============================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[ X ]         QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

                                       OR

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

                FOR THE TRANSITION PERIOD FROM     TO
                                               ---    ---

                         COMMISSION FILE NO.: 000-09409

                            MERCER INTERNATIONAL INC.
             (Exact name of Registrant as specified in its charter)

         WASHINGTON                             91-6087550
(State or other jurisdiction                 (I.R.S.  Employer
of incorporation or organization)           Identification  No.)

          14900 INTERURBAN AVENUE SOUTH, SUITE 282, SEATTLE, WA  98168
                               (Address of office)

                                 (206) 674-4639
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the Registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.   YES  X      NO
                                              ---        ---

Indicate  by  check  mark  whether  the  Registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act).  YES  X      NO
                                                        ---        ---

The  Registrant  had  17,099,899 shares of beneficial interest outstanding as at
November  13,  2003.


================================================================================

<PAGE>

                         PART I.  FINANCIAL INFORMATION
                                  ---------------------

ITEM  1.     FINANCIAL  STATEMENTS




                            MERCER INTERNATIONAL INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003

                                  (UNAUDITED)


FORM 10-Q
QUARTERLY REPORT - PAGE 2


<PAGE>

                            MERCER INTERNATIONAL INC.
                           CONSOLIDATED BALANCE SHEETS
                 As at September 30, 2003 and December 31, 2002
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                               SEPTEMBER 30,  DECEMBER 31,
                                                   2003           2002
                                               -------------  ------------
                              ASSETS
<S>                                            <C>            <C>
Current Assets
 Cash and cash equivalents                     E      17,554  E     30,261
 Cash restricted                                       8,444         9,459
 Investments                                             511           307
 Receivables                                          35,744        28,132
 Cumulative unrealized gains on derivatives           20,407         3,792
 Inventories                                          22,929        16,375
 Prepaids and other                                    8,729         7,891
                                               -------------  ------------
   Total current assets                              114,318        96,217

Long-Term Assets
 Cash restricted                                      40,296        38,795
 Properties                                          649,780       441,990
 Investments                                           7,435         5,592
 Equity method investment                              6,886         7,019
 Deferred income taxes                                10,043        10,137
                                               -------------  ------------
                                                     714,440       503,533
                                               -------------  ------------
                                               E     828,758  E    599,750
                                               =============  ============

                             LIABILITIES
Current Liabilities
 Accounts payable and accrued expenses         E      44,971  E     32,866
 Construction in progress costs payable               57,771        24,885
 Note payable                                          1,609           832
 Note payable, construction in progress               45,000        15,000
 Debt, current portion                                23,016        16,306
                                               -------------  ------------
   Total current liabilities                         172,367        89,889

Long-Term Liabilities
 Debt, construction in progress, less current
   portion                                           287,386       146,485
 Debt, less current portion                          188,740       205,393
 Derivative financial instruments, construction
   in progress                                        52,633        30,108
 Other                                                 1,649         2,906
                                               -------------  ------------
                                                     530,408       384,892
                                               -------------  ------------
   Total liabilities                                 702,775       474,781

Minority Interest                                          -             -

                           SHAREHOLDERS' EQUITY
Shares of beneficial interest                         78,139        76,995
Additional paid-in capital, stock options                208             -
Accumulated other comprehensive income (loss)          4,020        (4,815)
Retained earnings                                     43,616        52,789
                                               -------------  ------------
                                                     125,983       124,969
                                               -------------  ------------
                                               E     828,758  E    599,750
                                               =============  ============

</TABLE>


   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 3

<PAGE>

                            MERCER INTERNATIONAL INC.

           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                For Nine Months Ended September 30, 2003 and 2002
                                   (Unaudited)
               (Euros in thousands, except for earnings per share)

<TABLE>
<CAPTION>

                                                  2003           2002
                                               ----------     ----------
<S>                                            <C>            <C>
Revenues
 Sales of pulp and paper                       E  134,935     E  174,289
 Transportation                                     2,850          3,885
 Other                                              6,351          4,868
                                               ----------     ----------
                                                  144,136        183,042
Cost of sales
 Pulp and paper                                   131,838        152,270
 Transportation                                     2,388          3,747
                                               ----------     ----------
   Gross profit                                     9,910         27,025
General, administrative and other                  12,961         20,400
                                               ----------     ----------
   (Loss) income from operations                   (3,051)         6,625
                                               ----------     ----------

Other income (expense)
 Interest expense                                  (6,887)       (10,838)
 Investment income (loss)                           1,055           (300)
 Gain on derivative contracts                      18,335         10,855
 Loss on derivative contracts, interest rate
   swaps, construction in progress                (22,525)       (22,011)
 Gain on derivative contract, currency forward,
   construction in progress                           586              -
 Settlement expense                                  (630)             -
 Impairment of available-for-sale securities       (5,511)             -
 Other                                              1,182            223
                                               ----------     ----------
   Total other expense                            (14,395)       (22,071)
                                               ----------     ----------
   Loss before income taxes                       (17,446)       (15,446)
Income taxes                                          226             11
                                               ----------     ----------
   Loss before minority interest                  (17,672)       (15,457)
Minority interest                                   8,499          8,016
                                               ----------     ----------
   Net loss                                        (9,173)        (7,441)

Retained earnings, beginning of period             52,789         59,111
                                               ----------     ----------
Retained earnings, end of period               E   43,616     E   51,670
                                               ==========     ==========

Loss per share
 Basic                                         E    (0.54)    E    (0.44)
                                               ==========     ==========
 Diluted                                       E    (0.54)    E    (0.44)
                                               ==========     ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 4

<PAGE>

                            MERCER INTERNATIONAL INC.

           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
               For Three Months Ended September 30, 2003 and 2002
                                   (Unaudited)
               (Euros in thousands, except for earnings per share)

<TABLE>
<CAPTION>

                                                  2003           2002
                                               ----------     ----------
<S>                                            <C>            <C>
Revenues
 Sales of pulp and paper                       E   43,661     E   54,754
 Transportation                                       828          1,132
 Other                                              1,333          1,019
                                               ----------     ----------
                                                   45,822         56,905
Cost of sales
 Pulp and paper                                    45,366         47,667
 Transportation                                       525          1,269
                                               ----------     ----------
   Gross profit                                       (69)         7,969
General, administrative and other                   4,231          6,004
                                               ----------     ----------
   (Loss) income from operations                   (4,300)         1,965
                                               ----------     ----------

Other income (expense)
 Interest expense                                  (2,236)        (2,739)
 Investment income                                    416            367
 Gain (loss) on derivative contracts                3,734         (4,026)
 Gain (loss) on derivative contracts, interest
   rate swaps, construction in progress             5,419        (22,011)
 Gain on derivative contract, currency forward,
   construction in progress                           586              -
 Settlement expense                                  (630)             -
 Other                                               (205)        (2,169)
                                               ----------     ----------
   Total other income (expense)                     7,084        (30,578)
                                               ----------     ----------
   Income (loss) before income taxes                2,784        (28,613)
Income taxes                                           28              -
                                               ----------     ----------
   Income (loss) before minority interest           2,756        (28,613)
Minority interest                                  (1,880)         8,016
                                               ----------     ----------
   Net income (loss)                                  876        (20,597)

Retained earnings, beginning of period             42,740         72,267
                                               ----------     ----------
Retained earnings, end of period               E   43,616     E   51,670
                                               ==========     ==========

Income (loss) per share
 Basic                                         E     0.05     E    (1.23)
                                               ==========     ==========
 Diluted                                       E     0.05     E    (1.23)
                                               ==========     ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 5

<PAGE>

                            MERCER INTERNATIONAL INC.

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                For Nine Months Ended September 30, 2003 and 2002
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                  2003           2002
                                               ----------     ----------
<S>                                            <C>            <C>
Net loss                                       E   (9,173)    E   (7,441)
                                               ----------     ----------

Other comprehensive income:
 Foreign currency translation adjustments           1,240          3,894
 Unrealized gain (loss) on securities
   Unrealized holding gain (loss) arising
      during the period                             2,084         (2,935)
   Adjustment for other than temporary
      decline in value                              5,511              -
                                               ----------     ----------
                                                    7,595         (2,935)
                                               ----------     ----------

 Other comprehensive income                         8,835            959
                                               ----------     ----------

Total comprehensive loss                       E     (338)    E   (6,482)
                                               ==========     ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 6

<PAGE>
                            MERCER INTERNATIONAL INC.

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
               For Three Months Ended September 30, 2003 and 2002
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                  2003           2002
                                               ----------     ----------
<S>                                            <C>            <C>
Net income (loss)                              E      876     E  (20,597)
                                               ----------     ----------

Other comprehensive income (loss):
 Foreign currency translation adjustments             115            381
 Unrealized gain (loss) on securities               2,345         (1,646)
                                               ----------     ----------

 Other comprehensive income (loss)                  2,460         (1,265)
                                               ----------     ----------

Total comprehensive income (loss)              E    3,336     E  (21,862)
                                               ==========     ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.

FORM 10-Q
QUARTERLY REPORT - PAGE 7

<PAGE>

                            MERCER INTERNATIONAL INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                For Nine Months Ended September 30, 2003 and 2002
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                  2003           2002
                                               ----------     ----------
<S>                                            <C>            <C>
Cash Flows from Operating Activities:
 Net loss                                      E   (9,173)    E   (7,441)
 Adjustments to reconcile net loss to cash
  flows from operating activities
   Unrealized loss on derivative financial
     instruments, construction in progress, net    21,939         22,011
   Depreciation and amortization                   18,135         20,231
   Impairment of securities                         5,511              -
   Minority interest                               (8,499)        (8,016)
   Loss from an equity investee                       912              -
   Stock compensation expense                         432              -

 Changes in current assets and liabilities
   Investments                                       (166)         4,004
   Inventories                                     (6,554)          (675)
   Receivables                                     (8,138)         5,556
   Cumulative unrealized gains on derivatives     (18,333)            67
   Accounts payable and accrued expenses           11,516        (12,363)
   Other                                             (651)           651
                                               ----------     ----------
    Net cash provided by operating activities       6,931         24,025

Cash Flows from Investing Activities:
 Purchase of properties, net of investment
   grants received                               (226,240)      (156,526)
 Sale of properties                                     -          3,513
 Purchase of long-term investments                      -         (3,000)
 Sale of long-term investments                        296            966
 Other                                                 48              -
                                               ----------     ----------
    Net cash used in investing activities        (225,896)      (155,047)

Cash Flows from Financing Activities:
 Cash restricted                                     (486)       (29,261)
 Increase in construction in progress costs
   payable                                         34,362         51,826
 Increase in notes payable and debt               186,859        107,053
 Decrease in notes payable and debt               (15,444)       (17,570)
 Equity and loans from minority shareholders            -         30,615
 Issuance of shares of beneficial interest            913              -
                                               ----------     ----------
    Net cash provided by financing activities     206,204        142,663

Effect of exchange rate changes on cash and
   cash equivalents                                    54           (446)
                                               ----------     ----------
Net (decrease) increase in cash and cash
   equivalents                                    (12,707)        11,195
Cash and cash equivalents, beginning of period     30,261         11,741
                                               ----------     ----------
Cash and cash equivalents, end of period       E   17,554     E   22,936
                                               ==========     ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 8

<PAGE>

                            MERCER INTERNATIONAL INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR NINE MONTHS ENDED SEPTEMBER 30, 2003
                                   (Unaudited)

NOTE  1.     Basis  of  Presentation

The  interim  period  consolidated financial statements contained herein include
the  accounts  of  Mercer  International  Inc.  and  its  wholly-owned  and
majority-owned  subsidiaries  (the  "Company").

The  interim  period consolidated financial statements have been prepared by the
Company  pursuant  to  the  rules  and  regulations  of  the U.S. Securities and
Exchange  Commission  (the  "SEC").  Certain information and footnote disclosure
normally included in financial statements prepared in accordance with accounting
principles  generally  accepted  in  the  United  States  have been condensed or
omitted  pursuant  to  such  SEC  rules  and  regulations.  The  interim  period
consolidated  financial  statements  should  be  read  together with the audited
consolidated  financial  statements  and  accompanying  notes  included  in  the
Company's  latest  annual report on Form 10-K for the fiscal year ended December
31,  2002.  In  the opinion of the Company, the unaudited consolidated financial
statements  contained herein contain all adjustments necessary to present a fair
statement  of the results of the interim periods presented.  The results for the
periods  presented  herein  may  not be indicative of the results for the entire
year.

NOTE  2.     Stock-Based  Compensation

The  Company  has  a  stock-based employee compensation plan, which is described
more  fully  in  the  Company's  annual  report  on Form 10-K for the year ended
December  31, 2002.  The Company accounts for the plan under the recognition and
measurement  principles  of  APB  Opinion No. 25, Accounting for Stock Issued to
Employees,  and  related  interpretations.

On  September  10,  2003,  the  Company  granted  stock options to acquire up to
100,000  shares  of beneficial interest of the Company to David M. Gandossi, the
Chief  Financial  Officer  and  Secretary  of the Company, with a ten year term,
exercisable  at  a price of $5.65 per share, pursuant to an employment agreement
between  the  Company  and Mr. Gandossi dated August 7, 2003.  The stock options
were  in-the-money at the date of grant and, accordingly, the intrinsic value of
the  stock  options  was  recognized  as  a  stock-based compensation expense in
accordance  with  APB  Opinion  No.  25  and included in the consolidated income
statements.

The  following  tables  illustrate  the  effect  on net income (loss) and income
(loss)  per  share  if  the  Company  had  applied  the  fair  value recognition
provisions  of  Statement  of Financial Accounting Standards No. 123, Accounting
for  Stock-Based  Compensation,  to  stock-based  employee  compensation:

FORM 10-Q
QUARTERLY REPORT - PAGE 9


<PAGE>

<TABLE>
<CAPTION>

                                                  Nine Months Ended September 30,
                                                  -------------------------------
                                                     2003                 2002
                                                  ----------           ----------
                                                    (Euros in thousands, except
                                                         per share amounts)
<S>                                               <C>                  <C>
Net Loss
 As reported                                      E   (9,173)          E   (7,441)
 Deduct: Total stock-based employee compensation
    expense determined under fair value based
    methods for all awards, net of any related
    tax effects                                          (13)                  (6)
 Add: Reversal of stock-based compensation
    expense recognized under APB Opinion No. 25           14                    -
                                                  ----------           ----------
 Pro forma                                        E   (9,172)          E   (7,447)
                                                  ==========           ==========
Basic Loss Per Share
 As reported                                      E    (0.54)          E    (0.44)
                                                  ==========           ==========
 Pro forma                                        E    (0.54)          E    (0.44)
                                                  ==========           ==========
Diluted Loss Per Share
 As reported                                      E    (0.54)          E    (0.44)
                                                  ==========           ==========
 Pro forma                                        E    (0.54)          E    (0.44)
                                                  ==========           ==========

</TABLE>


<TABLE>
<CAPTION>

                                                  Three Months Ended September 30,
                                                  -------------------------------
                                                     2003                 2002
                                                  ----------           ----------
                                                    (Euros in thousands, except
                                                         per share amounts)
<S>                                               <C>                  <C>
Net Income (Loss)
 As reported                                      E      876           E  (20,597)
 Deduct: Total stock-based employee compensation
    expense determined under fair value based
    methods for all awards, net of any related
    tax effects                                           (5)                  (2)
 Add: Reversal of stock-based compensation
    expense recognized under APB Opinion No. 25           14                    -
                                                  ----------           ----------
 Pro forma                                        E      885           E  (20,599)
                                                  ==========           ==========
Basic Income (Loss) Per Share
 As reported                                      E     0.05           E    (1.23)
                                                  ==========           ==========
 Pro forma                                        E     0.05           E    (1.23)
                                                  ==========           ==========
Diluted Income (Loss) Per Share
 As reported                                      E     0.05           E    (1.23)
                                                  ==========           ==========
 Pro forma                                        E     0.05           E    (1.23)
                                                  ==========           ==========

</TABLE>

NOTE  3.     Earnings  Per  Share

Basic  earnings  per  share  is  computed by dividing income available to common
shareholders  by  the  weighted  average  number  of shares outstanding during a
period.  Diluted  earnings per share takes into consideration shares outstanding
(computed  under  basic earnings per share) and potentially dilutive shares. The
following  table sets out the weighted average number of shares for the purposes
of  calculating  basic  and diluted earnings per share for the nine months ended
September  30,  2003  and  2002:

<TABLE>
<CAPTION>

                     Nine Months Ended September 30,
                     -------------------------------
                        2003                 2002
                     ----------           ----------
<S>                  <C>                  <C>
Basic                16,887,262           16,794,899
Diluted              16,887,262           16,794,899

</TABLE>


FORM 10-Q
QUARTERLY REPORT - PAGE 10


<PAGE>

The  following  table  sets  out  the  weighted average number of shares for the
purposes  of  calculating  basic  and  diluted  earnings per share for the three
months  ended  September  30,  2003  and  2002:

<TABLE>
<CAPTION>

                   Three Months Ended September 30,
                   --------------------------------
                       2003                 2002
                   -----------           ----------
<S>                <C>                   <C>
Basic              16,911,584            16,794,899
Diluted            16,942,973            16,794,899

</TABLE>

For the nine months ended September 30, 2003 and 2002 and the three months ended
September 30, 2002, warrants and options were not included in the computation of
diluted  earnings  per  share  because  they  were  anti-dilutive.

NOTE  4.     Stendal  Pulp  Mill  Project

In  August  2002,  the  Company completed financing arrangements for the design,
development,  financing, construction and operation of a "greenfield" project to
construct  and  operate  a  552,000-tonne softwood kraft pulp mill to be located
near  Stendal,  Germany  (the  "Stendal Project").  The Stendal Project is being
implemented  through  Zellstoff Stendal GmbH ("Stendal"), an approximately 63.6%
owned  subsidiary  of  the Company.  Two minority shareholders own approximately
29.4% and 7%, respectively, of the project company.  Accordingly, the results of
the  subsidiary  are  consolidated  into  the  results  of  the Company.  Mercer
currently  capitalizes  the  majority  of  the  expenses and all of the interest
related  to the Stendal Project as it is classified as construction in progress.
The  construction  costs of the Stendal Project will commence to depreciate when
the  Stendal  Project  is  completed  and  commences  its commercial production.
Minority interests on the balance sheet represent the share capital contribution
from the minority shareholders, adjusted for their proportionate share of income
and  loss.

NOTE  5.     Landqart  AG

The  Company  acquired  all  of  the  shares  of Landqart AG ("Landqart"), which
operates  a  specialty  paper mill in Graubunden, Switzerland, in December 2001.
The  results  of  Landqart  were consolidated into the results of the Company in
2002.  The  Company  reorganized  its  interest  in Landqart in December 2002 by
selling  a  20% interest to a Swiss bank and exchanging the remaining 80% for an
indirect  39%  minority  interest  through  a  limited partnership on a non-cash
basis.  As of December 31, 2002, the Company's interest in Landqart is no longer
consolidated  and is included in the Company's results on an equity basis within
other  income  (expense).

NOTE  6.     Transactions  with  Related  or  Certain  Other  Parties

A  trustee  and  former  Chief  Financial  Officer of the Company, became a Vice
President  of  MFC  Bancorp  Ltd.  ("MFC")  in August 2003.  As a result, MFC is
considered to be a related party.  Prior to June 1996, MFC was the Company's 92%
owned  subsidiary.  In  June  1996, the Company distributed shares of MFC to its
shareholders by way of a special dividend-in-kind and spun off approximately 83%
of  the  issued shares of MFC.  Prior to the spin off, MFC provided and arranged
for  the  majority  of the Company's financial requirements.  From time to time,
the  Company  and  MFC  (and  its  affiliates)  enter  into certain arm's length
transactions.

As  at  September  30,  2003:

i.   The Company owes MFC and its affiliates E37.2 million (including principal,
     fees  and  accrued  interest)  with  respect to a bridge loan arranged by a
     Swiss  banking  subsidiary  of


FORM 10-Q
QUARTERLY REPORT - PAGE 11


<PAGE>

     MFC  (of  which the Company's Chairman, Chief Executive Officer ("CEO") and
     trustee is currently a non-executive director) as part of the financing for
     the  Stendal  Project. Subsequent to September 30, 2003, the Company repaid
     this  bridge  loan  in  full with proceeds from its offering of convertible
     senior  subordinated  notes  (see  Note  10);

ii.  The  Company  owes MFC E7.7 million bearing interest at 6%, due April 2004,
     unsecured;

iii. The  Company  has  a  current  trade  receivable  of  E1.3  million  from a
     subsidiary  of  MFC in connection with certain pulp sales made under normal
     market  terms;

iv.  The  Company  indirectly  holds approximately 575,683 common shares of MFC,
     representing  approximately  4.4%  of the outstanding common shares of MFC;
     and

v.   The  Company  has a loan receivable from a director of MFC in the amount of
     E0.2  million.

In  December  2002,  the  Company  contributed its 80% interest in Landqart to a
limited  partnership for a 49% interest therein (see Note 5).  The other limited
partner  of  the  limited  partnership  is MFC and the general partner is wholly
owned  by  Cade Struktur Corporation ("CSC"), a Canadian public company in which
the  Company owns an approximate 26% interest and MFC owns 25% of the issued and
outstanding  shares.  The  Company's  CEO  previously  served  as a director and
officer  of  CSC,  although  at  the  time  of  the Landqart reorganization, the
Company's  CEO  was  neither an officer nor a director of CSC.  MFC assists with
purchases  and  sales for Landqart.  In addition, from time to time, MFC assists
with  supplier  arrangements  for  Landqart.

NOTE  7.     New  Accounting  Standards

In  April  2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standard  ("SFAS")  No.  149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities.  SFAS 149 amends
and  clarifies  financial  accounting  and reporting for derivative instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities  under  SFAS  133, Accounting for Derivative Instruments and
Hedging  Activities.  This  Statement is effective for contracts entered into or
modified  after  June  30,  2003, and for hedging relationships designated after
June  30,  2003. In addition, all provisions of this Statement should be applied
prospectively.  The  Company does not anticipate that this Statement will have a
material  impact  on  the  Company's  financial  statements.

In  May 2003, FASB issued SFAS 150, Accounting for Certain Financial Instruments
with  Characteristics  of  both  Liabilities  and  Equity.  SFAS 150 establishes
standards  for  how  an  issuer  classifies  and  measures  certain  financial
instruments with characteristics of both liabilities and equity.  This Statement
is  effective  for  financial instruments entered into or modified after May 31,
2003,  and  otherwise  is effective at the beginning of the first interim period
beginning after June 15, 2003.  This Statement did not have a material impact on
the  Company's  financial  statements.

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), Consolidation
of  Variable  Interest  Entities,  an  Interpretation  of  ARB  No. 51.   FIN 46
requires  certain  variable  interest entities to be consolidated by the primary
beneficiary  of the entity if the equity investors in the entity do not have the
characteristics  of  a  controlling financial interest or do not have sufficient
equity  at  risk  for  the  entity  to finance its activities without additional
subordinated  financial support from other parties.  FIN 46 is effective for all
new  variable interest entities created or acquired after January 31, 2003.  For
variable  interest  entities  created or acquired prior to February 1, 2003, the
provisions  of


FORM 10-Q
QUARTERLY REPORT - PAGE 12


<PAGE>

FIN  46  must  be applied for the first interim or annual period beginning after
June  15, 2003. The Company does not anticipate that the adoption of FIN 46 will
have  a  material impact on the results of operations and financial condition of
the  Company.

NOTE  8.     Business  Segment  Information

The  Company  operates  in two reportable business segments: pulp and paper. The
segments  are  managed  separately  because  each  business  requires  different
production  and  marketing  strategies.

Summarized  financial  information  concerning  the  segments  is  shown  in the
following  table:

<TABLE>
<CAPTION>

                                                   PULP      PAPER      TOTAL
                                                 --------  ---------  ---------
                                                     (Euros in thousands)
Nine Months Ended September 30, 2003
------------------------------------
<S>                                              <C>       <C>        <C>
Sales to external customers                      E 92,418  E  42,517  E 134,935
Intersegment net sales                              2,178          -      2,178
Income (loss) from operations                        (650)       622        (28)
Segment profit                                      9,155      1,254     10,409

Reconciliation of profit:
 Total profit for reportable segments                                 E  10,409
 Elimination of intersegment profits                                      4,086
 Loss on derivative financial instruments,
   construction in progress financing, net                              (21,939)
 Impairment of available-for-sale securities                             (5,511)
 Unallocated amounts, other corporate expenses                           (4,491)
                                                                      ---------

   Consolidated loss before income taxes and
      minority interest                                               E (17,446)
                                                                      =========
The total assets for the Stendal pulp mill under
construction were E455,253 thousand and E223,386
thousand as at September 30, 2003 and December 31,
2002, respectively.

Nine Months Ended September 30, 2002
------------------------------------
Sales to external customers                      E 98,962  E  75,327  E 174,289
Intersegment net sales                              3,919          -      3,919
Income from operations                              8,047      1,341      9,388
Segment profit                                     10,659        133     10,792

Reconciliation of profit:
 Total profit for reportable segments                                 E  10,792
 Elimination of intersegment profits                                      1,295
 Loss on derivative financial instruments,
   construction in progress financing                                   (22,011)
 Unallocated amounts, other corporate expenses                           (5,522)
                                                                      ---------
   Consolidated loss before income taxes and
      minority interest                                               E (15,446)
                                                                      =========

</TABLE>


FORM 10-Q
QUARTERLY REPORT - PAGE 13


<PAGE>

<TABLE>
<CAPTION>

                                                   PULP      PAPER      TOTAL
                                                 --------  ---------  ---------
                                                     (Euros in thousands)
Three Months Ended September 30, 2003
-------------------------------------
<S>                                              <C>       <C>        <C>
Sales to external customers                      E 30,004  E  13,657   E 43,661
Intersegment net sales                                633          -        633
Loss from operations                               (1,821)      (681)    (2,502)
Segment loss                                       (1,397)    (1,550)    (2,947)

Reconciliation of loss:
 Total loss for reportable segments                                    E (2,947)
 Elimination of intersegment profits                                        934
 Gain on derivative financial instruments,
    construction in progress financing, net                               6,005
 Unallocated amounts, other corporate expenses                           (1,208)
                                                                       --------

   Consolidated income before income taxes and
      minority interest                                                E  2,784
                                                                       ========

</TABLE>

<TABLE>
<CAPTION>

Three Months Ended September 30, 2002
-------------------------------------
<S>                                              <C>       <C>        <C>
Sales to external customers                      E 30,878  E  23,876  E  54,754
Intersegment net sales                                994          -        994
Income from operations                              2,473         11      2,484
Segment loss                                       (2,380)    (3,243)    (5,623)

Reconciliation of loss:
 Total loss for reportable segments                                   E  (5,623)
 Elimination of intersegment profits                                        462
 Loss on derivative financial instruments,
    construction in progress financing                                  (22,011)
 Unallocated amounts, other corporate expenses                           (1,441)
                                                                      ---------

   Consolidated loss before income taxes and
      minority interest                                               E (28,613)
                                                                      =========

</TABLE>

NOTE  9.     Settlement  Expense

On  August  5,  2003,  the  Company,  Greenlight  Capital, L.L.C. and Greenlight
Capital,  Inc.  (collectively, "Greenlight") entered into a settlement agreement
pursuant  to  which,  among  other  things: (i) Greenlight agreed to terminate a
proxy  solicitation  which  it had commenced; (ii) the Company issued options to
acquire  an  aggregate  of  up  to  375,000 shares of beneficial interest of the
Company exercisable at a price of $4.53 per share expiring between September 22,
2003 and June 20, 2004, of which options to acquire 225,000 shares of beneficial
interest  were exercised on September 16, 2003; and (iii) the Company reimbursed
Greenlight $250,000 for a portion of its costs and expenses of the solicitation.
The  Company  used  the Black-Scholes model to determine the fair value of these
options.  The Company recognized expenses aggregating approximately E0.6 million
in  connection  with  the  settlement  in the nine month and three month periods
ended  September  30,  2003.


FORM 10-Q
QUARTERLY REPORT - PAGE 14


<PAGE>

NOTE  10.     Subsequent  Events

On  October  10,  2003,  the  Company  completed  the  sale  of $82.5 million in
aggregate  principal amount of convertible senior subordinated notes due October
15,  2010.  The  notes  bear  interest  at  a  rate  of  8.5%  per annum and are
convertible  into  the  Company's  shares of beneficial interest at a conversion
price  of  $7.75  per  share.  The  notes  were  offered  only  to  qualified
institutional  buyers  in reliance on Rule 144A and to certain buyers outside of
the  United States in reliance on Regulation S under the Securities Act of 1933,
as  amended.  The  net proceeds from the offering of approximately E76.1 million
were  used  to  repay  in  full  the  Company's indebtedness, including fees and
accrued  interest,  under  two  bridge loan facilities aggregating approximately
E65.9 million  and  the  balance  will  be  used for general corporate purposes,
including  working  capital.

NOTE  11.     Accounts  Payable  And  Accrued  Expenses

<TABLE>
<CAPTION>

                                              As at               As at
                                        September 30, 2003   December 31,2002
                                       --------------------  ----------------
                                                  (Euros in thousands)
<S>                                    <C>                   <C>
Trade payables                             E   15,188            E  13,691
Derivative transactions                         1,524                2,303
Break up fee on bridge loans                    6,000                    -
Accounts payable and accrued expenses          22,259               16,872
                                           ----------            ---------
                                           E   44,971            E  32,866
                                           ==========            =========

</TABLE>


NOTE  12.     Accounting  For  Derivatives

The Company enters into currency swaps, currency forward contracts, and interest
rate  derivative contracts relating to its Rosenthal pulp mill and interest rate
swap agreements and currency forward contract relating to the Stendal pulp mill.
Rosenthal  has  entered  into  currency  swaps  in connection with its long-term
indebtedness  relating to the conversion of the Rosenthal mill to the production
of  kraft  pulp  to  convert  the  Euro-denominated  debt  obligations into U.S.
dollars.  Stendal  has  entered  into interest rate swaps in connection with its
long-term  indebtedness relating to the Stendal Project to fix the interest rate
thereunder.  Rosenthal  and  Stendal also enter into currency forward contracts,
forward rate agreements and interest rate cap agreements, as the case may be, to
reduce  or  limit  their  exposure  to  interest  rate and currency risks, or to
augment  their potential gains or to reduce their potential losses.  The Company
adopted  SFAS 133, Accounting for Derivative Instruments and Hedging Activities,
effective January 1, 2001.  Derivative instruments are measured at fair value at
each  reporting  date.  None  of  the  Rosenthal  and  Stendal  derivatives  are
designated  hedges  as  defined  in  SFAS  133.  Accordingly,  any  realized and
unrealized  gain  or  loss  on  the  Company's derivatives are included in other
income  (loss)  in  the  determination  of  the  Company's  net  income  (loss).
Cumulative  unrealized  loss  on derivatives is included in accounts payable and
accrued  expenses  for  Rosenthal  and  derivative  financial  instruments,
construction  in  progress  for  Stendal,  on the Company's consolidated balance
sheet.

The  Company  is  exposed  to  very  modest  credit-related  risk  relating  to
non-performance by counterparties to derivative contracts.  However, the Company
does not expect that the counterparties, which are major financial institutions,
will  fail  to  meet  their  obligations.

NOTE  13.     RECLASSIFICATIONS

Certain  prior  period  amounts  in  the  interim  period consolidated financial
statements  contained  herein  have  been reclassified to conform to the current
period's  presentation.


FORM 10-Q
QUARTERLY REPORT - PAGE 15


<PAGE>

ITEM  2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
           CONDITION  AND  RESULTS  OF  OPERATIONS

In this document:  (i) unless the context otherwise requires, "we", "our", "us",
the  "Company"  or "Mercer" mean Mercer International Inc. and its subsidiaries;
(ii)  information is provided as of September 30, 2003, unless otherwise stated;
(iii)  all  references  to  monetary amounts are to "Euros", the lawful currency
adopted by most members of the European Union, unless otherwise stated; (iv) "E"
refers  to  Euros;  and  (v)  a  "tonne"  is  one  metric ton or 2,204.6 pounds.

The following discussion and analysis of our results of operations and financial
condition  for  the nine months and three months ended September 30, 2003 should
be  read  in  conjunction with our consolidated financial statements and related
notes  included  in  this  quarterly  report,  as well as our most recent annual
report  on  Form 10-K for the fiscal year ended December 31, 2002 filed with the
Securities  and Exchange Commission (the "SEC").  Certain reclassifications have
been  made  to the prior period financial statements to conform with the current
period  presentation.

RESULTS  OF  OPERATIONS

We  operate  in  the  pulp  and  paper  business  and our operations are located
primarily  in  Germany.  Our  manufacturing  facilities  are comprised of: (a) a
northern bleached softwood kraft ("NBSK") pulp mill operated by our wholly-owned
subsidiary,  Zellstoff-und  Papierfabrik Rosenthal GmbH & Co., KG ("Rosenthal"),
which  produces  softwood  kraft  pulp  and has an annual production capacity of
approximately 300,000 tonnes; (b) a "greenfield" project (the "Stendal project")
to  construct  a new, state-of-the-art NBSK pulp mill, which is designed to have
an  annual  production  capacity  of approximately 552,000 tonnes, near Stendal,
Germany  by  our 63.6% owned subsidiary, Zellstoff Stendal GmbH ("Stendal"); and
(c)  two  paper  mills  located  at Heidenau and Fahrbrucke, Germany (the "paper
mills"), which produce specialty papers and printing and writing papers and have
an  aggregate  annual  production  capacity  of  approximately  85,000  tonnes.

Total  investment  costs  in  respect of the Stendal project are estimated to be
approximately E1.0  billion,  the  majority  of  which is being financed under a
senior  project  finance facility (the "Stendal Loan Facility") in the amount of
E828 million  and  arranged  with  Bayerische  Hypo-und  Vereinsbank  AG.  The
construction of the Stendal mill commenced in August 2002 and is scheduled to be
completed in the third quarter of 2004. Costs, including interest, in respect of
the  Stendal  project  are  capitalized.

Our financial performance depends on a number of variables that impact sales and
production  costs.  Sales  and  production results are influenced largely by the
market  price  for  products and raw materials, the mix of products produced and
foreign  currency  exchange  rates.  Kraft  pulp  and  paper  markets are highly
cyclical, with prices determined by supply and demand. Demand for kraft pulp and
paper  is  influenced  to  a  significant  degree  by  global levels of economic
activity  and  supply  is driven by industry capacity and utilization rates. Our
product  mix  is  important  because  premium grades of kraft pulp and specialty
papers  generally  achieve  higher  prices  and  profit  margins.

Our  production  costs  are  influenced  by  the  availability  and  cost of raw
materials,  energy  and  labor, and our plant efficiencies and productivity. Our
main  raw  material  is  fiber  in  the form of wood chips and pulplogs for pulp
production,  and  waste  paper  and  pulp  for paper production. Fiber costs are
primarily  affected by the supply of, and demand for, lumber and pulp, which are
both  highly  cyclical.  Production  costs  also  depend  on the total volume of
production.  High operating rates and production efficiencies permit us to lower
our  average  cost  by  spreading  fixed  costs  over  more  units.


FORM 10-Q
QUARTERLY REPORT - PAGE 16


<PAGE>

Global  economic conditions, changes in production capacity and inventory levels
are  the  primary  factors  affecting  kraft pulp and paper prices. Historically
kraft  pulp  and  paper  prices have been cyclical in nature. Kraft pulp prices,
which  had  been  at historically low levels between 1996 and 1999, rebounded in
2000  as  a  result  of  recoveries in Asian economies and a decline in capacity
resulting  from  the  shut-down  of  unprofitable  or  older  mills  requiring
environmental upgrades. This contributed to tightening inventory levels and list
prices  increasing  to  an average of approximately $710 per tonne in the fourth
quarter  of  2000. However, the decline of North American and European economies
in  2001  caused  a  sharp  reduction  in  paper  demand.  As a result, producer
inventories  increased  markedly  and  list price levels eroded to an average of
approximately  $460  per tonne in late 2001. List prices for kraft pulp averaged
approximately  $463  per  tonne  in 2002. Low producer inventories in early 2003
resulted  in  producers  increasing  list  prices  for  kraft  pulp in Europe to
approximately  $560  per  tonne  in  April  2003.  List  prices  fell during the
seasonally  weak  summer months, and were approximately $510 per tonne in August
2003.  Most  producers,  including  ourselves,  announced  a $20 per tonne price
increase  for  NBSK  pulp  for  September  2003,  which was largely implemented.
Further  price  increases  of  $5  to  $15  per  tonne  were implemented by most
producers,  including  ourselves,  in  October  2003.

Our  financial  performance for any reporting period is also impacted by changes
in  the U.S. dollar to Euro exchange rate and in interest rates. Changes in such
rates  can  impact  both our operating results and certain derivatives Rosenthal
and  Stendal  use to partially protect against the effect of such changes. Gains
or  losses  on  such derivatives are recorded in our earnings either as they are
settled  or as they are marked to market for each reporting period. See "Item 3.
Quantitative  and  Qualitative  Disclosures  about  Market  Risk".

While the majority of our sales are invoiced in Euros, pulp prices are generally
based  on a global industry benchmark price that is quoted in U.S. dollars. As a
result,  a  weakening  of the U.S. dollar against the Euro will generally reduce
the  amount  of  Euro  revenues  of  our  pulp operations. Most of our costs are
incurred,  and  our debt obligations are predominantly denominated, in Euros and
do  not  fluctuate with the U.S. dollar to Euro exchange rate. Thus, a weakening
of  the  U.S.  dollar  against the Euro tends to reduce our sales revenue, gross
profit  and  income  from  operations.

In  order  to  partially protect against a weakening U.S. dollar, Rosenthal uses
derivatives  to  swap its Euro denominated debt obligations to U.S. dollars (the
"Rosenthal  Currency  Swaps").  Such derivatives effectively convert Rosenthal's
loan  obligations  from  Euros into U.S. dollars. Rosenthal's use of U.S. dollar
currency  derivatives  has  provided  additional  protection  and  augmented its
earnings  and cash flow during a weakening U.S. dollar environment. Primarily as
a  result of a weakening of the U.S. dollar versus the Euro, we recognized a net
gain  of E18.3  million  and E3.7  million  on  the  derivatives  of  Rosenthal,
including certain interest rate derivatives, in the nine months and three months
ended  September  30,  2003,  respectively.

Stendal, as required under its project financing, entered into variable-to-fixed
rate  swaps  (the  "Stendal  Interest Rate Swap Agreements") to fix the interest
rate  for  the  full  term  of  the  Stendal  Loan  Facility.  While  such swaps
effectively  fix  the  interest  cost  on  the Stendal Loan Facility and provide
stability  with respect to future interest payments, they have kept Stendal from
benefiting  from the general decline in interest rates in the later part of 2002
and  the  first  half  of  2003. These swaps are marked to market on a quarterly
basis taking into account, among other things, all future payments and the yield
curve.  Declining  interest rates in 2003 resulted in a non-cash holding loss of
E22.5  million  on  such  swaps  in  the  nine  months ended September 30, 2003.
However, an increase in long-term European interest rates over the third quarter
of  2003  resulted  in  a  non-cash  holding  gain  of


FORM 10-Q
QUARTERLY REPORT - PAGE 17


<PAGE>

E5.4 million on such swaps in the three months ended September 30, 2003. Stendal
also  entered  into  a  currency forward contract in connection with the Stendal
Loan  Facility  in the third quarter of 2003. This derivative instrument is also
marked to market on a quarterly basis. Primarily as a result of the weakening of
the U.S. dollar versus the Euro, a non-cash holding gain of E0.6 million on such
currency  forward  contract  was  recognized  for  both the nine and three month
periods  ended  September  30,  2003.

In  the  quarter  ended  September 30, 2003, interest rate trends have partially
reversed  and  the  Euro  to  U.S. dollar exchange rate fluctuated.  If the U.S.
dollar  strengthens  against  the  Euro, unless we settle the Rosenthal Currency
Swaps, they may show a mark to market loss in future periods, although (assuming
stable  pulp  prices) we would expect our operations to benefit from higher pulp
pricing  as  the  global  U.S.  dollar  benchmark  is  translated  into  Euros.
Furthermore,  if  higher  interest rates continue, the Stendal variable-to-fixed
rate  swaps  may  have a mark to market non-cash holding gain in future periods,
which may be offset in part by higher interest rates payable on Rosenthal's debt
obligations. See "Item 3.  Quantitative and Qualitative Disclosures about Market
Risk".

NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2002

Selected  sales data for the nine months ended September 30, 2003 and 2002 is as
follows:

<TABLE>
<CAPTION>

                                         Nine Months Ended September 30,
                                         -------------------------------
                                            2003                 2002
                                         ----------           ----------
                                                   (unaudited)
                                               (Euros in thousands)
<S>                                      <C>                  <C>
REVENUES BY PRODUCT CLASS
Pulp(1)                                  E   92,418           E   98,962
Papers
 Specialty papers(2)                         30,185               60,816
 Printing papers                             12,332               14,511
                                         ----------           ----------
   Total papers                              42,517               75,327
                                         ==========           ==========
Total(1)                                 E  134,935           E  174,289
                                         ==========           ==========

REVENUES BY GEOGRAPHIC AREA
Germany                                  E   60,596           E   70,178
European Union(3)                            56,555               56,967
Eastern Europe and Other                     17,784               47,144
                                         ----------           ----------
Total(1)                                 E  134,935           E  174,289
                                         ==========           ==========

SALES VOLUME BY PRODUCT CLASS                        (tonnes)
Pulp(1)                                     221,926              217,555
Papers
 Specialty papers(2)                         30,420               47,135
 Printing papers                             16,568               17,922
                                         ----------           ----------
   Total papers                              46,988               65,057
                                         ----------           ----------
Total(1)                                    268,914              282,612
                                         ==========           ==========

</TABLE>

________
(1)  Excluding  intercompany sales volumes of 5,166 and 8,528 tonnes of pulp and
     intercompany  net  sales revenues  of  approximately E2.2  million and E3.9
     million in the nine months ended September 30, 2003 and 2002, respectively.
(2)  As  of  December  31,  2002,  our  interest  in  Landqart  AG  is no longer
     consolidated  and  is included in our financial results on an equity basis.
     Accordingly,  sales from the Landqart specialty paper mill are not included
     in  our  results  for  the  nine  months  ended September 30, 2003, but are
     included  for  the  nine  months  ended  September  30,  2002. The Landqart
     specialty  paper  mill  sold  approximately 13,597 tonnes for approximately
     E30.4  million  in  the  nine  months  ended  September  30,  2002.
(3)  Not  including  Germany.

In  the nine months ended September 30, 2003, total revenues decreased to E144.1
million  from E183.0  million  in  the  nine  months  ended  September 30, 2002,
primarily  as  the  current period does not include the revenues of the Landqart
specialty  paper  mill.  We reorganized our interest in


FORM 10-Q
QUARTERLY REPORT - PAGE 18


<PAGE>


Landqart  AG  ("Landqart")  in  December  2002  and now account for it under the
equity  method. Primarily as a result thereof, pulp and paper revenues decreased
to E134.9  million in  the current period from E174.3 million in the comparative
period  in  2002.

Cost  of  pulp  and  paper  sales  in  the  nine months ended September 30, 2003
decreased  to E131.8  million  from E152.3  million  in  the  nine  months ended
September  30,  2002,  primarily as a result of the deconsolidation of Landqart.

Pulp  sales  in the current period were E92.4 million, compared to E99.0 million
in  the  comparative  period  of  2002.  U.S. dollar denominated list pulp price
increases  were  more  than offset by a 16.8% decline in the U.S. dollar against
the Euro in the current period versus the comparative period last year.  Average
list  prices  for  NBSK pulp in Europe, which were approximately E420 ($440) per
tonne at the end of 2002, improved to approximately E441 ($480) per tonne in the
first  quarter  of  2003  and  approximately E484 ($550) per tonne in the second
quarter  of  2003,  and  were  approximately E444  ($500) per tonne in the third
quarter  of 2003.  Our pulp sales realizations were E416 per tonne on average in
the current period, compared to E455 per tonne in the first nine months of 2002.
Pulp  sales  by  volume  increased  to 221,926 tonnes in the current period from
217,555  tonnes  in  the  comparative  period  of  2002.

Cost  of  sales  and  general,  administrative  and  other expenses for the pulp
operations  were E101.1  million  for  the nine months ended September 30, 2003,
compared  to E98.8  million  for  the  nine months ended September 30, 2002.  On
average,  fiber costs for pulp production increased marginally to E179 per tonne
in the current period from E178 per tonne in the nine months ended September 30,
2002.  Depreciation  within  the  pulp  segment was E16.6 million in the current
period,  compared  to E16.2  million  in  the  comparative  period  of  2002.

Our  pulp  operations  generated  an  operating loss of E0.7 million in the nine
months ended September 30, 2003, compared to operating income of E8.0 million in
the  nine  months  ended  September  30,  2002.

Results  for  our  paper  segment  during  the  current  period  reflect  the
aforementioned  exclusion of the results from the Landqart specialty paper mill,
which were included in the results for the nine months ended September 30, 2002.
Paper  sales in the current period decreased to E42.5 million from E75.3 million
in the comparative period in 2002.  Sales of specialty papers in the nine months
ended  September  30,  2003 decreased to E30.2 million from E60.8 million in the
nine  months  ended  September 30, 2002.  Total paper sales volumes decreased to
46,988  tonnes in the nine months ended September 30, 2003 from 65,057 tonnes in
the  nine  months  ended  September  30, 2002.  On average, prices for specialty
papers  realized  in  the  nine  months  ended  September  30, 2003 decreased by
approximately  23.1%  as our product mix changed upon the deconsolidation of the
Landqart mill, and for printing papers decreased by approximately 8.1%, compared
to  the  nine  months  ended  September  30,  2002.

Cost  of  sales  and  general,  administrative  and other expenses for the paper
operations  decreased  to E42.8 million in the current period from E75.0 million
in  the  comparative  period  of  2002  as a result of lower paper sales.  Paper
segment  depreciation  decreased  to E1.5  million  in  the  nine  months  ended
September  30,  2003  from E4.0  million  in  the  prior  period.

Our  paper  operations  generated  operating  income of E0.6 million in the nine
months  ended  September  30,  2003, compared to E1.3 million in the nine months
ended  September  30,  2002.

Consolidated  general  and administrative expenses decreased to E13.0 million in
the  nine  months ended September 30, 2003 from E20.4 million in the nine months
ended  September 30, 2002,


FORM 10-Q
QUARTERLY REPORT - PAGE 19


<PAGE>

primarily as a result of the exclusion of the results of the Landqart mill and a
decrease  in  professional  fees  in  the  current  period.

For the nine months ended September 30, 2003, we reported a loss from operations
of E3.1  million,  compared  to  income  from  operations of E6.6 million in the
comparative period of 2002.  Interest expense (excluding capitalized interest of
E12.5 million in respect of the Stendal project) in the current period decreased
to E6.9  million from E10.8 million in the comparative period of 2002, primarily
as  a  result  of lower borrowing costs and lower indebtedness for our operating
units.  During the current period, we made principal repayments of E12.7 million
in  respect  of  the  indebtedness  of  the  Rosenthal  NBSK  pulp  mill.

Pursuant to the Stendal Loan Facility, Stendal entered into the Stendal Interest
Rate  Swap  Agreements  for  the  full  term  of the facility to manage the risk
exposure  with  respect  to  an aggregate maximum amount of approximately E612.6
million  of  the  principal  amount  of  the Stendal Loan Facility.  Under these
swaps,  Stendal  pays  a fixed rate and receives a floating rate with respect to
interest  payments  calculated  on  a  notional  amount.  These swaps manage the
exposure  to  variable  cash flow risk from the variable interest payments under
the  Stendal  Loan  Facility.  Stendal  also  entered  into  a  currency forward
contract  in  connection  with the Stendal Loan Facility in the third quarter of
2003.  These  derivative  instruments  are  marked  to market at the end of each
reporting  period and all unrealized gains and losses are recognized in earnings
for  such  period.  A  holding  loss of E22.5 million and a holding gain of E0.6
million  before  minority interests was recognized in respect of these swaps and
currency  forward, respectively, for the nine months ended September 30, 2003. A
holding  loss  of E22.0  million  before  minority  interests  was recognized in
respect  of  the swaps in the nine months ended September 30, 2002. We determine
market  valuations  based  primarily upon values provided by our counterparties.

In  addition,  Rosenthal has entered into the Rosenthal Currency Swaps to manage
its exposure with respect to an aggregate amount of approximately E192.2 million
of  the  principal  long-term indebtedness of the Rosenthal mill (the "Rosenthal
Loan  Facility").  Rosenthal  has  also entered into currency forward contracts,
forward  interest  rate  and  interest  cap contracts in connection with certain
indebtedness  relating  to the Rosenthal mill.  These derivative instruments are
also  marked  to  market  at the end of each reporting period, and all gains and
losses  are  recognized  in  earnings  for such period. In the nine months ended
September  30,  2003,  we  recognized  a  net  gain  of E18.3 million from these
derivative  contracts,  compared  to E10.9  million  in  the  prior  period.

Minority  interest  in the nine months ended September 30, 2003 amounted to E8.5
million  and  represented  the  proportion  of  the  loss of the Stendal project
allocated  to the two minority shareholders of Stendal. Minority interest in the
nine  months  ended  September  30,  2002  amounted  to E8.0  million.

Our  results  for the nine months ended September 30, 2003 include an adjustment
of E5.5  million  for  the  non-cash  aggregate  pre-tax  earnings  impact  of
other-than-temporary  impairment  losses  on  certain  of our available-for-sale
securities.  This  adjustment  was  recorded  in  other  income (expense) in our
consolidated  statement  of  operations.  This  adjustment  did  not  affect our
shareholders'  equity  since all of our available-for-sale securities are marked
to  market  on  a  quarterly  basis  and unrealized gains or losses are reported
through  the  statement  of comprehensive income in our financial statements and
recorded in other comprehensive income (loss) within shareholders' equity on our
balance  sheet.  Such  unrealized gains or losses, the cost base and the current
marked  to  market  value  of  our  available-for-sale  securities  are  further
described  in  the  notes  to our annual financial statements.  These are legacy
investments  and  are  unrelated  to  our  pulp  and  paper  operations.


FORM 10-Q
QUARTERLY REPORT - PAGE 20


<PAGE>


SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, EITF
03-1,  The  Meaning  of  Other-Than-Temporary  Impairment and its Application to
Certain  Investments,  and  SEC  Staff  Accounting  Bulletin  59, Accounting for
Noncurrent Marketable Equity Securities, provide guidance on determining when an
impairment  is  other-than-temporary,  which  requires judgment.  In making this
judgment, we evaluate, among other factors, the duration and extent to which the
fair  value  of an investment is less than its cost; the financial health of and
business outlook for the investee, including factors such as industry and sector
performance,  changes  in  technology,  operational and financing cash flow, the
investee's  financial  position  including  its  appraisal  and net asset value,
market  prices,  its  business  plan and investment strategy; and our intent and
ability  to  hold  the  investment.

For  the  nine  months  ended September 30, 2003, we reported a net loss of E9.2
million, or E0.54 per share on a basic and diluted basis, compared to a net loss
of E7.4  million,  or E0.44  per share on a basic and diluted basis, in the nine
months  ended  September  30,  2002.

As  the  Stendal  project  is  currently  under  construction and because of its
overall  size  relative  to  our  other facilities, management uses consolidated
operating  results excluding derivative items relating to the Stendal project to
measure the performance and results of our operating units.  Management believes
this  measure  provides meaningful information for it and securityholders on the
performance  of  our  operating  facilities  for  a  reporting  period.  Upon
commencement  of  commercial  production,  the Stendal project will be evaluated
with  our  other operating units.  For the nine months ended September 30, 2003,
we  reported  a  net loss of E9.2 million or E0.54 per share on a diluted basis.
If  we  had excluded items relating to the Stendal project by adding the loss on
derivative  financial  instruments of E22.5 million on the Stendal Interest Rate
Swap Agreements to, and subtracting the gain on the currency forward relating to
the  Stendal Loan Facility of E0.6 million and minority interest of E8.5 million
from,  the  reported net loss of E9.2 million, we would have reported net income
of E4.3  million  or E0.25  per  share  on a diluted basis.  For the nine months
ended  September  30,  2002, we reported a net loss of E7.4 million or E0.44 per
share  on  a  diluted  basis.  If  we had excluded items relating to the Stendal
project  by adding the loss on derivative financial instruments of E22.0 million
on  the  Stendal  Interest  Rate  Swap  Agreements  to, and subtracting minority
interests  of E8.0 million from, the reported net loss of E7.4 million, we would
have  reported net income of E6.6 million or E0.39 per share on a diluted basis.
This  measure  has significant limitations as an analytical tool, and should not
be  considered  in  isolation, or as a substitute for analysis of our results as
reported  under  generally  accepted  accounting  principles  ("GAAP").

We  generated  operating  earnings  before  interest,  taxes,  depreciation  and
amortization  ("Operating  EBITDA")  of E15.1  million  in  the  current period,
compared to Operating EBITDA of E26.9 million in the comparative period of 2002.
Operating  EBITDA  is defined as income (loss) from operations plus depreciation
and  amortization.  Operating  EBITDA  is  calculated by adding depreciation and
amortization  of E18.1  million and E20.2 million to the loss from operations of
E3.1 million  and  income  from  operations of E6.6 million for each of the nine
months  ended  September  30,  2003  and  2002,  respectively.  Management  uses
Operating EBITDA as a benchmark measurement of its own operating results, and as
a  benchmark  relative  to  its  competitors.  Management  considers  it to be a
meaningful  supplement  to  operating  income as a performance measure primarily
because  depreciation expense is not an actual cash cost, and varies widely from
company  to company in a manner that management considers largely independent of
the  underlying  cost efficiency of their operating facilities.  In addition, we
believe  Operating EBITDA is commonly used by securities analysts, investors and
other  interested  parties  to  evaluate  our  financial performance.  Operating
EBITDA  does  not  reflect  the  impact of a number of items that affect our net
income  (loss),  including  financing  costs  and  the  effect  of  derivative
instruments.  Operating  EBITDA  is not a measure of


FORM 10-Q
QUARTERLY REPORT - PAGE 21


<PAGE>

financial  performance  under  accounting  principles  generally accepted in the
United  States,  and  should  not  be considered as an alternative to net income
(loss)  or  income (loss) from operations as a measure of performance, nor as an
alternative  to  net  cash  from operating activities as a measure of liquidity.
Operating  EBITDA  has significant limitations as an analytical tool, and should
not  be  considered in isolation, or as a substitute for analysis of our results
as reported under GAAP. Some of these limitations are: (i) Operating EBITDA does
not  reflect  our  cash  expenditures,  or  future  requirements,  for  capital
expenditures  or contractual commitments; (ii) Operating EBITDA does not reflect
changes in, or cash requirements for, working capital needs; and (iii) Operating
EBITDA  does  not  reflect  the  significant  interest  expense,  or  the  cash
requirements  necessary  to  service  interest  or  principal  payments,  on our
outstanding  debt.  Because of these limitations, operating EBITDA should not be
considered  as  a  measure of liquidity or cash available to us to invest in the
growth  of our business. Because all companies do not calculate Operating EBITDA
in  the  same  manner,  Operating  EBITDA  as  calculated  by us may differ from
Operating  EBITDA  as  calculated  by  other  companies.

The  following table provides a reconciliation of net loss to (loss) income from
operations  and  Operating  EBITDA  for  the  periods  indicated:

<TABLE>
<CAPTION>

                                              Nine Months Ended September 30,
                                              -------------------------------
                                                 2003                 2002
                                              ----------           ----------
                                                        (unaudited)
                                                   (Euros in thousands)
<S>                                           <C>                  <C>
Net loss, per income statement                E   (9,173)          E   (7,441)
 Less:  Minority interest                         (8,499)              (8,016)
 Add:  Income taxes                                  226                   11
     Total other expense                          14,395               22,071
                                              ----------           ----------
(Loss) income from operations                     (3,051)               6,625
 Add:  Depreciation and amortization              18,135               20,231
                                              ----------           ----------
Operating EBITDA                              E   15,084           E   26,856
                                              ==========           ==========

</TABLE>


FORM 10-Q
QUARTERLY REPORT - PAGE 22


<PAGE>

THREE  MONTHS  ENDED SEPTEMBER 30, 2003 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30,  2002

Selected sales data for the three months ended September 30, 2003 and 2002 is as
follows:

<TABLE>
<CAPTION>

                                         Three Months Ended September 30,
                                         --------------------------------
                                            2003                 2002
                                         ----------           ----------
                                                   (unaudited)
                                               (Euros in thousands)
<S>                                      <C>                  <C>
REVENUES BY PRODUCT CLASS
Pulp(1)                                  E   30,004           E   30,878
Papers
 Specialty papers(2)                          8,610               19,830
 Printing papers                              5,047                4,046
                                         ----------           ----------
   Total papers                              13,657               23,876
                                         ==========           ==========
Total(1)                                 E   43,661           E   54,754
                                         ==========           ==========

REVENUES BY GEOGRAPHIC AREA
Germany                                  E   19,682           E   23,253
European Union(3)                            18,493               16,797
Eastern Europe and Other                      5,486               14,704
                                         ----------           ----------
Total(1)                                 E   43,661           E   54,754
                                         ==========           ==========

SALES VOLUME BY PRODUCT CLASS.                           (tonnes)
Pulp(1)                                      73,747               67,757
Papers
 Specialty papers(2)                          8,745               15,265
 Printing papers                              7,234                5,715
                                         ----------           ----------
   Total papers                              15,979               20,980
                                         ----------           ----------
Total(1)                                     89,726               88,737
                                         ==========           ==========

</TABLE>
________
(1)  Excluding  intercompany sales volumes of 1,555 and 2,158 tonnes of pulp and
     intercompany  net  sales  revenues  of  approximately E0.6 million and E1.0
     million  in  the  three  months  ended  September  30,  2003  and  2002,
     respectively.
(2)  As  of  December  31,  2002,  our  interest  in  Landqart  AG  is no longer
     consolidated  and  is included in our financial results on an equity basis.
     Accordingly,  sales from the Landqart specialty paper mill are not included
     in  our  results  for  the  three  months ended September 30, 2003, but are
     included  for  the  three  months  ended  September  30, 2002. The Landqart
     specialty paper mill sold approximately 4,537 tonnes for approximately E9.8
     million  in  the  three  months  ended  September  30,  2002.
(3)  Not  including  Germany.

In  the three months ended September 30, 2003, total revenues decreased to E45.8
million  from E56.9  million  in  the  three  months  ended  September 30, 2002,
primarily  as  the  current period does not include the revenues of the Landqart
specialty  paper  mill.  Primarily  as a result thereof, pulp and paper revenues
decreased  to E43.7  million  in  the  current  period from E54.8 million in the
comparative  period  in  2002.

Cost  of  pulp  and  paper  sales  in  the three months ended September 30, 2003
decreased  to E45.4  million  from E47.7  million  in  the  three  months  ended
September  30,  2002,  primarily as a result of the deconsolidation of Landqart.

Pulp  sales  in the current period were E30.0 million, compared to E31.0 million
in  the  second  quarter of 2003, E31.4 million in the first quarter of 2003 and
E30.9 million  in  the comparative period of 2002.  U.S. dollar denominated list
pulp price increases were more than offset by a 12.6% decline in the U.S. dollar
against the Euro for the current period versus the comparative period last year.
Average  list  prices  for  NBSK  pulp  in Europe, which were approximately E486
($480)  per tonne at the end of the third quarter of 2002 and approximately E420
($440) per tonne at the end of 2002, were approximately E444 ($500) per tonne in
the  current  period. Our pulp sales realizations were


FORM 10-Q
QUARTERLY REPORT - PAGE 23


<PAGE>

E407  per  tonne on average in the current period, compared to E445 per tonne in
the second quarter of 2003, E400 per tonne in the first quarter of 2003 and E456
per  tonne in the third quarter of 2002. Pulp sales by volume were 73,747 tonnes
in  the current period, compared to 69,700 tonnes in the second quarter of 2003,
78,479  tonnes in the first quarter of 2003 and 67,757 tonnes in the comparative
period  of  2002.

Cost  of  sales  and  general,  administrative  and  other expenses for the pulp
operations  were E33.6  million  for  the three months ended September 30, 2003,
compared  to E29.9  million  in  the  three months ended September 30, 2002.  On
average,  per  tonne  fiber costs for pulp production decreased by approximately
1.7%  and  5.4%  compared  to the three months ended June 30, 2003 and March 31,
2003, respectively, and by approximately 1.1% compared to the three months ended
September 30, 2002.  Fiber costs amounted to approximately E174 per tonne in the
current  period,  compared  to E176  per  tonne  in  the  third quarter of 2002.
Depreciation  within  the  pulp  segment was E5.7 million in the current period,
compared  to E5.4  million  in  the  comparative  period  of  2002.

Our  pulp  operations  generated  an operating loss of E1.8 million in the three
months ended September 30, 2003, compared to operating income of E2.6 million in
the  three  months ended June 30, 2003, an operating loss of E1.4 million in the
three  months  ended  March 31, 2003 and operating income of E2.5 million in the
three  months  ended  September  30,  2002.

Results for our paper segment during the current period exclude the results from
the  Landqart  specialty  paper mill, which were included in the results for the
three  months  ended  September  30,  2002.  Paper  sales  in the current period
decreased to E13.7 million from E23.9 million in the comparative period in 2002.
Sales of specialty papers in the three months ended September 30, 2003 decreased
to E8.6 million from E19.8 million in the three months ended September 30, 2002.
Total  paper  sales volumes decreased to 15,979 tonnes in the three months ended
September  30,  2003  from 20,980 tonnes in the three months ended September 30,
2002.  On  average,  prices  for  specialty  papers realized in the three months
ended  September  30,  2003  decreased by approximately 24.2% as our product mix
changed  upon  the deconsolidation of the Landqart mill, and for printing papers
decreased  by  approximately  1.5%, compared to the three months ended September
30,  2002.

Cost  of  sales  and  general,  administrative  and other expenses for our paper
operations  decreased  to E14.7 million in the current period from E24.3 million
in  the  comparative  period  of  2002  as a result of lower paper sales.  Paper
segment  depreciation  decreased  to E0.6  million  in  the  three  months ended
September  30,  2003  from E1.3  million  in  the  prior  period.

Our  paper  operations  generated an operating loss of E0.7 million in the three
months  ended  September  30, 2003, compared with operating income of E11,000 in
the  comparative  period  of  2002.

Consolidated  general  and  administrative expenses decreased to E4.2 million in
the  three months ended September 30, 2003 from E6.0 million in the three months
ended  September 30, 2002, primarily as a result of the exclusion of the results
of  the  Landqart  mill  and a decrease in professional fees in the three months
ended  September  30,  2003.

For  the  three  months  ended  September  30,  2003,  we  reported  a loss from
operations  of E4.3  million, compared to income from operations of E2.0 million
in  the  comparative  period  of  2002.  Interest expense (excluding capitalized
interest  of E5.3  million  in  respect  of  the Stendal project) in the current
period  decreased to E2.2 million from E2.7 million in the comparative period of
2002,  primarily as a result of lower borrowing costs and lower indebtedness for
our  operating  units.


FORM 10-Q
QUARTERLY REPORT - PAGE 24


<PAGE>


In  the current quarter, a non-cash holding gain of E5.4 million before minority
interests  was  recognized  in  respect  of  the  Stendal  Interest  Rate  Swap
Agreements, compared to recognizing a holding loss of E22.0 million in the prior
period  in respect of these swaps.  Stendal also entered into a currency forward
contract  in connection with the Stendal Loan Facility in the current quarter. A
holding gain of E0.6 million before minority interests was recognized in respect
of  the  currency  forward  contract in the current quarter. In addition, in the
three  months ended September 30, 2003, we recognized a net gain of E3.7 million
from  the  Rosenthal  Currency  Swaps,  and  currency forward contracts, forward
interest rate and interest cap contracts in connection with certain indebtedness
relating  to  the  Rosenthal  mill,  compared  to recognizing a net loss of E4.0
million  in  the  prior  period  in  respect  thereof.

Minority  interest  in  the  three  months  ended September 30, 2003 amounted to
E(1.9) million  and  represented  the  proportion  of  the gain from the Stendal
project  allocated  to  the  two  minority  shareholders  of  Stendal.  Minority
interest  in the three months ended September 30, 2002 amounted to E8.0 million.

For  the  three  months ended September 30, 2003, we reported net income of E0.9
million, or E0.05 per share on a basic and diluted basis, compared to a net loss
of E20.6  million, or E1.23 per share on a basic and diluted basis, in the three
months  ended  September  30,  2002.

As  the  Stendal  project  is  currently  under  construction and because of its
overall  size  relative  to  our  other facilities, management uses consolidated
operating  results excluding derivative items relating to the Stendal project to
measure the performance and results of our operating units.  Management believes
this  measure  provides meaningful information for it and securityholders on the
performance  of  our  operating  facilities  for  a  reporting  period.  Upon
commencement  of  commercial  production,  the Stendal project will be evaluated
with  our other operating units.  For the three months ended September 30, 2003,
we  reported  net  income of E0.9 million or E0.05 per share on a diluted basis.
If we had excluded items relating to the Stendal project by subtracting the gain
on  the  Stendal  Interest  Rate  Swap  Agreements  of E5.4 million and currency
forward  relating  to the Stendal Loan Facility of E0.6 million from, and adding
minority  interest  of E1.9 million to, the reported net income of E0.9 million,
we  would  have  reported  a  net  loss  of E3.2 million or E0.19 per share on a
diluted basis.  For the three months ended September 30, 2002, we reported a net
loss of E20.6 million or E1.23 per share on a diluted basis.  If we had excluded
items relating to the Stendal project by adding the loss on the Stendal Interest
Rate Swap Agreements of E22.0 million to, and subtracting the minority interests
of E8.0  million  from,  the  reported  net loss of E20.6 million, we would have
reported a net loss of E6.6 million or E0.39 per share on a diluted basis.  This
measure  has  significant  limitations  as an analytical tool, and should not be
considered  in  isolation,  or as a substitute for an analysis of our results as
reported  under  GAAP.

We  generated  Operating EBITDA of E2.0 million in the current quarter, compared
to  an Operating EBITDA of E7.7 million in the second quarter of 2003, Operating
EBITDA of E5.5 million in the first quarter of 2003 and Operating EBITDA of E8.7
million  in  the  comparative quarter of 2002.  Operating EBITDA has significant
limitations as an analytical tool, and should not be considered in isolation, or
as  a  substitute  for  analysis  of  our  results  as reported under GAAP.  See
"Results  of  Operations - Nine Months Ended September 30, 2003 Compared to Nine
Months  Ended  September  30,  2002"  above  for  additional  information.


FORM 10-Q
QUARTERLY REPORT - PAGE 25


<PAGE>

The  following  table  provides  a reconciliation of net income (loss) to (loss)
income  from  operations  and  Operating  EBITDA  for  the  periods  indicated:

<TABLE>
<CAPTION>

                                              Three Months Ended September 30,
                                              --------------------------------
                                                 2003                 2002
                                              ----------           ----------
                                                        (unaudited)
                                                   (Euros in thousands)
<S>                                           <C>                  <C>
Net income (loss), per income statement       E      876           E  (20,597)
 Add (less):  Minority interest                    1,880               (8,016)
              Income taxes                            28                    -
              Other (income) or expense           (7,084)              30,578
                                              ----------           ----------
(Loss) income from operations                     (4,300)               1,965
 Add:  Depreciation and amortization               6,254                6,742
                                              ----------           ----------
Operating EBITDA                              E    1,954           E    8,707
                                              ==========           ==========

</TABLE>

STENDAL  PROJECT  STATUS

We  are  implementing  the  Stendal  project, which is a "greenfield" project to
construct  a  new state-of-the-art NBSK pulp mill.  The mill will have an annual
production capacity of approximately 552,000 tonnes and will be located near the
town  of  Stendal in Germany.  As at September 30, 2003, progress on the Stendal
project  was  substantially on schedule and there were no significant deviations
from  the  project budget.  At September 30, 2003, the project was approximately
83%  completed  and approximately 97% of the total engineering was finished.  In
addition, approximately 85% of the civil works was completed.  Progress was made
in  a  number  of  areas including the erection of the recovery boiler and power
boiler,  the assembly and installation of evaporation units, the erection of the
main  equipment  for  the  recausticizing  plant  and  the  installation  of the
fiberline  wash  presses.  In addition, a debarking drum was shipped to the site
and  lifted  into  position.  Progress  was  also  made  in  connection with the
construction  of  the  infrastructure  of the mill site including power, gas and
road  connections.  Power  was  connected  to the mill site and a temporary rail
connection  to  the  mill site was available at the end of October 2003, and the
gas  connection  to  the  site  is  expected  to  be completed around the end of
December  2003.

At  the end of September 2003, Stendal employed 69 people, most of whom are part
of  the  management organization charged with supervising the implementation and
completion  of  the  Stendal  project.

During  the  third  quarter,  many  key  positions were filled in respect of the
Stendal  project,  including  for  the production and maintenance management and
wood  procurement  and  logistics operations, as well as the recovery, power and
effluent plants.  In addition, a number of operating personnel for the mill were
hired and training of personnel in connection with the operation of the mill was
commenced.  A  number  of  key positions are expected to be filled in the fourth
quarter of 2003 and first quarter of 2004, including in the areas of purchasing,
sales,  and  technology  and  customer  support.


FORM 10-Q
QUARTERLY REPORT - PAGE 26


<PAGE>

LIQUIDITY  AND  CAPITAL  RESOURCES

The  following  table  is  a  summary  of selected financial information for the
periods  indicated:

<TABLE>
<CAPTION>

                                              As at               As at
                                        September 30, 2003   December 31,2002
                                       --------------------  ----------------
                                                      (unaudited)
                                                  (Euros in thousands)
<S>                                    <C>                   <C>
FINANCIAL POSITION
Working capital                        E  (58,049)           E   6,328
Properties                                649,780              441,990
Total assets(1)                           828,758              599,750
Long-term debt(2)                         476,126              351,878
Shareholders' equity                      125,983              124,969

</TABLE>
___________
(1)  Includes  approximately  E404.3  million  and  E186.9  million  related  to
     properties  construction  in progress at the site of the Stendal mill as at
     September  30,  2003  and  December  31,  2002,  respectively.
(2)  Includes  approximately  E287.4  million  and  E146.5  million  related  to
     construction  in  progress  at the site of the Stendal mill as at September
     30,  2003  and  December  31,  2002,  respectively.

At  September  30,  2003,  our  cash  and  cash  equivalents were E17.6 million,
compared  to E30.3  million at the end of 2002. We also had E8.4 million of cash
restricted  to  pay  construction in progress costs payable and E19.1 million of
cash restricted in a debt service account, both relating to the Stendal project.
In  addition,  we had E21.2 million of cash restricted in a debt service account
relating  to the Rosenthal mill. Short-term trading securities were E0.5 million
at  September 30, 2003, compared to E0.3 million at December 31, 2002.  We had a
working  capital  deficit of E58.0 million (including Stendal construction costs
payable  of E57.8  million  and  bridge  financing and related expenses of E56.5
million)  at  September 30, 2003, compared to working capital of E6.3 million at
December  31,  2002.  The  change  in  our working capital position is primarily
attributable  to  an increase in Stendal construction costs payable for which we
had  not  drawn  down  funds under the Stendal Loan Facility as at September 30,
2003 and the reclassification of one of our bridge loans in the principal amount
of E30  million from long-term to current liabilities.  The Stendal construction
costs  payable  will  be  paid  from  the  Stendal Loan Facility in the ordinary
course.  The  bridge  loans and related amounts were repaid on October 10, 2003.
See  "Certain  Relationships"  below.

On  October  10,  2003,  we  completed  the  sale  of $82.5 million in aggregate
principal  amount of convertible senior subordinated notes due October 15, 2010.
The notes bear interest at a rate of 8.5% per annum and are convertible into our
shares of beneficial interest at a conversion price of $7.75 per share.  The net
proceeds  from the offering of approximately E76.1 million were used to repay in
full  our  indebtedness,  including  fees and accrued interest, under two bridge
loan  facilities aggregating approximately E65.9 million and the balance will be
used  for  general  corporate  purposes,  including  working  capital.

We  expect  to  continue to generate sufficient cash flow from operations to pay
our  interest  and  debt  service  expenses and meet the working and maintenance
capital  requirements  for our current operations.  We currently do not have any
revolving  credit  facilities.  From  time to time, we have entered into project
specific credit facilities to finance capital projects and expect to continue to
do  so,  subject to availability. We expect to meet the capital requirements for
the Stendal mill, including working capital and potential losses incurred during
start-up,  through  shareholder advances already made to Stendal and the Stendal
Loan Facility, which includes a revolving line of credit for the mill, and, when
operational,  cash  flow  from  operations.


FORM 10-Q
QUARTERLY REPORT - PAGE 27


<PAGE>

OPERATING  ACTIVITIES

Operating  activities  in the nine months ended September 30, 2003 provided cash
of E6.9  million,  compared  to E24.0 million in the nine months ended September
30,  2002.  Net  changes  in trading securities used cash of E0.2 million in the
nine months ended September 30, 2003, compared to providing cash of E4.0 million
in  the  nine months ended September 30, 2002. An increase in receivables in the
current  period  used  cash  of E8.1 million, compared to a decrease in the same
providing  cash  of E5.6 million in the nine months ended September 30, 2002. An
increase  in  cumulative  unrealized  gains  on  derivatives  used cash of E18.3
million in the current period, compared to a decrease in the same providing cash
of E0.1  million  in  the comparative period in 2002. An increase in inventories
used cash of E6.6 million in the current period, compared to E0.7 million in the
comparable  period of 2002. An increase in accounts payable and accrued expenses
provided  cash  of E11.5  million  in  the nine months ended September 30, 2003,
compared  to  a  decrease  in  the  same using cash of E12.4 million in the nine
months  ended  September  30,  2002.

INVESTING  ACTIVITIES

Investing  activities  in  the nine months ended September 30, 2003 used cash of
E225.9 million,  primarily  as a result of the acquisition of properties, net of
investment  grants  received,  of  which E217.9  million was attributable to the
Stendal  project,  compared to E155.0 million in the nine months ended September
30,  2002,  of  which E145.9  million  was  attributable to the Stendal project.

We  have applied for investment grants from the federal and state governments of
Germany  and  have claims of E62.6 million outstanding as of September 30, 2003.
We  expect to receive the full amount of our currently outstanding claims within
12  months.  We  have  received  investment  grants  totaling E66.2 million with
respect  to  the Stendal project in the nine months ended September 30, 2003. In
accordance  with  our  accounting  policies, we do not record these grants until
they  are  received.  These grants reduce the cost basis of the assets purchased
with  them.

Our  paper mills have or will have to replace certain equipment that was damaged
as a result of flooding in parts of Germany and other eastern European countries
during the third quarter of 2002. The aggregate equipment costs are estimated to
be  approximately E3.3 million, of which approximately E1.6 million was incurred
in  the  nine  months  ended  September  30,  2003.  We  have applied for German
government grants and for assistance under special credit programs instituted by
the  German  government  for flooding victims in connection with these and other
related  costs.  As  at  September  30, 2003, we had received approximately E3.4
million  of  such  grants, of which E1.8 million was recognized as income in the
current  period  and  the  balance has either been deferred or deducted from the
cost  of  property  acquired.  Although  we  have received approval for the full
amount  of the grants and assistance applied for, there can be no assurance that
we  will  receive  any  unpaid  amounts  of  such  grants  and  assistance.

FINANCING  ACTIVITIES

Financing  activities  provided  cash of E206.2 million in the nine months ended
September  30,  2003.  A  net increase in indebtedness, primarily related to the
Stendal  project,  provided cash of E186.9 million and an increase in restricted
cash  used  cash  of E0.5  million  in  the  current  period.  We made principal
repayments  of E12.7  million  in connection with the Rosenthal Loan Facility in
the  nine  months ended September 30, 2003. The issuance of shares in connection
with  the  exercise  of  options  provided  cash  of E0.9 million in the current
period.  Financing activities provided cash of


FORM 10-Q
QUARTERLY REPORT - PAGE 28


<PAGE>

E142.7  million  in  the  nine  months  ended September 30, 2002, primarily as a
result  of  a  net  increase  in  indebtedness  relating to the Stendal project.

In  2003,  our  paper  operations secured two term credit facilities aggregating
approximately E2.5  million,  which  facilities  along  with  certain government
grants  are  being  utilized  to repair flooding damage suffered by the mills in
2002. One facility totaling approximately E1.0 million matures on June 30, 2009,
bears  interest  at  a  rate  of  2.65%  per annum and is repayable in ten equal
semi-annual  installments.  The  other  facility  in the amount of approximately
E1.5 million  matures  on  June  30, 2013, bears interest at a rate of 2.65% per
annum and is repayable in 15 equal semi-annual installments. Both facilities are
guaranteed  as  to 80% thereof by a German governmental agency.  An aggregate of
approximately E1.8  million  was utilized under these facilities as of September
30,  2003.

In  addition, in 2003, our Fahrbrucke paper mill secured three credit facilities
aggregating E5.5  million, which facilities along with certain government grants
will  be  utilized  to  finance equipment and construction costs associated with
expanding,  adapting  and  improving  the efficiency of the paper machine at the
mill.  This  will  also  permit the mill to produce pre-impregnated decor paper.
Two  of  the facilities aggregating E3.5 million mature on December 30, 2012 and
bear  interest at rates between 4.15% and 4.3% per annum and are repayable in 16
equal semi-annual installments. The other facility in the amount of E2.0 million
matures  on March 31, 2009 and bears interest at a rate equal to the three-month
Euribor  rate  plus  1.75%  per  annum  and  is  repayable in 16 equal quarterly
installments.  All three facilities are guaranteed as to 80% thereof by a German
state  government.  As at September 30, 2003, we had utilized approximately E2.5
million  of  such  facilities.

Other  than  the  agreements  entered  into  by  Stendal relating to the Stendal
project,  we  had  no  material  commitments  to  acquire  assets  or  operating
businesses  at September 30, 2003. We anticipate that there will be acquisitions
of businesses or commitments to projects in the future. To achieve our long-term
goals  of  expanding  our  asset  and  earnings  base through the acquisition of
interests  in companies and assets in the pulp and paper and related businesses,
and  organically  through  high  return  capital  expenditures  at our operating
facilities,  we  will  require  substantial  capital  resources.  The  required
necessary  resources  for  such long-term goals will be generated from cash flow
from  operations,  cash  on hand, borrowing against our assets, the sale of debt
and/or  equity  securities  and/or  asset  sales.

FOREIGN  CURRENCY

We  hold  certain assets and liabilities in U.S. dollars, Swiss francs and, to a
lesser  extent,  in  Canadian  dollars.  Accordingly, our consolidated financial
results  are  subject  to  foreign  currency  exchange  rate  fluctuations.

We  translate  foreign denominated assets and liabilities into Euros at the rate
of  exchange  on  the  balance sheet date. Unrealized gains or losses from these
translations  are  recorded  as shareholders' equity on the balance sheet and do
not  affect  our  net  earnings.

In  the  nine  months  ended  September 30, 2003, we reported a net E1.2 million
foreign  exchange  translation  gain  and,  as  a result, the cumulative foreign
exchange  translation  gain increased to E4.7 million at September 30, 2003 from
E3.5  million  at  December  31,  2002.

Based  upon  the  average  exchange rate for the nine months ended September 30,
2003, the U.S. dollar decreased by approximately 16.8% in value against the Euro
compared  to  the  same  period  in  2002.


FORM 10-Q
QUARTERLY REPORT - PAGE 29


<PAGE>

CERTAIN  RELATIONSHIPS

As  part  of  the  financing  for the Stendal project, we obtained a E15 million
bridge  loan  from Babcock & Brown Investment Management Partners LP ("Babcock &
Brown"), and a E30 million bridge loan arranged by a Swiss banking subsidiary of
MFC  Bancorp  Ltd.  ("MFC"),  with  variable interest rates and specified  fees,
which  were  repaid  on  October  10,  2003.  Babcock & Brown was our advisor in
connection  with the overall financing arrangements for the Stendal project. MFC
was  our  approximately  92%  owned subsidiary until June 1996, when we spun-off
approximately  83%  of  the issued shares of MFC to our shareholders by way of a
special  dividend-in-kind  as,  among  other  things,  there were no significant
synergies  between  our  pulp  and  paper  business and MFC's financial services
business.  Prior  to the spin-off, MFC provided and arranged for the majority of
our  financial  requirements.  In  addition  to  the  bridge loan, we have other
indebtedness to MFC in the amount of approximately E7.7 million which matures in
April  2004.

We  currently hold, directly and indirectly, approximately 575,683 common shares
of MFC, representing approximately 4.4% of the outstanding common shares of MFC.
Prior  to  our  spin-off  of  MFC  in  1996, Jimmy S.H. Lee, our Chairman, Chief
Executive Officer and a trustee was also Chairman and Chief Executive Officer of
MFC.  Mr.  Lee  is  currently  a  non-executive  director  of  the Swiss banking
subsidiary of MFC and he and members of his family, directly and indirectly, own
approximately 2% of MFC's outstanding shares, which shares were in part acquired
pursuant  to  the  1996  spin-off.  Ian  Rigg,  a  trustee  and our former Chief
Financial  Officer,  became  a  Vice  President  of  MFC  in  August  2003.

We  have  in  the  course  of  our  business entered into transactions and other
arrangements  with MFC and its affiliates. From time to time, our Rosenthal pulp
mill  sells  pulp  to  a commodities trading subsidiary of MFC, both for its own
account  and  as  an  agent  for  sales  to  certain  parts  of Europe. All such
transactions  are conducted on market terms on an arm's length basis as provided
for  in  the  Rosenthal  project  loan  agreements.

In  December  2002,  we  contributed  our  80% interest in Landqart to a limited
partnership in exchange for a 49% interest therein. The other limited partner of
the  limited  partnership is MFC and the general partner is wholly-owned by Cade
Struktur  Corporation  ("CSC"). CSC is a Canadian public company in which we own
an  approximate  26%  interest  and MFC owns 25% of CSC's issued and outstanding
shares.  Mr.  Lee,  our Chief Executive Officer, previously served as an officer
and  director  of CSC from July 2001 to December 2002. During such time, Mr. Lee
received  no  remuneration  of  any sort from CSC and did not have any ownership
interest  therein.  At  the  time  of  the  Landqart reorganization, Mr. Lee was
neither  an  officer nor a director of CSC. MFC assists with purchases and sales
for  Landqart.  In  addition,  from  time  to  time,  MFC  assists with supplier
arrangements for Landqart. Such arrangements are negotiated between Landqart and
MFC.  Mr.  Lee  is  a  director  of  Landqart.

Through a minority owned affiliate, MFC has an indirect minority interest in AIG
Altmark  Industrie  AG,  which  is  a  7%  shareholder  of  Stendal.


FORM 10-Q
QUARTERLY REPORT - PAGE 30


<PAGE>

CRITICAL  ACCOUNTING  POLICIES

The  preparation  of  financial statements in conformity with generally accepted
accounting  principles requires our management to make estimates and assumptions
that  affect  the  reported  amounts of assets and liabilities and disclosure of
contingent  assets  and  liabilities at the date of the financial statements and
the  reported  amounts  of  revenues  and expenses during the reporting periods.

Our  management  routinely  makes  judgments  and estimates about the effects of
matters  that  are  inherently  uncertain.  As  the  number  of  variables  and
assumptions  affecting  the  probable  future  resolution  of  the uncertainties
increase,  these  judgments  become  even  more  subjective and complex. We have
identified  certain  accounting  policies  that  are  the  most important to the
portrayal  of  our  financial  condition  and  results  of  operations.

For information about our critical accounting policies, see our annual report on
Form  10-K  for  the  year  ended  December  31,  2002.

CAUTIONARY  STATEMENT  REGARDING  FORWARD-LOOKING  INFORMATION

The  statements in this report that are not based on historical facts are called
"forward-looking  statements"  within  the  meaning of the United States Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
different  places  in  this  report  and  can  be  identified  by  words such as
"estimates",  "projects",  "expects",  "intends",  "believes", "plans", or their
negatives  or other comparable words. Also look for discussions of strategy that
involve  risks  and uncertainties. Forward-looking statements include statements
regarding  the  outlook for our future operations, forecasts of future costs and
expenditures,  the  evaluation  of  market  conditions,  the  outcome  of  legal
proceedings,  the  adequacy  of  reserves,  or  other  business  plans.  You are
cautioned  that  any  such forward-looking statements are not guarantees and may
involve  risks  and uncertainties. Our actual results may differ materially from
those  in the forward-looking statements due to risks facing us or due to actual
facts  differing  from  the  assumptions underlying our estimates. Some of these
risks  and assumptions include those set forth in reports and other documents we
have  filed with or furnished to the SEC, including in our annual report on Form
10-K  for  the  year  ended  December  31,  2002 and current reports on Form 8-K
furnished  on  May  12,  2003  and  September 15, 2003. We advise you that these
cautionary  remarks  expressly  qualify  in  their  entirety all forward-looking
statements  attributable  to us or persons acting on our behalf. Unless required
by  law,  we  do  not assume any obligation to update forward-looking statements
based  on  unanticipated  events  or  changed  expectations. However, you should
carefully  review the reports and other documents we file from time to time with
the  SEC.

CYCLICAL  NATURE  OF  BUSINESS;  COMPETITIVE  POSITION

The  pulp and paper business is cyclical in nature and markets for our principal
products  are  characterized by periods of supply and demand imbalance, which in
turn  affects  product  prices.  The  markets  for  pulp  and  paper  are highly
competitive  and  sensitive  to cyclical changes in industry capacity and in the
global  economy, all of which can have a significant influence on selling prices
and  our  earnings.  Demand  for  pulp  and paper products has historically been
determined  by the level of economic growth and has been closely tied to overall
business  activity.  During  the  past  three  years,  pulp  prices  have fallen
significantly.  Our  competitive  position is influenced by the availability and
quality  of raw materials and our experience in relation to other producers with
respect  to  inflation,  energy,  transportation,  labor costs, productivity and
currency  exchange  rates. There can be no assurance that we will continue to be
competitive  in  the  future,  as  a result of new technological advancements or
otherwise.


FORM 10-Q
QUARTERLY REPORT - PAGE 31


<PAGE>

ITEM  3.   QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT
           MARKET  RISK

We  are exposed to market risks from changes in interest rates, foreign currency
exchange  rates and equity prices which may affect our results of operations and
financial  condition  and,  consequently,  our fair value. We manage these risks
through  internal  risk  management  policies  as  well as the use of derivative
instruments.  We  use  derivative instruments to reduce or limit our exposure to
interest  rate  and  currency  risks.  We  may  in  the  future  use  derivative
instruments  to  reduce or limit our exposure to fluctuations in pulp prices. We
also  use  derivative  instruments  either  to augment our potential gains or to
reduce  our potential losses, depending on our management's perception of future
economic  events  and  developments.  These  types of derivative instruments are
generally  highly speculative in nature. They are also very volatile as they are
highly leveraged given that margin requirements are relatively low in proportion
to  notional  amounts.

Many  of  our  strategies,  including  the use of derivative instruments and the
types  of derivative instruments selected by us, are based on historical trading
patterns  and  correlations  and our management's expectations of future events.
However,  these strategies may not be fully effective in all market environments
or  against  all  types  of risks. Unexpected market developments may affect our
risk  management  strategies  during  this  time, and unanticipated developments
could impact our risk management strategies in the future. If any of the variety
of instruments and strategies we utilize are not effective, we may incur losses.

Rosenthal  has  entered into the Rosenthal Currency Swaps in connection with our
long-term  indebtedness  relating to the conversion of the Rosenthal mill to the
production  of  kraft  pulp. These derivatives have been contracted by Rosenthal
using  a  dedicated  credit line within the Rosenthal Loan Facility and assigned
for  this  purpose,  and  are  subject to prescribed controls, including certain
maximum  amounts  for  notional  and  at-risk  amounts. As kraft pulp prices are
quoted  in  U.S.  dollars  and  the  majority  of  our business transactions are
denominated in Euros, Rosenthal has entered into the Rosenthal Currency Swaps to
reduce the effects of exchange rate fluctuations between the U.S. dollar and the
Euro  on notional amounts under the Rosenthal Loan Facility. Under the Rosenthal
Currency  Swaps,  Rosenthal  effectively pays the principal and interest in U.S.
dollars  and at U.S. dollar borrowing rates.  In the nine months ended September
30,  2003,  Rosenthal entered into an additional Rosenthal Currency Swap for the
notional  amount  of E124.2  million  maturing  on  September  30,  2008.

In addition, Rosenthal has entered into interest rate contracts to either fix or
limit  the  interest  rates  in connection with certain of its indebtedness, and
various  currency forwards to reduce or limit its exposure to currency risks and
to  augment  its  potential  gains  or  to  reduce  its  potential  losses.

Stendal has entered into the Stendal Interest Rate Swap Agreements in connection
with  its  long-term  indebtedness  relating  to  the Stendal project to fix the
interest rate under the Stendal Loan Facility at the then low level, relative to
its  historical  trend  and projected variable interest rate.  Under the Stendal
Interest Rate Swap Agreements, Stendal pays a fixed rate and receives a floating
rate with interest payments being calculated on a notional amount.  The interest
rates  payable  under  the Stendal Loan Facility were swapped at the fixed rates
based  on  the  Eur-Euribor rate for the repayment periods of the tranches under
the  Stendal  Loan  Facility.  Stendal  effectively  converted  the Stendal Loan
Facility  from  a  variable  interest rate loan into a fixed interest rate loan,
thereby  reducing  interest  rate  uncertainty.


FORM 10-Q
QUARTERLY REPORT - PAGE 32


<PAGE>

In  the  third  quarter  of  2003,  Stendal also entered into a currency forward
contract  for  the  notional  amount of $10.0 million maturing in August 2004 to
reduce  or  limit  its  exposure  to currency risks and to augment its potential
gains  or  reduce  its  potential  losses.

For  more information concerning market risk and our derivative instruments, see
our annual report on Form 10-K for the year ended December 31, 2002 on file with
the SEC and current report on Form 8-K dated September 15, 2003 furnished to the
SEC.

ITEM  4.     CONTROLS  AND  PROCEDURES

Our  management,  with  the participation of our Principal Executive Officer and
Principal  Financial  Officer, has evaluated the effectiveness of our disclosure
controls  and  procedures  (as  such  term  is  defined  in  Rules 13a-15(e) and
15d-15(e)  under  the Securities Exchange Act of 1934, as amended (the "Exchange
Act")),  as  of  the  end  of  the period covered by this report.  Based on such
evaluation, our Principal Executive Officer and Principal Financial Officer have
concluded  that,  as  of  the  end  of  such period, our disclosure controls and
procedures are effective in recording, processing, summarizing and reporting, on
a  timely  basis, information required to be disclosed by us in the reports that
we file or submit under the Exchange Act.  It should be noted that any system of
controls is based in part upon certain assumptions designed to obtain reasonable
(and  not  absolute)  assurance  as  to  its  effectiveness, and there can be no
assurance  that  any  design  will  succeed  in  achieving its stated goals.  In
addition,  no  changes  in  our  internal  control  over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during
the  period  covered  by  this  report  that  have  materially  affected, or are
reasonably  likely  to  materially  affect,  our internal control over financial
reporting.


FORM 10-Q
QUARTERLY REPORT - PAGE 33


<PAGE>

                           PART II.  OTHER INFORMATION
                                     -----------------

ITEM  1.     LEGAL  PROCEEDINGS

We  are  subject  to  routine  litigation incidental to our business.  We do not
believe  that the outcome of such litigation will have a material adverse effect
on  our  business  or  financial  condition.

ITEM  2.     CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

On  October  10,  2003,  we  completed  the  sale  of $82.5 million in aggregate
principal  amount of convertible senior subordinated notes due October 15, 2010.
The notes bear interest at a rate of 8.5% per annum and are convertible into our
shares of beneficial interest at a conversion price of $7.75 per share, which is
equal  to  a  conversion  rate  of approximately 129 shares per $1,000 principal
amount  of  the notes, subject to adjustment for certain customary anti-dilution
matters.  The  notes  were  offered  only  to  qualified institutional buyers in
reliance  on  Rule  144A  and  to certain buyers outside of the United States in
reliance  on  Regulation  S  under  the Securities Act of 1933, as amended.  The
notes  were  sold  to  RBC  Dain  Rauscher  Inc., as the initial purchaser.  The
aggregate  initial purchaser's discounts of the offering were approximately $3.4
million.

In connection with the sale of the notes, we amended our shareholder rights plan
to  provide  that  the  determination of the percentage of outstanding shares of
beneficial  interest  beneficially  owned  by  a  person,  entity  or  group  of
associated  persons  shall  be  based  upon  the  number of shares of beneficial
interest  outstanding as at the date of determination as if the then outstanding
notes  had  been  fully converted and to amend the percentage at which a person,
entity  or  group of associated persons becomes an "acquiring person" as defined
in  the  rights  plan  from  25  percent  to 15 percent.  See our Form 8-K dated
October  15,  2003  on  file  with  the  SEC.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITYHOLDERS

We held our annual meeting of shareholders on August 22, 2003.   At the meeting,
two Class III trustees were elected to our board of trustees, the appointment of
Deloitte  &  Touche  LLP  as  our independent auditors was ratified and our 2003
Non-Qualified  Stock  Option  Plan  was  adopted.

The  votes  cast  by  shareholders at the meeting as to the election of trustees
were  as  follows:

<TABLE>
<CAPTION>

                                                     Abstentions and
                       Votes For     Votes Withheld  Broker Non-Votes
                       ---------     --------------  ----------------
<S>                    <C>           <C>             <C>
Kenneth A. Shields     9,525,666          30,907             -
Guy W. Adams . . .     9,330,042         226,531             -

</TABLE>

Jimmy  S.H.  Lee,  C.S.  Moon,  William  McCartney, R. Ian Rigg and Graeme Witts
continued  their  respective  terms  as  trustees.

In  connection with the ratification of the appointment of Deloitte & Touche LLP
as  our independent auditors, shareholders cast 9,501,773 votes in favour of and
4,500  votes against the ratification of such appointment, and there were 50,300
abstentions  and  broker  non-votes.

In  connection with the approval of the adoption of our 2003 Non-Qualified Stock
Option  Plan, shareholders cast 7,112,181 votes in favour of and 2,424,084 votes
against  the adoption of such plan, and there were 20,308 abstentions and broker
non-votes.


FORM 10-Q
QUARTERLY REPORT - PAGE 34


<PAGE>

We  also  held  a  special  meeting  of shareholders on October 3, 2003 at which
shareholder  approval  was  sought  and  obtained  for  the  issuance  of  up to
10,750,000  of  our  shares  of  beneficial  interest  upon  the  conversion  of
convertible  senior  subordinated  notes  that we proposed to issue in a private
offering,  subject  to  adjustment  for  customary  anti-dilution  matters,  as
described  in  our  proxy  statement  dated  September 22, 2003.  At the special
meeting,  9,109,861  shares were voted in favour of and 90,665 shares were voted
against  the  proposal,  and  there were 3,001 abstentions and broker non-votes.

ITEM  6.   EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  EXHIBITS

     4.1  Indenture  dated  as  of October 10, 2003 between Mercer International
          Inc. and Wells Fargo Bank Minnesota, N.A. Incorporated by reference to
          the  Company's  Form 8-K dated October 15, 2003, previously filed with
          the  SEC.

     4.2  Registration  Rights  Agreement  dated  as of October 10, 2003 between
          Mercer  International  Inc. and RBC Dain Rauscher Inc. Incorporated by
          reference to the Company's Form 8-K dated October 15, 2003, previously
          filed  with  the  SEC.

     4.3  First  Amendment  dated  as of October 5, 2003 to the Rights Agreement
          dated  as  of  August  20,  1993 between Mercer International Inc. and
          Computershare  Trust  Company  of Canada. Incorporated by reference to
          the Company's Form 8-K dated August 6, 2003, previously filed with the
          SEC.

     4.4  Second  Amendment dated as of October 10, 2003 to the Rights Agreement
          dated  as  of  August  20,  1993 between Mercer International Inc. and
          Computershare  Trust  Company  of Canada. Incorporated by reference to
          the  Company's  Form 8-K dated October 15, 2003, previously filed with
          the  SEC.

     10.1 Purchase  Agreement  dated  as  of  October  6,  2003  between  Mercer
          International  Inc.  and  RBC  Dain  Rauscher  Inc.

     10.2 Employment Agreement dated for reference August 7, 2003 between Mercer
          International  Inc.  and  David Gandossi. Incorporated by reference to
          the  Company's  Form  8-K dated August 11, 2003, previously filed with
          the  SEC.

     10.3 Settlement  Agreement  dated  as  of  August  5,  2003  among  Mercer
          International Inc., Greenlight Capital, L.L.C. and Greenlight Capital,
          Inc.  Incorporated by reference to the Company's Form 8-K dated August
          6,  2003,  previously  filed  with  the  SEC.

     31.1 Section  302  Certification  of  Chief  Executive  Officer

     31.2 Section  302  Certification  of  Chief  Financial  Officer

     32.1*  Section  906  Certification  of  Chief  Executive  Officer

     32.2*  Section  906  Certification  of  Chief  Financial  Officer
     ________________
     *  In  accordance  with  Release  33-8212  of  the  Commission,  these
     Certifications:  (i)  are "furnished" to the

FORM 10-Q
QUARTERLY REPORT - PAGE 35


<PAGE>

     Commission  and  are  not  "filed"  for the purposes of liability under the
     Securities Exchange Act of 1934, as amended; and (ii) are not to be subject
     to  automatic  incorporation  by  reference  into  any  of  the  Company's
     registration  statements filed under the Securities Act of 1933, as amended
     for the purposes of liability thereunder or any offering memorandum, unless
     the  Company  specifically  incorporates  them  by  reference  therein.

(b)  REPORTS  ON  FORM  8-K

     The  Company  filed  the  following reports on Form 8-K with respect to the
     indicated  items  during  the  third  quarter  of  2003:

     Form  8-K  dated  July  16,  2003
       Item  4.  Changes  in  Registrant's  Certifying  Accountant

     Form  8-K  dated  August  6,  2003
       Item  5.  Other  Events  and  Regulation  FD  Disclosure
       Item  7.  Exhibits

    Form  8-K/A  dated  August  6,  2003
       Item  4.  Changes  in  Registrant's  Certifying  Accountant
       Item  7.  Exhibits

    Form  8-K  dated  August  11,  2003
       Item  5.  Other  Events  and  Regulation  FD  Disclosure
       Item  7.  Exhibits

    Form  8-K  dated  August  14,  2003
       Item  12.  Results  of  Operations  and  Financial  Condition
       Item  7.  Exhibits

    Form  8-K  dated  September  12,  2003
       Item  5.  Other  Events  and  Regulation  FD  Disclosure
       Item  7.  Exhibits

    Form  8-K  dated  September  15,  2003
       Item  9.  Regulation  FD  Disclosure

    Form  10-K  dated  October  6,  2003
       Item  5.  Other  Events  and  Regulation  FD  Disclosure
       Item  7.  Exhibits

    Form  8-K  dated  October  10,  2003
       Item  5.  Other  Events  and  Regulation  FD  Disclosure
       Item  7.  Exhibits

    Form  8-K  dated  October  15,  2003
       Item  5.  Other  Events  and  Regulation  FD  Disclosure
       Item  7.  Exhibits


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  36


<PAGE>

                                   SIGNATURES

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned,  thereunto  duly  authorized.


                                   MERCER  INTERNATIONAL  INC.


                                   By:  /s/  David M. Gandossi
                                      --------------------------
                                      David M. Gandossi
                                      Secretary and Chief Financial Officer


Date:  November  13,  2003


FORM 10-Q
QUARTERLY REPORT - PAGE 37