Columbia.

The capacities by product, in thousands of tonnes, of our pulp and paper
facilities as at December 31, 2004 are:

<TABLE>
<CAPTION>
                                              OTHER UNCOATED
                                  DIRECTORY     GROUNDWOOD      LWC    KRAFT                  MARKET
MILL                  NEWSPRINT     PAPER      SPECIALTIES     PAPER   PAPER     SUB-TOTAL    PULP(1)     TOTAL
----                  ---------   ---------   -------------    -----   -----     ---------    -------     -----
<S>                   <C>         <C>         <C>              <C>     <C>       <C>          <C>         <C>
Crofton                  264         157            -             -        -         421         318        739
Elk Falls                382           -          147             -      131         660         180        840
Port Alberni(2)            -         216            -           217        -         433           -        433
Powell River             127           -          329             -        -         456           -        456
                         ---         ---          ---           ---      ---       -----         ---      -----
Total                    773         373          476           217      131       1,970         498      2,468
                         ===         ===          ===           ===      ===       =====         ===      =====
</TABLE>

      (1)   Total pulp capacity of 658,000 tonnes is reduced by 160,000 tonnes
            in order to reflect the pulp that is provided to our paper and kraft
            paper operations.

      (2)   Beginning February 1, 2005 one paper machine at Port Alberni was
            indefinitely shut down. See "Lines of Business - Port Alberni". The
            product capacities noted in the above table have not been adjusted
            for the indefinite shut down.

In addition, our paper recycling operation has a production capacity of 148,000
air-dried equivalent tonnes of pulp per year, the vast majority of which is
consumed internally.

Our principal business is printing papers, consisting of groundwood coated,
uncoated and specialty papers, kraft paper and newsprint. For the year ended
December 31, 2004, groundwood and printing papers comprised approximately 80% of
our total manufacturing capacity and contributed approximately 85% of our total
sales revenues.

The principal markets for our products are located in North America and Asia.
The major markets for our market pulp are Western Europe and Asia.

                              COMPETITIVE STRENGTHS

We believe that we have the following competitive strengths:

-     Strong Market Position. We are the third largest producer of newsprint and
      uncoated groundwood specialty papers based in North America measured by
      production capacity. We are also the largest producer of coated and
      uncoated specialty papers and newsprint, and the only producer of
      lightweight coated paper, on the west coast of North America. We are the

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      largest producer of directory paper in the world. We have annual
      production capacity of approximately 2.5 million tonnes of specialty
      paper, newsprint and market pulp. In addition, we operate the largest
      paper recycling operation in Western Canada.

-     Diversified Product Mix. Since 1993, we have introduced or expanded a
      number of specialty and differentiated product lines, including
      lightweight newsprint grades, coated papers, machine finished hi-brites,
      super hi-brites, soft-calendered grades, directory, sawdust-based pulp and
      whitetop linerboard. These products are of superior quality and offer
      improved margins over standard commodity grades. Additionally, market pulp
      accounts for only 20% of our manufacturing capacity, significantly
      reducing our exposure to volatile pulp markets.

-     Upgraded, Cost-Competitive Manufacturing Facilities. Over the last five
      years, we have invested approximately $520 million in our manufacturing
      facilities to shift production towards higher margin papers, reduce unit
      production costs, increase operating efficiency, improve product quality,
      increase capacity and meet environmental regulations.

-     Strong Supply Chain Management Practices. We introduced new supply chain
      systems in 2000 to improve our supply chain and order fulfillment
      processes. These processes range from the purchase of raw materials to the
      delivery of finished paper products to our customers. These new systems
      have allowed us to reduce inventory levels, increase inventory turnover
      and provide faster delivery to customers. We are also able to make better
      use of the barges, rail cars, trucks and containers that we use to ship
      our products. With better planning and scheduling, we are now able to ship
      our products to customers using the most cost-efficient mode of
      transportation on virtually every shipment. Following the acquisition of
      Pacifica Papers Inc. in 2001, we harmonized our order fulfillment systems
      to better service our customers' requirements. Specifically, we have
      applied our order fulfillment, distribution and procurement expertise to
      further lower the supply chain costs at our Powell River and Port Alberni
      facilities.

-     Lightweight Alkaline Papermaking Technology. Over the last few years, we
      switched our paper mills to alkaline papermaking, which uses lower-cost
      precipitated calcium carbonate, or PCC, fillers in the production process.
      In addition to being a lower-cost input, the PCC filler leads to improved
      brightness and opacity. All of our products are created utilizing alkaline
      papermaking processes, and we believe these products are well recognized
      by our customers for their quality and performance. In addition, the use
      of PCC fillers enhances sheet quality to facilitate the production of
      papers with a lower basis weight. We believe that a lower basis weight
      gives us an important competitive advantage because a higher volume of
      lower basis weight paper can be stored on each paper roll, thereby
      reducing shipping, storage and handling costs and warehouse space required
      for inventories. The use of lower basis weight paper by our customers also
      reduces their postage costs. PCC also enables us to produce high quality,
      higher brightness uncoated groundwood grades. We have implemented the
      alkaline paper making process at all of our facilities.

-     Sawdust Pulp Expertise. We are one of the few manufacturers of
      sawdust-based pulp in the world. This product is valued by producers of
      tissue and wood-free printing papers as a substitute for more costly NBSK
      pulp. High initial tensile strength and ease of refining are other
      attributes of this type of pulp.

                                       5
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-     Proven and Experienced Management Team. Our management team is comprised
      of seasoned industry professionals with experience operating through
      multiple business cycles in the paper and forest products industry. Our
      senior executives have an average of over 20 years of industry experience
      and 15 years with NorskeCanada.

                                BUSINESS STRATEGY

We intend to achieve greater earnings stability and to maximize cash flow by
strengthening our position as a leading producer of value-added paper and
related forest products within Western North America. Key principles of our
strategy include:

-     Performance Improvement Program. We will continue to implement performance
      improvement initiatives that challenge us to create innovative and cost
      effective business solutions. In 2004, we commenced our fourth consecutive
      annual performance improvement initiative. This initiative generated $103
      million in earnings improvements across all areas, year over year. We
      realized improvements in the areas of grade development and product
      optimization, as well as cost reductions.

-     New Product Development. We plan to increase profitability within our
      paper operations by developing new high-value specialty paper products. In
      2004, we further developed two new grades, Electraprime and Electrastar.
      Our Electraprime grade is a soft-calendered high-brightness paper designed
      to compete as an alternative to supercalendered grades used primarily for
      advertising flyers and inserts. Our Electrastar product is a super
      high-brightness grade designed for applications in which brightness is a
      desirable characteristic such as magazines and specialty newspapers. Both
      products have been well received in the market. We intend to continue to
      aggressively promote them while exploring other product development
      opportunities.

-     Optimizing Fibre Mix to Reduce Costs. We intend to continue to use low
      cost PCC filler and to reduce kraft input while maintaining the quality of
      our products and improving printability. In 2004, we reduced the amount of
      kraft used in our specialty and newsprint products by 40% compared to
      2003. In December 2003, we acquired Western Canada's largest paper
      recycling facility. This acquisition allowed us to exit a higher-cost,
      long term de-inked pulp contract with the facility's previous owner.
      Subsequently, we have improved the value of this acquisition by increasing
      its production by an additional 25,000 air-dried metric tonnes, and by
      realizing synergies related to chemical purchases and freight
      optimization.

-     Improving Operating Costs and Improving Efficiency. We are committed to
      reducing our operating costs and improving efficiency. We examine all
      areas of our business on an ongoing basis for cost reduction
      opportunities. For example, in 2004 we improved our production planning
      and focused on lower cost forms of transportation to ship our products. To
      deal with rising energy costs, we worked on optimizing the fuel mix in our
      power boilers, resulting in less reliance on fossil fuels in favour of
      lower cost wood waste hog fuel. We also took advantage of our ability to
      alternate between oil and natural gas at several mill sites, allowing us
      to consume lower cost fuels.

-     Become the Preferred Supplier for our Customers. We are working on
      initiatives to improve service levels, distribution and customer
      relationships. Our plan is to seek to differentiate ourselves from our
      competitors by becoming a trusted supplier that consistently produces

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      reliable products. Our initiatives to date have resulted in a 35%
      reduction of product complaints compared to 2003.

                                LINES OF BUSINESS

We have three business segments: specialty paper, newsprint and pulp. Our
groundwood specialty papers and newsprint are manufactured on 13 paper machines
at four mill locations. Our market pulp is manufactured on three kraft pulp
lines at our Crofton and Elk Falls mills.

PAPER

      Paper Operations

We manufacture our groundwood specialties papers and newsprint on 13 paper
production lines at our four mill locations at Crofton, Elk Falls, Port Alberni
and Powell River, British Columbia.

Our capacity to produce specialty papers and newsprint, in thousands of tonnes,
as compared to our production for each of the last two years is as follows:

<TABLE>
<CAPTION>
                                          ANNUAL CAPACITY                           YEAR ENDED DECEMBER 31
     MILL                                DECEMBER 31, 2004                  2004 PRODUCTION        2003 PRODUCTION
---------------                          -----------------                  ---------------        ----------------
<S>                                      <C>                                <C>                    <C>

Crofton                                         421                               396                     390
Elk Falls                                       660                               637                     618
Port Alberni(1)                                 433                               425                     411
Powell River                                    456                               423                     431
                                              -----                             -----                   -----
                                              1,970                             1,881                   1,850
                                              =====                             =====                   =====
</TABLE>

   (1) Beginning February 1, 2005 one paper machine at Port Alberni was
       indefinitely shut down. The product capacities noted in the above table
       have not been adjusted for the indefinite shut down.

   Crofton

Crofton's capacity for the year ending December 31, 2004 was 421,000 tonnes of
newsprint and directory paper. On a 48.8 gsm equivalent basis the annual
capacity of the Crofton paper operations is approximately 512,000 tonnes.

The Crofton paper mill, which produces newsprint and lightweight directory
paper, has three paper machines, which were put in operation in 1964, 1968 and
1982. All machines were installed with, or have been converted to, twin-wire
sheet formation, which provides a more uniform quality of sheet for both
printing surfaces. Pulp furnish for the paper mill is supplied by a three-line
thermomechanical pulp mill, Crofton's kraft pulp mill and our paper recycling
operation. Reduced fibre requirements, made possible by the move to lighter
weight paper production at the mill, allowed the closure of a groundwood pulp
mill in September, 1999. In 2002, the refiner mechanical pulp mill was also
closed.

Crofton's No. 1 paper machine produces up to 119,000 tonnes of newsprint and
directory paper. The No. 2 paper machine produces up to 104,000 tonnes annually
of lightweight directory paper grades used in telephone and other directories,
as well as other lightweight printing papers. The No. 3 paper machine produces
up to 198,000 tonnes of newsprint. The No. 2 paper machine remains capable of
producing newsprint grades as market conditions warrant. To further our
objective to produce highly runnable directory paper, we completed $16 million
in modifications to the No. 2 paper machine in May 1999. These modifications
enable the Crofton mill to produce an innovative directory paper at the

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lowest industry basis weight. This directory paper has improved consistency,
runnability and printability. Crofton's directory paper production can be
supplemented by excess production capacity available on the No. 1 paper machine.

In 2001, the Crofton mill invested $13 million on bark presses to increase hog
burning capability and to reduce greenhouse gases. In August 2003, we completed
an $11 million upgrade to increase the capacity of the thermomechanical pulp
facility and improve the quality of the pulp. This resulted in improved
consistency in quality and lower production costs for light basis weight paper
manufactured at the Crofton mill. In 2004, we began work on a $10 million
investment in the thermomechanical pulp facility. This project is expected to be
completed in 2005 and will further improve capacity and quality. We also spent
$3 million to install a crumb pulp operation. Crumb pulp requires less drying
than regular pulp. This installation has allowed us to free up drying capacity
for our market pulp business and, as a result, we are able to produce an
additional 25,000 tonnes of market pulp a year.

   Elk Falls

Elk Falls' capacity for the year ended December 31, 2004 was 660,000 tonnes of
newsprint, high brightness uncoated specialties and kraft paper. On a 48.8 gsm
equivalent basis, the annual capacity of the Elk Falls paper operations,
excluding kraft paper, is approximately 544,000 tonnes. The Elk Falls mill has
annual kraft paper production capacity of approximately 131,000 tonnes.

Four paper machines, which were put into operation in 1952, 1957, 1966 and 1982,
produce newsprint, soft calendered high brightness specialties papers and
whitetop linerboard. All machines were installed with, or converted to,
twin-wire sheet formation. Pulp furnish for the paper mill is supplied primarily
from the mill's seven-line thermomechanical pulp mill and its semi-bleached
kraft pulping facilities.

Paper machine No. 1 has a capacity to produce approximately 154,000 tonnes of
newsprint. Paper machine No. 2 has the capacity to produce approximately 147,000
tonnes of uncoated groundwood specialty grades. Paper machine No. 4 has the
capacity to produce approximately 131,000 tonnes of kraft paper. Paper machine
No. 5 has the capacity to produce approximately 228,000 tonnes of newsprint.

Elk Falls has broadened its range of uncoated groundwood specialty papers to
meet the needs of commercial printers. We have met the demand for better quality
through equipment upgrades to produce a cleaner, more refined pulp furnish. We
have improved smoothness and printability to meet the exacting standards of
large commercial printers, and we have developed high brightness offset papers
in a variety of basis weights. The No. 2 paper machine has a soft roll
calendering system designed to produce up to 147,000 tonnes annually of uncoated
groundwood specialty papers. Soft calendered specialty grades, marketed under
the Electracal and Electrasoft labels, are used mainly by the commercial print
market for advertising flyers and newspaper supplements. We are the largest
supplier of soft-calendered papers on the west coast of North America.

In 2001, we installed a new $15 million precipitator at Elk Falls to improve air
quality. In August 2003, we completed a $4 million upgrade to our No. 5 paper
machine, which has reduced the consumption of kraft in our paper furnish.

Whitetop linerboard, which is produced by the kraft paper specialties machine,
is a premium product that combines a layer of unbleached kraft pulp with a layer
of bleached kraft pulp. The two layers are formed on the paper machine by
uniting the bleached and unbleached stock into what is known as a

                                       8
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duplex stock. This specialty product is white on the top and brown on the
reverse side and is used in packaging where bright, high quality graphics are
important. Elk Falls' competitive advantage in producing this product stems from
its ability to produce a lightweight, high-performance sheet. The inclusion of
sawdust-based pulp in the furnish also results in a smoother, more consistent
surface which performs better in customers' conversion facilities.

Production of whitetop linerboard grades totaled approximately 119,000 tonnes,
or 96%, of production from the Elk Falls kraft paper machine for the year ended
December 31, 2004. The majority of this product is marketed under the brand name
"SilverLiner." In 2003, we completed a $3 million upgrade to stock preparation
equipment supporting the No. 4 paper machine, enabling us to replace a portion
of sawdust-based pulp with externally purchased hardwood pulp. The upgrade has
improved the quality and production of our SilverLiner product and allows us to
sell a higher volume of sawdust based pulp externally.

The furnish for the kraft paper specialties produced at Elk Falls is comprised
of long-fibre pulp, alternative fibre sources such as sawdust-based pulp and
rejects from the Elk Falls kraft pulp mill, as well as clippings received from
converting plants and post-consumer waste. Elk Falls also purchases a limited
quantity of high quality hardwood kraft pulp in order to enhance the top sheet
quality of our kraft paper product line.

   Port Alberni

Port Alberni's capacity for the year ended December 31, 2004 was 433,000 tonnes
of directory paper and lightweight coated paper. Port Alberni's annual directory
paper capacity on a 48.8 gsm equivalent basis is approximately 307,000 tonnes.

The Port Alberni paper mill has three paper machines. Two of the paper machines
were put into operation in 1957, with the third paper machine put into operation
in 1968.

Paper machine No. 3 has the capacity to produce approximately 112,000 tonnes of
directory paper, paper machine No. 4 has the capacity to produce approximately
104,000 tonnes of directory paper and paper machine No. 5 has the capacity to
produce approximately 217,000 tonnes of lightweight coated paper.

Beginning February 1, 2005, we began the indefinite shut down of paper machine
No. 3. Curtailment of this machine will effectively displace 140,000 tonnes per
year of newsprint production as we shift the directory production from paper
machine No. 3 to other machines.

Paper machine No. 5 is the only lightweight coated paper machine in western
North America. Its technology allows for the coating of paper on both sides
simultaneously, reduces the amount of kraft pulp required to produce
conventional lightweight coated paper and produces the desired product quality
in terms of runnability, printability and bulk.

Pulp furnish for the paper mill is supplied primarily from the mill's
thermomechanical pulp plant and groundwood mill, from our paper recycling
operation and from kraft pulp supplied from the Crofton mill. We have installed
equipment at the Port Alberni mill to allow us to use recycled fibre in
telephone directory paper.

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<PAGE>

   Powell River

Powell River's capacity for the year ended December 31, 2004 was 456,000 tonnes
of newsprint and uncoated groundwood specialty paper. Powell River's annual
capacity on a 48.8 gsm equivalent basis is approximately 463,000 tonnes.

The Powell River mill has three paper machines, which were put into operation in
1957, 1967 and 1981.

No. 9 paper machine has the capacity to produce 119,000 tonnes of hi-brite,
uncoated groundwood specialty papers or newsprint. At the end of 2004, this
machine was fully dedicated to the production of specialty paper grades. No. 10
paper machine has a capacity of 158,000 tonnes and produces only high quality,
soft-calendered, specialty papers. No. 11 paper machine is Powell River's
largest machine and has a capacity to produce 179,000 tonnes of newsprint. In
2004, we completed a $7.5 million upgrade of No. 10 paper machine to support the
production of higher value groundwood specialty paper, including our newest
Electraprime grade. We have dedicated our No. 9 paper machine to produce
highbrightness Electrastar and Electrabrite grades. We continue our effort to
push towards the development of highbrightness products at our Powell River
mill, and in 2005 we will be upgrading the bleach plant at a cost of $3 to $5
million.

Pulp furnish for the paper mill comes primarily from a thermomechanical pulp
plant. In November, 2001, we permanently closed the kraft pulp mill, which
consumed a high-cost fibre diet which resulted in higher unit costs compared to
our other two pulp mills at Elk Falls and Crofton. In addition, the pulp mills
at Elk Falls and Crofton have roughly twice the capacity of the Powell River
pulp mill. We now supply the pulp requirements of the paper machines at Powell
River from our Elk Falls and Crofton facilities.

The Powell River mill has the capability to use recycled de-inked pulp on a
limited scale. Recycled de-inked pulp is supplied from our paper recycling
operation.

We hold a 50% economic interest in Powell River Energy Inc., or Powell River
Energy, which owns two hydroelectric dams near the Powell River mill with a
combined generating capacity of 82 megawatts. Pursuant to a power purchase
agreement between us and Powell River Energy, Powell River Energy will provide
the power generated by its facilities to us at a fixed rate approximating
current British Columbia Hydro and Power Authority rates until 2011. Powell
River Energy's hydroelectric facilities supply approximately 40% of the annual
power needs of the Powell River mill.

   Paper Marketing

The principal customers for our specialty papers and newsprint are retailers,
magazine and catalogue publishers, commercial printers, telephone directory
publishers, corrugated box manufacturers and newspaper publishers, and are
located primarily in western and central North America and Asia. Specialty and
newsprint customers are served primarily by our sales and marketing personnel in
North America and Japan and distributors and agents in other geographic markets.
In recent years, our marketing strategy for kraft paper has been, first, to
shift the sales mix to 100% white-top production and eliminate lower value
unbleached grades and second, to improve surface properties in order to expand
freight logical North American sales with high graphic accounts that prefer our
lightweight grades.

                                       10
<PAGE>

The following table sets out our paper sales revenue by country or geographic
region:

<TABLE>
<CAPTION>
                                                       UNITED     ASIA AND      OTHER
                                            CANADA     STATES   AUSTRALIASIA   OFFSHORE   TOTAL($ MILLIONS)
                                            ------     ------   ------------   --------   -----------------
<S>                                         <C>        <C>      <C>            <C>        <C>
Year ended December 31, 2002                  13%        67%        12%             8%          1,466
Year ended December 31, 2003                  13%        67%        13%             7%          1,542
Year ended December 31, 2004                  12%        65%        11%            12%          1,590
</TABLE>

Historically, approximately two-thirds of our paper sales revenue has been
generated from sales to customers in the United States. The United States is the
world's largest consumer of newsprint, with consumption of approximately 10
million tonnes in 2004, representing about 27% of total world consumption.

For the years ended December 31, 2004 and 2003, specialty paper and newsprint
accounted for 85% of our consolidated net sales revenue. No single customer
accounts for more than 10% of our specialty consolidated net sales revenue nor
is a material part of our business dependent on a small group of customers.
Specialty paper and newsprint markets are not subject to significant seasonal
fluctuations.

The Crofton, Elk Falls and Powell River mills are located on tidewater and have
deep-sea vessel loading facilities. Specialty paper and newsprint is shipped
primarily by deep-sea vessel, and by a combination of ship, barge, rail and
truck for inland destinations. We use the services of independent warehouses all
over the world for distribution to our customers.

We have built effective long-term relationships with our customers for our
specialty papers and newsprint, based on a partnership approach to produce the
best product for their particular needs. As a result, we expect to remain a
preferred supplier to many of those customers.

PULP

   Pulp Operations

We manufacture market pulp at our Crofton and Elk Falls pulp and paper mills,
located in British Columbia on the east coast of Vancouver Island.

Our capacity, in thousands of tonnes, as compared to our production for each of
the last two years is as follows:

<TABLE>
<CAPTION>
                                                        ANNUAL CAPACITY                 YEAR ENDED DECEMBER 31
                                        MILL         DECEMBER 31, 2004 (1)      2004 PRODUCTION       2003 PRODUCTION
                                        ----         ---------------------      ---------------       ---------------
<S>                                  <C>             <C>                        <C>                   <C>
Market pulp                          Crofton                   318                   262                  253
                                     Elk Falls                 180                   159                  166
                                                               ---                   ---                  ---

Total                                                          498                   421                  419
                                                               ===                   ===                  ===
</TABLE>

(1)   Total pulp capacity of 658,000 tonnes is reduced by 160,000 tonnes in
      order to reflect the pulp that is provided to our paper and kraft paper
      operations.

The Crofton kraft pulp mill is a two-line mill. The first line began operating
in 1957 and the second in 1965. At December 31, 2004 total annual market pulp
capacity was 318,000 tonnes. This mill is equipped with two continuous digesters
(although currently we are only running one) and eight batch

                                       11
<PAGE>

digesters, which provide the flexibility to cook different species of chips
independently. Crofton's batch digesters utilize a rapid displacement heating,
or RDH, cooking system. The RDH system allows for rapid turnaround in the batch
cooking process, because it rapidly extracts and replaces the cooking liquor in
the cooking vessel for each batch without a significant loss in temperature.
This technology improves the overall quality of Crofton pulps and provides a
stronger and more uniform pulp than conventional cooking.

The Crofton kraft pulp mill produces Northern bleached softwood kraft, or NBSK
pulp grades. One grade is a low coarseness fine fibre pulp. This pulp is
consumed internally at our Crofton, Port Alberni and Powell River operations and
sold to market customers. This pulp is a high tensile grade which is ideally
suited for the manufacture of lightweight papers. The other pulp grade produced
is made from Coastal Hemlock and Douglas Fir fibre species. This pulp has high
intrinsic strength and bulk, and is used in a variety of printing and writing
papers.

The Elk Falls kraft pulp mill was initially commissioned in 1956, and its
sawdust-based pulp production began in 1964. The mill has been extensively
modernized over recent years to meet or exceed current environmental standards
and to improve operating efficiency and costs.

The Elk Falls kraft pulp mill is equipped with five batch digesters and three
continuous digesters and has a total annual market pulp capacity of 180,000
tonnes. The mill manufactures a sawdust-based pulp branded "Elk Prime". Elk
Prime is a fully bleached pulp that is manufactured from a combination of
low-cost sawdust, wood shavings and chip screenings. Blending of these residuals
produces a pulp with an average fibre length between that of conventional
softwood and hardwood pulps. Elk Prime is easy to refine, delivers high initial
tensile strength and, when added to a paper makers' furnish, enhances
dimensional stability. Manufacturers of products such as specialty papers,
tissue, paper toweling, printing and writing and other paper products can
substitute Elk Prime for portions of their conventional NBSK pulp feedstock,
realizing cost savings and, in many cases, improved quality. Sawdust-based pulps
have an added environmental advantage in that they are made from fibre that
would otherwise have been a waste product. Elk Falls uses some sawdust-based
pulp in producing its specialty brands of high quality white-top linerboard,
which is sold to customers who manufacture corrugated containers that require
high quality graphics.

All of the kraft pulp operations are equipped with chlorine dioxide bleaching
systems and secondary effluent treatment facilities and are presently operating
in substantial compliance with applicable environmental laws and regulations.

In 2004, we completed a $45 million upgrade of the Elk Falls No. 2 recovery
boiler to increase capacity and maintain reliability. This upgrade allowed the
permanent shut down of the smaller recovery boiler, a lime kiln and a bleach
plant. As a result, gross pulp production at Elk Falls was reduced by
approximately 90,000 tonnes per year. This decrease in production is expected to
be offset by reduced internal consumption of kraft pulp.

   Pulp Marketing

Our two pulp mills are well situated for export shipments to Asia and Western
Europe, the largest pulp consuming markets.

Our strategy is to maintain a diversified range of freight-logical customers,
including producers of tissue, magazine papers, woodfree printing and writing
papers and certain specialty paper products.

                                       12
<PAGE>

Our sawdust-based pulp produced at Elk Falls is particularly versatile and is
used as a lower cost substitute for more expensive NBSK and eucalyptus
fibre-based hardwood pulp.

The combination of a simple pulp product line and a diversified range of
customers enables the full utilization of our pulp production facilities
throughout market cycles.

The following table contains our market pulp sales revenue by country or
geographic region:

<TABLE>
<CAPTION>
                                                    UNITED       ASIA &        LATIN       EUROPE &        TOTAL
                                       CANADA       STATES     AUSTRALASIA    AMERICA       OTHER       ($ MILLIONS)
                                       ------       ------     -----------    -------      --------     ------------
<S>                                    <C>          <C>        <C>            <C>          <C>          <C>
Market Pulp
Year ended December 31, 2002             1%           1%          46%            2%            50%             238
Year ended December 31, 2003             1%           0%          56%            0%            43%             279
Year ended December 31, 2004             1%           0%          56%            0%            43%             288
</TABLE>

Pulp customers are served by sales and marketing staff in Canada and Japan and a
network of agents in locations throughout the world.

The Crofton and Elk Falls pulp mills are located on tidewater and have deep-sea
vessel loading facilities. Pulp is shipped to offshore locations by both break
bulk on deep-sea vessels and container shipment.

For the year ended December 31, 2004, pulp accounted for 15% of our consolidated
sales revenue as compared to 15% for the year ended December 31, 2003. There is
no single customer that accounts for more than 10% of our consolidated net sales
revenue, nor is a material part of our business dependent upon a small group of
customers.

   Paper Recycling Division

On December 1, 2003 we acquired Western Canada's largest paper recycling
operation, located in Coquitlam, B.C. The purchase price was $61.1 million
(including a $2.5 million working capital adjustment) and was comprised of $31.5
million of cash, approximately 8.7 million of our common shares having a value
of $29 million, and $0.6 million of transaction costs. As part of the
acquisition, we entered into a lease of the land and buildings where the paper
recycling plant operates for an initial term of 20 years, with one 10 year
renewal option. The annual rent under the lease is $2.0 million, subject to
adjustment for changes in the Consumer Price Index. The lease includes options
to purchase the land and buildings, and a right of first offer in the event the
landlord wishes to sell the land to a third party.

Our paper recycling operation recycles old newspapers, magazines and other waste
paper into pulp suitable for the manufacture of newsprint, telephone directory
paper and similar grades of paper. The plant was constructed in 1990. Its
current production capacity is 148,000 air-dried metric tonnes of pulp per year.
Average annual production in the last three fiscal years was approximately
130,000 air-dried metric tonnes per year. We were the principal customer of the
paper recycling operation and prior to our acquisition we purchased
approximately 95% of the de-inked pulp it produced. The operation now supplies
100% of our de-inked pulp requirements.

The paper recycling operation utilizes flotation, cleaning and screening
technologies to remove ink and impurities from the waste paper input. This
produces high-quality pulp that can be blended with traditional virgin-fibre
pulp to produce paper in accordance with customers' specifications.

                                       13
<PAGE>

The pulp is mechanically dried to a consistency of about 50% moisture content
for shipment to its customers.

The waste paper furnish for our paper recycling operation is purchased in
Western Canada and the Western United States. In the most recent fiscal year,
approximately 38% of the furnish was sourced in British Columbia, 18% in the
balance of Western Canada and 44% in the United States.

The plant receives waste paper primarily by rail and truck into warehouse
facilities located adjacent to the production facility. An independent
contractor is responsible for operations in the raw materials warehouse. Batches
of waste paper are loaded onto a conveyor for transport into the production
facility.

Within the production facility the waste paper is initially mixed with water and
de-inking and bleaching chemicals in a batch pulper. The paper slurry produced
by the pulper is then processed by a succession of cleaners and screens to
remove contaminants. It then passes through a flotation unit, where tiny air
bubbles float ink particles out of the slurry. The slurry is then further
processed through additional cleaners and a final flotation process before being
formed into mechanically-dried sheets which are baled for shipment. The recycled
pulp is shipped to our other operations by truck, rail and barge.

                                  FIBRE SUPPLY

Our pulp and paper operations consume wood fibre which is purchased from more
than 70 independent mills. Our fibre supply comes primarily from residual wood
chips and sawdust from lumber operations located on the coast or in the southern
Interior of British Columbia and secondarily from the chipping of pulp logs
originating from locations throughout the region.

Sawmill wood chips presently comprise 57% of the fibre supply for our pulp and
paper operations. The remainder is comprised of pulp logs (22%), sawdust (17%)
and recycled de-inked pulp (4%). Currently, five wood chip, log and sawdust
suppliers provide 59% of our fibre supply. The supply contracts with these
companies were negotiated for indefinite ("evergreen") terms when certain of our
timber and processing assets were sold.

In addition, through an evergreen contract with a coastal log producer,
additional wood chips can be obtained from regional sawmills. These suppliers
provide an additional 11% of our fibre supply.

Together, all of these long-term, secure supply agreements provide approximately
70% of the fibre supply for our pulp and paper operations.

The remainder of the fibre requirements for the four pulp and paper operations
is sourced from independent suppliers, many under long-term contracts. Fibre is
purchased from these suppliers at market prices or at prices determined under
market-based formulas.

To enhance our fibre security, we maintain a surplus fibre position. As a result
of our fibre position, we make annual sales of approximately 425,000 cubic
meters of surplus fibre to regional customers. In addition, we engage in fibre
trading activities to ensure optimum allocation of different fibre grades to the
appropriate product.

                                       14
<PAGE>

During 2004 we implemented an independent chain of custody system to track our
wood fibre supply. This auditable system identifies the source of wood fibre
coming from forests with independently certified forest management practices.
The independent chain of custody verifies that select paper products made at our
Port Alberni and Powell River mills contain 100% certified wood fibre.

                                   COMPETITION

The markets for our products are highly competitive on a global basis. The pulp
and paper industry is essentially a commodity market in which producers compete
primarily on the basis of price. In addition, since a majority of our production
is directed to export markets, we compete on a worldwide basis against many
producers of approximately the same or larger capacity. In export markets,
Canadian producers generally compete with American, European and Asian
producers.

                                   PROPERTIES

Our head office is located in leased premises in Vancouver, British Columbia.
The lease covers an aggregate of 40,842 square feet and expires February 15,
2016.

We lease the land and buildings where our paper recycling operation is located.
The lease expires November 30, 2023, subject to one 10 year renewal option. We
also lease a port and warehouse facility in Long Beach, California, which we use
for delivering product to customers located in the Western United States. That
lease terminates in August, 2006, subject to an option to renew for an
additional two year term.

Each of our Crofton, Elk Falls, Powell River and Port Alberni pulp and paper
manufacturing facilities are situated on land we own. The Crofton mill is
located on a 107 hectare site, the Elk Falls mill is located near the town of
Campbell River, British Columbia on a 78 hectare site, the Powell River mill is
located on a 94 hectare site and the Port Alberni mill is located on a 44
hectare site. Each of our properties is the subject of a mortgage in favor of
our lenders to secure our credit facilities.

                                 HUMAN RESOURCES

We have approximately 3,800 employees.

All of the approximately 2,900 hourly employees at our pulp and paper mills
(with the exception of the paper recycling operation) are members of either the
Communications, Energy & Paperworkers Union of Canada, or CEP, or the Pulp,
Paper and Woodworkers of Canada, or PPWC. Twenty-three employees in the Port
Alberni mill are represented by the Canadian Office and Professional Employees
Union, or COPE.

The current collective agreements with each of CEP and PPWC expire on April 30,
2008. The collective agreement with the COPE expires on April 30, 2006.

                                   ENVIRONMENT

Our operations are subject to a wide range of general and industry-specific
environmental laws and regulations including those related to waste management,
air emissions, water discharges and remediation of environmental contamination.
There has been significant upgrading of our facilities during the last few years
to comply with solid and special waste, effluent and air regulations.
Environmental performance is monitored regularly by us. We believe that our
facilities are operating in substantial compliance with applicable environmental
laws and regulations.

                                       15
<PAGE>

Environmental performance is monitored regularly by us. We believe that our
facilities are operating in substantial compliance with applicable environmental
laws and regulations.

In addition to regular monitoring of emission points and reporting to regulatory
authorities, we manage our environmental performance through an environmental
management system. This system is registered to the ISO 14001 standard at four
of our five facilities. The environmental management system utilizes annual
internal surveillance audits and bi-annual external compliance audits of our
manufacturing facilities. The audit findings are communicated to management and
a committee of the board of directors, so that appropriate action plans can be
developed to address any deficiencies. Audits were completed during 2004 and no
material issues were uncovered during those reviews.

Numerous federal environmental initiatives are underway which could translate
into more vigourous regulatory standards and permits in the next decade,
especially with respect to air emissions. Substances that may be targeted
include chlorine dioxide, odorous compounds, fine particulate, oxides of
nitrogen, carbon monoxide and sulphur dioxide. Because of recent upgrades we
have made to our air emissions controls, we believe we are well positioned to
meet many of these new challenges. In cases where equipment improvements may be
required, we expect that policy lead time and flexibility in the permitting
process will mitigate any required capital spending.

RECYCLED CONTENT IN GROUNDWOOD PAPER

We are a major supplier of newsprint, directory and other groundwood printing
papers to western North America. The most significant of these markets is the
western United States, where in three states - California, Arizona and Oregon
- newspaper publishers and commercial printers are required by law to use a
certain proportion of recycled containing paper. While the other western U.S.
states and Canada do not have legislated requirements for recycled containing
paper, many printers and publishers are demanding some recycled containing paper
as part of their supply mix.

We meet this market demand through the use of de-inked pulp from our paper
recycling operation located in Coquitlam, British Columbia. This de-inked
post-consumer recycled pulp is mixed with virgin pulp furnish to produce
newsprint and directory paper that meets the legislated requirement.

The recycling plant was designed to minimize deleterious impacts on the
environment. Water is obtained from the municipal water supply and is recycled
and reused in the operation to minimize water intake. Process effluent is
processed in on-site primary, secondary and tertiary treatment facilities before
being discharged into the municipal sewer system. The majority of the solid
waste produced by plant operations is used in agricultural and thermal
applications, and only a small portion of the waste stream (consisting primarily
of metal, glass and plastic contaminants received with the waste paper) is
placed in landfill. No chlorine-based bleaching chemicals are used in the
process.

SOLID WASTE

An ongoing environmental issue faced by our operations is the disposal of solid
waste. Most non-recyclable waste is disposed of at on-site landfills and based
on current practice we have at least three year's capacity in the landfills at
each of our facilities. We continue to work to reduce volumes sent to landfill
by increasing recycling efforts and investigating alternative uses for all
waste. In 2004, we constructed a new landfill at Crofton with a 30 year capacity
and we are planning to develop another landfill site at our Elk Falls mill to
establish more capacity.

                                       16
<PAGE>

EFFLUENT

In the early 1990s, the British Columbia provincial government mandated the
elimination of AOX in mill effluent by December 31, 2002. In July 2002, this
regulation was amended to 0.6 kilograms per tonne of pulp produced effective
December 31, 2002. All of our facilities are operating below this new limit
which is similar to legislation recently enacted in the United States.

The Port Alberni and Powell River mills do not produce kraft pulp or use a
brightening process involving chlorine or chlorine derivatives, so they do not
produce any appreciable AOX or dioxins in their effluent.

AIR EMISSIONS

Over the past five years, substantial environmental capital has been spent at
all facilities upgrading air emissions controls and infrastructure. This
includes an odour collection and treatment system at Crofton, a new wet
precipitator for the Elk Falls power boiler, a fluidized bed boiler conversion
at Port Alberni and a new fluidized bed boiler at Powell River. Our facilities
are well positioned to be compliant with future air emissions standards, which
will likely focus on odour, fine particulates and other criteria air
contaminants.

In February 2005, the Kyoto Protocol came into effect. Canada's commitment is to
obtain by 2010 a 6% absolute reduction of greenhouse gas emissions below 1990
levels. Our 2003 greenhouse gas emissions were 61% below 1990 levels and,
therefore, we easily surpass the federal commitment. While specific Canadian
policy regarding large final emitters such as pulp and paper facilities is still
under development, under a currently proposed federal plan we expect to have
emission credits.

In 2004, we spent approximately $5 million on environmental capital projects.
Key 2004 environmental projects included construction of the 30 year capacity
landfill at Crofton and an upgrade of Crofton's ambient air monitoring systems.
We also successfully completed a hog fuel washing trial at Elk Falls which
reduced the sea salt content in the waste wood fuel supplied to the boiler. At
Port Alberni we began remediation of lands that had some minor creosote
contamination from an old river water pipeline. We also undertook substantial
demolition of old infrastructure which required careful disposal of old asbestos
materials. We estimate that capital expenditures relating to known environmental
matters, including compliance issues and the assessment and remediation of the
environmental condition of our properties, will total approximately $3 million
in 2005. While we believe that our estimate for environmental projects for the
remainder of 2005 is reasonable, there can be no assurance that actual
expenditures will not exceed the estimated amounts.

CONTAMINATED SITES

We are not aware of any sites or land parcels which are considered contaminated
under the Province's contaminated sites legislation.

Provincial legislation governing contaminated sites came into effect in British
Columbia on April 1, 1997. If a particular site exceeds prescribed levels of
certain classes of substances, the site is determined to be a "contaminated
site" under the legislation. The legislation specifies the circumstances in
which a "site profile" must be prepared in respect of any property that has been
used for certain industrial or commercial purposes. If a site is determined to
be contaminated, remediation will normally be required under government
supervision. As current and past owners of mill sites, all

                                       17
<PAGE>

forest products companies in British Columbia may face remediation costs
particularly as a result of historical operations and disposal practices.
Compliance with this legislation has not resulted in any material cost to us but
there can be no guarantee that such costs will not be incurred in the future as
a consequence, for example, of the discovery of unknown conditions or changes in
enforcement policies.

                            RESEARCH AND DEVELOPMENT

We continue to contribute to industry supported research organizations such as
the Pulp and Paper Research Institute of Canada. In addition, research required
to meet our specific needs is conducted at private laboratories under the
direction of our technical experts and at the mill laboratories.

Business unit technical staff provide scientific and technological expertise in
support of operations and product development efforts.

Our research and development expenditures totaled approximately $3 million for
the year ended December 31, 2004, and approximately $3 million for the year
ended December 31, 2003.

                              CAPITAL EXPENDITURES

Over the past five years our capital expenditures on continuing operations have
totaled approximately $520 million. In the year ended December 31, 2004,
approximately $68 million was spent on various environmental, maintenance of
business and discretionary projects. The following table summarizes capital
expenditures on continuing operations by business segment over the past five
years:

<TABLE>
<CAPTION>

      $ Millions           2004      2003      2002     2001      2000     TOTAL
---------------------      ----      ----      ----     ----      ----     -----
<S>                        <C>       <C>       <C>      <C>       <C>      <C>
Paper                       39        54        63       113       100      369
Pulp                        29        27        19        24        52      151
                            --        --        --       ---       ---      ---
Continuing Operations       68        81        82       137       152      520
                            ==        ==        ==       ===       ===      ===
</TABLE>

                                CAPITAL STRUCTURE

We are authorized to issue an unlimited number of common shares and 100,000,000
preferred shares. As of December 31, 2004, there were 214,604,120 common shares
issued and outstanding and no preferred shares issued and outstanding. All of
the issued and outstanding common shares are fully paid. Holders of common
shares are entitled to receive dividends as and when declared by our Board of
Directors and, unless otherwise provided by legislation, are entitled to one
vote per share on all matters to be voted on at all meetings of shareholders.
Upon the voluntary or involuntary liquidation, dissolution or winding-up of the
company, the holders of common shares are entitled to share rateably in the
remaining assets available for distribution after payment of liabilities. The
common shares are not subject to any future call or assessment and there are no
pre-emptive, conversion or redemption rights attached to the common shares.

                               FOREIGN OPERATIONS

We have no foreign manufacturing operations.

                                       18
<PAGE>

                                  RISK FACTORS

Our business and operations are subject to a number of risk factors which are
set out in the Management's Discussion and Analysis contained in the Annual
Report for our most recently completed financial year, which is available on
SEDAR at www.sedar.com.

                                LEGAL PROCEEDINGS

We occasionally become party to legal proceedings, generally related to contract
disputes and employment law in the ordinary course of business. The final
results of currently ongoing legal proceedings, while not immediately
determinable, are not expected to have a material effect on our financial
results.

We and certain of our affiliates have been named as defendants, together with a
number of other paper producers, in class action lawsuits in the United States
alleging an ongoing conspiracy to fix prices of magazine and other publication
papers. These suits have been triggered by a European Commission investigation
into possible anti-competitive practices by certain European paper producers. We
believe there is no merit to the allegations, but will nevertheless incur costs
to defend ourselves.

                                    DIVIDENDS

We are currently restricted from paying dividends under the terms of our bond
indentures because our cumulative losses (adjusted to exclude foreign exchange
gains/losses on debt) since the initial bond issue exceed cash proceeds from
equity issues for the same period. No dividends were paid in the years ended
December 31, 2004, 2003 or 2002.

                                     RATINGS

In February 2004, Moody's lowered its credit ratings on our senior unsecured
debt to Ba3 from Ba2, on our secured credit facilities to Ba2 from Ba1, and
confirmed its outlook on our debt ratings as negative. The downgrade was cited
as due to the prolonged downturn in the market for newsprint and other products
we manufacture.

In December 2004, Standard and Poor's (S&P) lowered its long-term corporate
credit and senior unsecured ratings to BB- from BB and its senior secured rating
to BB from BB+, and confirmed the outlook as negative. The rapid appreciation of
the Canadian dollar as well as continued energy pressures were attributed to the
downgrade. The adjustment makes the S&P ratings similar to those of Moody's
which remain unchanged in the quarter.

The interest rate we pay on borrowings under our revolving credit facility
includes a margin that varies with our credit rating. The margin increased with
the Moody's downgrade in February 2004. Downgrades could negatively impact our
cost of additional borrowing and potentially our cost of capital, but otherwise
have no direct impact on our business.

The following table highlights our credit ratings and assigned outlooks with
Moody's and S&P as of December 31, 2004, 2003 and 2002.

                                       19
<PAGE>

<TABLE>
<CAPTION>

                                          DECEMBER 31,
                                2004          2003          2002
                              --------    ------------    --------
<S>                           <C>         <C>             <C>
MOODY'S
Outlook                       Negative      Negative      Stable
Issuer rating                      Ba3           Ba2         Ba2
Senior implied issuer              Ba3           Ba2         Ba2
Bank loan debt                     Ba2           Ba1         Ba1
Senior unsecured debt              Ba3           Ba2         Ba2

STANDARD & POOR'S
Outlook                       Negative      Negative      Negative
Long term corporate credit         BB-           BB            BB+
Senior unsecured debt              BB-           BB            BB+
Senior secured debt                BB            BB+           BB+
</TABLE>

                              MARKET FOR SECURITIES

Our common shares are listed for trading on The Toronto Stock Exchange (the
"TSX") under the symbol NS. During 2004, the common shares traded at a high of
$4.95, a low of $3.30 and an average daily volume of 546,140. The price range
and volume of trading of the common shares on the TSX during each month of 2004
was as follows:

<TABLE>
<CAPTION>
                         PRICE RANGE
   MONTH                 LOW-HIGH ($)                   VOLUME
-----------              ------------                 ----------
<S>                      <C>                          <C>
 January                 3.85 - 4.67                  18,009,316
 February                3.98 - 4.95                  18,048,306
  March                  4.04 - 4.95                  13,703,375
  April                  4.32 - 4.78                   9,647,015
   May                   3.90 - 4.54                   9,780,334
   June                  4.20 - 4.74                   8,158,644
   July                  4.21 - 4.69                   5,286,011
  August                 3.72 - 4.50                  10,324,984
September                3.80 - 4.14                   6,736,304
 October                 3.30 - 4.20                  10,518,902
 November                3.35 - 3.75                  18,026,054
 December                3.46 - 3.80                   9,934,292
</TABLE>

                               MATERIAL CONTRACTS

Since January 1, 2002, we have entered into the following material contracts:

1.    Indenture, dated as of March 23, 2004, governing the Corporation's 7 3/8%
      Senior Notes due 2014, among the Corporation, the subsidiary guarantors
      and Wells Fargo Bank, National Association, as trustee.

2.    Credit Agreement, dated as of July 19, 2002, among the Corporation, the
      subsidiary restricted parties named therein, TD Securities and RBC Capital
      Markets as arrangers, the Toronto-Dominion Bank, as administration agent,
      Royal Bank of Canada as syndication agent, and the lender parties named
      therein (the "Credit Agreement").

                                       20
<PAGE>

3.    First Amending Agreement to Credit Agreement, dated as of May 8, 2003,
      among the Corporation, the subsidiary restricted parties named therein,
      The Toronto-Dominion Bank, as administration agent, and the lender parties
      named therein.

4.    Second Amending Agreement to Credit Agreement, dated August 6, 2003 among
      the Corporation, its subsidiary restricted parties named therein, the
      Toronto-Dominion Bank, as administrative agent, and the lender parties
      thereto.

5.    Third Amending Agreement to Credit Agreement, dated May 28, 2004, among
      the Corporation, its subsidiary restricted parties named therein, the
      Toronto-Dominion Bank, as administrative agent, and the lender parties
      thereto.

6.    Omnibus Pledge Agreement, dated as of July 19, 2002, entered into by
      certain wholly owned subsidiaries of the Corporation and The
      Toronto-Dominion Bank pursuant to the Credit Agreement.

7.    Aggregate Repricing Agreement, dated as of May 14, 2003, among Norske Skog
      Canada Finance Limited, certain lenders or affiliates of lenders named in
      the Credit Agreement and Royal Bank of Canada as group valuation agent,
      with respect to the repricing from time to time of certain secured
      derivative contracts entered into by Norske Skog Canada Finance Limited.

8.    Indenture, dated as of May 15, 2003, governing the Corporation's 8 5/8%
      Senior Notes due 2011, among the Corporation, the subsidiary guarantors
      and Wells Fargo Bank Minnesota, National Association, as trustee (the
      "2003 Notes Indenture").

9.    First Supplemental Indenture amending the 2003 Notes Indenture, dated as
      of December 1, 2003, among the Corporation, the subsidiary guarantors
      named therein and Wells Fargo Bank Minnesota, National Association, as
      trustee.

                          TRANSFER AGENT AND REGISTRAR

CIBC Mellon Trust Company; Vancouver, Toronto and Montreal.

                           AUDIT COMMITTEE INFORMATION

The Audit Committee consists of Thomas S. Chambers, J. Trevor Johnstone, Harold
N. Kvisle, R. Keith Purchase and Vidar Lerstad. Each of these directors are
independent for the purposes of sitting on the Audit Committee, as defined under
applicable legislation, and are financially literate. The Board has determined
that each member of the Audit Committee qualifies as an "audit committee
financial expert" for the purposes of applicable legislation. The relevant
education and experience of each Audit Committee member is as follows:

                                       21
<PAGE>

NAME                    RELEVANT EDUCATION AND EXPERIENCE

T.S. Chambers           Mr. Chambers has been a chartered accountant since 1969.
                        He was an audit partner at PricewaterhouseCoopers LLP
                        from 1976 to 2002 and was the managing parter of
                        PricewaterhouseCoopers LLP's and its predecessor's
                        Canadian audit practice from 1996 to 2001. Mr. Chambers
                        is a member of the Institute of Corporate Directors and
                        was the chair of the British Columbia chapter of that
                        organization from 2002 to 2004. Mr. Chambers is a member
                        of two other audit committees and the chair of one of
                        them.

J.T. Johnstone          Mr. Johnstone is a chartered accountant and has
                        qualified as a certified public accountant, although he
                        no longer actively practices as such. He worked for a
                        public accountant where he oversaw the preparation and
                        audit of financial statements for four years. He has
                        been the chief financial officer of a number of private
                        companies and he is a member of four other audit
                        committees.

H. Kvisle               Mr. Kvisle has an accounting degree from the University
                        of Alberta and received his MBA from the University of
                        Calgary in 1982. He is the Chief Executive Officer of
                        TransCanada Corporation, a Canadian publicly traded
                        company, and in that capacity he supervises the
                        company's financial officers. He also supervised various
                        financial officers while he was president of Fletcher
                        Challenge Energy Canada Inc.

R.K. Purchase           Mr. Purchase holds a Bachelor of Commerce
                        (Administration) from Victoria University of Wellington
                        (New Zealand) and an MBA from Simon Fraser University.
                        He has been the Chief Executive Officer of Timberwest,
                        the managing director of Tasman Pulp & Paper and the
                        Executive Vice President of MacMillan Bloedel Ltd. In
                        those capacities he actively supervised financial
                        officers of the respective companies.

V.Lerstad               Mr. Lerstad holds an MBA from the Norwegian School of
                        Economics and Business Administration. He worked as a
                        controller for Norsk Hydro AS and has been the managing
                        director of two companies where he actively supervised
                        the financial officers of those companies. Mr. Lerstad
                        is the acting chief financial officer of Norske
                        Skogindustrier ASA.

The principal functions of the Audit Committee are:

      (i)   to review all financial information and statutory disclosure
            documents prior to their approval by the Board and their
            distribution to shareholders and other interested persons;

                                       22
<PAGE>

      (ii)  to evaluate systems of internal control and procedures for financial
            reporting;

      (iii) to review and recommend for approval by the Board the terms of
            engagement and remuneration of the external auditor;

      (iv)  to monitor the performance of the external and internal auditors and
            assess the independence thereof; and

      (v)   to recommend to the Board the appointment of investment managers for
            the Corporation's salaried pension plans and to monitor the
            performance of these managers.

The roles and responsibilities of the Audit Committee are contained in its terms
of reference, which are reviewed annually.

The Board, through the Audit Committee, identifies and reviews with management
the principal risks facing the Corporation and ensures that appropriate risk
management systems and internal control systems are implemented. The Audit
Committee is also responsible for the Corporation's financial reporting
processes and the quality of its financial reporting. The Audit Committee is
free to communicate with the Corporation's external and internal auditors at any
time, and the committee meets with the Corporation's internal and external
auditors, without management present, on a regular basis.

Through the Audit Committee the Board has approved policies relating to the
treatment and disclosure of corporate information. Public disclosure about the
Corporation is reviewed by a group that includes the Chief Executive Officer,
Chief Financial Officer, and the legal, investor relations and corporate
controller's departments, and others as required, to ensure timely and accurate
disclosure.

All quarterly and annual financial statements, material press releases, investor
presentations and other corporate materials are posted immediately on the
Corporation's website (www.norskecanada.com). The Corporation provides live
internet and conference call access to interested parties in connection with the
release of its quarterly financial information.

The Audit Committee is responsible for pre-approving all non-audit services to
be performed by the external auditors. The Chair of the Audit Committee is
authorized to pre-approve non-audit services that have a value equal to up to
$100,000. All non-audit services pre-approved by the Chair are presented to the
Committee at its first scheduled meeting following the Chair's pre-approval. In
January, 2005 the Audit Committee approved the engagement of the external
auditors for the period ending January 31, 2006 for the provision of certain tax
related services and miscellaneous accounting advice having an aggregate cost of
$350,000.

During the last two years, we paid the following fees to our external auditors:

<TABLE>
<CAPTION>
                      PERIOD ENDING DECEMBER 31

                        2004            2003
                      --------        ---------
<S>                   <C>             <C>
Audit Fees            $732,200        $709,100

Audit Related Fees     124,500          99,900

Tax Fees                90,900         156,100

All Other Fees               -               -
                      --------        --------

Total                 $947,600        $965,100
                      ========        ========
</TABLE>

                                       23
<PAGE>

The services rendered in connection with "Audit Related Fees" consisted
primarily of the audit of a wholly owned subsidiary, the audit of our pension
plan and other accounting advice. The services rendered in connection with "Tax
Fees" consisted primarily of tax compliance services.

                              CORPORATE GOVERNANCE

Additional information regarding our corporate governance practices, including
the terms of reference for our Board of Directors and our Audit Committee, is
contained in our Management Proxy Circular for our 2005 Annual Meeting. This
document can be found at www.sedar.com.

                                       24
<PAGE>

                             DIRECTORS AND OFFICERS

As of March 21, 2005, the name and municipality of residence of each of the
directors and officers of the Corporation, the office held by each and the
principal occupation of each during the past five years are as follows:

DIRECTORS

<TABLE>
<CAPTION>
 Name and Municipality of
         Residence                                    Occupation Principal                          Director Since
---------------------------      --------------------------------------------------------------   -----------------
<S>                              <C>                                                              <C>
JAN A. OKSUM                     Chairman, President and Chief Executive Officer                  October 24, 2001
Oslo, Norway                     Norske Skogindustrier ASA. Previously, Deputy Chief Executive
                                 Officer and Senior Vice President, Norske Skogindustrier ASA.

WILLIAM P. ROSENFELD             Counsel, Goodmans LLP. Previously, Partner, Goodmans LLP.        October 27, 1993
TORONTO, Ontario

RUSSELL J. HORNER                President and Chief Executive Officer. Previously, President     November 3, 1999
Vancouver, British Columbia      and Chief Operating Officer; Chief Operating Officer,
                                 Australasia, Fletcher Challenge Paper Division, Fletcher
                                 Challenge Limited.

THOMAS S. CHAMBERS               President, Senior Partner Services Ltd. Previously, Partner,     October 30, 2003
Vancouver, British Columbia      PricewaterhouseCoopers.

JARLE DRAGVIK                    Senior Vice President, Production, Norske Skogindustrier ASA.    February 1, 2005
Vollen, Norway                   Previously, Senior Vice President, Sales and Marketing and
                                 Mill Manager, Norske Skog Bruck, at Norske Skogindustrier ASA.

J. TREVOR JOHNSTONE              Managing director, Tricor Pacific Capital Inc., a private        August 27, 2001
West Vancouver, British          equity firm.
Columbia

HAROLD N. KVISLE                 President and Chief Executive Officer, TransCanada               November 28, 1997
Calgary, Alberta                 Corporation. Previously, Executive Vice President, Trading
                                 and Business Development, Senior Vice Presient, Trading and
                                 Business Development and Senior Vice President, Energy
                                 Operations, TransCanada Pipelines Limited.

VIDAR LERSTAD                    Senior Vice-President, Corporate Strategy, Norske                April 27, 2004
Billingstad, Norway              Skogindustrier ASA. Previously, Executive Vice-President,
                                 South America, Senior Vice-President, Asian Activities and
                                 Senior Vice-President, International, Norske Skogindustrier
                                 ASA.

R. KEITH PURCHASE                Corporate director and Advisor. Previously, Executive Vice       August 27, 2001
West Vancouver, British          President and Chief Operating Officer, MacMillan Bloedel
Columbia                         Limited, an integrated forest products company.
</TABLE>

                                       25
<PAGE>

OFFICERS

<TABLE>
<CAPTION>
Name and Municipality of Residence                                     Principal Occupation
----------------------------------          --------------------------------------------------------------------------
<S>                                         <C>
JAN A. OKSUM                                Chairman, President and Chief Executive Officer Norske Skogindustrier
Oslo, Norway                                ASA. Previously, Deputy Chief Executive Officer and Senior Vice
                                            President, Norske Skogindustrier ASA.

WILLIAM P. ROSENFELD                        Deputy Chairman.
Toronto, Ontario                            Counsel, Goodmans LLP. Previously, Partner, Goodmans LLP.

RUSSELL J. HORNER                           President and Chief Executive Officer. Previously, President and Chief
Vancouver, British Columbia                 Operating Officer; Chief Operating Officer, Australasia, Fletcher
                                            Challenge Paper Division, Fletcher Challenge Limited.

JAMES E. ARMITAGE                           Senior Vice-President, Sales and Marketing. Previously, Senior
Vancouver, British Columbia                 Vice-President, Newsprint; Vice-President, Worldwide Newsprint Sales.

JESSE M. BEAMAN                             Senior Vice-President, Operations. Previously, Vice-President, Crofton
Surrey, British Columbia                    Pulp and Paper; Manager, Crofton Paper. Previously, Vice-President,
                                            Eastern Operations, Building Materials; Vice-President, Business
                                            Transformation, Printing Papers; and General Manager, Alberni
                                            Specialties, MacMillan Bloedel Limited.

W.R. (RON) BUCHHORN                         Vice-President, Corporate Services. Previously, Vice-President, Human
West Vancouver, British Columbia            Resources. Previously, Consultant and Vice-President Compensation and
                                            Rehabilitation Services, Workers' Compensation Board of British Columbia.

STUART H. CLUGSTON                          Vice-President, Corporate Affairs and Social Responsibility. Previously,
Vancouver, British Columbia                 Director, Communication Management.

RALPH LEVERTON                              Vice-President, Finance and Chief Financial Officer. Previously, Chief
Surrey, British Columbia                    Financial Officer, Secretary and Treasurer; Consultant; President and
                                            Chief Operating Officer, Harmac Pacific Inc.; Vice-President, Finance,
                                            Chief Financial Officer and Secretary, Harmac Pacific Inc.

ROBERT H. LINDSTROM                         Vice-President, Strategy. Previously, Vice-President, Supply and
Burnaby, British Columbia                   Utilities, Pulp Operations; Director, Strategic Planning, Pulp Operations.

VALERIE B. SEAGER                           Corporate Secretary and Legal Counsel. Previously, Vice President and
Vancouver, British Columbia                 General Counsel, Norigen Communications Inc.; Partner, Heenan Blaikie

PETER M. STAIGER                            Treasurer. Previously, Controller Treasurer; Corporate Controller; and
Vancouver, British Columbia                 Manager, Corporate Reporting.
</TABLE>

Our directors and officers as a group beneficially own, directly or indirectly,
or exercise control or direction over, less than 1% of our issued and
outstanding Common Shares.

                             ADDITIONAL INFORMATION

Additional financial information is provided in the Corporation's Management's
Discussion and Analysis of Financial Condition and Results of Operation and
Consolidated Financial Statements for the year ended December 31, 2004, both of
which are incorporated by reference herein.

Further information relating to the Corporation may be found on SEDAR at
www.sedar.com, including the Management Proxy Circular for the Corporation's
2005 Annual Meeting, which contains additional information regarding directors'
and officers' remuneration, principal holders of our securities, and securities
authorized for issuance under equity compensation plans.

                                       26
<PAGE>

In addition, we will provide to any person, upon request to the Corporate
Secretary:

(a)   when our securities are in the course of a distribution pursuant to a
      short form prospectus or a preliminary short form prospectus which has
      been filed in respect of a distribution of our securities:

      (i)   one copy of our Annual Information Form, together with one copy of
            any document, or the pertinent pages of any document, incorporated
            by reference in the Annual Information Form;

      (ii)  one copy of our comparative financial statements for our most
            recently completed fiscal year together with the accompanying report
            of the auditor and one copy of any of our interim financial
            statements subsequent to the financial statements for our most
            recently completed fiscal year;

      (iii) one copy of our Information Circular in respect of our most recent
            annual meeting of shareholders that involved the election of
            directors; and

      (iv)  one copy of any other documents that are incorporated by reference
            into the preliminary short form prospectus or the short form
            prospectus and are not required to be provided under (i) to (iii)
            above; or

(b)   at any other time, one copy of any other documents referred to in (a) (i),
      (ii) and (iii) above, provided we may require the payment of a reasonable
      charge if the request is made by a person who is not a holder of our
      securities.

                                       27
<PAGE>

                        SUMMARY OF FINANCIAL INFORMATION

ANNUAL INFORMATION

<TABLE>
<CAPTION>
                                                                  Year Ended December 31
                                                       -------------------------------------------
                                                        2004              2003               2002
                                                       ------            -------           -------
                                                                  (millions of dollars)
<S>                                                    <C>               <C>               <C>
Sales                                                  1,878             $1,821            $1,704
Operating Earnings (Loss)                                (31)              (112)             (122)
Net Earnings (Loss)                                      (29)               (85)             (123)
Total Assets                                           2,746              2,816             2,897
Long Term Debt (Net of Current Portion)                  824                846               886
Other Long-Term Debt Obligations                         234                250               177
                                                       (dollars per weighted average common share)
Net Earnings (Loss)                                    (0.13)             (0.41)            (0.64)
Dividends Declared                                         -                  -                 -
Dividends Paid                                             -                  -                 -
</TABLE>

QUARTERLY INFORMATION

<TABLE>
<CAPTION>



                                                                 Year Ended December 31, 2004
                                                       ---------------------------------------------
                                                         Q1            Q2          Q3           Q4
                                                       ------        ------       -----       ------
                                                                   (millions of dollars)
<S>                                                    <C>        <C>             <C>         <C>
Sales                                                    454           480          467         477
Net Earnings (Loss)                                      (47)          (24)          28          14
                                                        (dollars per weighted average common share)
Net Earnings (Loss)                                    (0.22)        (0.11)        0.13        0.06
Dividends Declared                                         -             -            -           -
                                                                     (dollars)
Price Range Per Share          High                     4.95          4.78         4.69        4.20
(The Toronto Stock Exchange)    Low                     3.85          3.90         3.72        3.30

                                                                 Year Ended December 31, 2003
                                                       ---------------------------------------------
                                                         Q1            Q2           Q3          Q4
                                                       ------        ------       -----       ------
                                                                   (millions of dollars)
Sales                                                    446           440          474         461
Net Earnings (Loss)                                      (25)          (19)         (28)        (13)
                                                        (dollars per weighted average common share)
Net Earnings (Loss)                                    (0.12)        (0.09)       (0.14)      (0.06)
Dividends Declared                                         -             -            -           -
                                                                     (dollars)
Price Range Per Share          High                     6.06          4.19         4.20        4.35
(The Toronto Stock Exchange)    Low                     3.90          3.00         3.31        2.93

                                                                 Year Ended December 31, 2002
                                                       ---------------------------------------------
                                                         Q1            Q2           Q3          Q4
                                                       ------        ------       -----       ------
                                                                   (millions of dollars)
Sales                                                    371           413          451         469
Net Earnings (Loss)                                      (42)          (24)         (20)        (37)
                                                        (dollars per weighted average common share)
Net Earnings (Loss)                                    (0.24)        (0.13)       (0.10)      (0.18)
Dividends Declared                                                       -            -           -
                                                           -
                                                                     (dollars)
Price Range Per Share          High                     7.70          7.45         7.50        5.80
(The Toronto Stock Exchange)    Low                     6.70          6.00         5.06        4.65
</TABLE>

Further discussion of our financial results is contained within the Management's
Discussion and Analysis section of the Annual Report for the year ended December
31, 2004.

                                       28