<SUBMISSION>
<ACCESSION-NUMBER>0000950144-05-002561
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>17
<PERIOD>20041231
<FILING-DATE>20050316
<DATE-OF-FILING-DATE-CHANGE>20050315
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>BOWATER INC
<CIK>0000743368
<ASSIGNED-SIC>2621
<IRS-NUMBER>620721803
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>001-08712
<FILM-NUMBER>05682943
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>55 EAST CAMPERDOWN WAY
<STREET2>P O BOX 1028
<CITY>GREENVILLE
<STATE>SC
<ZIP>29601
<PHONE>8642717733
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>55 EAST CAMPERDOWN WAY
<STREET2>P O BOX 1028
<CITY>GREENVILLE
<STATE>SC
<ZIP>29602
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>g93753e10vk.htm
<DESCRIPTION>BOWATER INCORPORATED
<TEXT>
<HTML>
<HEAD>
<TITLE>Bowater Incorporated</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<P align="center" style="font-size: 14pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<P align="center" style="font-size: 18pt"><B>FORM 10-K</B>


<P align="center" style="font-size: 12pt"><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B>


<P align="center" style="font-size: 10pt"><B>FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004<BR>
COMMISSION FILE NO. 1-8712</B>


<P align="center" style="font-size: 24pt"><B>Bowater Incorporated</B>



<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>62-0721803</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><B>55 East Camperdown Way<BR>
P. O. Box 1028<BR>
Greenville, South Carolina 29602-1028</B><BR>
(Address of principal executive offices)<BR>
<B>(864)&nbsp;271-7733</B><BR>
(Registrant&#146;s telephone number, including area code)



<P align="left" style="font-size: 10pt"><B>Securities registered pursuant to Section&nbsp;12(b) of the Act:</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Title Of Each Class</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>Name Of Each Exchange On Which Registered</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Common Stock, par value $1 per share
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">New York Stock Exchange, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Pacific Exchange, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">The London Stock Exchange</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><B>Securities registered pursuant to Section&nbsp;12(g) of the Act:</B><BR>
None



<P align="left" style="font-size: 10pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
Yes&nbsp;<FONT face="wingdings">&#254;</font>&nbsp; No&nbsp;<FONT face="wingdings">&#111;</font>



<P align="left" style="font-size: 10pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is
not contained herein, and will not be contained, to the best of the registrant&#146;s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form&nbsp;10-K
or any amendment to this Form&nbsp;10-K. <FONT face="wingdings">&#254;</font>



<P align="left" style="font-size: 10pt">Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule&nbsp;12b-2). Yes&nbsp;<FONT face="wingdings">&#254;</font>&nbsp; No&nbsp;<FONT face="wingdings">&#111;</font>



<P align="left" style="font-size: 10pt">The aggregate market value of the voting common equity held by nonaffiliates* of the registrant as
of June&nbsp;30, 2004, was approximately $2.3&nbsp;billion.



<P align="left" style="font-size: 10pt">As of March&nbsp;1, 2005, there were 55,911,559 shares of the registrant&#146;s Common Stock outstanding.



<P align="center" style="font-size: 10pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B>



<P align="left" style="font-size: 10pt">Portions of the definitive Proxy Statement to be delivered with respect to the Annual Meeting of
Shareholders to be held on May&nbsp;11, 2005 are incorporated by reference into Part III.



<P align="left" style="font-size: 10pt">* Without acknowledging that any individual director or executive officer of the registrant is an
affiliate, the shares over which they are deemed to have voting control are considered to be owned
by affiliates solely for purposes of this calculation.



<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>






<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt">TABLE OF CONTENTS



<P align="left" style="font-size: 10pt">Bowater Incorporated




<P align="left" style="font-size: 10pt"><B>Form&nbsp;10-K</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>For the year ended December&nbsp;31, 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Part I.</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;1.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Business
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;2.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Properties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;3.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Legal Proceedings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;4.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Submission of Matters to a Vote of Security Holders
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Officers of the Registrant as of March&nbsp;1, 2005
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Part II.</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;5.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Market for the Registrant&#146;s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;6.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Selected Financial Data
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;7.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;7A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Quantitative and Qualitative Disclosures about Market Risk
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;8.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Statements and Supplementary Data
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;9.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">89</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;9A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Controls and Procedures
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">89</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;9B.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other Information
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">89</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Part III.</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;10.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Directors and Executive Officers of the Registrant
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">89</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;11.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Compensation
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">90</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;12.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">90</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;13.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certain Relationships and Related Transactions
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">90</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;14.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Principal Accountant Fees and Services
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">91</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Part IV.</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Item&nbsp;15.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exhibits and Financial Statement Schedules
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">91</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Signatures
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">99</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>PART I</B>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;1. </B><B><I>Business</I></B>



<P align="left" style="font-size: 10pt"><B>General</B>



<P align="left" style="font-size: 10pt">Bowater Incorporated (&#147;Bowater&#148;) is engaged in the manufacture, sale and distribution of newsprint,
uncoated specialty paper, coated groundwood paper, market pulp, lumber and timber. We operate
facilities in the United States, Canada and South Korea and, as of December&nbsp;31, 2004, our
operations were supported by 1.4&nbsp;million acres of timberlands owned or leased in the United States
and Canada and 29.6&nbsp;million acres of timber cutting rights on Crown-owned lands in Canada. We
market and distribute our products throughout the world. No single customer, related or otherwise,
accounted for 10% or more of Bowater&#146;s 2004 consolidated sales.



<P align="left" style="font-size: 10pt">Bowater was incorporated in Delaware in 1964. Our principal executive offices are located at 55
East Camperdown Way, Greenville, South Carolina 29601, and our telephone number at that address is
(864)&nbsp;271-7733.



<P align="left" style="font-size: 10pt"><B>Operating Divisions</B>



<P align="left" style="font-size: 10pt">As of December&nbsp;31, 2004, Bowater operated through five divisions: the Newsprint Division, the
Coated and Specialty Papers Division, the Pulp Division, the Forest Products Division and the
Canadian Forest Products Division. These divisions will form the basis for the disclosures in this
report.



<P align="left" style="font-size: 10pt">Effective January&nbsp;1, 2005, the Forest Products Division was merged into the Newsprint and Canadian
Forest Products divisions and the Thunder Bay Operation was moved to the Coated and Specialty
Papers Division. The Forest Products Division was originally established as a separate profit
center to manage a large amount of timberland as well as to supply wood fiber to several of our
mills. However, much of this timberland has been sold in recent years. In future periods,
operating divisions will be reported under this new organizational structure.



<P align="left" style="font-size: 10pt">The Newsprint Division, headquartered in Greenville, South Carolina, consists of the following
manufacturing facilities:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>the Calhoun Operation and Calhoun Newsprint Company (&#147;CNC&#148;) (CNC
is owned approximately 51% by Bowater and approximately 49% by
Herald Company, Inc.) located in Calhoun, Tennessee;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>the Coosa Pines Operation located in Coosa Pines, Alabama;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater Mersey Paper Company Limited (&#147;Mersey Operation&#148;) (which
is owned 51% by Bowater and 49% by The Washington Post Company)
located in Liverpool, Nova Scotia;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>the Thunder Bay Operation located in Thunder Bay, Ontario
(effective January&nbsp;1, 2005 this operation is included in the
Coated and Specialty Papers Division);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Ponderay Newsprint Company (&#147;Ponderay Operation&#148;) (an
unconsolidated partnership in which Bowater has a 40% interest
and, through a wholly-owned subsidiary, is the managing partner;
the balance of the partnership is held by subsidiaries of five
newspaper publishers) located in Usk, Washington;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>the Grenada Operation located in Grenada, Mississippi; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>the Mokpo Operation located in Mokpo, South Korea.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">This division is also supported across our North American markets by sales teams, which are
responsible for marketing and selling all of Bowater&#146;s North American newsprint and some uncoated
specialty paper. Offices in Brazil, England, Singapore and South Korea support international
marketing and selling of newsprint and some uncoated specialty paper.



<P align="left" style="font-size: 10pt">The Coated and Specialty Papers Division, headquartered in Greenville, South Carolina, consists of
the Catawba Operation located in Catawba, South Carolina, two paper coating facilities (referred to
as &#147;Nuway&#148;) located in Benton Harbor, Michigan and
Covington, Tennessee, and four sales offices.
This division is responsible for marketing and selling Bowater&#146;s coated papers and the majority of
our uncoated specialty papers. Effective January&nbsp;1, 2005, the Thunder Bay Operation will become a
component of the Coated and Specialty Papers Division.



<P align="left" style="font-size: 10pt">The Pulp Division, headquartered in Burlington, Ontario, consists of two sales offices. This
division is responsible for marketing all of Bowater&#146;s market pulp, which is produced at the
Calhoun, Catawba, Coosa Pines and Thunder Bay Operations.



<P align="center" style="font-size: 10pt">1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">The Forest Products Division, headquartered in Cleveland, Tennessee, consists of five manufacturing
facilities:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Albertville Sawmill located in Albertville, Alabama;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater Mersey Paper Company Limited Oakhill Sawmill (which is
owned 51% by Bowater and 49% by The Washington Post Company)
located in Bridgewater, Nova Scotia;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Westover Sawmill located in Westover, Alabama;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Thunder Bay Sawmill located in Thunder Bay, Ontario; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Ignace Sawmill located in Ignace, Ontario.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">The Forest Products Division is supported by 12 business offices and is responsible for managing
our timberlands in the United States and the Canadian provinces of Ontario and Nova Scotia, selling
timber (to third parties and to our paper mills), selling our U.S. lumber production, managing wood
procurement for the sawmills and our Calhoun, Coosa Pines, Grenada, Mersey and Thunder Bay
Operations, and selling non-strategic timberlands in the United States, Ontario and Nova Scotia.
Effective January&nbsp;1, 2005, the Forest Products Division was merged into the Newsprint and Canadian
Forest Products divisions.



<P align="left" style="font-size: 10pt">The Ignace Sawmill stopped producing in July&nbsp;2004 due to a wood supply shortage in Ontario. We
re-started the sawmill in January&nbsp;2005.



<P align="left" style="font-size: 10pt">The Canadian Forest Products Division, headquartered in Montreal, Quebec, consists of the following
manufacturing facilities:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater Maritimes Inc. (&#147;Dalhousie Operation&#148;) (which is owned 67% by Bowater, 25% by Oji Paper Co., Ltd. and 8% by
Mitsui &#038; Co., Ltd.) located in Dalhousie, New Brunswick;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>the Gatineau Operation, located in Gatineau, Quebec;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>the Donnacona Operation, located in Donnacona, Quebec;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>the Dolbeau Operation, located in Dolbeau, Quebec;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>six sawmills located in Quebec (D&#233;gelis, Price, Maniwaki, Saint-F&#233;licien, Girardville, and Mistassini) and the Baker
Brook sawmill located in New Brunswick; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>one wood-treating facility located in D&#233;gelis, Quebec (sold in January&nbsp;2005).</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">The Canadian Forest Products Division is responsible for marketing our Canadian lumber production,
managing the balance of our timberlands, managing wood procurement for the division&#146;s manufacturing
facilities previously listed and selling non-strategic timberlands in Quebec and New Brunswick.



<P align="left" style="font-size: 10pt">See Note 23 &#147;Segment Information&#148; to our Consolidated Financial Statements for financial
information regarding segment operations, sales by product, and sales and long-lived assets by
country.



<P align="left" style="font-size: 10pt"><B>Product Lines</B>



<P align="left" style="font-size: 10pt"><B>Newsprint</B>



<P align="left" style="font-size: 10pt">Bowater is the largest manufacturer of newsprint in the United States. Including jointly-owned
facilities, our annual North American production capacity of newsprint is approximately 2.6&nbsp;million
metric tons, or approximately 19% of the North American capacity. Including the South Korean
newsprint mill, our annual production capacity is approximately 2.9&nbsp;million metric tons, or
approximately 7% of worldwide capacity.



<P align="left" style="font-size: 10pt">The Calhoun Operation, one of the largest newsprint mills in North America, is located on the
Hiwassee River in Tennessee. Under the management of Bowater, this facility operates five paper
machines, which produced 718,000 metric tons of newsprint and uncoated specialty paper in 2004.
Included at this facility is CNC&#146;s paper machine, which produced 209,000 metric tons of newsprint
in 2004. CNC also owns a recycle fiber plant and a portion of the original thermomechanical pulp
(&#147;TMP&#148;) mill. Bowater owns the remainder of the original TMP facility. The TMP mill was expanded
in 1998. This expansion is 100% owned by Bowater along with all the other assets at the site,
which include a kraft pulp mill and other support equipment necessary to produce the finished
product. Bowater operates the entire facility. Pulp, other raw materials, labor and other
manufacturing services are transferred between Bowater and CNC at agreed upon transfer costs.



<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">The Coosa Pines Operation, located on the Coosa River in Alabama, includes two paper machines,
which produced 323,000 metric tons of 100% recycled fiber newsprint in 2004. Other facilities
include a kraft pulp mill, recovery boiler, power boilers, a wastewater treatment plant, a raw
water treatment plant, chip handling system, and other support equipment.



<P align="left" style="font-size: 10pt">The Dalhousie Operation, located on the Chaleur Bay in New Brunswick, has two newsprint machines.
These machines were rebuilt in 1982 and produced 237,000 metric tons of newsprint in 2004. This
operation has a deep-sea docking facility that can accommodate large ocean freighters, providing
economical access to ports along the eastern seaboard of the United States and throughout the
world. Other facilities include a TMP mill, a refuse boiler, a waste treatment plant, and other
support equipment.



<P align="left" style="font-size: 10pt">The Gatineau Operation, located on the Ottawa River in Quebec, consists of three paper machines,
which produced 448,000 metric tons of newsprint and 27,000 short tons of specialty paper in 2004.
Other facilities include a recycling plant, a refuse boiler, a TMP mill, a secondary effluent
treatment facility, and other support equipment.



<P align="left" style="font-size: 10pt">The Grenada Operation, located on the Yalobusha River in Mississippi, consists of a TMP mill and
one paper machine that produced 244,000 metric tons of newsprint in 2004. Other facilities include
a waste treatment plant, a refuse boiler, and other support equipment.



<P align="left" style="font-size: 10pt">The Mersey Operation is located in Nova Scotia on an ice-free port and has a deep-sea docking
facility that can accommodate large ocean freighters, providing economical access to ports
throughout the world. It has two paper machines that were built in 1929 and rebuilt between 1983
and 1985. The mill produced 250,000 metric tons of newsprint in 2004. Other facilities include a
TMP mill, a wastewater treatment facility and other support equipment.



<P align="left" style="font-size: 10pt">The Mokpo Operation, located in the Daebul Industrial Complex on the southwest coast of South
Korea, has one paper machine that produces 100% recycled fiber newsprint. This facility began
production in late 1996. The mill produced 252,000 metric tons of recycled fiber newsprint in
2004. This facility ships by truck or from a nearby public deep-sea docking facility. The Mokpo
Operation is subject to risks associated with the economic and political climate of South Korea.
See, &#147;Cautionary Statements Regarding Forward-Looking Information and Use of Third Party Data &#150;
Changes in the political or economic conditions in the United States or other countries in which
our products are manufactured or sold can adversely affect our results of operations&#148; on page 12<B>.</B>



<P align="left" style="font-size: 10pt">The Ponderay Operation, located on the Pend Oreille River in Washington, consists of one newsprint
machine, which began production in 1989 and produced 260,000 metric tons of newsprint in 2004.
Other facilities include a TMP mill, a recycling plant, a wastewater treatment facility and other
support equipment.



<P align="left" style="font-size: 10pt">The Thunder Bay Operation, located on the Kaministiquia River in northwestern Ontario, includes
three paper machines and two kraft pulp mills. In 2004, this facility produced 325,000 metric tons
of newsprint and uncoated specialty paper and 60,000 metric tons of base stock for Bowater&#146;s Nuway
operation. As a result of newsprint market conditions and a stronger Canadian dollar, one paper
machine was idled at our Thunder Bay Operation in late June of 2003 and is expected to remain down
until newsprint market conditions improve. Other facilities include a TMP mill, a recycling plant,
two recovery boilers, a refuse boiler, a chip handling system, a waste treatment plant and other
support equipment.



<P align="left" style="font-size: 10pt">Including the production capacity for our unconsolidated partnership, Ponderay Newsprint Company,
we have 46% of our newsprint capacity in the U.S., 45% in Canada and 9% in South Korea.



<P align="left" style="font-size: 10pt">Our North American newsprint is sold directly by Bowater by its domestic sales force. Sales
outside North America are made through our subsidiaries located in the markets they serve. We
distribute newsprint by rail, truck and ship.



<P align="left" style="font-size: 10pt">In 2004, Bowater sold newsprint to various related parties. During 2004, our joint venture partners
purchased an aggregate of approximately 770,000 metric tons, which includes purchases from our
unconsolidated partnership, Ponderay Newsprint Company. Newsprint tons sold from consolidated
entities to related parties represent approximately 25% of our total newsprint tons sold.



<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Coated and Specialty Papers</B>



<P align="left" style="font-size: 10pt">Bowater is one of the largest producers of coated mechanical paper in the United States and North
America. Capacity in 2004 was 925,000 short tons. This tonnage represents approximately 15% of
North American capacity. We are one of the largest producers of supercalendared and uncoated
specialty papers in North America with an annual capacity of approximately 750,000 short tons, or
approximately 12% of North American capacity. Our coated and uncoated specialty papers are used in
magazines, catalogs, books, retail advertising pieces, direct mail pieces and coupons.



<P align="left" style="font-size: 10pt">Bowater manufactures a variety of coated paper grades on three paper machines at the Catawba
Operation. In 2004, Catawba produced approximately 676,000 short tons of coated paper and
approximately 11,000 short tons of uncoated specialty paper. The Catawba Operation also includes a
newly replaced kraft pulp mill (2003), a TMP mill and other support equipment.



<P align="left" style="font-size: 10pt">The Donnacona Operation, located in Quebec, consists of one specialty paper machine that produced
approximately 148,000 short tons of specialty paper, mostly supercalendared grades, during 2004.
The Donnacona operation also includes a TMP mill, a waste water treatment plant, a steam boiler and
other support equipment.



<P align="left" style="font-size: 10pt">The Dolbeau Operation, located in Quebec, consists of two specialty paper machines that produced
approximately 250,000 short tons of specialty paper, mostly book paper and supercalendared grades,
during 2004. The Dolbeau operation also includes a TMP mill, a wastewater treatment plant and
other support equipment.



<P align="left" style="font-size: 10pt">Bowater also operates coating facilities in Benton Harbor, Michigan and Covington, Tennessee
(referred to as &#147;Nuway&#148;). These two sites operate coaters that converted approximately 62,800
short tons of uncoated basestock, produced by our paper mills, into approximately 77,000 short tons
of coated paper during 2004. Transaction prices for our Nuway product improved significantly in
2004, but continued to be insufficient to cover costs. We realized significant improvements in our
productivity and quality, but these improvements were mitigated by higher base stock costs. Due to
these factors, we are currently operating our Nuway facilities at about half their capacity. The
No.&nbsp;1 line at Benton Harbor remained shut during 2004 mainly due to market conditions. Assuming
market conditions improve, we expect to increase our production. However, there is no assurance as
to whether Nuway product pricing or costs will improve.



<P align="left" style="font-size: 10pt">Bowater also produces uncoated specialty paper at its Calhoun, Thunder Bay and Gatineau Operations,
totaling 263,000 metric tons in 2004.



<P align="left" style="font-size: 10pt">Bowater sells coated and uncoated specialty papers domestically through its regional sales offices
and through paper brokers to major printers, publishers, catalogers and retailers. We distribute
coated and uncoated specialty paper by truck and rail. Export markets are served primarily through
international agents.



<P align="left" style="font-size: 10pt"><B>Market Pulp</B>



<P align="left" style="font-size: 10pt">Bowater is the third largest producer of market pulp in North America and has a North American
market share of approximately 10.1%. Market pulp is used in the manufacture of fine paper, tissue,
packaging, specialty paper products, diapers and other absorbent products.



<P align="left" style="font-size: 10pt">In 2004, the Catawba Operation produced 191,000 metric tons of softwood market pulp; the Calhoun
Operation produced 140,000 metric tons of hardwood market pulp; the Thunder Bay Operation produced
229,000 metric tons of hardwood market pulp and 285,000 metric tons of softwood market pulp; and
the Coosa Pines Operation produced 247,000 metric tons of fluff market pulp.



<P align="left" style="font-size: 10pt">North American sales are made directly by Bowater, while export sales are made through
international sales agents local to their markets. We distribute market pulp by truck, rail and
ship.



<P align="left" style="font-size: 10pt"><B>Forest Products</B>



<P align="left" style="font-size: 10pt">In addition to pulp and paper, Bowater sells pulpwood, sawtimber, lumber and wood chips to
customers located in the eastern United States and Canada. We also provide many of our
manufacturing facilities with the wood needed for pulp, paper and lumber production and sell
non-strategic timberlands.



<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">At December&nbsp;31, 2004, we owned approximately 0.3&nbsp;million acres of timberlands in the southeastern
United States and approximately 1.0&nbsp;million acres in Canada. We also lease approximately 0.1
million acres in the southeastern United States. We also have approximately 29.6&nbsp;million acres of
timber cutting rights on Crown-owned lands in Canada under long term contracts. These contracts
are approximately 20-25&nbsp;years in length and renew every 5&nbsp;years, contingent upon Bowater&#146;s
continual compliance with environmental performance and reforestation requirements. In addition to
timber management, we give considerable attention to enhancing other uses of our timberlands. In
fact, 15 to 25% of the areas we manage are not scheduled for harvest, but rather designated to help
achieve other forest management objectives.



<P align="left" style="font-size: 10pt">Our customers and the general public continue to seek assurances from the forest products industry
that the forest resource is managed in a sustainable manner. In accordance with our values, our
environmental and forestry policies and the interests of our customers and other stakeholders,
Bowater is committed to environmental management systems with the goal of sustainable forest
management. We hold a 50% participation in a Quebec nursery, in order to replace trees harvested
from our own and small private landowners&#146; timberlands. It is our standard practice to reforest all
areas that are harvested. In Canada, we also use harvest practices designed to promote natural
regeneration of approximately 75% of the area we harvest with the remaining 25% replanted.



<P align="left" style="font-size: 10pt">Bowater has achieved International Organization for Standardization (&#147;ISO&#148;) 14001 1996 standard on
the majority of its Canadian woodlands. ISO 14001 is the most widely recognized standard for the
registration of an environmental management system. It is an effective approach to verifying
environmental forest management practices through an independent third party audit. ISO 14001 also
requires a commitment to continual improvement.



<P align="left" style="font-size: 10pt">The majority of Bowater&#146;s lands and wood purchasing operations in the United States are in
compliance with standards of the American Forest and Paper Association&#146;s Sustainable Forestry
Initiative (&#147;SFI&#148;). Bowater has also achieved SFI certification for its New Brunswick woodlands
operations and its freehold forest land in Quebec as a way of progressively responding to customer
preferences. The SFI program combines the perpetual growing and harvesting of trees with the
protection of wildlife, plants, soil and water quality. To accomplish this, the SFI program uses a
comprehensive system of principles, objectives and performance measures developed by foresters,
conservationists and scientists.



<P align="left" style="font-size: 10pt">In addition, Bowater is committed to achieve the certification of the majority of its Qu&#233;bec crown
land forest practices by mid 2006 according to the CSA Z-809 standard (Canadian Standard
Association).



<P align="left" style="font-size: 10pt">Also, we recently announced
plans to contribute 3,700 acres of woodlands to the Cumberland Trail State Park in Tennessee.
The donation includes 610 acres on the Cumberland Plateau and permanent conservation protection
for more than 3,000 acres in our pocket wilderness system.



<P align="left" style="font-size: 10pt">Our timberland base supplies an important portion of the needs of our paper mills and sawmills. In
2004, we consumed approximately 14.4&nbsp;million short tons of wood for pulp, paper and lumber
production. Of this amount, we harvested 0.7&nbsp;million short tons of wood from our owned or leased
properties, generated 3.6&nbsp;million short tons from cutting rights on Crown land owned by the
government in Canada, and purchased 10.0&nbsp;million short tons, primarily under contract, from local
wood producers, private landowners and sawmills (in the form of residual chips) at market prices.
In addition, we harvested 1.1&nbsp;million short tons of wood from our managed properties to sell to
other sawmills and paper companies.



<P align="left" style="font-size: 10pt">Bowater operates 12 sawmills and one wood treatment facility (sold in January&nbsp;2005) in the United
States and Canada that produce construction grade lumber. In addition, these sawmills are a major
source of chip supply for our pulp and paper mills.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>The Albertville and Westover Sawmills produced 105&nbsp;million and 49
million board feet of lumber, respectively, in 2004. These mills
produce southern yellow pine lumber that is sold in the
southeastern and midwestern United States.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>The Oakhill Sawmill, which produced 130&nbsp;million board feet of
lumber in 2004, sells to customers in eastern Canada and the
northeastern United States.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>The Thunder Bay and Ignace Sawmills, produced 135&nbsp;million and 2
million board feet of lumber in 2004, respectively, and sell to
customers in eastern Canada and the eastern and mid-western United
States. The Thunder Bay sawmill was completed and became
operational in May&nbsp;2003. The Ignace sawmill was refurbished, but</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;</TD>
    <TD>operated only partially in 2004 due to poor market conditions, a labor
disruption, and wood supply issues in northwest Ontario. We restarted the
Ignace sawmill in January&nbsp;2005.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>The Maniwaki Sawmill, which produced 98&nbsp;million board
feet of lumber in 2004, sells mainly to customers in
eastern Canada and eastern United States.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>The Baker Brook Sawmill, which produced 62&nbsp;million
board feet of lumber in 2004, sells to customers in
eastern Canada and eastern United States.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>The Mistassini and Saint-F&#233;licien sawmills, which
produced 150&nbsp;million and 146&nbsp;million board feet of
lumber in 2004, respectively, sells to customers in
eastern Canada and eastern United States.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Three other sawmills (D&#233;gelis, Price, and
Girardville,) collectively produced 135&nbsp;million board
feet of lumber in 2004 and sell to customers in
eastern Canada and eastern United States.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater sold its wood treating facility, located in
D&#233;gelis, Quebec, in January&nbsp;2005. This facility
produced 21&nbsp;million board feet of treated lumber
(approximately 6&nbsp;million supplied by Bowater
locations) in 2004 and sold to customers in eastern
Canada.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater sold two sawmills in 2004 (Lac des Aigles and
Baie Trinit&#233;), which produced 9&nbsp;million board feet of
lumber in 2004 and sold to customers in eastern
Canada and eastern United States.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">We distribute lumber by truck and rail.



<P align="left" style="font-size: 10pt"><B>Recycling Capability</B>



<P align="left" style="font-size: 10pt">Bowater has focused its efforts in recent years on meeting the demand for recycled fiber paper
products. This effort not only allows publishers and other customers to meet recycled fiber
standards, but also provides environmental benefits by reducing deposits to solid waste landfills.



<P align="left" style="font-size: 10pt">Bowater has recycling plants at its Calhoun, Coosa Pines, Gatineau, Mokpo, Ponderay and Thunder Bay
Operations. Taking a mixture of old newspapers and old magazines (&#147;recovered paper&#148;), these plants
utilize advanced mechanical and chemical processes to manufacture high quality pulp. The resulting
products, which include recycled fiber newsprint and uncoated specialty paper, are comparable in
quality to paper produced with 100% virgin fiber pulp. The Coosa Pines and Mokpo operations
produce newsprint containing 100% recycled fiber. In 2004, we processed 1.4&nbsp;million metric tons of
recovered paper worldwide.



<P align="left" style="font-size: 10pt">Bowater purchases recovered paper from suppliers around the world, generally within the region of
its recycling plants. These suppliers collect, sort and usually bale the material before selling
it to us, primarily under long-term agreements. We are one of the largest purchasers of recovered
paper in North America, averaging in excess of 1.1&nbsp;million short tons purchased annually. In 2004,
our top 3 suppliers accounted for approximately 35% of our annual recovered paper purchases, while
only one supplier individually accounted for more than 10% of the total.



<P align="left" style="font-size: 10pt"><B>Competition</B>



<P align="left" style="font-size: 10pt">In general, our products are globally-traded commodities, and the markets in which we compete are
highly competitive. Our operating results reflect the general cyclical pattern of the pulp and
paper industry. Pricing and the level of shipments of our products are influenced by the balance
between supply and demand as affected by global economic conditions, changes in consumption and
capacity, the level of customer and producer inventories and fluctuations in currency exchange
rates. Any material decline in prices for our products or other adverse developments in the
markets for our products could have a material adverse effect on our financial results, financial
condition and cash flow. Prices for our products have been and are likely to continue to be highly
volatile.



<P align="left" style="font-size: 10pt">Newsprint, one of Bowater&#146;s principal products, is produced by numerous worldwide manufacturers.
Aside from quality specifications to meet customer needs, the production of newsprint does not
depend upon a proprietary process or formula. The five largest North American producers represent
approximately 70% of the North American capacity for newsprint. The five largest global producers
represent approximately 47% of global newsprint capacity. Our annual production capacity is
approximately 7% of worldwide capacity. We face actual and potential competition from them and
numerous smaller regional producers. Price, quality, close customer relationships and the ability
to produce paper with recycled fiber are important competitive determinants.



<P align="left" style="font-size: 10pt">Bowater competes with 11 coated mechanical paper producers with operations in North America. In
addition, several major offshore suppliers of coated mechanical paper sell into the North American
market. As a major supplier to



<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">printers in North America, we also compete with numerous worldwide suppliers of other grades of
paper such as coated freesheet, supercalendared and uncoated mechanical paper. Price, quality and
service are important competitive determinants, but a degree of proprietary knowledge is required
in both the manufacture and use of this product, which requires close customer-supplier
relationships.



<P align="left" style="font-size: 10pt">Bowater competes with nine producers of supercalendared paper in North America. In addition, two
other major offshore suppliers compete in the North American market.



<P align="left" style="font-size: 10pt">Bowater competes with seven major market pulp companies in North America along with other smaller
competitors. Like newsprint, market pulp is one of our principal products and is a globally-traded
commodity for which competition exists in all major markets. Aside from quality specifications to
meet customer needs, the production of market pulp does not depend on a proprietary process or
formula. We produce five major grades of market pulp (northern and southern hardwood, northern and
southern softwood and fluff) and compete with other producers from South America (eucalyptus
hardwood pulp and radiata pine softwood pulp), Europe (northern hardwood and softwood pulps), and
Asia (mixed tropical hardwood pulp). Price, quality and service are considered the main
competitive determinants.



<P align="left" style="font-size: 10pt">As with other global commodities, the competitive position of Bowater&#146;s products is significantly
affected by the volatility of currency exchange rates. See &#147;Quantitative and Qualitative
Disclosures About Market Risk&#148; in Item&nbsp;7A of this Form&nbsp;10-K. We have operations in the United
States, Canada and South Korea, with several of our primary competitors located in Canada, Sweden
and Finland. Accordingly, the relative rates of exchange between those countries&#146; currencies and
the United States dollar can have a substantial effect on our ability to compete. In addition, the
degree to which we compete with foreign producers depends in part on the level of demand abroad.
Shipping costs generally cause producers to prefer to sell in local markets when the demand is
sufficient in those markets.



<P align="left" style="font-size: 10pt">Trends in electronic data transmission and storage and the Internet could adversely affect
traditional print media, including products of our customers, but neither the timing nor the extent
of those trends can be predicted with certainty. Our newspaper publishing customers in North
America use and compete with businesses that use other forms of media and advertising, such as
direct mailings and newspaper inserts (both of which are end uses for several of our products),
television and the Internet. Our magazine and catalog publishing customers are also subject to
effects of competing electronic media. Although we cannot predict the timing or extent of this
trend, we believe that these trends have adversely affected classified advertising.



<P align="left" style="font-size: 10pt"><B>Raw Materials and Energy</B>



<P align="left" style="font-size: 10pt">The manufacture of pulp, paper and lumber requires significant amounts of wood, recycled fiber and
energy. We obtain the wood we need for production from property we own or lease, or on which we
possess cutting rights, or by purchase from local producers. We also use recovered paper as raw
material when producing recycled fiber paper grades. See &#147;Forest Products&#148; and &#147;Recycling
Capability&#148; on pages 4-6 of this Form&nbsp;10-K for information regarding our procurement and use of raw
materials. The availability of raw materials and energy may be disrupted by many factors outside
our control. See &#147;Raw material and energy prices are volatile, and shortages or price increases
could adversely affect our operating results&#148; on pages 10-11.



<P align="left" style="font-size: 10pt">Steam and electrical power are the primary forms of energy used in pulp and paper production.
Process steam is produced in boilers using a variety of fuel sources. All of Bowater&#146;s mills
produce all of their steam requirements with the exception of the Dolbeau and Mersey Operations,
which purchase all of their steam from third-party suppliers. The Thunder Bay, Calhoun, Coosa
Pines and Catawba Operations produce approximately one-fourth of their electrical requirements. The
Dolbeau Operation purchases all of its electrical requirements through a public utility, with about
one fifth produced by the third party that operates a cogeneration unit on the Dolbeau Operations&#146;
premises. The balance of our operations&#146; energy needs is purchased from third parties.



<P align="left" style="font-size: 10pt"><B>Employees</B>



<P align="left" style="font-size: 10pt">As of December&nbsp;31, 2004,
Bowater employed 8,100 people, of whom 5,800 were represented by
bargaining units. Labor agreements covering approximately 2,200 employees at five of our six
Canadian paper mills expired on April&nbsp;30, 2004. These employees are represented predominantly by
the Communications, Energy and Paper Union (&#147;CEP&#148;). The CEP negotiated with Abitibi Consolidated
Inc. as the &#147;target&#148; company for the region and they reached a five-year collective bargaining
agreement, which was ratified on July&nbsp;16, 2004. Traditionally, agreements reached with the target
company have been the basis for other agreements in the region. We are currently in negotiations
with the CEP at the mill level.



<P align="center" style="font-size: 10pt">7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">While we consider relations with our employees to be good and we do not expect a work stoppage to
occur prior to the finalization of new labor agreements, we can provide no assurance regarding
these outcomes or the timing of these negotiations or their effect on our operations.



<P align="left" style="font-size: 10pt">We successfully negotiated a labor agreement covering approximately 150 of our employees at our
Mokpo, Korea paper mill, which expires in July&nbsp;2006. The wage portion of the labor agreement is
for a one-year period and will be renegotiated in July&nbsp;2005. Including our Mokpo mill,
approximately 500 employees are covered by bargaining unit contracts that will expire in 2005.



<P align="left" style="font-size: 10pt">The expiration dates of our pulp and paper mills and sawmills bargaining unit contracts are as
follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Pulp and Paper Mills:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dalhousie, Dolbeau, Gatineau, Mersey and Thunder Bay
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2004</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Donnacona
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mokpo
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Catawba
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2006</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Coosa Pines
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2007</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Calhoun
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2008</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Sawmills:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mistassini
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2004</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Girardville
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Maniwaki
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Westover
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Saint-F&#233;licien
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2006</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Price
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2007</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Baker Brook
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2007</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">D&#233;gelis
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2007</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Albertville
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2009</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><B>Trademarks</B>



<P align="left" style="font-size: 10pt">Bowater has rights and registrations of the mark &#147;Bowater&#148; and the Bowater logo in countries in its
principal markets. We consider our interest in the logo and mark to be valuable and necessary to
the conduct of our business.



<P align="left" style="font-size: 10pt"><B>Environmental Matters</B>



<P align="left" style="font-size: 10pt">Information regarding environmental matters is included on page 12 of this Form&nbsp;10-K.



<P align="left" style="font-size: 10pt">Bowater believes that its United States, Canadian and South Korean operations are in substantial
compliance with all applicable federal, state, provincial and local environmental regulations and
that all currently required control equipment is in operation. While it is impossible to predict
future environmental regulations that may be established, we believe that we will not be at a
competitive disadvantage with regard to meeting future United States, Canadian or South Korean
standards.



<P align="left" style="font-size: 10pt">Our pulp and paper mills mainly utilize process wastes or by-products to produce energy instead of
sending the wastes to landfills. Bowater operates recycled (de-inked) fiber plants at six of our
mills, diverting over 1.4&nbsp;million metric tons of recovered paper from municipal landfills annually.
See &#147;Recycling Capability&#148; on page 6 of this Form&nbsp;10-K.



<P align="left" style="font-size: 10pt"><B>Internet Availability of Information</B>



<P align="left" style="font-size: 10pt">We make our Form&nbsp;10-K, our Form&nbsp;10-Qs, our Form&nbsp;8-Ks, and amendments to them, available through our
internet website <B>(http://www.bowater.com) </B>as soon as reasonably practicable after we file or
furnish such material to the SEC.



<P align="center" style="font-size: 10pt">8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Cautionary Statements Regarding Forward-Looking Information and Use of Third Party Data</B>



<P align="left" style="font-size: 10pt">Statements that are not reported financial results or other historical information are
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. This Form&nbsp;10-K, each of Bowater&#146;s annual reports to shareholders, Forms 8-K, 10-Q and 10-K,
proxy statements, prospectuses and any other written or oral statement made by or on behalf of
Bowater after the filing of this Form&nbsp;10-K may contain forward-looking statements including, for
example, statements about our business outlook, assessment of market conditions, strategies, future
plans, future sales, liquidity, prices for our major products, inventory levels, capital spending
and tax and exchange rates. These forward-looking statements are not guarantees of future
performance. These statements are based on management&#146;s expectations that involve a number of
business risks and uncertainties, any of which could cause actual results to differ materially from
those expressed in or implied by the forward-looking statements. In addition to specific factors
described in connection with any particular forward-looking statement, factors that could cause
actual results to differ materially include, but are not limited to, those set forth below and
those described from time to time in Bowater&#146;s other filings with the Securities and Exchange
Commission. In addition, other risks could adversely affect us, as it is not possible for us to
predict or assess all risks. We disclaim any obligation to publicly update or revise any
forward-looking statements even if our situation changes in the future.



<P align="left" style="font-size: 10pt">Information about industry or general economic conditions contained in this report are derived from
third party sources (e.g. trade publications) that Bowater believes are widely accepted and
accurate; however, Bowater has not independently verified this information and cannot provide
assurances of its accuracy.



<P align="left" style="font-size: 10pt"><B>Risks Related to Our Business</B>



<P align="left" style="font-size: 10pt"><B>Industry conditions may adversely affect our results of operations and financial condition</B>



<P align="left" style="font-size: 10pt">Most of our products are world-traded commodity products. Prices for our products have been
volatile, reflecting the cyclical pattern of the forest products industry. We, like other
participants in the forest products industry, have limited influence over the timing and extent of
price changes for our products. Instead, these price changes depend primarily on industry supply
and customer demand. Industry supply depends primarily on available manufacturing capacity, and
customer demand depends on a variety of factors, including the health of the economy in general and
the strength of both print media advertising and new home construction. The United States and
global economies and the markets for our products weakened significantly over a period of
several-years and market conditions, although recently somewhat improved, continue to be
challenging. Industry statistics indicate that North American newsprint consumption has been
steadily declining. In 2004, year-over-year newsprint consumption in the United States declined by
1.7%.



<P align="left" style="font-size: 10pt">In response to market conditions, we continue to curtail newsprint production at our Thunder Bay
mill and coated paper production at our Nuway operations. If these market conditions continue or
worsen, it may be necessary to curtail production or permanently shut down these or other machines
or facilities. Curtailments or shut downs could result in goodwill or asset write-downs at the
affected facilities and could negatively impact our cash flows and materially affect our results of
operations and financial condition.



<P align="left" style="font-size: 10pt">In response to current and projected market conditions, we may also decide to convert newsprint
capacity to the production of other grades. Conversions could require capital expenditures in
excess of current levels. Even a successful conversion, such as the one we completed at our
Catawba mill in 2003, could have a temporary adverse effect on our cash flows, results of
operations and financial condition.



<P align="left" style="font-size: 10pt"><B>Intense competition in the forest products industry could adversely affect our operating results
and financial condition</B>



<P align="left" style="font-size: 10pt">The markets for our products are all highly competitive. Actions by competitors can affect our
ability to sell our products and can affect the volatility of the prices at which our products are
sold. For example, during 2004, we announced two price increases of $50 per metric ton each for
newsprint sold in our North American markets. However, prevailing market conditions, including the
actions of competing newsprint suppliers, limited the company&#146;s rate of realization on those
announced pricing adjustments. In addition, our industry is capital intensive, which leads to high
fixed costs. Some of our competitors may be lower-cost producers in some of the businesses in
which we operate. Actions by competitors, such as reducing costs or adding low-cost capacity, may
adversely affect our competitive position in the products we manufacture and, consequently, our
sales, operating income and cash flows.



<P align="center" style="font-size: 10pt">9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Developments in alternative media could adversely affect the demand for our products</B>



<P align="left" style="font-size: 10pt">Our newspaper, magazine and catalog publishing customers may increasingly use, and compete with
businesses that use other forms of media and advertising and electronic data transmission and
storage instead of newsprint, coated paper, uncoated specialty papers or other products made by us.
Although we cannot predict their timing or extent, we believe these trends have adversely affected
classified advertising.



<P align="left" style="font-size: 10pt"><B>Currency fluctuations may adversely affect our results of operations</B>



<P align="left" style="font-size: 10pt">Changes in foreign currency exchange rates can affect our competitive position, selling prices and
manufacturing costs.



<P align="left" style="font-size: 10pt">We compete with North American, European and Asian producers in most of our product lines. Our
products are sold and denominated in both U.S. dollars and selected foreign currencies. In
addition to the impact of product supply and demand, changes in the relative strength or weakness
of the U.S. dollar may also affect international trade flows of these products. A stronger U.S.
dollar may attract imports from foreign producers, increase supply, and have a downward effect on
prices, while a weaker U.S. dollar may encourage U.S. exports. Variations in the exchange rates
between the U.S. dollar and other currencies, particularly the Euro and the currencies of Canada,
Sweden, Finland and certain Asian countries, significantly affect our competitive position compared
to many of our competitors.



<P align="left" style="font-size: 10pt">Nearly half of our manufacturing costs and a small portion of our financial assets and liabilities
are denominated in Canadian dollars. Our sales are denominated in the currency of the country in
which they occur, and only a small portion of our sales are denominated in Canadian dollars.
Accordingly, we are particularly sensitive to changes in the value of the Canadian dollar versus
the U.S. dollar. The impact of these changes primarily depends on our production and sales volume,
the proportion of our production and sales that occur in Canada, the proportion of our financial
assets and liabilities denominated in Canadian dollars, our hedging levels, and the magnitude,
direction and duration of changes in the exchange rate. For example, in some quarters Canadian
dollar exchange rates may change less than one cent, while in others the change may be several
cents or more. From December&nbsp;31, 2003 to December&nbsp;31, 2004, the relative value of the Canadian
dollar increased from US$0.77 to US$0.83. Such increases in the value of the Canadian dollar
versus the U.S. dollar can significantly increase our costs and thus reduce our earnings, which are
reported in U.S. dollar terms.



<P align="left" style="font-size: 10pt">Under the exchange rates, hedging levels and operating conditions that existed at December&nbsp;31,
2004, for every one-cent increase in the Canadian-U.S. dollar exchange rate, our operating income,
net of hedging, for 2004 would have been reduced by approximately $5.2&nbsp;million.



<P align="left" style="font-size: 10pt">We expect exchange rate fluctuations to continue to impact costs and revenues; however, we cannot
predict the magnitude or direction of this effect for any quarter, and there can be no assurance
that the future effect will be similar to that set forth above. However, based on exchange rates,
hedging levels and operating conditions projected for 2005, a one-cent increase in the Canadian
dollar exchange rate will reduce our 2005 operating income, net of hedging by approximately $7.0
million.



<P align="left" style="font-size: 10pt"><B>Raw material and energy prices are volatile, and shortages or price increases could adversely
affect our operating results</B>



<P align="left" style="font-size: 10pt">We buy energy and raw materials, including chemicals, wood, recovered paper and other raw
materials, primarily on the open market. The prices for raw materials and energy are volatile and
may change rapidly, directly affecting our results of operations. The availability of raw
materials and energy may also be disrupted by many factors outside our control, adversely affecting
our operations.



<P align="left" style="font-size: 10pt">Our processes consume significant amounts of energy, which comprised approximately 14% of our 2004
operating costs. Typically, we internally generate approximately half of our own energy needs and
purchase the remaining energy from third-party suppliers. Of the energy needs that we purchase,
approximately three-fourths is spent on electrical purchases with the balance being primarily
fossil fuels. In 2005, we anticipate that our total cost of purchased electricity will increase
by approximately 2% as compared to 2004.



<P align="left" style="font-size: 10pt">We are a major user of renewable natural resources such as water and wood fiber. Accordingly,
significant changes in climate and agricultural diseases or infestation could affect our financial
condition and results of operations. The volume and value of timber that can be harvested may be
limited by factors such as fire and fire prevention, insect



<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">infestation, disease, ice storms, wind storms, flooding, other weather conditions and other causes.
As is typical in the industry, we do not maintain insurance for any loss to our standing timber
from natural disasters or other causes. Our supply of wood fiber is also affected by factors that
impact production levels within the lumber industry such as currency fluctuations, duties,
harvesting restrictions and finished lumber prices. We continued to experience a restricted supply
of third party sawmill wood chips to our Thunder Bay mill due to production levels within the
industry during 2004 and have had increased wood fiber costs at several of our other mills. See
the section entitled &#147;Item&nbsp;7, Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations.&#148;



<P align="left" style="font-size: 10pt"><B>Our substantial indebtedness could adversely affect our financial health</B>



<P align="left" style="font-size: 10pt">We have a significant amount of indebtedness. As of December&nbsp;31, 2004, we had outstanding total
debt of $2,514.9&nbsp;million, a deficit of earnings to fixed charges
of $148.6&nbsp;million and
shareholders&#146; equity of $1,507.3&nbsp;million. Our substantial amount of debt could have important
consequences. For example, it could:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>limit our ability to obtain additional financing, if needed, for working capital, capital expenditures, acquisitions,
debt service requirements or other purposes;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>increase our vulnerability to adverse economic and industry conditions;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>require us to dedicate a substantial portion of our cash flow from operations to make payments on our debt, thereby
reducing funds available for operations, future business opportunities or other purposes;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>limit our flexibility in planning for, or reacting to, changes in our business and our industry; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="3%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>place us at a competitive disadvantage compared to our competitors that have less debt.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">On April&nbsp;22, 2004, we replaced our expiring revolving credit facilities with a new three-year
revolving credit facility due April&nbsp;2007. The new facility provides $400&nbsp;million of revolving
credit in the United States and $35&nbsp;million in Canada. Borrowings under the new facility incur
interest based, at our option, on specified market interest rates plus a margin tied to the credit
rating of our long-term debt. The facility contains various covenants, including requirements to
maintain a minimum consolidated net worth (generally defined as common shareholders&#146; equity,
excluding hedging gains in place as of December&nbsp;31, 2003, plus any outstanding preferred stock plus
minimum pension liability amounts) of $1.5&nbsp;billion, a maximum 62.5% ratio of total debt to total
capital (defined as total debt less revaluation of debt assumed through acquisitions, plus net
worth including minority interest, plus minimum pension liability amounts), and to maintain an
annual minimum EBITDA (generally defined as net income, excluding extraordinary, non-recurring or
non-cash items, plus income taxes plus depreciation plus net interest expense) of $250.0&nbsp;million
measured quarterly beginning March&nbsp;31, 2005, through December&nbsp;31, 2005 and $400.0&nbsp;million at the
end of each quarter thereafter. If we generate net income, the minimum net worth requirement
increases by half of our consolidated net income for each fiscal quarter, excluding gains from cash
flow hedges in place as of December&nbsp;31, 2003. At December&nbsp;31, 2004, our consolidated net worth was
approximately $1,620.4&nbsp;million, and our ratio of total debt to total capital was 59.1%, calculated
according to our credit facility&#146;s guidelines. The reconciliation of the ratio of total debt to
total capital as defined in and required by our current credit facility to the ratio of total debt
to total capital as defined under Generally Accepted Accounting Principles (&#147;GAAP&#148;) is presented in
the section &#147;Short-Term Funding and Contractual/Commercial Commitments&#148; on page 41 of this Form
10-K.



<P align="left" style="font-size: 10pt"><B>We are exposed to changes in banking and capital markets and changes in interest rates</B>



<P align="left" style="font-size: 10pt">We require both short-term and long-term financing to fund our operations, including capital
expenditures. Changes in banking, capital markets and/or our credit rating could affect the cost
or availability of financing. In addition, we are exposed to changes in interest rates with
respect to floating rate debt and in determining the interest rate of any new debt issues. Changes
in the capital markets or prevailing interest rates can increase or decrease the cost or
availability of financing.



<P align="left" style="font-size: 10pt"><B>There can be no assurance that we will return to profitability</B>



<P align="left" style="font-size: 10pt">We incurred net losses of $142.4&nbsp;million for the 2002 fiscal year and $205.0&nbsp;million for the 2003
fiscal year. In 2003, we completed an aggressive cost saving initiative and continued our efforts
to control costs in 2004. Also in 2004, we implemented price increases for our newsprint, coated
and specialty papers and revenues increased from approximately $2.7&nbsp;billion for 2003 to
approximately $3.2&nbsp;billion for 2004. However, we still incurred a net loss of $87.1&nbsp;million for
the 2004 fiscal year. While we will continue to identify and implement cost and cash savings
initiatives and to seek



<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">opportunities to enhance our revenues, these steps may not be sufficient by themselves to enable us
to return to profitability.



<P align="left" style="font-size: 10pt"><B>Changes in laws and regulations could adversely affect our results of operations</B>



<P align="left" style="font-size: 10pt">We are subject to a variety of foreign, federal, state and local laws and regulations dealing with
trade, employees, transportation, currency controls, taxes and the environment. Changes in, or
more stringent enforcement of, these laws or regulations have required in the past, and could
require in the future, substantial expenditures by us and adversely affect our results of
operations. For example, changes in environmental laws and regulations have in the past and could
in the future require us to spend substantial amounts to comply with restrictions on air emissions,
wastewater discharge, waste management and landfill sites, including remediation costs.
Environmental laws are becoming increasingly more stringent. Consequently, our compliance and
remediation costs could increase materially. For example, in April&nbsp;1998, the Environmental
Protection Agency promulgated new air and water quality standards for the paper industry, known as
the Cluster Rule, aimed at further reductions of pollutants. Prior to 2004, we spent approximately
$170&nbsp;million to enable our Catawba, South Carolina facility to comply with the Cluster Rule.
Another example is duties imposed on lumber shipments from Canada into the United States as
discussed in the section under &#147;Item&nbsp;7, Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; entitled &#147;Product Line Information,&#148; subsection &#147;Lumber&#148; &#150;
&#147;Year Ended 2004 compared to 2003&#148; in this Form&nbsp;10-K.



<P align="left" style="font-size: 10pt"><B>Changes in the political or economic conditions in the United States or other countries in which
our products are manufactured or sold can adversely affect our results of operations</B>



<P align="left" style="font-size: 10pt">We manufacture our products in the United States, Canada and South Korea, and sell our products
throughout the world. The economic and political climate of each region has a significant impact
on costs, prices of and demand for our products. Changes in regional economies or political
stability, including acts of war or terrorist activities, can affect the cost of manufacturing and
distributing our products, pricing and sales volume, directly affecting our results of operations.
Such changes could also affect the availability or cost of insurance.



<P align="left" style="font-size: 10pt"><B>We may be subject to environmental liabilities</B>



<P align="left" style="font-size: 10pt">As an owner and operator of real estate and manufacturing and processing facilities, we may be
liable under environmental laws for cleanup and other costs and damages, including tort liability
and damages to natural resources, resulting from past or present spills or releases of hazardous or
toxic substances on or from our current or former properties (see &#147;Legal Proceedings&#148;). We may
incur liability under these laws without regard to whether we knew of, were responsible for or
owned the property at the time of any spill or release of hazardous or toxic substances on or from
our property, or at properties where we arranged for the disposal of regulated materials. Claims
may arise out of currently unknown environmental conditions or aggressive enforcement efforts by
governmental or private parties.



<P align="left" style="font-size: 10pt"><B>Item&nbsp;2. </B><B><I>Properties</I></B>



<P align="left" style="font-size: 10pt">Information regarding Bowater&#146;s owned properties and cutting rights is included in Item&nbsp;1,
&#147;Business&#148; of this Form&nbsp;10-K.



<P align="left" style="font-size: 10pt">In addition to the properties that we own, we also lease under long-term leases certain
timberlands, office premises and office and transportation equipment and have cutting rights with
respect to certain timberlands. Information regarding timberland leases, operating leases and
cutting rights is included in Note 22, &#147;Timberland Leases and Operating Leases&#148;, of the
Consolidated Financial Statements in this Form&nbsp;10-K.



<P align="left" style="font-size: 10pt"><B>Item&nbsp;3. Legal Proceedings</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>a.</I>&nbsp;&nbsp;</TD>
    <TD>We are involved in various legal proceedings relating to contracts, commercial
disputes, taxes, environmental issues, employment and workers&#146; compensation claims and other
matters. We periodically review the status of these proceedings with both inside and outside
counsel. We believe that the ultimate disposition of these matters will not have a material
adverse effect on our financial condition, but it could have a material adverse effect on the
results of operations in a given quarter or year.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>b.</I>&nbsp;&nbsp;</TD>
    <TD>In late 2001, Bowater, several other paper companies, and 120 other companies were
named as defendants in asbestos personal injury actions based on product liability claims.
These actions generally allege occupational</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>exposure to numerous products. We have denied the allegations and no specific product of ours
has been identified by the plaintiffs in any of the actions as having caused or contributed to
any individual plaintiff&#146;s alleged asbestos-related injury.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>These suits have been filed by approximately 1,238 claimants who sought monetary damages in
civil actions pending in state courts in Georgia, Illinois, Mississippi, Missouri, New York and
Texas. Approximately 982 of these claims have been dismissed, either voluntarily or by summary
judgment, and approximately 256 claims remain. Insurers are defending these claims and we have
not settled or paid any of these claims. We believe that all of these asbestos-related claims

are covered by insurance, subject to any applicable deductibles and our insurers&#146; rights to
dispute coverage. While it is not possible to predict with certainty the outcome of these
matters, based upon the advice of special counsel, at this time we do not expect these claims to
have a material adverse impact on our business, financial position or results of operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>c.</I>&nbsp;&nbsp;</TD>
    <TD>Bowater may be a &#147;potentially responsible party&#148; with respect to three hazardous
waste sites that are being addressed pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (&#147;Superfund&#148;) or the Resource Conservation and
Recovery Act (&#147;RCRA&#148;) corrective action authority. The first two sites are on CNC timberland
tracts in South Carolina. One was contaminated when acquired, and subsequently, the prior
owner remediated the site and continues to monitor the groundwater. On the second site,
several hundred steel drums containing textile chemical residue were discarded by unknown
persons. The third site, at our mill in Coosa Pines, Alabama, contained buried drums and has
been remediated pursuant to RCRA. We continue to monitor the groundwater. We believe we will
not be liable for any significant amounts at any of these sites.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>d.</I>&nbsp;&nbsp;</TD>
    <TD>Bowater was one of numerous parties that shipped empty drums to a drum recycling
plant in South Carolina. The U.S. EPA has remediated the site pursuant to Superfund at a cost
of $6.2&nbsp;million. We have agreed to pay less than $100,000 to settle this matter with the EPA.
It is anticipated that the settlement will be finalized in the second quarter of 2005.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>e.</I>&nbsp;&nbsp;</TD>
    <TD>On December&nbsp;28, 2001, we filed a lawsuit against the Tennessee Valley Authority
(TVA)&nbsp;alleging that TVA overcharged us for electricity it supplied to our Calhoun, Tennessee
and Grenada, Mississippi facilities. The lawsuit has been resolved by agreement and the
parties have entered into revised and extended power supply arrangements for the Calhoun and
Grenada facilities. Consequently, the lawsuit was dismissed on March&nbsp;8, 2005.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Item&nbsp;4. </B><B><I>Submission of Matters to a Vote of Security Holders</I></B>



<P align="left" style="font-size: 10pt">No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2004.




<P align="center" style="font-size: 10pt">13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><I>Executive Officers of the Registrant as of March&nbsp;1, 2005</I>



<P align="left" style="font-size: 10pt">Bowater&#146;s executive officers, who are elected by the Board of Directors to serve one-year terms,
are listed below. There are no family relationships among officers or directors and no
arrangements or understandings between any officer and any other person under which the officer was
selected.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="11" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Officer Since</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Arnold M. Nemirow
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman, President and Chief Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1994</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">David G. Maffucci
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">54</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and President &#151; Newsprint Division
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1987</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">R. Donald Newman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Operating Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1999</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jerry R. Gilmore
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President &#151; Administration
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1999</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">William G. Harvey
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and Chief Financial Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1998</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ronald T. Lindsay
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">54</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President &#150; General Counsel and Secretary
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2004</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pierre Monahan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and President &#150; Canadian Forest Products
Division
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2001</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">David J. Steuart
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and President &#150; Pulp Division
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1998</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James T. Wright
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President &#150; Human Resources
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1999</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">C. Randy Ellington
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President &#150; Newsprint Sales
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Steven G. Lanzl
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President &#150; Information Technology
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1996</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Roger R. Loney
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President &#150; Newsprint Operations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">William C. Morris
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President and President &#151; Coated &#038; Specialty Papers Division
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael F. Nocito
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President and Controller
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1993</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Craig B. Stevens
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President &#151; Business Performance, Coated &#038; Specialties,
Pulp &#038; Lumber Operations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Colin R. Wolfe
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President &#151; Administration &#038; Planning (Newsprint)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><I>Arnold M. Nemirow </I>became Chairman in 1996 and Chief Executive Officer in 1995. He has been
President and a director of Bowater since September&nbsp;1994 and was Chief Operating Officer from
September&nbsp;1994 through February&nbsp;1995.



<P align="left" style="font-size: 10pt"><I>David G. Maffucci </I>became Executive Vice President and President &#151; Newsprint Division in January
2005. Previously, from 2002 to 2005, he was Executive Vice President and Chief Financial Officer
and from 1995 to 2002, he was Senior Vice President and Chief Financial Officer. From 1993 to
1995, he served as Vice President and Treasurer and from 1992 to 1993, he was Treasurer.



<P align="left" style="font-size: 10pt"><I>R. Donald Newman </I>became Executive Vice President and Chief Operating Officer in June&nbsp;2002. From
2001 to 2002, he was Vice President of Strategic Planning; and from 1998 to 2001, he was Vice
President &#150; Canadian Newsprint Operations of the Newsprint Division. Previously, from 1995 to
1998, he was Vice President &#150; Operations and Resident Manager of the Calhoun Operations and from
1994 to 1995, he was Vice President and Operations Manager of the Calhoun Operations.



<P align="left" style="font-size: 10pt"><I>Jerry R. Gilmore </I>became Senior Vice President &#151; Administration in January&nbsp;2005. From 2002 to 2005,
he was Senior Vice President &#150; Operations, Newsprint Division. Previously, from 1998 to 2002, he
was Vice President of United States and Korean Newsprint Operations and from 1995 to April&nbsp;1998, he
was Vice President &#150; Administration and Planning of the Newsprint Division. Prior to joining
Bowater in 1994, he held financial and management positions with Georgia-Pacific Corporation and
Great Northern Nekoosa Corporation, both forest products companies.



<P align="left" style="font-size: 10pt"><I>William G. Harvey </I>became Senior Vice President and Chief Financial Officer and Treasurer in January
2005. From 1998 to 2005, he was Vice President and Treasurer. From 1995 to 1998, he was Vice
President and Treasurer of Avenor Inc., a pulp and paper company, until its acquisition by Bowater.



<P align="left" style="font-size: 10pt"><I>Ronald T. Lindsay </I>became Senior Vice President &#151; General Counsel and Secretary in January&nbsp;2005.
From January&nbsp;2004 to January&nbsp;2005, he was Vice President &#151; General Counsel and Secretary.
Previously, he was with Collins &#038; Aikman Corporation, a multinational manufacturer of automotive
interior components, where he was Senior Vice President &#151; Law in 2003 and Senior Vice President,
General Counsel and Secretary from 1999 through 2002.



<P align="center" style="font-size: 10pt">14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><I>Pierre Monahan </I>became Senior Vice President and President &#150; Canadian Forest Products Division in
June&nbsp;2002. From 2001 to 2002, he was Vice President and President &#150; Canadian Forest Products
Division. From 1994 to 2001, he was President and Chief Executive Officer of Alliance Forest
Products Inc. until its acquisition by Bowater. He is a director of AXA Insurance Inc. and Groupe
Laperri&#232;re et Verreault.



<P align="left" style="font-size: 10pt"><I>David J. Steuart </I>became Senior Vice President and President &#150; Pulp Division in June&nbsp;2002. From
1999 to 2002, he was Vice President of Bowater and from 1998 to 2002, he was President of the Pulp
Division. From 1994 to 1998, he was President, Pulp Group of Avenor Inc., a pulp and paper
company, until its acquisition by Bowater.



<P align="left" style="font-size: 10pt"><I>James T. Wright </I>became Senior Vice President &#150; Human Resources in 2002. From 1999 to 2002, he was
Vice President &#150; Human Resources. He was Vice President &#150; Human Resources for Georgia-Pacific
Corporation from 1993 to 1999. Prior to 1993, he held human resource and labor relations positions
with Georgia-Pacific Corporation and Weyerhaeuser Company, both forest products companies.



<P align="left" style="font-size: 10pt"><I>C. Randolph Ellington
</I>became Vice President &#151; Newsprint Sales in 2004. From 1995 to 2004, he was
Vice President of North American Newsprint Sales. Previously, he held sales positions in both
coated paper and newsprint.



<P align="left" style="font-size: 10pt"><I>Steven G. Lanzl </I>became Vice President &#150; Information Technology in 1996. From 1992 to 1996, he was
with E.I. du Pont de Nemours and Company, a science and technology company, where he was
responsible for planning information system initiatives. Earlier, he was with DuPont Asia Pacific,
Ltd. in Japan as Manager of Information Systems Planning.



<P align="left" style="font-size: 10pt"><I>Roger R. Loney </I>became Vice President &#151; Newsprint Operations in January&nbsp;2005. From 2002 to 2005,
he was Vice President and Resident Manager, Calhoun Operations; from 2000 to 2002, he was Vice
President and Resident Manager, Mersey, Nova Scotia Operations, and from 1999 to 2000, Manager,
Special Projects.



<P align="left" style="font-size: 10pt"><I>William C. Morris </I>became President &#151; Coated &#038; Specialty Papers Division in January&nbsp;2005. From
August&nbsp;2004 to January&nbsp;2005, he was Assistant to the Coated &#038; Specialty Papers Division President;
from February&nbsp;2004 to August&nbsp;2004, he was Vice President &#150; Strategic Planning for the Coated and
Specialty Papers, Pulp and Forest Product Divisions; from 1995 to 2004, he was Vice
President of International Sales in the Newsprint Division.



<P align="left" style="font-size: 10pt"><I>Michael F. Nocito </I>became Vice President and Controller in 1993. From 1992 to 1993, he was
Controller of the Calhoun Operations and from 1988 to 1992, he was Assistant Controller of the
Calhoun Operations. From 1978 to 1988, he held various positions of increasing responsibility in
Bowater&#146;s Finance Department.



<P align="left" style="font-size: 10pt"><I>Craig B. Stevens </I>became Vice President &#151; Business Performance, Coated &#038; Specialties, Pulp &#038; Lumber
Operations in January&nbsp;2005. From 2002 to 2005, he was Vice President &#151; General Manager, Nuway
Operations. From 1998 to 2002, he was Vice President &#151; Administration and Planning.



<P align="left" style="font-size: 10pt"><I>Colin R. Wolfe </I>became Vice President &#151; Administration &#038; Planning (Newsprint) in January&nbsp;2005. From
2002 to 2005, he was Vice President-Finance and Administration, Newsprint Division and from 1998 to
2002, he was Vice President, Planning and Administration, Forest Products Division.



<P align="center" style="font-size: 10pt">15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>PART II</B>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;5. </B><B><I>Market for the Registrant&#146;s Common Equity, Related Stockholders Matters and Issuer
Purchases of Equity Securities</I></B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)&nbsp;&nbsp;</TD>
    <TD>Bowater&#146;s common stock, $1 par value (&#147;Common Stock&#148;), is listed on the New York Stock
Exchange, Inc. (stock symbol BOW), the Pacific Exchange, Inc. and The London Stock Exchange.
Bowater Canada, Inc., a subsidiary of Bowater, has a special class of Exchangeable Shares
(&#147;Exchangeable Shares&#148;) outstanding and listed on the Toronto Stock Exchange (stock symbol
BWX), which is exchangeable into Bowater Common Stock on a one-for-one basis. Price
information with respect to Bowater&#146;s Common Stock is set forth below:</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>Price ranges of Bowater&#146;s Common Stock during 2004 and 2003 as reported on the New York Stock
Exchange were:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="16" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Low</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34.23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">46.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36.30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36.52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)&nbsp;&nbsp;</TD>
    <TD>As of March&nbsp;1, 2005, there were 3,637 holders of record of Bowater&#146;s Common Stock and 341
holders of record of Exchangeable Shares.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)&nbsp;&nbsp;</TD>
    <TD>Bowater has paid consecutive quarterly dividends of $0.20 per share of Common Stock during
2004 and 2003. Future dividends on our Common Stock are at the discretion of the Board of
Directors and the payment of any dividends will depend upon, among other things, our earnings,
capital requirements and financial condition.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(d)&nbsp;&nbsp;</TD>
    <TD>Information regarding securities authorized for issuance under Bowater&#146;s equity compensation
plans is incorporated by reference to Item&nbsp;12 on page 90 in this Form 10-K.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(e)&nbsp;&nbsp;</TD>
    <TD>In 2004, Bowater filed with the New York Stock Exchange
(NYSE) the required annual certification of compliance with the
NYSE&#146;s listing standards. Bowater is filing certifications under
SEC Rule 13a-14(a) as exhibits to this Form 10-K.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="left" style="font-size: 10pt"><B>Item&nbsp;6. </B><B><I>Selected Financial Data</I></B>



<P align="left" style="font-size: 10pt">The following table summarizes our selected historical consolidated financial information for each
of the last five years. The selected financial information under the captions &#147;Income Statement
Data&#148; and &#147;Financial Position&#148; shown below has been derived from our audited Consolidated Financial
Statements. This table should be read in conjunction with other financial information of Bowater,
including &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148;
and the financial statements, included elsewhere herein. The data set forth below may not be
indicative of Bowater&#146;s future financial condition or results of operations (see Item&nbsp;1
&#147;Business-Risk Factors Related to our Business&#148;).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="20" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B><I>(In millions, except per-share amounts)</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2001<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2000<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income Statement Data</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,190.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,721.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,581.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,454.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,500.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(95.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">363.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings (loss)&nbsp;per common
share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared per common
share<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.80</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Product Sales Information</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Newsprint<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,340.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,236.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,199.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,438.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,421.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Coated and specialty papers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>904.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">726.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">613.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Market pulp</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>543.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">489.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">403.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">546.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lumber and other wood products</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>401.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,190.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,721.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,581.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,454.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,500.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Financial Position</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Timber and timberlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>186.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">184.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">212.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">243.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">265.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,301.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,557.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,645.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,802.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,981.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,458.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,615.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,599.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,761.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,004.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt, including current
installments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,441.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,305.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,121.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,901.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,446.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,514.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,506.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,370.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,242.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,931.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Additional Information</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return on average common equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5.6</B></TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.2</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.5</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.7  </TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.9  </TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>36.9 </B></TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.1 </TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.7  </TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">29.4  </TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>122.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">372.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">416.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash invested in fixed assets,
timber and timberlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>84.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">238.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">246.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">283.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Book value per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>26.31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common Stock price range</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Low</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>34.15</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41.88</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">High</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>48.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">55.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">59.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders of record<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,100</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="2%"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>&nbsp;</TD>
    <TD width="98%"> In 2001, we acquired Alliance Forest Products Inc. In 2000, we acquired Newsprint
South, Inc.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="2%"><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP> &nbsp;</TD>
    <TD width="98%">Operating income (loss)&nbsp;includes pretax net gain on sale of assets of $6.9&nbsp;million,
$124.0&nbsp;million, $85.7&nbsp;million, $163.3&nbsp;million and $7.3&nbsp;million for the years 2004, 2003, 2002,
2001 and 2000, respectively. Operating income (loss)&nbsp;for 2002 includes a pretax impairment
charge of $28.5&nbsp;million.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="2%"><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>&nbsp;</TD>
    <TD width="98%"> Dividends are declared quarterly.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="2%"><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP>&nbsp;</TD>
    <TD width="98%"> Newsprint sales do not include shipments from Ponderay Newsprint Company, an
unconsolidated entity.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="2%"><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP>&nbsp;</TD>
    <TD width="98%"> This includes holders of Bowater Common Stock and Exchangeable Shares issued by
Bowater Canada Inc.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<P align="left" style="font-size: 10pt"><B>Item&nbsp;7. </B><B><I>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</I></B>



<P align="left" style="font-size: 10pt">The following discussion and analysis provides information that we believe is useful in
understanding our operating results, cash flows and financial condition for the three years ended
December&nbsp;31, 2004. The discussion should be read in conjunction with, and is qualified in its
entirety by reference to, the Consolidated Financial Statements and related notes appearing
elsewhere in this report. Except for the historical information contained here, the discussions in
this document contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve risks and uncertainties. Bowater&#146;s actual results could
differ materially from those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed under &#147;Cautionary Statements Regarding
Forward-Looking Information and Use of Third Party Data&#148; and &#147;Risks Related to Our Business&#148; in
Item&nbsp;1 of this Form&nbsp;10-K and from time to time, in Bowater&#146;s other filings with the Securities and
Exchange Commission.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>Year In Review </B></FONT>



<P align="left" style="font-size: 10pt"><B>Business Fundamentals</B>



<P align="left" style="font-size: 10pt">Bowater manufactures approximately four million metric tons of a broad range of groundwood based
printing papers &#150; newsprint, coated groundwood and groundwood specialty papers. These products are
sold to leading publishers, commercial printers and advertisers. We also sell approximately 1.1
million metric tons annually of excess pulp to non-integrated paper, tissue and toweling
manufacturers who do not have a sufficient supply of pulp for their own needs. We operate sawmills
that produce over one billion board feet of lumber annually and provide a source of residual chips
that we use to manufacture pulp and paper. Our lumber is sold to a diversified group of customers,
namely large retailers, buying groups, distributors, wholesalers and industrial accounts.



<P align="left" style="font-size: 10pt">To produce our pulp and paper products we operate 12 pulp and paper mills, ten of which are located
in the eastern half of North America. The remaining two mills include a newsprint mill in
Washington state for which we are the managing partner and a newsprint mill in South Korea that
gives us access to growing Asian markets.



<P align="left" style="font-size: 10pt">Our North American manufacturing facilities are located near key domestic markets or have access to
export markets and are supported by approximately 31&nbsp;million acres of timberland &#150; about 1.4
million acres are owned or leased and the balance is available to us under long-term cutting rights
on Crown-owned land in Canada.



<P align="left" style="font-size: 10pt">Our products are, in large part, commodities with global markets. Our business is influenced by
general economic conditions that impact our customers as well as changes within our industry that
affect demand, supply, pricing, shipments or the cost of production.



<P align="left" style="font-size: 10pt">The manufacturing facilities we operate are capital intensive and require significant amounts of
cash to maintain. Our ability to generate cash flow is dependent on achieving revenues that exceed
manufacturing costs and the amount of cash that must be reinvested in the business.



<P align="left" style="font-size: 10pt">A large portion of our manufacturing facilities and some of our competitors&#146; facilities are located
outside the U.S.; however, the majority of our sales are denominated in U.S. dollars. Therefore,
fluctuations in currency rates can have a significant impact on our costs, cost competitiveness and
cash flows. In particular, our results can be materially influenced by the movement of the
Canadian dollar. A stronger Canadian dollar will typically weaken our results and a weaker
Canadian dollar will tend to strengthen our earnings. We can also be subject to government imposed
trade restrictions that can limit shipments or increase costs.



<P align="left" style="font-size: 10pt">The strength of the economy influences the level and extent of publishing and advertising, which in
turn affects the demand for our pulp and paper products. A decline in demand for our products also
would likely have a negative effect on prices. Changes in the level of supply caused by capacity
additions or contractions will also influence the supply and demand balance for our products and
have a direct impact on shipment levels and pricing.



<P align="left" style="font-size: 10pt">Significant cost components of our products can be highly volatile and include wood, recycled fiber
(old newspapers and magazines), energy, commodity and specialty chemicals, and labor and benefit
costs. Also, and as noted above, a major influence on our costs is the Canadian dollar exchange
rates with the U.S. dollar.



<P align="center" style="font-size: 10pt">18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>2004 Financial Performance</B>



<P align="left" style="font-size: 10pt">Our net loss for the year was $87.1&nbsp;million, $117.9&nbsp;million less than our loss in 2003. Although
this improvement was substantial, our financial performance remains unsatisfactory. Our cash flow
from operating activities was approximately equal to our capital spending and dividends. As a
result, our debt levels remained stable at approximately $2.5&nbsp;billion. Our total debt to
capitalization ratio, calculated in accordance with our credit facilities, rose to 59.1%, as a
result of the impact of the losses on shareholder equity.



<P align="left" style="font-size: 10pt">In 2004, prices rose for all of our products increasing our sales by $469.2&nbsp;million. Shipments
also increased substantially in lumber, coated and specialty papers. Our sales in 2004 were 17%
higher than in 2003. However, our costs were also significantly higher primarily due to greater
production volumes, the stronger Canadian dollar and higher recycled fiber, energy and labor costs.
Our unit manufacturing costs were up 5% in newsprint, 3% in market pulp and 13% in lumber.
&#147;Consolidated Results of Operations&#148; on pages 25-27 provides specifics regarding manufacturing cost
changes in 2004.



<P align="left" style="font-size: 10pt">We improved our product mix significantly in 2004. Shipments of higher value added coated and
specialty papers increased by 15% as compared to 2003. We also improved our wood fiber integration
starting up a new sawmill in Northwestern Ontario.



<P align="left" style="font-size: 10pt">Newsprint demand in North America declined slightly in 2004 as a cyclical advertising recovery was
offset by conservation measures taken by publishers and reduced North American newspaper
circulation. Global demand for newsprint in 2004 was healthy. Coated mechanical demand in North
America increased by 8.0% as compared to 2003. Uncoated mechanical demand increased by 13.9%,
while supercalendared high gloss specialty paper demand decreased by 2.3%. Global market pulp
demand reached record levels in 2004. Overall, pulp and paper markets were stronger in 2004 than in
2003.



<P align="left" style="font-size: 10pt">In 2004 we spent approximately $84&nbsp;million on capital projects. We expect to spend approximately
$170&nbsp;million in 2005, compared to projected depreciation expense of $330&nbsp;million. We believe that
this level of spending is adequate to effectively maintain our manufacturing facilities. We intend
to direct any excess cash flow to reduce debt.



<P align="left" style="font-size: 10pt"><B>Outlook</B>



<P align="left" style="font-size: 10pt">Markets for our products have improved but prices remain relatively weak. North American newsprint
demand may continue to decline over the next few years and we expect our newsprint capacity to
decline as we continue to shift production to coated and specialty grades. In particular, we have
attractive opportunities for further investment to enhance our product mix at our Calhoun and
Thunder Bay mills. We expect continued improvement in prices for our products in 2005, however the
pace and extent of any improvement is likely to depend on the overall economy.



<P align="left" style="font-size: 10pt">We believe our operations are positioned to deliver quality products and that capital reinvestment
in the business can be held to acceptable levels. We expect to generate significant cash flows in
2005, reducing debt to more desirable levels and enhancing our financial flexibility. However, a
significant downturn in our business may impact our ability to generate sufficient cash flows and
require us to seek additional external sources of capital. We believe our access to our credit
facilities and the capital markets will be sufficient to provide for our anticipated requirements.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>critical accounting policies and estimates</B></FONT>



<P align="left" style="font-size: 10pt">The following discussion and analysis of financial condition and results of operations are based on
our Consolidated Financial Statements.



<P align="left" style="font-size: 10pt">The preparation of financial statements in conformity with generally accepted accounting principles
requires us to make estimates, assumptions and judgments and rely on future projections of results
of operations and cash flows. We base our estimates and assumptions on historical data and other
assumptions that we believe are reasonable under the circumstances. These estimates and
assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities in our financial statements. In addition, they affect the reported amounts
of revenues and expenses during the reporting period.



<P align="left" style="font-size: 10pt">Our judgments are based on our assessment as to the effect certain estimates, assumptions of future
trends or events may have on the financial condition and results of operations reported in our
Consolidated Financial Statements.


<P align="center" style="font-size: 10pt">19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">It is important that the reader of our financial statements understand that actual results
could differ materially from these estimates, assumptions, projections and judgments.



<P align="left" style="font-size: 10pt">A summary of our significant accounting policies is disclosed in Note 1 to the Consolidated
Financial Statements. Based upon a review of our significant accounting policies, we believe the
critical accounting policies that follow contain the most significant judgments and estimates used
in the preparation of our Consolidated Financial Statements.



<P align="left" style="font-size: 10pt"><B>Pension and Other Nonpension Postretirement Benefits</B>



<P align="left" style="font-size: 10pt">Bowater has contributory and noncontributory pension plans that cover substantially all employees.
Our cash contributions to the plans have been sufficient to provide pension benefits to
participants and meet the funding requirements of ERISA and applicable Pension Benefits Acts in
Canada. We also sponsor defined benefit health care and life insurance plans for retirees at
certain locations. Net periodic costs are recognized as employees render the services necessary to
earn postretirement benefits.



<P align="left" style="font-size: 10pt">Bowater engages an independent actuarial firm to perform an actuarial valuation of the fair values
of our postretirement plans&#146; assets and benefit obligations. We provide the actuarial firm with
assumptions that have a significant effect on the fair value of the assets and obligations such as
the:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT>&nbsp;</TD>
    <TD>weighted average discount rate &#150; used to arrive at the net present value of the pension and postretirement obligations;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT>&nbsp;</TD>
    <TD>return on assets &#150; used to estimate the growth in invested asset value available to satisfy pension obligations;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT>&nbsp;</TD>
    <TD>rate of compensation increases &#150; used to calculate the impact future pay increases will have on pension obligations; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT>&nbsp;</TD>
    <TD>health care cost inflation &#150; used to calculate the impact future health care costs will have on postretirement obligations.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">These assumptions are updated annually on our measurement date, September&nbsp;30, and are disclosed in
Note 14 &#147;Pension and Other Nonpension Postretirement Benefits&#148; to our Consolidated Financial
Statements. We understand that these assumptions directly impact the actuarial valuation of the
assets and obligations recorded on our balance sheet and the income or expense that is recorded in
our Consolidated Statement of Operations. We base our assumptions on either historical or market
data we consider reasonable in the circumstances. The following weighted average assumptions were
used in our actuarial valuation to determine the projected benefit obligation at the measurement
date and the net periodic benefit cost for the year:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="16" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>Pension Plans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>Other Postretirement Plans</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Projected benefit obligation:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rate of compensation increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic benefit cost:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expected return on assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>7.8</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rate of compensation increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Variations in these assumptions could have a significant effect on the net periodic benefit
cost reported in our 2004 Consolidated Statement of Operations. For example, a 25 basis point
change in these assumptions would increase (decrease)&nbsp;2004 pension and postretirement expense as
follows (in millions):


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="8" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">25 Basis Point</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">25 Basis Point</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Assumption</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Increase</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Decrease</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(5.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Return on assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rate of compensation increases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Health care cost inflation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">Based on our September&nbsp;30, 2004 actuarial valuation of our postretirement plans&#146; assets and benefit
obligations we had a reduction in our additional minimum pension liability and an increase to
shareholders&#146; equity in 2004 of $49.2&nbsp;million. Additionally, based upon our actuarial valuation at
September&nbsp;30, 2004, pension expense and cash contributions are expected to increase approximately
$4.0&nbsp;million and $24.8&nbsp;million, respectively, in 2005. Our other nonpension postretirement expense
and cash contributions are expected to increase approximately $1.0&nbsp;million and $3.2&nbsp;million,
respectively, in 2005, primarily as a result of health care cost increases, offset by the new
prescription drug benefit under Medicare Part D (discussed below).



<P align="left" style="font-size: 10pt">In December&nbsp;2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
&#147;Act&#148;) was passed. The Act introduced a prescription drug benefit under Medicare Part D as well as
a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is
at least actuarially equivalent to Medicare Part D. Our postretirement benefits include
prescription drug benefits for Medicare-eligible retirees. In March&nbsp;2004, the Financial Accounting
Standards Board (FASB)&nbsp;issued FASB Staff Position (FSP)&nbsp;106-2, &#147;Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003&#148;
(the Act) that provides guidance on the accounting for the effects of the Act for employers that
sponsor postretirement health care plans that provide drug benefits. This FSP also requires those
employers to provide certain disclosures regarding the effect of the federal subsidy provided by
the Act.



<P align="left" style="font-size: 10pt">Bowater adopted FSP 106-2 effective July&nbsp;1, 2004 and applied the prospective transition method. As
a result, a remeasurement of the plan&#146;s assets and accumulated postretirement benefit obligation
(APBO), including the effects of the subsidy was made. The remeasurement resulted in a reduction of
our net periodic benefit cost for 2004 of $2.5&nbsp;million. The $2.5&nbsp;million reduction consisted of
$0.3&nbsp;million for the reduction of current period service costs, $1.3&nbsp;million for the reduction of
amortization of actuarial experience loss and $0.9&nbsp;million for reduction in interest costs on our
APBO. The remeasurement decreased the actuarial loss component of our APBO by approximately $36.9
million. The reduction to our net periodic benefit cost for 2005 for the prescription drug benefit
under Medicare Part D is estimated to be approximately $4.4&nbsp;million.



<P align="left" style="font-size: 10pt"><B>Long-Lived Assets:</B>



<P align="left" style="font-size: 10pt">Bowater&#146;s long-lived assets include goodwill and the net depreciated value of fixed assets.



<P align="left" style="font-size: 10pt"><B>Goodwill</B>



<P align="left" style="font-size: 10pt">As of December&nbsp;31, 2004, we had unamortized goodwill in the amount of $828.2&nbsp;million. Statement of
Financial Accounting Standard (SFAS)&nbsp;No.&nbsp;142, &#147;Goodwill and Other Intangible Assets,&#148; requires
goodwill to be tested for impairment at least on an annual basis.



<P align="left" style="font-size: 10pt">Our goodwill is tested for impairment in the fourth quarter of each year. We completed our annual
goodwill impairment test in the fourth quarter of 2004. The test did not indicate impairment.
With the exception of our Thunder Bay mill, the fair values of each of our reporting units exceeded
their carrying value amounts by at least 10%. The fair value of the Thunder Bay mill exceeded its
carrying value by 6%.



<P align="left" style="font-size: 10pt">The goodwill impairment test involves a comparison of the fair value of each of our reporting units
as defined under SFAS No.&nbsp;142, with its carrying amount. If a reporting unit&#146;s carrying amount
exceeds its fair value, then goodwill of the reporting unit is considered to be impaired. The
impairment to be recognized is measured by the amount by which the carrying value of the assets of
the reporting unit being measured exceeds their fair value. Fair value is determined with the
assistance of an independent third party. In making our determination of fair value, we rely
primarily on the discounted cash flow method. This method uses projections of cash flows from each
of the reporting units. Several of the key assumptions include periods of operation, projections
of product pricing, production levels, product costs, market supply and demand, foreign exchange
rates, inflation and capital spending. We derive these assumptions used in our valuation models
from several sources. Many of these assumptions are derived from our internal budgets which would
include existing sales data based on current product lines and assumed production levels,
manufacturing costs and product pricing. Our products are commodity products, therefore, pricing
is inherently volatile and often follow a cyclical pattern; the average price over a commodity
cycle forms the basis of our product pricing assumption. We derive our pricing estimates from
information generated internally, from industry research firms and other published reports and
forecasts. Historical changes or variations in these estimates have not resulted in any goodwill
impairment charges in our financial statements since adopting SFAS 142.



<P align="center" style="font-size: 10pt">21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">The above-listed assumptions used in our valuation models are interrelated. The continuing degree
of interrelationship of these assumptions is, in and of itself a significant assumption. Because
of the interrelationships among these assumptions, we do not believe it would be meaningful to
provide a sensitivity analysis on any of these individual assumptions. However, one key assumption
in our valuation model is our weighted average cost of capital. If our weighted average cost of
capital, which is used to discount the projected cash flows, was lower, the measure of the fair
value of our assets would increase. Conversely, if our weighted average cost of capital was
higher, the measure of the fair value of our assets would decrease. If our estimate of weighted
average cost of capital were to increase by 25 basis points, the excess of the fair values of each
of the reporting units would continue to exceed their carrying value amounts.



<P align="left" style="font-size: 10pt">Future changes in assumptions or the interrelationship of the assumptions may negatively impact
future valuations. In future measurements of fair value, adverse changes in discounted cash flow
assumptions could result in an impairment of goodwill that would require a non-cash charge to the
consolidated statement of operations and may have a material effect on our financial condition and
operating results.



<P align="left" style="font-size: 10pt"><B>Fixed Assets</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT>&nbsp;</TD>
    <TD>For fixed assets acquired in an acquisition, we estimate their fair value based on accepted
valuation techniques. These techniques are dependent upon management estimates and
assumptions. While we believe management&#146;s assumptions, including the assigned useful lives,
are reasonable under the circumstances, different estimates and assumptions could have a
significant impact on the amounts reported through our Consolidated Statement of Operations.
During the year ended December&nbsp;31, 2004, no assets were acquired in an acquisition.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT>&nbsp;</TD>
    <TD>For the impairment or disposal of long-lived assets, we follow the guidance as prescribed
in SFAS&nbsp;No.&nbsp;144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets.&#148; In
accordance with SFAS No.&nbsp;144, long-lived assets and intangible assets subject to amortization
would be reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset or group of assets may not be recoverable. A long-lived
asset classified as held for sale is initially measured and reported at the lower of its
carrying amount or fair value less cost
to sell. Long-lived assets to be disposed of other than by sale are classified as held and used
until the long-lived asset is disposed of.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">Tests for recoverability of a long-lived asset to be held and used are measured by comparing the
carrying amount of the long-lived asset to the sum of the estimated future undiscounted cash flows
expected to be generated by the asset. In estimating the future undiscounted cash flows we use
projections of cash flows directly associated with, and which are expected to arise as a direct
result of, the use and eventual disposition of the assets. Several of the key assumptions include
periods of operation, projections of product pricing, first quality production levels, product
costs, market supply and demand, foreign exchange rates, inflation and projected capital spending.
We derive these assumptions from several sources. Many of these assumptions are derived from our
internal budgets which would include existing sales data based on current product lines and assumed
production levels, manufacturing costs and product pricing. Our products are commodity products,
therefore, pricing is inherently volatile and often follow a cyclical pattern; the average price
over a commodity cycle forms the basis of our product pricing assumption. We derive our pricing
estimates from information generated internally, from industry research firms and other published
reports and forecasts. Except as discussed herein, historical changes or variations in these
estimates have not resulted in significant fixed asset impairments in our financial statements. In
December&nbsp;2002 we recorded an impairment charge of $26.4&nbsp;million for the permanent closing of our
No.&nbsp;3 paper machine at our Donnacona facility.



<P align="left" style="font-size: 10pt">The above-listed assumptions used in our valuation models are interrelated. The continuing degree
of interrelationship of these assumptions is, in and of itself a significant assumption. Because
of the interrelationships among these assumptions, we do not believe it would be meaningful to
provide a sensitivity analysis on any of these individual assumptions. Changes in any of these
estimates could have a material effect on the estimated future undiscounted cash flows expected to
be generated by the asset. If it is determined that a long-lived asset is not recoverable, an
impairment loss would be calculated equal to the excess of the carrying amount of the long-lived
asset over its fair value.



<P align="left" style="font-size: 10pt">Nuway Operations &#150; Our product prices are based on coated groundwood paper prices. Transaction
prices for our Nuway product improved significantly in 2004, but continued to be insufficient to
cover costs. We realized the effects of significant improvements in our productivity and quality
in 2004, but these improvements were mitigated by higher base stock costs. Due to these factors,
we are operating our Nuway facilities at about half their capacity. The No.&nbsp;1 line at Benton
Harbor remained shut during 2004 mainly due to market conditions. Assuming market conditions
improve,




<P align="center" style="font-size: 10pt">22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">we expect to increase our production. However, there is no assurance as to when Nuway
product pricing or costs will improve.



<P align="left" style="font-size: 10pt">As a result of these factors, we performed a test for recoverability on our Nuway assets. The
current carrying amount of these assets is $91.4&nbsp;million. We determined the estimated future
undiscounted cash flows expected to be generated by the Nuway assets consistent with the tests of
recoverability discussed above. The results of the test for recoverability indicated that the
estimated future undiscounted cash flows exceeded the carrying amount of the long-lived asset and
therefore, no impairment exists. The estimated undiscounted cash flows exceeded the carrying
amount by at least 10%.



<P align="left" style="font-size: 10pt">Future changes in assumptions or the interrelationship of the assumptions may negatively impact
future valuations. In future tests for recoverability, adverse changes in undiscounted cash flow
assumptions could result in an impairment of our Nuway assets that would require a non-cash charge
to the statement of operations and may have a material effect on our financial condition and
operating results.



<P align="left" style="font-size: 10pt"><B>Derivatives</B>



<P align="left" style="font-size: 10pt">The majority of our revenues are generated and received in United States dollars. A significant
portion of our manufacturing facilities are in Canada, and accordingly, we pay our operating
expenses in Canadian dollars at these Canadian mill sites. To reduce our exposure to Canadian
dollar exchange rate fluctuations, we enter into and designate Canadian dollar forward contracts to
hedge certain of our monthly forecasted Canadian dollar cash
outflows. We estimate our monthly forecasted Canadian
dollar outflows on a rolling 24-month basis and, depending on the level of the Canadian dollar,
hedge the first monthly Canadian dollar outflows of manufacturing costs up to 90% of such
monthly forecasts in each of the first twelve months and up to 80% in the following twelve months. We also
assess, both at the inception of the hedge and on an on-going basis, whether the derivatives used
are highly effective in offsetting changes in cash flows of hedged items. We believe that these
Canadian dollar forward contracts qualify as a cash flow hedge in accordance with SFAS No.&nbsp;133 and
we have, therefore, deferred $123.0&nbsp;million of unrealized gains recorded in accumulated other
comprehensive loss at December&nbsp;31, 2004. Had these Canadian dollar forward contracts not qualified
for cash flow hedging, these gains would have been reported through our Consolidated Statement of
Operations.



<P align="left" style="font-size: 10pt"><B>Taxes</B>



<P align="left" style="font-size: 10pt"><B>Tax Exposure Matters</B>



<P align="left" style="font-size: 10pt">In the normal course of business, we are subject to audits from the Federal, state, Canadian
provincial and other tax authorities regarding various tax liabilities. The Canadian taxing
authorities are auditing years 1999 through 2001 for our Canadian entities. The Internal Revenue
Service (IRS)&nbsp;has closed audits of our U.S. federal income tax returns through fiscal year 1997.
There were no material adjustments to the company&#146;s tax liabilities arising from the closed IRS
audits. The IRS chose not to audit our calendar years 1998 and 1999 tax returns; however, the IRS
may adjust our reported tax liabilities for these years to the extent of refunds generated by
operating loss carrybacks from subsequent tax years. In 2003, the IRS began auditing our federal
income tax returns for years 2000 through 2002.



<P align="left" style="font-size: 10pt">These audits may alter the timing or amount of taxable income or deductions, or the allocation of
income among tax jurisdictions. The amount ultimately paid upon resolution of issues raised may
differ from the amount accrued. We believe that taxes accrued on the Consolidated Balance Sheet
fairly represent the amount of future tax liability due.



<P align="left" style="font-size: 10pt">Bowater utilizes certain income tax planning strategies to reduce its overall cost of income taxes.
Upon audit, it is possible that certain strategies might be disallowed resulting in an increased
liability for income taxes. We have provided for our estimated exposure attributable to income tax
planning strategies. We believe that the provision for liabilities resulting from the
implementation of income tax planning strategies is appropriate. To date, we have not experienced
an examination by governmental revenue authorities that would lead management to believe that our
past provisions for exposures related to income tax planning strategies are not adequate.



<P align="left" style="font-size: 10pt">The process to derive Bowater&#146;s provision for all tax liabilities, including those related to tax
planning strategies, requires significant judgment, historical comparisons and reference to
authoritative tax resources. In general, on a quarterly basis, we review tax reserves based on
changes in tax law and changes in facts or circumstances. Bowater&#146;s tax reserves are adjusted
based on either an agreed determination of a particular matter, the expiration of the statute of
limitations for a particular tax period or a change in facts or circumstances regarding the matter.
For example, in the third quarter of



<P align="center" style="font-size: 10pt">23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">2004, income tax reserves of $6.8&nbsp;million were eliminated due
to the expiration of a statute of limitation associated with pre-2001 Canadian tax years, resulting
in a decrease to income tax expense for the quarter.



<P align="left" style="font-size: 10pt"><B>Tax Valuation Allowances</B>



<P align="left" style="font-size: 10pt">Deferred income taxes represent a substantial liability on our consolidated balance sheet.
Deferred income taxes are determined in accordance with SFAS No.&nbsp;109, &#147;Accounting for Income
Taxes.&#148; Deferred tax assets and liabilities are recognized for the expected future tax
consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and operating loss and tax credit
carryforwards. We evaluate our tax assets and liabilities on a periodic basis and adjust these
balances as appropriate. We believe that we have adequately provided for our future tax
consequences based upon current facts and circumstances and current tax law. However, should these
tax positions be challenged and not prevail, different outcomes could result and have a significant
impact on the amounts reported through our Consolidated Statement of Operations.



<P align="left" style="font-size: 10pt">The carrying value of our deferred tax assets (tax benefits expected to be realized in the future)
assumes that we will be able to generate, based on certain estimates and assumptions, sufficient
future taxable income in certain tax jurisdictions to utilize these deferred tax benefits, or in the absence of sufficient future
taxable income, that we would implement tax planning strategies to generate sufficient taxable
income. If these tax planning strategies, estimates and related assumptions change in the future,
we may be required to reduce the value of the deferred tax assets resulting in additional income
tax expense. We believe that it is more likely than not that the deferred tax assets, net of
valuation allowance, will be realized, based on forecasted income, or where necessary, the
implementation of prudent and feasible tax planning strategies. However, there can be no assurance
that we will meet our forecasts of future taxable income, or be able to implement tax planning
strategies where required in future periods. We evaluate the deferred tax assets on a periodic
basis and assess the need for additional valuation allowances as conditions change.



<P align="left" style="font-size: 10pt">Additionally, at December&nbsp;31, 2004, Bowater had unremitted earnings of subsidiaries outside the
United States totaling $266.4&nbsp;million, which we have deemed as being permanently invested. No
deferred tax liability has been recognized with regard to these earnings. If our policy was to
change in the future and these earnings were remitted to the United States, these amounts could
significantly increase the income tax liability reported through our Consolidated Statement of
Operations. See discussion of FASB Staff Position No.&nbsp;109-2, &#147;Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision within the American Jobs Creations Act of 2004&#148;, on
page 45 of this Annual Report on Form&nbsp;10-K.




<P align="center" style="font-size: 10pt">24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>business and financial review</B></FONT>



<P align="left" style="font-size: 10pt"><B><I>Consolidated Results of Operations:</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions, except per share amounts)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004 vs. 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003 vs. 2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,190.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">2,721.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,581.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>469.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">140.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(95.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>130.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>117.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Loss per diluted share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.10</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9" align="left">Significant items that improved (lowered)&nbsp;operating income (loss):</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(117.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Product pricing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>300.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Distribution costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(42.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Manufacturing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(27.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(141.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employee termination costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Selling and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>130.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">&nbsp;

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>Year ended 2004 compared to 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><B>Sales </B>increased in 2004 compared to 2003 from both product price increases in all of our major
product groups and increased shipments in coated and specialty papers, pulp and lumber. Please
refer to the discussion of &#147;Product Line Information&#148; beginning on page 28 for a more detailed
analysis of pricing and shipments.



<P align="left" style="font-size: 10pt"><B>Operating income </B>for 2004 improved when compared to 2003. The above table analyzes the major items
that caused the improvement in operating income. A brief explanation of these major items follows.



<P align="left" style="font-size: 10pt"><B>Gain on sale of
assets</B>, primarily for the sale of timberlands, is discussed on pages 36-37 of this
Form&nbsp;10-K.



<P align="left" style="font-size: 10pt"><B>Product pricing </B>for all of our major product groups increased during the year. Please refer to the
discussion of &#147;Product Line Information&#148; beginning on page 28 for a more detailed analysis of
pricing.



<P align="left" style="font-size: 10pt"><B>Distribution costs </B>increased in 2004 as a result of increased shipments, higher lumber duties on
increased lumber shipments and lumber transaction prices and increased fuel prices and
export-related costs. Please refer to the discussion on page 31 of this Form&nbsp;10-K for a discussion
of the lumber duties.



<P align="left" style="font-size: 10pt"><B>Manufacturing costs </B>were higher in 2004 primarily as a result of the items that follow. These
higher manufacturing costs were partially offset by higher production volumes and shipments.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>

    <TD>Recycled fiber &#150; We recycle and use old newspapers and magazines in our groundwood paper grades. The cost of recycled
fiber increased due to higher recycle fiber prices in 2004 and the re-start in May&nbsp;2003 of an idled recycle facility at
our Calhoun mill.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>
    <TD>Labor and repair materials &#150; Labor costs were higher in 2004 as a result of increased labor and fringe rates, primarily
from increased pension costs. Repair materials were higher as a result of increased maintenance outages in 2004.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>
    <TD>Wood costs &#150; We use both harvested timber and residual sawmill chips to make our pulp and paper products. The price
for residual chips in Canada increased in 2003 and remained at those levels throughout 2004. Additionally, the fees we
pay to the Canadian government for harvesting trees increased as a result of increases in lumber transaction prices.</TD>
</TR>



</TABLE>

<P align="center" style="font-size: 10pt">25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>
    <TD>Energy costs &#150; Increases in electricity and fuel consumption and prices caused an increase in energy costs.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>
    <TD>Canadian dollar &#150; During 2004 the Canadian dollar rose significantly (8.1%) in relation to the U.S. dollar. Since
about 42% of our pulp and paper manufacturing capacity is in Canada, our costs stated in U.S. dollars rose
approximately $95.6&nbsp;million. Our currency hedging program allowed us to offset approximately $78.6&nbsp;million of this
increase.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Employee termination costs </B>were lower as we completed our cost reduction program in 2003.



<P align="left" style="font-size: 10pt"><B>Selling and administrative expenses </B>were higher due primarily to increased selling costs on
increased sales of our coated papers.



<P align="left" style="font-size: 10pt"><B>Net loss </B>in 2004 was lower compared to 2003. Net loss in 2003 includes an after tax charge of $4.5
million, or $0.08 per diluted share, for cumulative effect adjustments from the adoption of
Statement of Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;143, &#147;Accounting for Asset Retirement
Obligations&#148; and the partial adoption of FIN 46, &#147;Consolidation of Variable Interest Entities&#148;.

<P align="left" style="font-size: 10pt">&nbsp;


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Year ended 2003 compared to 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Sales increased in 2003 compared to 2002 primarily from product price increases as further
discussed in the &#147;Product Line Information&#148; section.



<P align="left" style="font-size: 10pt">Operating loss for 2003 increased when compared to 2002. The above table analyzes the major items
that caused the increase in operating loss. A brief explanation of these major items follows.



<P align="left" style="font-size: 10pt">Gain on sale of assets, primarily for the sale of timberlands, is discussed on pages 36-37 of this
Form&nbsp;10-K.



<P align="left" style="font-size: 10pt">An impairment of assets of $28.5&nbsp;million, primarily related to the permanent closure of a paper
machine at our Donnacona mill, was taken in 2002.



<P align="left" style="font-size: 10pt">Product pricing for all of our major product groups increased during the year but only marginally
for coated and specialty papers and lumber. Please refer to the discussion of &#147;Product Line
Information&#148; beginning on page 28 for a more detailed analysis of pricing and shipments.



<P align="left" style="font-size: 10pt">Distribution costs increased in 2003 as a result of Canadian lumber duties being imposed beginning
in May&nbsp;2002, and from increased coated and specialty paper shipments from our Catawba mill.



<P align="left" style="font-size: 10pt">Shipments were higher in 2003 in Coated and Specialty Papers due to the conversion of a newsprint
machine to coated groundwood papers at our Catawba mill. Newsprint shipments were lower in 2003
due to the conversion of the Catawba machine and the closure of another paper machine in Donnacona.
Pulp shipments were lower in part due to down time at our Thunder Bay mill and the start-up of a
new pulp line at Catawba. Lumber shipments were basically unchanged from 2002 levels. Please refer
to the discussion of &#147;Product Line Information&#148; beginning on page 28 for a more detailed analysis
of pricing and shipments.



<P align="left" style="font-size: 10pt">Manufacturing costs were significantly higher in 2003 primarily as a result of the following:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>
    <TD>Wood costs &#150; We use both harvested timber and residual sawmill chips to make our pulp and
paper products. The combination of high lumber duties affecting Canadian sawmills and the
strengthening of the Canadian dollar caused some third party sawmills to shut. This created a
temporary wood shortage that was subsequently addressed with higher cost whole tree chipping.
In the Southeast U.S., unusually wet weather reduced harvest levels in the first half of 2003 causing prices for purchased timber to rise and the wood to be
purchased further away from our mills.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>
    <TD>Recycled fiber &#150; We also recycle and use old newspapers and magazines in our groundwood paper grades. The cost of
recycled fiber increased primarily due to the re-start of an idled recycle facility at our Calhoun mill.</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>
    <TD>Energy costs &#150; The severe cold weather in the early part of 2003 caused an increase in energy prices and consumption.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</TD>
    <TD>Canadian dollar &#150; During 2003 the Canadian dollar rose dramatically (21%) in relation to the U.S. dollar. Since about
40% of our manufacturing capacity is in Canada, our costs stated in U.S. dollars rose approximately $136.0&nbsp;million.
Our currency hedging program allowed us to offset approximately $52.4&nbsp;million of this increase.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">Employee termination costs were higher as we completed our cost reduction program that resulted in
the elimination of about 600 jobs over the preceding two years.



<P align="left" style="font-size: 10pt">Selling and administrative expenses were higher because increases in the price of our stock in 2003
increased our compensation expense from employee equity participation rights, whereas price
decreases of our stock in 2002 resulted in recognition of credits in 2002.



<P align="left" style="font-size: 10pt">Net loss in 2003 includes an after tax charge of $4.5&nbsp;million, or $0.08 per diluted share, for
cumulative effect adjustments from the adoption of SFAS&nbsp;No.&nbsp;143, &#147;Accounting for Asset Retirement Obligations&#148; and the partial adoption of FIN 46,
&#147;Consolidation of Variable Interest Entities&#148;.

<P align="left" style="font-size: 10pt">&nbsp;

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><FONT style="font-variant: SMALL-CAPS"><B>Fourth quarter of 2004</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Subsequent to our earnings release on January&nbsp;27, 2005, we made an adjustment relating to the
conversion of certain long-term liabilities from Canadian to U.S. dollars. The result was a charge
to foreign exchange (which is classified in the &#147;Other expense (income)&#148; line item of our
Consolidated Statement of Operations) of $1.9&nbsp;million ($0.03 per diluted share) and an increase to
&#147;Pension, other postretirement benefits and other long-term liabilities&#148; on our Consolidated
Balance Sheet of $1.9&nbsp;million. This brought our reported net loss for the fourth quarter to $35.2
million (or $0.61 per diluted share) and $87.1&nbsp;million (or $1.52 per diluted share) for the twelve
months ended December&nbsp;31, 2004.<BR><BR>

Net loss in the fourth quarter of 2004 was $35.2&nbsp;million, or $0.61 per diluted share on sales of
$823.0&nbsp;million. This compares to a net loss in the fourth quarter of 2003 of $50.9&nbsp;million, or
$0.89 per diluted share on sales of $735.6&nbsp;million.



<P align="left" style="font-size: 10pt">Operating loss for the fourth quarter of 2004 was $7.6&nbsp;million compared to an operating loss of
$24.3&nbsp;million for the fourth quarter of 2003. The improvement in operating loss is primarily the
result of higher transaction prices for all our product lines ($80.8&nbsp;million) and increased
shipments in coated and specialty papers and lumber. These improvements were partially offset by
higher distribution costs ($13.6&nbsp;million), higher operating costs related to higher wood ($10.3&nbsp;million), fiber ($4.8&nbsp;million) and energy
($9.0&nbsp;million) costs, and the strengthening of the Canadian dollar versus the U.S. dollar ($14.2
million).



<P align="left" style="font-size: 10pt">Interest expense increased $2.2&nbsp;million, from $46.6&nbsp;million in the fourth quarter of 2003 to $48.8
million in the fourth quarter of 2004, primarily from higher average debt balances and interest
rates and less capitalized interest.



<P align="left" style="font-size: 10pt">The effective tax rate for the fourth quarter of 2004 (20.8%) was lower than the fourth quarter of
2003 (25.5%) primarily due to certain losses from changes in foreign currency exchange rates for
which the company received no tax benefit.



<P align="left" style="font-size: 10pt"><B>Division/Segments and Product Line Information</B>



<P align="left" style="font-size: 10pt">Bowater is organized by Division. Bowater also provides product line disclosures for
informational purposes to our analysts and investors. The Divisions have operational
responsibility over their group of operating assets. The Divisions also have sales
responsibilities that overlap several of the Company&#146;s operating Divisions/Segments. The matrix
below depicts the various products that are manufactured by each of the Company&#146;s operating
Divisions/Segments and corresponding sales dollars for 2004. The shaded areas in the matrix below
represent the Division that is responsible for the sale of the product line for the entire
company.



<P align="center" style="font-size: 10pt">27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Coated &#038;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Canadian</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Specialty</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Forest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Forest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Corporate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Newsprint</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Papers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Products</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Products</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pulp</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">and Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Product Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Eliminations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Newsprint</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">987.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">348.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,340.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Coated &#038; Specialties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">517.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">904.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pulp</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">449.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">543.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lumber</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,626.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>611.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>819.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>173.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(40.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,190.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">For example, the Newsprint Division has operational (profit and loss) responsibility for the
profitability of all three products (newsprint, coated &#038; specialties and pulp) manufactured at its
mills. The sales and related manufacturing costs for these product lines are recorded by the
Newsprint Division. The Newsprint Division also has the responsibility for the sale of all
newsprint produced at all divisions within Bowater (see shaded area in matrix). Each of these
other divisions (the Coated &#038; Specialty Papers Division and the Canadian Forest Products Division)
has operational (profit and loss) responsibility for the profitability of newsprint manufactured at
its mills, but no selling responsibility.



<P align="left" style="font-size: 10pt">Bowater discloses operating income and depreciation by product line in its Annual Report. The
table below presents a reconciliation of operating income and depreciation by product line to
consolidated totals for the year ended December&nbsp;31, 2004.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="26">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="26" style="border-bottom: 1px solid #000000">Product Line</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Coated &#038;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net gain on</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Specialty</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">fixed assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Corporate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Newsprint</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Papers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pulp</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Lumber</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">and land sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">and Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(84.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="left" style="font-size: 10pt">&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>PRODUCT LINE INFORMATION</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Presented below is a discussion of each significant product line, followed by a discussion of the
results of each of the reported divisions.



<P align="left" style="font-size: 10pt">In general, Bowater&#146;s products are globally-traded commodities. Pricing and the level of shipments
of these products will continue to be influenced by the balance between supply and demand as
affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and
fluctuations in exchange rates.



<P align="left" style="font-size: 10pt"><B>Newsprint &#150; Product Line</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left">&nbsp;</TD>
</TR>



<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales (in millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,340.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,236.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,199.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average prices (per metric ton)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>528</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">454</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shipments (thousands of metric tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,541.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,570.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,643.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Downtime (thousands of metric tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>192.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory at end of year (thousands of metric tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>89.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>Year ended 2004 compared to 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Our average newsprint transaction price was 9.8% higher in 2004 compared to 2003. The increase
reflects the realization of price increases in 2004 in the North American and international
markets. Newsprint shipments decreased by 1.1% compared to 2003. This decrease was primarily due
to a production shift from newsprint to higher margin specialty papers. In June&nbsp;2003, we shifted
our idled capacity because of market conditions from our Calhoun mill to our Thunder Bay mill
(since late June&nbsp;2003) due to a rise in operating costs caused by a stronger Canadian dollar. We
expect this market downtime of approximately 36,000 metric tons per quarter to continue until
market conditions improve. We plan to take 40,000 metric tons of market and maintenance downtime
in the first quarter of 2005 and we will continue to match our production to our orders.
Inventories increased approximately 20% in 2004 due to export production and year-end shipment
timing issues.



<P align="left" style="font-size: 10pt">We have announced a $35 per metric ton price increase for the domestic market effective March&nbsp;1,
2005; however, market conditions will determine whether we fully realize the increase.



<P align="left" style="font-size: 10pt"><B>Newsprint Third Party Data: </B>Total United States newsprint demand and consumption declined 1.4% and
1.7%, respectively, in 2004 compared to 2003. Because of significantly decreased industry
capacity, the 2004 operating rate of 96% exceeded the 2003 rate of 93%. North American net
exports of newsprint declined approximately 4.7% from 2003 levels. North American mill inventories
at year end 2004 were unchanged from year-ago levels, while customer inventories increased slightly
from 2003 levels. Total inventories (North American mills and users) ended 2004 at 1.31&nbsp;million
metric tons, slightly above the 2003 level. Days of supply at the U.S. dailies increased to 43
days from 41&nbsp;days at year end 2003. Newspaper advertising linage improved 1.1% in 2004 compared to
2003.

<P align="left" style="font-size: 10pt">&nbsp;

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Year ended 2003 compared to 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Our average newsprint transaction price was 5.9% higher in 2003 compared to 2002. The increase
reflects the partial realization of announced price increases in 2003 for domestic newsprint and in
the international market. Newsprint shipments decreased by 2.8% compared to 2002. This reduction
was primarily due to the permanent removal of 240,000 metric tons of annual newsprint production
capacity related to the conversion of a newsprint machine at Catawba to coated paper. The decrease
in production was partially offset by less downtime and other shifts in production. Our No.&nbsp;1
newsprint machine at Calhoun started back up in January of 2003 after being down since January of
2002. This startup was in conjunction with the shutdown of a specialty paper machine at Donnacona
and a transfer of those specialty orders to Calhoun (also removing 100,000 metric tons of annual
newsprint capacity). Our No.&nbsp;3 newsprint machine at Calhoun started back up in July of 2003 after
being down since January of 2002, as we idled a paper machine at our Thunder Bay mill (since late
June&nbsp;2003) due to a rise in operating costs caused by a stronger Canadian dollar.



<P align="left" style="font-size: 10pt">Newsprint Third Party Data: Total United States newsprint demand and consumption declined 1.3% and
0.8%, respectively, in 2003 compared to 2002. However, 565,000 metric tons were permanently
removed from North American capacity, which improved the overall market balance. North American
net exports of newsprint declined approximately 1.3% from 2002 levels. Newspaper advertising
linage improved 0.7% in 2003 compared to 2002. North American mill inventories increased in 2003,
while customer inventories decreased slightly from 2002 levels. Total inventories (North American
mills and users) ended 2003 at 1.29&nbsp;million metric tons, approximately 17% below historical levels.



<P align="left" style="font-size: 10pt"><B>Coated and Specialty Papers &#150; Product Line</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD colspan="13" align="left">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Sales (in millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>904.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">726.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">613.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Average prices (per short ton)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>616</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">567</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Shipments (thousands of short tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,467.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,276.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,081.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Downtime (thousands of short tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>99.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Inventory at end of year (thousands of short tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>Year ended 2004 compared to 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Our average transaction price for coated paper was 7.6% higher in 2004 compared to 2003. The
increase reflects the realization of price increases in 2004. Our coated mechanical papers
shipments increased 19.8% compared to 2003, due primarily to the conversion in 2003 of a paper
machine at Catawba from newsprint to coated paper. Our average transaction price for specialty
paper was 8.3% higher in 2004 compared to 2003. The increase reflects the realization of price
increases in 2004. Our specialty papers shipments increased 10.5% compared to 2003, due to
increased shipments to book market customers moving from traditional freesheet grades to mechanical
specialties and retailer circular customers upgrading from newsprint to mechanical specialties.
Market downtime of 88,000 short tons was taken in 2004 at our Nuway facilities. We anticipate
taking 22,000 short tons of downtime in the first quarter of 2005. Inventories decreased in 2004
as a result of stronger market demand.



<P align="left" style="font-size: 10pt"><B>Coated and Specialty Papers Third Party Data: </B>North American demand for coated mechanical papers
increased 8% during 2004 compared to 2003. According to Publishers Information Bureau (PIB), U.S.
magazine monthly advertising pages increased 3.8% in 2004 compared to 2003 and catalog/bulk
mailings (measured by Standard mail pieces) increased through September&nbsp;2004 8.7% compared to 2003.
North American coated mechanical mill inventories were at 11&nbsp;days supply at December&nbsp;31, 2004,
compared to 15&nbsp;days supply at December&nbsp;31, 2003.



<P align="left" style="font-size: 10pt">North American demand for supercalendared high gloss paper and other uncoated mechanical papers
ended 2004 down 2.3% and up 13.9%, respectively, compared to 2003. North American uncoated
mechanical inventories were at 13&nbsp;days supply at December&nbsp;31, 2004, compared to 14&nbsp;days supply at
December&nbsp;31, 2003.

<P align="left" style="font-size: 10pt">&nbsp;

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Year ended 2003 compared to 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Our average transaction price for coated paper was 0.4% higher in 2003 compared to 2002. Our
coated mechanical papers shipments increased 27.4% compared to 2002, due to the conversion of a
paper machine at Catawba from newsprint to coated paper. Our average transaction price for
specialty paper was 0.9% lower in 2003 compared to 2002. Our specialty papers shipments increased
10.4% compared to the same period last year, due to book market customers down-grading from
traditional freesheet grades to mechanical specialties and retailer circular customers upgrading
from newsprint to groundwood specialties.



<P align="left" style="font-size: 10pt">Coated and Specialty Papers Third Party Data: North American demand for coated mechanical papers
increased 5.4% compared to 2002. U.S. magazine monthly advertising pages increased 2.0% in 2003
compared to 2002 and catalog mailings (measured by Standard A mail pieces) increased through
December&nbsp;2003 3.7% compared to 2002. North American coated mechanical mill inventories were at 16
days supply at December&nbsp;31, 2003, compared to 13&nbsp;days supply at December&nbsp;31, 2002.



<P align="left" style="font-size: 10pt">North American demand for supercalendared high gloss paper and other uncoated mechanical papers
were up approximately 6% and down approximately 1%, respectively, in 2003 compared to 2002. North
American uncoated mechanical inventories were at 14&nbsp;days supply at December&nbsp;31, 2003, compared to
15&nbsp;days supply at December&nbsp;31, 2002.



<P align="left" style="font-size: 10pt"><B>Market Pulp</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD colspan="13" align="left">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Sales (in millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>543.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">489.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">498.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Average prices (per metric ton)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>513</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Shipments (thousands of metric tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,058.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,038.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,143.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Downtime (thousands of metric tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>62.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Inventory at end of year (thousands of metric tons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>49.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="left" style="font-size: 10pt">&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>Year ended 2004 compared to 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Our average price for market pulp was 8.7% higher in 2004 compared to 2003. The increase reflects
the price increases in 2004 brought about by improved world supply and demand. Our shipments
increased 1.9% in 2004 compared to



<P align="center" style="font-size: 10pt">30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">2003, mainly due to increased production from our Thunder Bay facility. Our market pulp inventories ended 2004 at 14&nbsp;days supply, 17&nbsp;days below the industry
average. Generally, our inventories are below the industry average because our mills are
geographically closer to the markets they serve. We believe our inventory levels are appropriate
and have no impact on our operations.



<P align="left" style="font-size: 10pt">We have announced two market price increases of $30 per metric ton each for hardwood grades
effective January&nbsp;1, 2005 and March&nbsp;1, 2005, respectively. Additionally, we have announced a
market price increase of $30 per metric ton for softwood grades, including fluff, effective March
1, 2005. Our Catawba, SC facility will be down for a scheduled maintenance requirement in the
first quarter of 2005, removing approximately 6,000 metric tons of production. We believe this
maintenance downtime, combined with a strong Canadian dollar and other cost pressures, will
continue to keep our manufacturing cost of market pulp elevated in the first quarter of 2005.



<P align="left" style="font-size: 10pt"><B>Market Pulp Third Party Data: </B>World demand for market pulp increased 6% in 2004 compared
to 2003. Demand in China grew 28% over the prior year; comparatively, demand in North America grew
by 6% and demand in Western Europe by 3%. World producers shipped at 96% of capacity. World
producer inventories have decreased to 31&nbsp;days supply, which is 3&nbsp;days less than the corresponding
period of 2003.

<P align="left" style="font-size: 10pt">&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Year ended 2003 compared to 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Our average price for market pulp was 8.3% higher in 2003 compared to 2002. The increase reflects
the realization of price increases in 2003 brought about by improved world supply and demand
dynamics. Our shipments decreased 9.2% in 2003 compared to 2002, primarily as a result of
production curtailments at our Thunder Bay facility due to wood shortages and our Catawba facility
due to the startup of a replacement fiber line. Our market pulp inventories ended 2003 at 18&nbsp;days
supply, 12&nbsp;days below the industry average.



<P align="left" style="font-size: 10pt">Market Pulp Third Party Data: Demand for market pulp increased 4% in 2003 compared to 2002. North
America and Nordic (United States, Canada, Finland and Sweden) shipments were up 2% over 2002.
North American and Nordic producers (United States, Canada, Finland, and Sweden) operated at 93% of
capacity during 2003 and shipped at 92% of capacity. North American and Nordic inventory stocks
were at 1.84&nbsp;million metric tons (30&nbsp;days supply) at December&nbsp;31, 2003 compared to 1.636&nbsp;million
metric tons (28&nbsp;days supply) at December&nbsp;31, 2002.



<P align="left" style="font-size: 10pt"><B>Lumber</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD colspan="13" align="left">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Sales (in millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>370.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">236.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">243.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Average prices</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>355</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">269</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Shipments (million board feet)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,043.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">875.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">904.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Downtime (million board feet)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>297.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Inventory at end of year (million board feet)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="left" style="font-size: 10pt">&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>Year ended 2004 compared to 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Our lumber shipments increased 19.1% in 2004 compared to 2003 as we continued our ramp up of the
Thunder Bay sawmill and increased our output at the Maniwaki sawmill as a result of
a recent plant modernization. Due to periods of weak lumber markets and limited availability of
timber supply from our cutting rights on Crown-owned land, we took approximately 297.7&nbsp;million
board feet of downtime in 2004, compared to 151.7&nbsp;million board feet in 2003.



<P align="left" style="font-size: 10pt">The U.S. Department of Commerce (DOC)&nbsp;imposed antidumping duties (ADD)&nbsp;of 8.43% on all of Bowater&#146;s
Canadian softwood lumber imports and countervailing duties (CVD)&nbsp;of 18.79% on softwood lumber
imported from all provinces except New Brunswick and Nova Scotia. The duties became effective for
lumber shipments beginning May&nbsp;22, 2002. Bowater accrued lumber duties based upon the DOC&#146;s
preliminarily imposed effective dates of August&nbsp;16, 2001, for countervailing duties and November&nbsp;6,
2001, for antidumping duties. During the second quarter of 2002, Bowater reversed approximately
$7.3&nbsp;million for previously recorded lumber duties for periods prior to the effective date of May
22, 2002. Since May&nbsp;22, 2002 Bowater has been posting cash deposits to cover the duties. On
December&nbsp;20, 2004 the



<P align="center" style="font-size: 10pt">31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">CVD rate was adjusted to 17.18% and the ADD rate was adjusted to 4.03% for
the period of May&nbsp;22, 2002 to April&nbsp;30, 2003 pursuant to a review by the DOC. Bowater began to
accrue on this new published rate and will continue to accrue and pay duties based on rates
established by the DOC until new rates are published. The CVD rate was amended to 16.37% on
February&nbsp;24, 2005 and the ADD rate was amended to 3.78% on January&nbsp;24, 2005. Lumber duties are
included as a component of distribution costs on our consolidated statement of operations.



<P align="left" style="font-size: 10pt">The Canadian government has appealed the duties to the World Trade Organization (WTO)&nbsp;and under the
terms of the North American Free Trade Agreement (NAFTA)&nbsp;and requested that the duties be refunded.
The final amount of CVD and ADD that may be assessed on Canadian softwood lumber imports into the
U.S. will depend upon negotiations among the governments involved in the dispute or upon
determinations made by the NAFTA, WTO or other adjudicatory panels to which the duties may be
appealed. Until the dispute about the duties is resolved, we will continue to pay the duties as
required by the DOC. To date, we have paid CV and AD duties of approximately $70.6&nbsp;million.
Should these duty rates be eliminated or decreased, a portion or all of the $70.6&nbsp;million could be
reversed into operating income in future periods.



<P align="left" style="font-size: 10pt"><B>Lumber Third Party Data: </B>U.S. housing starts were strong in 2004, increasing 5.7% to 1.953&nbsp;million
units compared to 1.848&nbsp;million units in 2003.

<P align="left" style="font-size: 10pt">&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Year ended 2003 compared to 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Due to the weak lumber markets and limited availability of timber supply from our cutting rights on
Crown-owned land, we took approximately 151.7&nbsp;million board feet of downtime in 2003, compared to
75.6&nbsp;million board feet in 2002. Our lumber shipments decreased 3.2% in 2003 compared to 2002 due
to the temporary closure of select sawmills as a result of depressed lumber prices, countervailing
and anti-dumping duties imposed by the U.S. government, a stronger Canadian dollar and limited
availability of timber supply and the sale of a non-strategic sawmill. This was partially offset
by the opening of our Thunder Bay sawmill in May&nbsp;2003.



<P align="left" style="font-size: 10pt">Lumber Third Party Data: U.S. housing starts were strong in 2003, increasing 8.4% to 1.848&nbsp;million
units compared to 1.705&nbsp;million units in 2002.

<P align="left" style="font-size: 10pt">&nbsp;
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><FONT style="font-variant: SMALL-CAPS"><B>Divisional performance </B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><B>Overview</B>



<P align="left" style="font-size: 10pt">As of December&nbsp;31, 2004, Bowater was organized into five divisions: the Newsprint Division, the
Coated and Specialty Papers Division, the Pulp Division, the Forest Products Division and the
Canadian Forest Products Division. Except for Pulp, each division is responsible for the sales and
marketing of distinct product lines and the operation of certain manufacturing sites. Financial
results for the production and sale of market pulp are included in the Newsprint Division or the
Coated and Specialty Papers Division, depending upon which site manufactures the product. The Pulp
Division is responsible for the marketing and distribution of the product, and its administrative
expenses are included in &#147;Corporate &#038; other eliminations.&#148; Therefore, Bowater&#146;s financial results
have been collected, analyzed and reported through the other four operating divisions and
corporate. Total segment income (loss)&nbsp;in the following tables is equivalent to &#147;Operating income
(loss)&#148; as presented in our Consolidated Statement of Operations.



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT style="font-variant: SMALL-CAPS"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</FONT></TD>
    <TD> <FONT style="font-variant: SMALL-CAPS">newsprint division </FONT></TD>
</TR>

</TABLE>



<P align="left" style="margin-left:3%; font-size: 10pt">The Newsprint Division operates seven manufacturing sites (including Ponderay Newsprint Company,
an unconsolidated partnership) in the United States, Canada and South Korea. The principal
product at these manufacturing sites is newsprint, but several of the sites also produce market
pulp and uncoated specialty papers. This division has primary responsibility for the domestic
and international marketing and sales of newsprint and some uncoated specialty paper.



<P align="left" style="margin-left:3%; font-size: 10pt">Effective January&nbsp;1, 2005, the Thunder Bay Operation was moved to the Coated and Specialty
Papers Division. In future periods, divisional performance will be reported under this new
organizational structure, including a restatement of prior period divisional results to
facilitate comparisons to prior periods.


<P align="center" style="font-size: 10pt">32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT style="font-variant: SMALL-CAPS"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</FONT></TD>
    <TD> <FONT style="font-variant: SMALL-CAPS">coated and specialty papers division </FONT></TD>
</TR>

</TABLE>



<P align="left" style="margin-left:3%; font-size: 10pt">The Coated and Specialty Papers Division operates a manufacturing site in Catawba, South
Carolina, that produces coated paper and market pulp, and two Nuway
coating facilities, all located in the United States. A newsprint machine at the Catawba site,
with an annual capacity of approximately 265,000 short tons, was shut down in January&nbsp;2003 and
converted to coated mechanical paper production in March&nbsp;2003. This converted machine had
coated paper production of 321,000 short tons in 2004. We believe that the annual production
capacity of this machine will increase to 330,000 short tons by the end of 2005. This division
is responsible for the marketing and sale of coated and uncoated specialty papers manufactured
by Bowater.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT style="font-variant: SMALL-CAPS"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</FONT></TD>
    <TD> <FONT style="font-variant: SMALL-CAPS">canadian forest products division</FONT></TD>
</TR>

</TABLE>



<P align="left" style="margin-left:3%; font-size: 10pt">The Canadian Forest Products Division operates four paper manufacturing sites in Canada. The
division manages 0.4&nbsp;million acres of owned or leased timberland and approximately 21.2&nbsp;million
acres of Crown-owned land in the Canadian provinces of Quebec and New Brunswick on which we have
cutting rights. The division also operates seven sawmills and one wood treatment plant,
supplies wood to four paper mills and seven sawmills, and is responsible for the marketing and
sales of its timber and Canadian lumber production.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT style="font-variant: SMALL-CAPS"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</FONT></TD>
    <TD> <FONT style="font-variant: SMALL-CAPS">forest products division</FONT></TD>
</TR>

</TABLE>



<P align="left" style="margin-left:3%; font-size: 10pt">As of December&nbsp;31, 2004, the Forest Products Division managed 1.0&nbsp;million acres of timberland
owned or leased in the United States and the Canadian provinces of Ontario and Nova Scotia and
approximately 8.4&nbsp;million acres of Crown-owned land in the province of Ontario on which we have
timber cutting rights. The division also operated five softwood sawmills, supplied wood fiber to our pulp and paper
production sites and marketed and sold timber and southern yellow pine lumber in North America.



<P align="left" style="margin-left:3%; font-size: 10pt">Effective January&nbsp;1, 2005, the Forest Products Division was merged into the Newsprint and
Canadian Forest Products divisions. In future periods, divisional performance will be reported
under this new organizational structure, including a restatement of prior period divisional
results to facilitate comparisons to prior periods.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT style="font-variant: SMALL-CAPS"><Font face="Wingdings">&#216;</Font>&nbsp;&nbsp;</FONT></TD>
    <TD> <FONT style="font-variant: SMALL-CAPS">pulp division</FONT></TD>
</TR>

</TABLE>



<P align="left" style="margin-left:3%; font-size: 10pt">The Pulp Division markets and distributes market pulp produced by other divisions. Financial
results for the production and sale of market pulp are included in the Newsprint Division or the
Coated and Specialty Papers Division, depending upon which site manufactures the product. The
Pulp Division&#146;s administrative expenses are included in Corporate and other eliminations.
Accordingly, no separate results are reported for this division.


<P align="left" style="font-size: 10pt"><B>Newsprint Division</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004 vs. 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003 vs. 2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,626.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,448.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,318.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>177.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">130.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Segment income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(44.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(98.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>54.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9" align="left">Significant items that improved (lowered)&nbsp;segment income (loss):</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Product pricing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>131.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">95.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Distribution costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(11.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Manufacturing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(81.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(106.2</TD>

    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employee termination costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Selling and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>54.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(32.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>Year ended 2004 compared to 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Sales increased in 2004 as compared to 2003 primarily as a result of higher product pricing for
newsprint ($84.3&nbsp;million), market pulp ($33.3&nbsp;million), and specialty papers ($13.5&nbsp;million) and
increased sales of specialty papers. See the previous discussion of product line results.



<P align="left" style="font-size: 10pt">Segment loss decreased in 2004 compared to 2003 primarily as a result of higher product pricing
noted above and lower employee termination costs. These improvements were partially offset by
higher manufacturing costs, distribution costs and selling and administrative expenses.
Manufacturing costs were higher primarily from a stronger Canadian dollar ($45.2&nbsp;million) and
higher prices for recycled fiber ($28.5&nbsp;million), chemicals ($2.2&nbsp;million), energy ($11.2&nbsp;million),
labor ($10.2&nbsp;million) and repair materials ($10.3&nbsp;million), partially offset by improved production
volumes ($18.3&nbsp;million), lower depreciation expense ($7.6&nbsp;million) and lower wood costs ($3.1
million). Distribution costs were higher primarily from increased fuel prices and export-related
costs.

<P align="left" style="font-size: 10pt">&nbsp;

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Year ended 2003 compared to 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Sales increased in 2003 compared to 2002 primarily as a result of higher product prices for
newsprint ($54.8&nbsp;million), market pulp ($25.5&nbsp;million) and uncoated groundwood papers ($14.7
million) and higher shipments of newsprint ($43.0&nbsp;million) and uncoated specialty paper ($29.2
million). These increases were partially offset by lower shipments of market pulp ($36.9&nbsp;million).



<P align="left" style="font-size: 10pt">Segment loss in 2003 increased compared to 2002 primarily from higher manufacturing costs and
higher severance related charges. Manufacturing costs increased due to higher fiber, wood,
repairs, and fuel costs, and a stronger Canadian dollar ($61.2&nbsp;million). These increases were
partially offset by the higher product prices.



<P align="left" style="font-size: 10pt"><B>Coated and Specialty Papers Division</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004 vs. 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003 vs. 2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>611.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">493.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">484.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>118.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Segment income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>74.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9" align="left">Significant items that improved (lowered)&nbsp;segment income (loss):</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Product pricing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>47.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Distribution costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Manufacturing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employee termination costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Selling and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment Charge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>74.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(12.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="left" style="font-size: 10pt">&nbsp;

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>Year ended 2003 compared to 2002</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Sales increased in 2004 as compared to 2003 primarily as a result of increased shipments, due
primarily to the conversion of the No.&nbsp;3 paper machine at the Catawba facility in early 2003 from
newsprint to coated paper, and higher product pricing in coated and specialty papers ($36.4
million) and pulp ($11.2&nbsp;million). See the previous discussion of product line results.



<P align="left" style="font-size: 10pt">Segment income increased in 2004 as compared to 2003 primarily as a result of higher product
pricing in coated and specialty papers and pulp, lower manufacturing costs associated with improved
production volumes for coated papers, and lower employee termination costs.



<P align="center" style="font-size: 10pt">34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Year ended 2003 compared to 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Sales increased in 2003 as compared to 2002 primarily as a result of higher product prices for
market pulp. See the previous discussion of product line results.



<P align="left" style="font-size: 10pt">Segment loss increased in 2003 compared to 2002 primarily as a result of higher manufacturing
costs. Manufacturing costs increased due primarily to higher fiber, wood, chemicals, fuel, power
costs and depreciation and lower production volume due to the conversion of the Catawba newsprint
machine to coated paper. Distribution costs increased primarily from expanded customer locations
for coated and specialty papers shipments. These increases were partially offset by higher coated
shipments and higher pulp transaction prices.



<P align="left" style="font-size: 10pt"><B>Canadian Forest Products Division</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004 vs. 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003 vs. 2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>819.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">730.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">744.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>89.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(14.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-30px">Segment income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(18.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9" align="left">Significant items that improved (lowered)&nbsp;segment income (loss):</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Product pricing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>101.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Distribution costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(19.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Manufacturing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(59.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employee termination costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Selling and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Asset impairment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>27.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(52.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><B>Year ended 2004 compared to 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Sales increased in 2004 as compared to 2003 primarily as a result of higher product pricing for
newsprint ($33.0&nbsp;million), coated and specialty papers ($16.9&nbsp;million), lumber ($48.9&nbsp;million), and
timber ($2.2&nbsp;million), offset by lower shipments of newsprint and coated and specialty papers. See
the previous discussion of product line results.



<P align="left" style="font-size: 10pt">Segment loss decreased in 2004 as compared to 2003, primarily as a result of higher product
pricing. These improvements were offset by higher manufacturing costs and higher distribution
costs from higher shipments and lumber duties on increased lumber shipments and transaction prices.
The higher manufacturing costs are due to a stronger Canadian dollar ($45.3&nbsp;million), higher fiber
and wood costs ($12.6&nbsp;million), higher repair cost ($1.6&nbsp;million), higher labor ($5.8&nbsp;million) and
lower production volumes ($3.0&nbsp;million), offset by lower chemical costs ($4.3&nbsp;million).

<P align="left" style="font-size: 10pt">&nbsp;

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Year ended 2003 compared to 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Sales decreased in 2003 as compared to 2002 primarily as a result of lower shipments ($25.8
million), primarily lumber, and lower product prices for lumber ($1.3&nbsp;million) and specialty papers
($6.9&nbsp;million), partially offset by higher transaction prices for newsprint ($16.9&nbsp;million) and
timber ($2.2&nbsp;million).



<P align="left" style="font-size: 10pt">Segment loss increased in 2003 compared to 2002 primarily as a result of lower product prices for
specialty papers and lumber, lower lumber shipments ($2.0&nbsp;million), higher distribution costs
related to higher lumber duties, which were imposed beginning in May of 2002 and higher
manufacturing costs. Manufacturing costs increased primarily due to lower production volume ($17.2
million) and a stronger Canadian dollar ($67.6&nbsp;million). These decreases were partially offset by
higher transaction prices for newsprint and timber, higher shipments of newsprint ($4.5&nbsp;million)
and lower fuel and fiber costs and depreciation expense.




<P align="center" style="font-size: 10pt">35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><B>Forest Products Division</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004 vs. 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003 vs. 2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>173.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">118.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">95.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>55.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD colspan="13" align="left">Significant items that improved (lowered)&nbsp;segment income (loss):</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Product pricing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><b>$</b></TD>
    <TD align="right"><B>34.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><b>$</b></TD>
    <TD align="right">9.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Distribution costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Manufacturing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(19.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employee termination costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">

<TD colspan="9" align="left"><div style="margin-left:15px; text-indent:0px">
Selling and administrative expenses</div></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>8.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="100%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" style="border-bottom: 1px solid #000000"><B>Year ended 2004 compared to 2003</B></TD>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="left" style="font-size: 10pt">Sales increased in 2004 as compared to 2003 as a result of increased lumber transaction prices and
increased lumber shipments. The increase in lumber shipments was primarily the result of the new
sawmill in Thunder Bay, Ontario, which had shipments in 2004 but was primarily a start up operation
during 2003. See the previous discussion of product line results.


<P align="left" style="font-size: 10pt">Segment income increased in 2004 as compared to 2003 primarily as a result of increased lumber
transaction pricing. Higher lumber transaction prices were partially offset by higher distribution
costs and manufacturing costs. The higher distribution costs were driven primarily by higher
lumber duties. Manufacturing costs increased primarily as a result of higher wood costs ($6.3
million), the stronger Canadian dollar ($5.0&nbsp;million) and start-up related costs associated with
the operation of Thunder Bay and Ignace sawmills ($3.6&nbsp;million).


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="100%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" style="border-bottom: 1px solid #000000">Year ended 2003 compared to 2002</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Sales increased in 2003 as compared to 2002 primarily as a result of higher lumber shipments ($14.7
million) and higher lumber ($4.5&nbsp;million) and timber ($5.4&nbsp;million) transaction prices. Lumber
shipments increased primarily due to the start up of the new Thunder Bay, Ontario sawmill.


<P align="left" style="font-size: 10pt">Segment loss increased in 2003 as compared to 2002 due primarily to higher manufacturing costs
partially offset by higher lumber and timber transaction prices. Costs for the division were
higher primarily due to a stronger Canadian dollar ($7.2&nbsp;million) and the start-up of the new
Thunder Bay, Ontario sawmill ($4.5&nbsp;million).


<P align="left" style="font-size: 10pt"><B>Gain on Sale of Assets and Corporate &#038; Other Eliminations</B>


<P align="left" style="font-size: 10pt">Gain on sale of assets and corporate and other eliminations are included in order to reconcile
division sales and segment income (loss)&nbsp;to our total sales and operating income (loss)&nbsp;on our
Consolidated Statement of Operations.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Change</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004 vs. 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003 vs. 2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>6.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">124.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">85.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right"><B>(117.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate &#038; other eliminations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(40.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(61.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Segment income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(84.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>83.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><B>Gain on sale of assets: </B>During 2004, we sold fixed assets and land resulting in a pretax gain of
$6.9&nbsp;million. This gain was primarily due to the sale of approximately 3,200 acres of timberlands
for cash consideration of $7.3&nbsp;million, which resulted in a pretax gain of $5.7&nbsp;million. We also
received cash proceeds of $4.7&nbsp;million for other asset sales in 2004, resulting in pretax gains of
$1.2&nbsp;million.


<P align="left" style="font-size: 10pt">During 2003, we sold fixed assets and land resulting in a pretax gain of $124.0&nbsp;million. This gain
was primarily due to the sale of approximately 82,000 acres of owned timberlands and leaseholds for
cash consideration of $121.8&nbsp;million, which resulted in a pretax gain of $97.5&nbsp;million. We also
received cash proceeds of $32.5&nbsp;million for other timberland and asset sales in 2003, resulting in
pretax gains of $26.5&nbsp;million.


<P align="left" style="font-size: 10pt">During 2002, Bowater sold fixed assets and timberlands resulting in a pretax gain of $85.7&nbsp;million.
This gain was primarily due to the sale in January&nbsp;2002 of approximately 116,000 acres of
timberlands for aggregate consideration of $104.2&nbsp;million, comprised of approximately $5.1&nbsp;million
in cash and $99.1&nbsp;million in notes receivable. In March&nbsp;2002, we monetized the $99.1&nbsp;million notes
receivable for net cash proceeds of $88.1&nbsp;million. These transactions resulted in a net pretax
gain of $70.4&nbsp;million. Also in 2002, Bowater sold approximately 8,700 acres of other timberlands
and recognized the previously deferred revenue in connection with the fourth quarter 2001 sale of
147,000 acres for a total net pretax gain of $15.3&nbsp;million.


<P align="left" style="font-size: 10pt"><B>Corporate &#038; Other Eliminations: </B>The elimination of intersegment sales decreased $29.0&nbsp;million from
2003 to 2004 due to the decreased sales volumes between the divisions. Corporate income increased
$83.2&nbsp;million from 2003 to 2004, due primarily to increased gains on foreign currency hedges.


<P align="left" style="font-size: 10pt">The elimination of intersegment sales increased from 2002 to 2003 due to the increased sales
volumes between the divisions. Corporate expenses decreased from 2002 to 2003, due primarily to
hedging foreign currency gains.


<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>interest expense</B></FONT>


<P align="left" style="font-size: 10pt">Interest expense increased $20.8&nbsp;million in 2004, from $174.5&nbsp;million in 2003 to $195.3&nbsp;million in
2004, due to higher average debt balances carried in 2004 compared to 2003, higher interest rates
in connection with the issuance in March&nbsp;2004 of $250&nbsp;million notes and less capitalized interest
as a result of the completion of our major capital projects at our Catawba operation.


<P align="left" style="font-size: 10pt">Interest expense increased $11.5&nbsp;million in 2003, from $163.0&nbsp;million in 2002 to $174.5&nbsp;million in
2003, due to higher average debt balances carried in 2003 compared to 2002, higher interest rates
in connection with the issuance in June&nbsp;2003 of $400&nbsp;million notes and less capitalized interest as
a result of the completion of our major capital projects at our Catawba operation.


<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>provision for income taxes</B></FONT>


<P align="left" style="font-size: 10pt">Bowater&#146;s effective tax
rate in 2004, which was a benefit, was 36.9% compared to a benefit of 24.9%
in 2003. The rates in both 2004 and 2003 were primarily impacted by certain losses from changes in
foreign currency exchange rates for which the company received no tax benefit. The tax rate in
2004, however, was impacted by a lesser degree.


<P align="left" style="font-size: 10pt">Significant strengthening of the Canadian dollar in 2004 resulted in significant unrealized
statutory foreign currency exchange gains on which the Company provided a deferred tax expense for
Canadian statutory taxes. On a consolidated basis, the unrealized statutory foreign currency
exchange gains are substantially offset by certain foreign currency exchange losses on which the
Company receives no U.S. tax benefit. Additionally, during 2004 a statute of limitations expired
for pre 2001 tax years. Income tax reserves of $6.8&nbsp;million associated with the pre-2001 Canadian
tax years were eliminated, resulting in a decrease to income tax expense in 2004.


<P align="left" style="font-size: 10pt">Bowater&#146;s effective tax rate in 2003, which was a benefit, was 24.9% compared to a benefit of 40.1%
in 2002. The rates in both 2003 and 2002 were primarily impacted by certain losses from changes in
foreign currency exchange rates for which the company received no tax benefit.


<P align="left" style="font-size: 10pt">Due to recent operating
losses we are required to consider tax planning strategies in certain
jurisdictions to evaluate whether certain of our deferred tax assets can be utilized or recovered.
In the absence of tax planning strategies, we would be required to record a charge to income tax
expense to establish a valuation allowance for certain of our deferred tax assets.





<P align="center" style="font-size: 10pt">37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Our effective tax rate varies frequently and substantially from the weighted-average effect of both
domestic and foreign statutory tax rates primarily as a result of special tax treatment on foreign
currency gains and losses. We have a number of Canadian subsidiaries whose unconsolidated income
and gains are taxed in Canada. On consolidation, such income and gains are eliminated but we are
still liable for the Canadian taxes. Due to the variability and volatility of foreign exchange
rates we are unable to estimate the impact of future changes in exchange rates on our effective tax
rate.


<P align="left" style="font-size: 10pt"><B><I>Liquidity and Capital Resources:</I></B>


<P align="left" style="font-size: 10pt">The primary components of our cash flows are as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Increase (decrease)&nbsp;in cash and cash
equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>10.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(16.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Cash generated from operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>122.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments
to net loss:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>335.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(50.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net gain in land sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(124.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Impairment
of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Working capital:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(16.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(34.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Income taxes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(30.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(75.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(20.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(58.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Cash used for investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(72.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(122.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash invested in fixed assets, timber
and timberlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(84.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(238.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Disposition of fixed assets, timberlands
and note monetizations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Cash from (used for) financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(40.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Short-term financing, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(132.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(92.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Long-term financing, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>132.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">223.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(46.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><B>Cash Generated from Operations</B>


<P align="left" style="font-size: 10pt">Cash generated from operations increased from 2003 to 2004, primarily due to lower cash losses from
operations partially offset by higher working capital needs. The lower cash losses in 2004 were
driven by higher product pricing partially offset by higher distribution and manufacturing costs.
Cash generated from operations decreased from 2002 to 2003, primarily due to higher cash losses
from operations offset by lower working capital needs. The higher cash losses in 2003 were driven
by higher manufacturing and distribution costs partially offset by higher product pricing. See
discussion of manufacturing costs, distribution costs and product pricing in the &#147;Product Line
Information&#148; and



<P align="center" style="font-size: 10pt">38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&#147;Divisional Performance&#148; sections of our &#147;Management&#146;s Discussion and Analysis.&#148;
Additionally, see &#147;Risks Related to Our Business&#148; for discussion of product pricing, costs,
exchange rates and debt levels.


<P align="left" style="font-size: 10pt">Working capital in 2004 was negatively impacted by an increase in accounts receivable primarily
from higher pricing and timing of collection of our receivables, higher inventory levels due
primarily to timing of export shipments, lower income taxes payable due to timing of payments and
higher income taxes receivable due primarily to tax loss carryback refunds. These working capital changes were partially offset by an increase
in accounts payable and accrued liabilities primarily due to the timing of payments. Working
capital in 2003 was negatively impacted by an increase in accounts receivable primarily from higher
pricing and timing of collection of our receivables, as well as higher inventory levels (primarily
coated papers from increased production from our recently converted coated paper machine at our
Catawba facility and production of more coated paper grades offered to our customers). These
working capital changes were more than offset by a carryback tax refund received of $75.6&nbsp;million
and an increase in accounts payable and accrued liabilities primarily due to the timing of payments
and income taxes payable.


<P align="left" style="font-size: 10pt">Please see the discussion entitled &#147;Liquidity and Financing&#148; below.


<P align="left" style="font-size: 10pt"><B>Cash Used for Investing Activities</B>


<P align="left" style="font-size: 10pt">Cash invested in fixed assets, timber and timberlands in 2004 was primarily for compliance and
maintenance capital. Capital expenditures in 2004 compared to 2003 and 2002 were significantly
lower as we completed two major capital projects in 2003, consisting of the fiber line replacement
and the conversion of a newsprint machine to coated groundwood paper at our Catawba operation.
Capital spending for these two projects was approximately $119&nbsp;million in 2003. We expect capital
expenditure levels to be approximately $170&nbsp;million in 2005.


<P align="left" style="font-size: 10pt"><B>Cash Used for Financing Activities</B>


<P align="left" style="font-size: 10pt">In March&nbsp;2004, Bowater sold, in a registered offering, $250&nbsp;million of notes due March&nbsp;15, 2010.
We received net proceeds from the sale of the notes of $246.2&nbsp;million. The proceeds were used to
pay amounts outstanding under the short-term bank debt credit facilities ($146.2&nbsp;million) and the
associated term loan ($100.0&nbsp;million).


<P align="left" style="font-size: 10pt">In June&nbsp;2003, we sold in a private placement $400&nbsp;million of our 6.5% notes due 2013 (which were
subsequently exchanged for registered notes in an exchange offer). We received net proceeds from
the sale of the notes of approximately $392.8&nbsp;million. The proceeds were used to pay amounts
outstanding under short-term bank debt credit facilities ($241.0&nbsp;million) and a portion of the
three-year term loan ($140.0&nbsp;million). In August&nbsp;2003, we used the $11.8&nbsp;million balance of the net
proceeds, plus new borrowings under our accounts receivable securitization program, to pay off the
$51.8&nbsp;million debt related to our lease agreement at Covington.


<P align="left" style="font-size: 10pt">Bowater had net payments of $132.7&nbsp;million and $48.6&nbsp;million on our short-term credit facilities
during 2004 and 2003, respectively.


<P align="left" style="font-size: 10pt">We intend to continue the payment of a quarterly dividend in 2005 at a quarterly dividend rate of
$0.20 per share. This dividend equates to a use of cash of approximately $46&nbsp;million annually.


<P align="left" style="font-size: 10pt"><B>Liquidity and Financing</B>


<P align="left" style="font-size: 10pt">On April&nbsp;22, 2004, Bowater obtained a new three-year revolving credit facility due April&nbsp;2007. The
facility provides $400&nbsp;million of revolving credit in the United States and $35&nbsp;million in Canada,
replacing the previous $500&nbsp;million three-year credit facility in the United States and the $100
million 364-day credit facility in Canada. See page 40 of this Form 10-K for a description of the
terms of this facility.


<P align="left" style="font-size: 10pt">On March&nbsp;17, 2004, Bowater sold, in a registered offering, $250&nbsp;million of notes due March&nbsp;15,
2010. Interest on the notes accrue at a rate based on LIBOR plus 3% and is payable quarterly. On
or after March&nbsp;15, 2006, Bowater may redeem all or a portion of the notes at any time. The
redemption price will be 102% of the principal amount if redeemed from March&nbsp;15, 2006 to March&nbsp;14,
2007; 101% if redeemed from March&nbsp;15, 2007 to March&nbsp;14, 2008; and 100% if redeemed on or after
March&nbsp;15, 2008. We received net proceeds from the sale of the notes of $246.2&nbsp;million, which were
net of underwriting fees of $3.8&nbsp;million. These fees are being amortized over the life of the
notes. The proceeds were used to pay amounts outstanding under the short-term bank debt credit
facilities ($146.2&nbsp;million) and the associated term loan ($100.0&nbsp;million).



<P align="center" style="font-size: 10pt">39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Bowater believes that cash generated from operations and access to our credit facilities will be
sufficient to provide for our anticipated requirements for working capital, contractual obligations
(discussed below), dividends and capital expenditures for the next 12&nbsp;months. Also, Bowater
periodically reviews timberland holdings and sells timberlands.


<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>short-term funding and contractual/commercial commitments </B></FONT>


<P align="left" style="font-size: 10pt">As of December&nbsp;31, 2004, Bowater had available borrowings on our short-term bank debt &#151; credit
facilities as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Commitment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Termination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Interest</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Short-Term Bank Debt</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Commitment</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Outstanding</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Available&nbsp;<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Date</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Rate</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18"><I>(in millions except for dates and interest rates)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revolving credit facility <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">435.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">305.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">04/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="center">6.75%</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">364-day Accounts Receivable
Securitization Arrangement
<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="center">2.37%</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">635.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">73.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">437.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The commitment available under the Revolving credit facility is subject to covenant
restrictions described on page 40 of this Form 10-K and is reduced by outstanding letters of
credit of $91.4&nbsp;million.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Borrowings under the revolving credit facility incur interest based, at our option, on
specified market interest rates plus a margin tied to the credit rating of our long-term debt.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The amount that can be borrowed at any time under our 364-day accounts receivables
securitization arrangement depends on the amount and nature of the accounts receivable. The
interest rate is based on commercial paper issued by the lenders plus a margin.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">In October&nbsp;2004, Moody&#146;s downgraded Bowater&#146;s credit rating to Ba3 with a negative outlook. In
December&nbsp;2004, S&#038;P announced that Bowater&#146;s credit rating would remain at BB with a stable outlook.
There is no way to predict with certainty any future rating actions by these two agencies. The
interest rates associated with the bank lines of credit described above are based on Bowater&#146;s
highest credit rating. Any reduction in the highest rating will increase our cost of borrowing. In
addition to higher interest rates, although further downgrades would have no material impact on
availability under our present debt and credit agreements, it could impact our access to and cost
of capital and financial flexibility in the future.


<P align="left" style="font-size: 10pt">On April&nbsp;22, 2004, we replaced our expiring revolving credit facilities with a new three-year
revolving credit facility due April&nbsp;2007. The new facility provides $400&nbsp;million of revolving
credit in the United States and $35&nbsp;million in Canada. Borrowings under the new facility incur
interest based, at our option, on specified market interest rates plus a margin tied to the credit
rating of our long-term debt. The facility contains various covenants, including requirements to
maintain a minimum consolidated net worth (generally defined as common shareholders&#146; equity,
excluding hedging gains in place as of December&nbsp;31, 2003, plus any outstanding preferred stock plus
minimum pension liability amounts) of $1.5&nbsp;billion, a maximum 62.5% ratio of total debt to total
capital (defined as total debt less revaluation of debt assumed through acquisitions, plus net
worth including minority interest, plus minimum pension liability amounts), and to maintain an
annual minimum EBITDA (generally defined as net income, excluding extraordinary, non-recurring or
non-cash items, plus income taxes plus depreciation plus net interest expense) of $250&nbsp;million
measured quarterly beginning March&nbsp;31, 2005, through December&nbsp;31, 2005 and $400&nbsp;million at the end
of each quarter thereafter. If we generate net income, the minimum net worth requirement increases
by half of our consolidated net income for each fiscal quarter, excluding gains from cash flow
hedges in place as of December&nbsp;31, 2003. At December&nbsp;31, 2004, our consolidated net worth was
approximately $1,620.4&nbsp;million and our ratio of total debt to total capital was 59.1%, both as
calculated according to our credit facility&#146;s guidelines.


<P align="left" style="font-size: 10pt">Bowater believes it is in compliance with all its covenants and other requirements set forth in its
credit facility.



<P align="center" style="font-size: 10pt">40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Total debt as a percentage of total capitalization is the most directly comparable measure using
GAAP. A reconciliation of the GAAP items to the calculation of total debt as a percentage of total
capitalization, in accordance with our credit facilities, is as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">(in millions, except ratios)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,514.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,506.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Revaluation of debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(77.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,437.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,420.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Capitalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,090.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,188.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Revaluation of debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(77.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plus: Additional minimum pension liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>113.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,126.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,259.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt as a percentage of total capitalization in accordance with credit facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>59.1</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">56.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt as a percentage of total capitalization, in accordance with GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>61.5</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">59.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="left" style="font-size: 10pt">The revolving credit
facility, indentures pertaining to certain of our notes, and other debt
agreements place various restrictions on Bowater and certain of its subsidiaries. These
restrictions include limits on incurring additional indebtedness, granting liens, entering into
sale-leaseback transactions, and making certain restricted payments. Under various indentures,
liens and sale lease-back transactions in excess of various thresholds cannot be incurred unless
they also secure the notes issued under such indentures. The revolving credit facility and the
indentures permit Bowater and its subsidiaries to incur certain categories of permitted
indebtedness that we believe are customary, including refinancings of existing indebtedness, trade
letters of credit, capital leases up to specified amounts and industrial revenue bond indebtedness
up to specified amounts. Additional indebtedness that Bowater and its subsidiaries can incur is
limited by the revolving credit facility.


<P align="left" style="font-size: 10pt">The following summarizes Bowater&#146;s contractual obligations at December&nbsp;31, 2004 and the effect such
obligations are expected to have on our liquidity and cash flow in future periods.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2010 and</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2006-2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2008-2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Thereafter</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt, including
current installments
<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,441.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">287.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,106.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term bank debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-cancelable operating
lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">537.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total contractual obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,116.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">173.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">142.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">379.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,421.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Long-term debt includes $77.4&nbsp;million at December&nbsp;31, 2004, due to the revaluation of the
debt balances acquired with the purchase of the Grenada Mill in August&nbsp;2000, and the
acquisition of Avenor in July&nbsp;1998. Of the obligations above, approximately $8&nbsp;million per
year represents amortization of the revaluation, which requires no cash outlay.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">In addition to the amounts shown in the table, Bowater is party to employment and change-in-control
agreements with its executive officers. Those agreements are described under the heading
&#147;Executive Compensation &#150; Employment and Change in Control Agreements&#148; in the proxy statement
incorporated by reference into this Form 10-K.


<P align="left" style="font-size: 10pt">Bowater enters into various agreements including supply and cutting rights agreements and purchase
commitments in the normal course of business. Our purchase obligations related to these various
agreements are presented in the table above. In connection with the acquisition of Alliance,
Bowater assumed various long-term supply contracts, the more



<P align="center" style="font-size: 10pt">41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">significant of which includes a fiber
supply contract, at market prices, for its Coosa Pines Operation and a steam supply contract at its
Dolbeau Operation. The Coosa fiber supply contract expires in 2014 and has total commitments of
approximately $112.0&nbsp;million ($13.7&nbsp;million in year 2005, $54.9&nbsp;million in years 2006-2009 and
$43.4&nbsp;million thereafter). In addition, our Dolbeau Operation&#146;s steam supply contract expires in
2023 and has total commitments of approximately $188.4&nbsp;million ($8.0&nbsp;million in year 2005, $33.9
million in years 2006-2009 and $146.5&nbsp;million thereafter).



<P align="left" style="font-size: 10pt">Other Commitments:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19">Amount of Commitment Expiration Per Period</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2010 and</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2006-2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2008-2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Thereafter</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Off-balance sheet debt guarantees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="left" style="font-size: 10pt">Bowater&#146;s off-balance sheet debt guarantees include: $28.6&nbsp;million related to Ponderay Newsprint
Company, an unconsolidated partnership in which Bowater has a 40% interest and $9.1&nbsp;million,
representing 25% of the outstanding investor notes principal balance of Timber Note Holdings LLC,
one of our qualified special purpose entities.


<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">off-balance sheet arrangements </FONT>


<P align="left" style="font-size: 10pt"><B>Ponderay Guaranty: </B>Bowater has a 40% interest in Ponderay Newsprint Company, an unconsolidated
partnership. Ponderay has a credit facility which is comprised of a term loan and a revolving
credit facility. The term loan balance at December&nbsp;31, 2004 was $71.5&nbsp;million and is guaranteed by
the partners of Ponderay. Bowater guarantees 40% or $28.6&nbsp;million of this term loan. The
revolving credit facility has commitments from the lender for $25&nbsp;million. This revolving credit
facility is not guaranteed by the partners. At December&nbsp;31, 2004 there is a $10&nbsp;million letter of
credit reducing this commitment. There are no other drawings on this facility. Ponderay&#146;s
outstanding balance on the term loan is reduced annually by its excess cash flows as defined in the
credit facility and, although the final balance is due at maturity on April&nbsp;12, 2006, we believe
that Ponderay intends to renew this facility. The term loan cannot be increased once paid down,
therefore, Bowater&#146;s guarantee is reduced as the outstanding balance is reduced. Bowater would be
required to perform on the guarantee if Ponderay were to default on its credit facility and
Ponderay&#146;s assets, which collateralize the debt, were insufficient to pay off the credit facility.
Ponderay was in compliance with all its debt covenants as of December&nbsp;31, 2004. Ponderay&#146;s total
assets and liabilities at December&nbsp;31, 2004 were approximately $164&nbsp;million and $88&nbsp;million (which
includes the above mentioned debt), respectively.


<P align="left" style="font-size: 10pt"><B>Timberland Sales: </B>In connection with certain timberland sales transactions in 2002 and prior years,
Bowater received a portion of the sale proceeds in notes receivable. In order to increase its
liquidity, Bowater monetized these notes receivable using qualified special purpose entities
(&#147;QSPEs&#148;) set up in accordance with SFAS
No.&nbsp;140, &#147;Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities.&#148; The more significant aspects of the QSPEs are as follows:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="4%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>The QSPEs are not consolidated within Bowater&#146;s financial
statements. The business purpose of the QSPEs is to hold the
notes receivable and issue debt securities to third parties. The
value of these debt securities is equal to approximately 90% of
the value of the notes receivable. The full principal amount of
the notes receivable is backed by letters of credit issued by a
third party financial institution.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="4%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater records gains or losses on the monetization of the notes
receivable through the QSPEs. The amount of the gain or loss is
determined based on the original carrying amount of the notes,
allocated between the assets monetized and the retained interests
based on their relative fair value at the date of the
monetization.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="4%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater&#146;s retained interest consists principally of net excess
cash flows (the difference between the interest received on the
notes receivable and the interest paid on the debt issued to third
parties) and a cash reserve account. Fair values of the retained
interest are estimated based on the present value of future excess
cash flows to be received over the life of the notes, using
management&#146;s best estimate of key assumptions, including credit
risk and discount rates.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

<TD width="4%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>The cash reserve accounts are established at inception and are
required to meet specified minimum levels throughout the life of
the debt issued by the QSPEs to third party investors. Any excess
cash flows revert to</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">42
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>Bowater on a quarterly or semi-annual basis.
The cash reserve accounts revert to Bowater at the maturity date
of the third party debt.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="4%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater may be required to make capital contributions to the QSPEs
from time to time in sufficient amounts so that the QSPEs will be
able to comply with their covenants regarding the payment of
taxes, maintenance as entities in good standing, transaction fees,
contractual indemnification of the collateral agent and certain
other parties, and the maintenance of specified minimum amounts in
the cash reserve account. Notwithstanding these covenants,
because of the expected net available cash flow to the QSPEs
(interest and principal on notes receivable backed by letters of
credit will be in excess of interest and principal on debt
securities), Bowater does not expect to be required to make
additional capital contributions.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<TD width="4%" nowrap align="left"><FONT face="wingdings">&#216;</FONT></TD>
    <TD>Bowater currently guarantees approximately $9.1&nbsp;million,
representing 25% of the outstanding investor notes principal
balance of Timber Note Holdings LLC, one of the QSPEs. This
guarantee is proportionately reduced by annual principal
repayments on the investor notes (annual minimum repayment of $2.0
million) through 2008. The remaining investor notes principal
amount is to be repaid in 2009.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">The following summarizes our transactions with QSPEs as of December&nbsp;31, 2004 (in millions):


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Bowater's</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Excess of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Retained</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Assets over</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Qualified Special Purpose Entity</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Obligations</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Calhoun Note Holdings AT LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>

    <TD align="right">73.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">64.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Calhoun Note Holdings TI LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bowater Catawba Note Holdings I LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bowater Catawba Note Holdings II LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Timber Note Holdings LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bowater Saluda LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">410.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">358.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="left" style="font-size: 10pt">No QSPEs are permitted to hold Bowater stock and there are no commitments or guarantees that
provide for the potential issuance of Bowater stock. These entities do not engage in speculative
activities of any description and are not used to hedge Bowater positions, and no Bowater employee
is permitted to invest in any QSPE.


<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Canadian-U.S. Dollar Exchange Rate Fluctuation Effect on Earnings</FONT>


<P align="left" style="font-size: 10pt">Nearly half of our manufacturing costs and a small portion of our financial assets and liabilities
are denominated in Canadian dollars. Sales are denominated in the currency of the country in which
they occur and only a small portion of our sales are denominated in Canadian dollars. Accordingly,
changes in the Canadian-U.S. dollar exchange rate may significantly impact our revenues and costs.
The magnitude and direction of this impact primarily depends on our production and sales volume,
the proportion of our production and sales that occur in Canada, the proportion of our financial
assets and liabilities denominated in Canadian dollars, our hedging levels, and the magnitude,
direction and duration of changes in the Canadian-U.S. dollar exchange rate. Increases in the
value of the Canadian dollar versus the U.S. dollar reduce our earnings, which are reported in U.S.
dollar terms.


<P align="left" style="font-size: 10pt">We attempt to partially limit our exposure to Canadian-U.S. dollar exchange rate fluctuations
through hedging transactions. Under the exchange rates, hedging levels and operating conditions
that existed at December&nbsp;31, 2004, for every one-cent increase in the Canadian-U.S. dollar exchange rate, our operating income, net of
hedging, for 2004 would have been reduced by approximately $5.2&nbsp;million.


<P align="left" style="font-size: 10pt">We expect exchange rate fluctuations to continue to impact costs and revenues; however, we cannot
predict the magnitude or direction of this effect for any quarter, and there can be no assurance
that the future effect will be similar to that set forth above. However, based on exchange rates,
hedging levels and operating conditions projected for 2005, a one-cent increase in the Canadian
dollar exchange rate will reduce our 2005 operating income, net of hedging by approximately $7.0
million.




<P align="center" style="font-size: 10pt">43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Canadian Dollar Hedging Program </FONT>


<P align="left" style="font-size: 10pt">At December&nbsp;31, 2004 we had approximately $123.0&nbsp;million of unrealized gains recorded on our
Canadian dollar hedging program compared to an approximately $172.4&nbsp;million unrealized gains at
December&nbsp;31, 2003. These unrealized gains are classified as &#147;Other assets&#148; or, for the amounts
expected to mature in the next 12&nbsp;months, as a separate line item in current assets in our
consolidated balance sheet. These unrealized hedging gains account for the majority of the change
in these balance sheet classifications from December&nbsp;31, 2003, to December&nbsp;31, 2004. For a
description of our hedging activities, see Note 13 to the Notes to Consolidated Financial
Statements included in this Report on Form 10-K.


<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Environmental Items </FONT>


<P align="left" style="font-size: 10pt">We are subject to a variety of federal, state, provincial and local environmental laws and
regulations in the jurisdictions in which we operate. We believe our operations are in substantial
compliance with current applicable environmental laws and regulations.


<P align="left" style="font-size: 10pt">In April&nbsp;1998, the United States Environmental Protection Agency (&#147;EPA&#148;) promulgated new air and
water quality regulations for the paper industry. These regulations, known as the &#147;Cluster Rule,&#148;
are aimed at further reductions of certain environmental emissions. Projects necessary for the
Calhoun, Tennessee, facility to comply with this rule by April&nbsp;16, 2001, and the Coosa Pines mill
by April&nbsp;2002 have been completed. Prior to 2004, we spent approximately $170&nbsp;million to replace the fiber
line at the Catawba Operation. The new fiber line enables the mill to improve overall operating
efficiencies, as well as comply with the Cluster Rule by meeting the more stringent parameters of
Tier I of the EPA&#146;s Voluntary Advanced Technology Incentive Program. The $80&nbsp;million kraft
recovery boiler at the Thunder Bay, Ontario, facility was completed in 2001. This project
significantly decreased the level of air emissions from the mill. It also allowed the mill to
discontinue the use of coal for steam production, thereby decreasing greenhouse gas emissions.


<P align="left" style="font-size: 10pt">In addition to the projects mentioned above, we currently anticipate spending approximately $15
million of capital per year for all of our facilities for the foreseeable future to maintain
compliance with existing environmental regulations. Environmental regulations promulgated in the
future could require substantial additional expenditures for compliance and could have a material
impact on Bowater, in particular, and the industry in general.


<P align="left" style="font-size: 10pt">Bowater currently has recorded $20.7&nbsp;million for environmental liabilities. The majority of these
liabilities are recorded at undiscounted amounts and are included in pension, other postretirement
benefits and other long-term liabilities on the Consolidated Balance Sheet. The $20.7&nbsp;million
represents our estimate based on an assessment of relevant factors and assumptions of the ultimate
settlement amounts for these liabilities. The amount of these liabilities could be affected by
changes in facts or assumptions not currently known to us. Approximately $18.6&nbsp;million of the $20.7
million relates to two previously owned Canadian mills for costs primarily associated with soil
remediation, air compliance and landfill closure and one United States mill acquired in connection
with the Alliance acquisition for costs primarily for soil testing and monitoring.


<P align="left" style="font-size: 10pt">Bowater has been notified that it may be a &#147;potentially responsible party&#148; (&#147;PRP&#148;) with respect to
four hazardous waste sites which are being addressed pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (&#147;CERCLA&#148; or &#147;Superfund&#148;) or the
Resource Conservation and Recovery Act (&#147;RCRA&#148;) corrective action authority. The first two sites are on CNC timberland tracts in South
Carolina. One was contaminated when acquired, and subsequently, the prior owner remediated the
site and continues to monitor the groundwater. On the second site, several hundred steel drums
containing textile chemical residue were discarded by unknown persons. The U.S. EPA, based on the
remoteness of the site, listed it as &#147;No Further Action Status&#148; in September&nbsp;2002. The third site,
at our mill in Coosa Pines, Alabama, contained buried drums and has been remediated pursuant to
RCRA. We continue to monitor the groundwater. The fourth site is a drum recycling plant in South
Carolina. We were one of numerous parties that shipped empty drums to the site. The U.S. EPA has
remediated the site pursuant to Superfund at a cost of $6.2&nbsp;million. We have agreed to pay less
than $100,000 to settle this matter with the EPA. It is anticipated that the settlement will be
finalized in the second quarter of 2005.




<P align="center" style="font-size: 10pt">44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Recent Accounting Pronouncements</FONT>


<P align="left" style="font-size: 10pt">In December&nbsp;2004, the FASB issued SFAS 123(R),
&#147;Share-Based Payment&#148;, which requires the measurement of all employee share-based payments to
employees, including grants of employee stock options, using a fair-value-based method and the
recording of such expense in our consolidated statements of income. The accounting provisions of
SFAS 123R are effective for reporting periods beginning after June&nbsp;15, 2005. The pro forma
disclosures previously permitted under SFAS 123 no longer will be an alternative to financial
statement recognition. We are required to adopt SFAS 123R in the third quarter of 2005 and are
currently evaluating the effect that the adoption of FASB 123R will have on our financial position
and results of operation.


<P align="left" style="font-size: 10pt">In December&nbsp;2004, the FASB issued FASB Staff Position No.&nbsp;FAS 109-1 (&#147;FAS 109-1&#148;), &#147;Application of
FASB Statement No.&nbsp;109, &#147;Accounting for Income Taxes,&#148; to the Tax Deduction on Qualified Production
Activities provided by the American Jobs Creation Act of 2004.&#148; The American Jobs Creation Act
(AJCA)&nbsp;introduces a special 9% tax deduction (when fully phased in) on qualified production
activities. FAS 109-1 clarifies that this tax deduction should be accounted for as a special tax
deduction in accordance with Statement 109. Bowater&#146;s evaluation of the AJCA with respect to the
additional deduction is still in process and it expects to complete the evaluation process by the
end of the third quarter of 2005. The range of reasonably possible amounts of the additional
deduction that are still being considered as a result of this provision cannot be reasonably
determined as yet.


<P align="left" style="font-size: 10pt">In December&nbsp;2004, the FASB issued FASB Staff Position No.&nbsp;FAS 109-2 (&#147;FAS 109-2&#148;), &#147;Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs
Creations Act of 2004.&#148; The AJCA introduces a limited time 85% dividends received deduction on the
repatriation of certain foreign earnings to a U.S. taxpayer (repatriation provision), provided
certain criteria are met. FAS109-2 provides accounting and disclosure guidance for the repatriation
provision. Although FAS 109-2 is effective immediately, we do not expect to be able to complete our
evaluation of the repatriation provision until after Congress or the Treasury Department provides
additional clarifying language on key elements of the provision. In January&nbsp;2005, the Treasury
Department began to issue the first of a series of clarifying guidance documents related to this
provision. We expect to complete our evaluation of the effects of the repatriation provision in the
third quarter of 2005.


<P align="left" style="font-size: 10pt">In November&nbsp;2004, the FASB issued SFAS 151, <I>&#147;</I>Inventory Costs, an amendment of ARB No.&nbsp;43, Chapter
4<I>,&#148; </I>which clarifies the types of costs that should be expensed rather than capitalized as
inventory. This statement also clarifies the circumstances under which fixed overhead costs
associated with operating facilities involved in inventory processing should be capitalized. The
provisions of SFAS No.&nbsp;151 are effective for fiscal years beginning after June&nbsp;15, 2005 and we will
adopt this standard in 2006. We have not yet evaluated the effect that the adoption of SFAS 151
will have on our financial position or results of operations.


<P align="left" style="font-size: 10pt">In December&nbsp;2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
&#147;Act&#148;) was passed. The Act introduced a prescription drug benefit under Medicare Part&nbsp;D as well as
a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is
at least actuarially equivalent to Medicare Part&nbsp;D. Our postretirement benefits include
prescription drug benefits for Medicare eligible retirees. In March&nbsp;2004, the FASB issued FASB
Staff Position (FSP)&nbsp;106-2, &#147;Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003&#148; (the Act) that provides guidance on
the accounting for the effects of the Act for employers that sponsor postretirement health care plans
that provide drug benefits. This FSP also requires those employers to provide certain disclosures
regarding the effect of the federal subsidy provided by the Act.


<P align="left" style="font-size: 10pt">Bowater adopted FSP 106-2 effective July&nbsp;1, 2004 and applied the prospective transition method. As
a result, a remeasurement of the plan&#146;s assets and accumulated postretirement benefit obligation
(APBO), including the effects of the subsidy was made. The remeasurement resulted in a reduction of
our net periodic benefit cost for 2004 of $2.5&nbsp;million. The $2.5&nbsp;million reduction consisted of
$0.3&nbsp;million for the reduction of current period service costs, $1.3&nbsp;million for the reduction of
amortization of actuarial experience loss and $0.9&nbsp;million for reduction in interest costs on our
APBO. The remeasurement decreased the actuarial loss component of our APBO by approximately $36.9
million. The reduction to our net periodic benefit cost for 2005 for the prescription drug benefit
under Medicare Part&nbsp;D is estimated to be approximately $4.4&nbsp;million.


<P align="left" style="font-size: 10pt">In January&nbsp;2003, the FASB issued Financial Interpretation
No.&nbsp;46 (FIN 46), &#147;Consolidation of Variable Interest Entities.&#148; Many variable interest entities
(&#147;VIE&#148;) have commonly been referred to as special-purpose entities or off-balance sheet structures.
In general, a VIE is a corporation, partnership, trust, or any other legal structure used for
business purposes that either (a)&nbsp;does not have equity investors with voting rights or (b)&nbsp;has
equity investors that do not provide sufficient financial resources for the entity to support its
activities. FIN 46




<P align="center" style="font-size: 10pt">45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">requires a VIE to be consolidated by a company if that company is subject to a
majority of the risk of loss from the VIE&#146;s activities or entitled to receive a majority of the
entity&#146;s residual returns or both. The consolidation requirements of FIN 46 apply immediately to
VIEs created after January&nbsp;31, 2003. The consolidation requirements apply to older entities in the
first fiscal year or interim period beginning after June&nbsp;15, 2003. Certain of the disclosure
requirements apply in all financial statements issued after January&nbsp;31, 2003, regardless of when
the VIE was established.


<P align="left" style="font-size: 10pt">In October&nbsp;2003, the FASB issued FASB Staff Position FIN 46-6 which (i)&nbsp;deferred the implementation
of FIN 46 for VIEs created before February&nbsp;1, 2003, for periods ending after December&nbsp;15, 2003, and
(ii)&nbsp;permitted early adoption of FIN 46 before the end of the deferral period for some or all VIEs
in which an entity holds an interest.


<P align="left" style="font-size: 10pt">A paper coating facility (referred to as part of &#147;Nuway&#148;) located in Covington, Tennessee was
constructed for Bowater in 2002. Construction of the facility was financed through a special
purpose entity (&#147;SPE&#148;). Bowater has no ownership interest in the SPE. Bowater Nuway Inc., a
wholly-owned subsidiary of Bowater, had entered into a lease commitment with the SPE, the lessor in
the transaction, for this facility. The Covington, Tennessee facility commenced operations in March
of 2002. Total costs incurred by the SPE for the construction of the Covington facility were
approximately $52.3&nbsp;million. The assets and debt associated with this facility were not
consolidated in Bowater&#146;s financial statements prior to July&nbsp;1, 2003. The lease was classified as
an operating lease and the payments expensed in accordance with SFAS No.&nbsp;13, &#147;Accounting for
Leases.&#148; The base lease term for the facility was scheduled to expire on April&nbsp;30, 2006.


<P align="left" style="font-size: 10pt">Effective July&nbsp;1, 2003, Bowater early adopted FIN 46 specific to the Covington paper coating
facility, which had been financed through a SPE. This SPE was determined to be a VIE and required
to be consolidated by Bowater in accordance with FIN 46. Bowater consolidated assets of
approximately $49.4&nbsp;million and debt of approximately $51.8&nbsp;million and recorded a non-cash, after
tax cumulative effect charge of $2.4&nbsp;million, or $0.04 per diluted share, in the third quarter of
2003. On August&nbsp;11, 2003, Bowater terminated the lease agreement with the SPE and paid
approximately $51.8&nbsp;million to pay off the debt.


<P align="left" style="font-size: 10pt">In December&nbsp;2003, the FASB issued a revision to FIN 46 (&#147;FIN 46R&#148;). Under the new FIN 46R guidance,
application of FIN 46R is required in financial statements of entities that have interests in
structures that are commonly referred to as special-purpose entities for periods ending after
December&nbsp;15, 2003. Application for all other types of variable interest entities is required in
financial statements for periods ending after March&nbsp;15, 2004. Bowater adopted the remaining
provisions of FIN 46R in the first quarter of 2004. Adoption of FIN 46R had no impact on Bowater&#146;s
Consolidated Financial Statements.



<P align="center" style="font-size: 10pt">46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Item&nbsp;7A. </B><B><I>Quantitative and Qualitative Disclosures About Market Risk</I></B>


<P align="left" style="font-size: 10pt">Bowater is exposed to risks associated with foreign currency exchange rates, commodity price risk
and changes in interest rates.



<P align="left" style="font-size: 10pt"><B>Foreign Exchange Risk</B>


<P align="left" style="font-size: 10pt">We have manufacturing operations in the United States, Canada and Korea and sales offices located
throughout the world. As a result we are exposed to movements in foreign currency exchange rates
in countries outside the United States. Our most significant foreign currency exposure relates to
Canada. As a result of our 2001 acquisition of Alliance and 1998 acquisition of Avenor,
approximately 42% of our pulp and paper production capacity and a significant portion of our lumber
production is in Canada, with manufacturing costs primarily denominated in Canadian dollars. Also,
certain other assets and liabilities are denominated in Canadian dollars and are exposed to foreign
currency movements. As a result, our earnings are affected by increases or decreases in the value
of the Canadian dollar. Increases in the value of the Canadian dollar versus the United States
dollar will tend to reduce reported earnings, and decreases in the value of the Canadian dollar
will tend to increase reported earnings. See the information set forth under &#147;Item&nbsp;1 Business -
Risks Related to Our Business &#150; Currency fluctuations may adversely affect our results of
operations&#148; on page 10 and under &#147;Item&nbsp;7- Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations-Canadian-US Dollar Exchange Rate Fluctuation Effect on
Earnings&#148; on page 43 for further information on foreign exchange risks related to our operating
costs. To reduce our exposure to differences in Canadian dollar exchange rate fluctuations, we
enter into and designate Canadian dollar forward contracts to hedge certain of our forecasted
Canadian dollar cash outflows. We estimate the monthly forecasted Canadian dollar outflows on a rolling
24-month basis and, depending on the level of the Canadian dollar, hedge the first monthly Canadian
dollar outflows of manufacturing costs up to 90% of such monthly forecasts in each of the first twelve
months and up to 80% in the following twelve months of total forecasted Canadian dollar outflows.
At December&nbsp;31, 2004, we had $690.0&nbsp;million of Canadian dollar contracts outstanding, however, due
to the strong Canadian dollar we are not currently entering into new hedging agreements.
Information regarding the carrying value and fair market value of the contracts is set forth in
Note 13, &#147;Financial Instruments&#148;, of the Consolidated Financial Statements included in this Form
10-K.



<P align="left" style="font-size: 10pt"><B>Interest Rate Risk</B>


<P align="left" style="font-size: 10pt">We are exposed to interest rate risk on our fixed-rate long-term debt and our short-term variable
rate bank debt. Our objective is to manage the impact of interest rate changes on earnings and
cash flows and on the market value of our borrowings. We maintain a mix of fixed rate and variable
rate borrowings. At December&nbsp;31, 2004 and 2003 we had $2,158.4&nbsp;million and $2,172.3
million, respectively of fixed rate long-term debt and $356.5&nbsp;million and $334.0&nbsp;million,
respectively of short and long-term variable rate debt. The fixed rate long-term debt is exposed
to fluctuations in fair value resulting from changes in market interest rates, but not earnings or
cash flows. Our variable rate short and long-term debt approximates fair value as it bears
interest rates that approximate market, but changes in interest rates do affect future earnings and
cash flows. Based on our short and long-term variable bank debt at December&nbsp;31, 2004 and 2003 of
$356.5&nbsp;million and $334.0&nbsp;million, respectively, a 100 basis point increase in interest
rates would have increased our annual interest expense in 2004 and 2003 by approximately $3.6
million and $3.3&nbsp;million, respectively.


<P align="left" style="font-size: 10pt"><B>Commodity Price Risk</B>


<P align="left" style="font-size: 10pt">We purchase significant amounts of energy, chemicals, wood fiber and recovered paper to supply our
manufacturing facilities. These raw materials are market-priced commodities and, as such, are
subject to fluctuations in market prices. Increases in the prices of these commodities will tend to
reduce our reported earnings and decreases will tend to increase our reported earnings. From time
to time, we may enter into contracts aimed at securing a stable source of supply for commodities
such as timber, wood fiber, energy, chemicals and recovered paper. These contracts typically
require us to pay the market price at the time of purchase. Thus under these contracts we generally
remain subject to market fluctuations in commodity prices.




<P align="center" style="font-size: 10pt">47
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Item&nbsp;8. </B><B><I>Financial Statements and Supplementary Data</I></B>



<P align="left" style="font-size: 10pt">Index to Financial Statements


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page(s)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statement of Operations for Each of the Years in the
Three-Year Period Ended December&nbsp;31, 2004 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Balance Sheet at December&nbsp;31, 2004 and 2003 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statement of Capital Accounts for Each of the Years in the
Three-Year Period Ended December&nbsp;31, 2004 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statement of Cash Flows for Each of the Years in the
Three-Year Period Ended December&nbsp;31, 2004 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes to Consolidated Financial Statements </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">53-85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Management&#146;s Report on Financial Statements and Assessment of Internal Control over Financial Reporting </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">48
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENT OF OPERATIONS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions, except per-share amounts) </I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Years ended December 31,</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,190.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">2,721.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">2,581.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales, excluding depreciation, amortization and cost of timber harvested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,346.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,194.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,020.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation, amortization and cost of timber harvested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>335.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distribution costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>324.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling and administrative expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>161.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Operating income (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(95.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expense (income):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense, net of capitalized interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>195.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(13.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Loss before income taxes, minority interests and cumulative effect of
accounting changes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(148.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(280.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(250.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(54.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(70.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests in net loss of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Loss before cumulative effect of accounting changes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(200.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative effect of accounting changes, net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Net loss</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss), net of taxes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minimum pension liability adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain (loss)&nbsp;on hedged transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(30.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Comprehensive loss</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(68.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(102.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(230.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss per share:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per common share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss before cumulative effect of accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(3.52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cumulative effect of accounting changes, net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.08</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per common share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss before cumulative effect of accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(3.52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cumulative effect of accounting changes, net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.08</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Average common and common equivalent shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><I>See accompanying Notes to Consolidated Financial Statements.</I>



<P align="center" style="font-size: 10pt">49
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>CONSOLIDATED BALANCE SHEET</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions, except share amounts)</I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>At December 31,</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>29.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">19.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>377.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>327.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">293.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on hedged transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>67.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>902.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Timber and timberlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>186.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fixed assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,301.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,557.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>828.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>240.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>5,458.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">5,615.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities and shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current installments of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>14.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term bank debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>73.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>458.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">434.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>556.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">659.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt, net of current installments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,427.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,292.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pension, other postretirement benefits and other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>495.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>403.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interests in subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>68.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shareholders&#146; equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common Stock, $1 par value. Authorized 100,000,000 shares; issued 67,438,584 and 67,047,804 shares at
December&nbsp;31, 2004 and 2003, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>67.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exchangeable Shares, no par value. Unlimited shares authorized; 1,466,358 and 1,641,312 outstanding at
December&nbsp;31, 2004 and 2003, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>69.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,618.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,602.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>266.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unearned compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(28.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Treasury stock at cost, 11,608,385 and 11,611,203 shares at December&nbsp;31, 2004 and 2003, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(485.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(486.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,507.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,612.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total liabilities and shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>5,458.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">5,615.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><I>See accompanying Notes to Consolidated Financial Statements.</I>



<P align="center" style="font-size: 10pt">50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENT OF CAPITAL ACCOUNTS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Common</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exchangeable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Additional Paid</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Retained</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unearned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Other Comprehensive</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Treasury</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B><I>(In millions, except share amounts)</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">In Capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Income (Loss)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Stock</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at December&nbsp;31, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">96.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,569.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">837.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(61.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(486.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retraction of Exchangeable Shares (359,816
shares of Common Stock issued and
Exchangeable Shares retracted)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancellation of Exchangeable Shares (5,524)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends on Common Stock ($0.80 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock options exercised (213,350 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension plan additional minimum liability,
net of tax benefit of $55.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain on hedged transactions, net
of tax expense of $5.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock option compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock used for dividend
reinvestment plans and to pay employee and
director benefits (2,318 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">78.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,596.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">649.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(150.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(486.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retraction of Exchangeable Shares (1,936
shares of Common Stock issued and
Exchangeable Shares retracted)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends on Common Stock ($0.80 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock options exercised (67,200 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension plan additional minimum liability,
net of tax benefit of $11.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain on hedged transactions, net
of tax expense of $68.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock option compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted stock grant (81,510 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of unearned compensation on
restricted stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock used for dividend
reinvestment plans and to pay employee and
director benefits (6,291 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">78.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,602.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">399.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(47.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(486.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retraction of Exchangeable Shares (174,954
shares of Common Stock issued and
Exchangeable Shares retracted)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends on Common Stock ($0.80 per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock options exercised (223,600 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reduction of pension plan additional
minimum liability, net of tax expense of
$22.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized loss on hedged transactions, net
of tax benefit of $18.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock option compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted stock cancellation (7,774 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of unearned compensation on
restricted stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock used for dividend
reinvestment plans and to pay employee and
director benefits (2,818 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Balance at December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right"><B>67.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right"><B>69.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right"><B>1,618.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right"><B>266.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right"><B>(28.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right"><B>(485.9</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><I>See accompanying Notes to Consolidated Financial Statements.</I>



<P align="center" style="font-size: 10pt">51
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENT OF CASH FLOWS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <I>Years ended December 31,</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net loss to net cash provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cumulative effect of accounting changes, net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of unearned compensation on restricted stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation, amortization and cost of timber harvested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>335.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(50.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interests in net loss of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(124.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Impairment of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in working capital:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(16.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(34.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(30.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(75.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(20.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Net cash provided by operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>122.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash invested in fixed assets, timber and timberlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(84.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(238.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dispositions of fixed assets, timber and timberlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from the monetization of notes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash invested in marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash from maturity of marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Net cash used for investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(72.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(122.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends, including minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(46.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term financing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>733.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">973.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,109.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term financing repayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(866.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,022.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,202.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term financing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>245.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">394.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(113.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(276.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Net cash from (used for) financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(40.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net increase (decrease)&nbsp;in cash and cash equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>29.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">19.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">35.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental disclosures of cash flow information:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid during the year for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest, including capitalized interest of $0.1, $7.4, and $8.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>197.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">184.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">176.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>35.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">12.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">26.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><I>See accompanying Notes to Consolidated Financial Statements.</I>



<P align="center" style="font-size: 10pt">52
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>



<P align="left" style="font-size: 10pt"><B><I>Note 1. Summary of Significant Accounting Policies</I></B>



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">nature of operations:</FONT>


<P align="left" style="font-size: 10pt">Bowater Incorporated (&#147;Bowater&#148;) is engaged in the manufacture, sale and distribution of
newsprint, uncoated specialty paper, coated groundwood paper, market pulp, lumber and timber. We
operate facilities in the United States, Canada and South Korea and, as of December&nbsp;31, 2004, our
operations were supported by 1.3&nbsp;million acres of timberlands owned or leased in the United States
and Canada and 29.6&nbsp;million acres of timber cutting rights on Crown-owned lands in Canada. We
market and distribute our products throughout the world.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">basis of presentation:</FONT>


<P align="left" style="font-size: 10pt">The accompanying Consolidated Financial Statements include the accounts of Bowater
Incorporated and Subsidiaries (collectively &#147;Bowater&#148;). All consolidated subsidiaries are
wholly-owned with the exception of the following:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Related</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Bowater</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Party</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Consolidated Subsidiary</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ownership</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Related Party</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Ownership</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bowater Maritimes Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">67</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oji Paper Co., Ltd.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">25</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mitsui &#038; Co., Ltd.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Calhoun Newsprint Company (&#147;CNC&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Herald Company, Inc.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bowater Mersey Paper Company Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Washington Post Company
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Bowater also has a 40% interest in and is the managing partner of an unconsolidated entity,
Ponderay Newsprint Company. The balance of this partnership is held by subsidiaries of five
newspaper publishers. Additionally, Bowater has a 30% interest in a Canadian sawmill. Both
partnerships are accounted for using the equity method of accounting.


<P align="left" style="font-size: 10pt">For purposes of financial reporting, all partners described above are considered related parties.
All significant inter-company transactions and balances with consolidated subsidiaries have been
eliminated.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">cash equivalents:</FONT>


<P align="left" style="font-size: 10pt">Cash equivalents generally consist of direct obligations of the United States and Canadian
governments and their agencies, investment-grade commercial paper and other short-term
investment-grade securities with original maturities of three months or less. These investments
are stated at cost, which approximates market value.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">financial</FONT> <FONT style="font-variant: SMALL-CAPS">instruments</FONT>:


<P align="left" style="font-size: 10pt">Derivative financial instruments are accounted for in accordance with Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;133, &#147;Accounting for Derivative Instruments and Hedging
Activities,&#148; as amended (see below). SFAS No.&nbsp;133 establishes accounting and reporting standards
for derivative instruments and hedging activities and requires that we record all derivatives as
either assets or liabilities in the balance sheet at fair value. Changes in the derivative fair
values that are designated effective and qualify as cash flow hedges are deferred and recorded as a
component of &#147;Accumulated other comprehensive income (loss)&#148; until the underlying transaction is
recorded in earnings. When the hedged item affects earnings, gains or losses are reclassified from
&#147;Accumulated other comprehensive income (loss)&#148; to the Consolidated Statement of Operations on the
same line as the underlying transaction (cost of sales). Any ineffective portion of a hedging
derivative&#146;s change in fair value is recognized immediately in earnings.


<P align="left" style="font-size: 10pt">In April&nbsp;2003, the Financial Accounting Standards Board (&#147;FASB&#148;) issued SFAS No.&nbsp;149, &#147;Amendment of
Statement 133 on Derivative Instruments and Hedging Activities&#148;. SFAS No.&nbsp;149 amends and clarifies
financial reporting for derivative instruments and for hedging activities accounted for under SFAS
No.&nbsp;133 and is effective for contracts entered into or modified, and for hedges designated, after
June&nbsp;30, 2003. The adoption of SFAS No.&nbsp;149 had no impact on our Consolidated Financial
Statements.




<P align="center" style="font-size: 10pt">53
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">In May&nbsp;2003, the FASB issued SFAS No.&nbsp;150, &#147;Accounting for Certain Instruments with
Characteristics of Both Liabilities and Equity.&#148; SFAS No.&nbsp;150 establishes how an issuer classifies
and measures certain freestanding financial instruments with characteristics of liabilities and
equity and requires that such instruments be classified as liabilities. The standard is effective
for financial instruments entered into or modified after May&nbsp;31, 2003 and is otherwise effective at
the beginning of the first interim period beginning after June&nbsp;15, 2003. Adoption of the standard
had no impact on our Consolidated Financial Statements.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">inventories:</FONT>



<P align="left" style="font-size: 10pt">Inventories are stated at the lower of cost or market. Cost includes labor, materials and
production overhead and is determined by using the average cost and last-in, first-out (&#147;LIFO&#148;)
methods.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">timber and timberlands:</FONT>



<P align="left" style="font-size: 10pt">The acquisition cost of land and timber, property taxes, lease payments, site preparation and other
costs related to the planting and growing of timber are capitalized. Capitalization policies are
consistent prior to and during harvesting. These costs, excluding land, are charged against revenue
at the time the timber is harvested, based on annually determined depletion rates, and are included
in the line titled &#147;Depreciation, amortization and cost of timber harvested&#148; in the Consolidated
Statement of Operations. Growth and yield models are used to estimate timber volume on our land
from year to year. These volumes affect the depletion rates, which is calculated annually based on
the capitalized costs and the total timber volume based on the current stage of the growth cycle.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">fixed</FONT> <FONT style="font-variant: SMALL-CAPS">assets</FONT> <FONT style="font-variant: SMALL-CAPS">and</FONT> <FONT style="font-variant: SMALL-CAPS">depreciation</FONT>:



<P align="left" style="font-size: 10pt">Fixed assets are stated at cost less accumulated depreciation. Depreciation is generally provided
on a straight-line basis over the estimated useful lives of the assets. Repairs and maintenance
are charged to operations as incurred. Bowater capitalizes interest on borrowings during the
construction period of major capital projects. Capitalized interest is added to the cost of the
underlying assets and is amortized on a straight-line basis over the useful lives of the assets.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">asset retirement obligations:</FONT>



<P align="left" style="font-size: 10pt">In June&nbsp;2001, the FASB issued SFAS No.&nbsp;143, &#147;Accounting for Asset Retirement Obligations.&#148; SFAS
No.&nbsp;143 is effective for fiscal years beginning after June&nbsp;15, 2002 and requires entities to record
the fair value of a liability for an asset retirement obligation in the period in which it is
incurred and in which a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the related long-lived asset.
Subsequently, the asset retirement costs are to be allocated to expense using a systematic and
rational method and the liability is to be accreted to its face amount. As more fully described in
Note 2, &#147;Asset Retirement Obligations,&#148; effective January&nbsp;1, 2003, Bowater adopted SFAS No.&nbsp;143,
which resulted in, among other things, a net charge of $2.1&nbsp;million that is included in &#147;Cumulative
effect of accounting changes, net of taxes&#148; in the 2003 Consolidated Statement of Operations.
Prior to SFAS No.&nbsp;143, Bowater had not recorded a liability for its asset retirement obligations.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">impairment of long-lived assets and long-lived assets to be disposed of:</FONT>



<P align="left" style="font-size: 10pt">Effective January&nbsp;1, 2002, Bowater adopted SFAS No.&nbsp;144, &#147;Accounting for the Impairment or Disposal
of Long-Lived Assets.&#148; This pronouncement supersedes SFAS No.&nbsp;121, &#147;Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of&#148;, and provides a single accounting
model for long-lived assets to be disposed of. In accordance with SFAS No.&nbsp;144, long-lived assets
and intangible assets subject to amortization are evaluated for impairment whenever events or
changes in circumstances indicate that the carrying amount of a long-lived asset or group of assets
(herein defined as &#147;long-lived asset&#148;) may not be recoverable.



<P align="left" style="font-size: 10pt">Tests for recoverability of a long-lived asset to be held and used are measured by comparing the
carrying amount of the long-lived asset to the sum of the estimated future undiscounted cash flows
expected to be generated by the asset. In estimating the future undiscounted cash flows we use
projections of cash flows directly associated with, and which are expected to arise as a direct
result of, the use and eventual disposition of the assets. Several of the key assumptions include
periods of operation, projections of product pricing, first quality production levels, product
costs, market supply




<P align="center" style="font-size: 10pt">54
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">and demand, foreign exchange rates, inflation and projected capital spending.
Changes in any of these estimates could have a material effect on the estimated future undiscounted
cash flows expected to be generated by the asset. If it is
determined that a long-lived asset is not recoverable, an impairment loss would be calculated equal
to the excess of the carrying amount of the long-lived asset over its fair value.



<P align="left" style="font-size: 10pt">A long-lived asset classified as held for sale is initially measured and reported at the lower of
its carrying amount or fair value less cost to sell. Long-lived assets to be disposed of other
than by sale are classified as held and used until the long-lived asset is disposed.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">goodwill:</FONT>



<P align="left" style="font-size: 10pt">Effective January&nbsp;1, 2002, Bowater adopted SFAS No.&nbsp;142, &#147;Goodwill and Other Intangible Assets.&#148;
Under SFAS No.&nbsp;142, goodwill, which represents the excess of purchase price over fair value of net
assets acquired, and intangible assets with indefinite useful lives are no longer amortized but are
to be tested for impairment at least on an annual basis in accordance with the provisions of SFAS
No.&nbsp;142. The goodwill impairment test involves a comparison of the fair value of each of our
reporting units as defined under SFAS No.&nbsp;142, with its carrying amount. If a reporting unit&#146;s
carrying amount exceeds its fair value, then goodwill of the reporting unit is considered to be
impaired. The impairment to be recognized is measured by the amount by which the carrying value of
the reporting entity being measured exceeds their fair value. Fair value is determined with the
assistance of an independent third party. In making our determination of fair value, we rely
primarily on the discounted cash flow method. This method uses projections of cash flows from each
of the reporting units and includes, among other estimates, periods of operation, projections of
product pricing, production levels, product costs, market supply and demand, foreign exchange
rates, inflation, capital spending and an assumption of our weighted average cost of capital.
Changes in any of these estimates could have a material effect on the fair value of these assets in
future measurement periods. See Note 3, &#147;Goodwill&#148; for a discussion of the annual goodwill
impairment test.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">transfers and servicing of financial assets and extinguishments of liabilities:</FONT>



<P align="left" style="font-size: 10pt">Bowater adopted SFAS No.&nbsp;140, &#147;Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities&#148; in 2001, and accounts for transactions relating to the standard in
accordance with its provisions.



<P align="left" style="font-size: 10pt">Note Monetizations &#150; Bowater monetized notes receivable using qualified special purpose entities
(&#147;QSPE&#148;) set up in accordance with SFAS No.&nbsp;140. The QSPE&#146;s that have been established for note
monetization purposes have not been consolidated within Bowater&#146;s financial statements (see Note 5,
&#147;Net Gain on Sale of Assets&#148;). Bowater records gains or losses on the monetization of the notes
receivable, with the amount of the gain or loss determined based on the original carrying amount of
the notes, allocated between the assets monetized and the retained interests in the QSPE based on
its relative fair value at the date of the monetization. Bowater&#146;s retained interest consists
principally of the excess cash flows (the difference between the interest received on the notes
receivable and the interest paid on the securities issued by the QSPE to third parties) and a cash
reserve account established at inception. Fair values of the retained interest are estimated based
on the present value of future excess cash flows to be received over the life of the notes, using
management&#146;s best estimate of key assumptions, including credit risk and discount rates. The
retained interest is included in &#147;Other assets&#148; in the Consolidated Balance Sheet. Excess cash
flows revert to Bowater on a quarterly or semi-annual basis. The cash reserve account reverts to
Bowater at the maturity of the investor notes.



<P align="left" style="font-size: 10pt">Accounts Receivable Securitization Arrangement &#150; Bowater entered into an accounts receivable
securitization arrangement in December&nbsp;2002. This accounts receivable securitization arrangement
is renewed annually. This accounts receivable securitization arrangement is accounted for as a
secured borrowing in accordance with the requirements of SFAS No.&nbsp;140. The securitization
arrangement has been accounted for as on-balance sheet and therefore the accounts receivable and
related borrowings are recorded on our Consolidated Balance Sheet. See Note 12, &#147;Long-Term and
Short-Term Debt and Off-Balance Sheet Arrangements&#148; for a discussion of the accounts receivable
securitization arrangement.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Income taxes:</FONT>



<P align="left" style="font-size: 10pt">Income taxes are accounted for under the asset and liability method, as prescribed by SFAS No.&nbsp;109,
&#147;Accounting for Income Taxes.&#148; Deferred tax assets and liabilities are recognized for the expected
future tax consequences attributable




<P align="center" style="font-size: 10pt">55
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases, and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be recovered or settled. Valuation allowances are recognized to reduce deferred tax
assets to the
amount that is more likely than not to be realized. In assessing the likelihood of realization, we
consider estimates of future taxable income and tax planning strategies.



<P align="left" style="font-size: 10pt">Bowater has not provided for U.S. income taxes on the undistributed earnings of certain of its
foreign subsidiaries, as it has specific plans for the reinvestment of such earnings. See Note 15,
&#147;Income Taxes&#148;, for a discussion of the Company&#146;s undistributed earnings of its foreign
subsidiaries.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Costs associated with exit or disposal activities:</FONT>



<P align="left" style="font-size: 10pt">In July&nbsp;2002, the FASB issued SFAS No.&nbsp;146, &#147;Accounting for Costs Associated with Exit or Disposal
Activities.&#148; SFAS No.&nbsp;146 requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an exit or disposal
plan. The provisions of SFAS No.&nbsp;146 were effective for exit or disposal activities that were
initiated or modified after December&nbsp;31, 2002. We adopted SFAS No.&nbsp;146 on January&nbsp;1, 2003 and
account for applicable exit or disposal activities in accordance with the provisions of SFAS No.
146, which impacts the timing of exit and disposal activities reported by us.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Foreign operations:</FONT>



<P align="left" style="font-size: 10pt">Financial statements of the majority of Bowater&#146;s Canadian and Korean operations are prepared using
the United States dollar as their functional currency. Non-monetary assets and liabilities and
related depreciation and amortization for these foreign operations are remeasured into U.S. dollars
using historical exchange rates. Remaining assets and liabilities are remeasured into U.S. dollars
using the exchange rates as of the balance sheet date. Income and expense items are remeasured
into U.S. dollars using an average exchange rate for the period. Gains and losses from foreign
currency transactions and from remeasurement of the balance sheet are reported as &#147;Other, net&#148; in
the Consolidated Statement of Operations.



<P align="left" style="font-size: 10pt">Financial statements of one foreign subsidiary are prepared using the local currency as the
functional currency. Assets and liabilities of this subsidiary are translated into U.S. dollars at
the current exchange rate and income and expense items are translated at an average exchange rate
for the period. The resulting translation gains or losses are recognized as a component of equity
in &#147;Accumulated other comprehensive income (loss).&#148; Gains and losses from foreign currency
transactions are included in the Consolidated Statement of Operations.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Off-balance sheet arrangements:</FONT>



<P align="left" style="font-size: 10pt">In November&nbsp;2002, the FASB issued Financial Interpretation No.&nbsp;45 (&#147;FIN 45&#148;), &#147;Guarantor&#146;s
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.&#148; FIN 45 requires a guarantor to include disclosure of certain obligations,
and, if applicable, at the inception of the guarantee, recognize a liability for the fair value of
other certain obligations undertaken in issuing a guarantee. Bowater adopted the disclosure
requirements of FIN 45 in 2002, while the recognition requirement is effective for guarantees
issued or modified after December&nbsp;31, 2002. The adoption of the recognition requirement had no
impact on our 2004 or 2003 Consolidated Financial Statements. See Note 12, &#147;Long-Term and
Short-Term Debt and Off-Balance Sheet Arrangements,&#148; for details of our off-balance sheet debt
guarantees.



<P align="left" style="font-size: 10pt">In January&nbsp;2003, the FASB issued FIN 46, &#147;Consolidation of Variable Interest Entities.&#148; Many
variable interest entities (&#147;VIE&#148;) have commonly been referred to as special-purpose entities or
off-balance sheet structures. In general, a VIE is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a)&nbsp;does not have equity investors with
voting rights or (b)&nbsp;has equity investors that do not provide sufficient financial resources for
the entity to support its activities. FIN 46 requires a VIE to be consolidated by a company if
that company is subject to a majority of the risk of loss from the VIE&#146;s activities or entitled to
receive a majority of the entity&#146;s residual returns or both. The consolidation requirements of FIN
46 apply immediately to VIEs created after January&nbsp;31, 2003. The consolidation requirements apply
to older entities in the first fiscal year or interim period beginning after June&nbsp;15, 2003.
Certain of the disclosure requirements apply in all financial statements issued after January&nbsp;31,
2003, regardless of when the VIE was established.




<P align="center" style="font-size: 10pt">56
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">In October&nbsp;2003, the FASB issued FASB Staff Position FIN 46-6 which (i)&nbsp;deferred the implementation
of FIN 46 for VIEs created before February&nbsp;1, 2003, for periods ending after December&nbsp;15, 2003, and
(ii)&nbsp;permitted early adoption of FIN 46 before the end of the deferral period for some or all VIEs
in which an entity holds an interest. Effective July&nbsp;1, 2003, Bowater early adopted FIN 46
specific to the Covington paper coating facility (referred to as &#147;Nuway&#148;) which had been financed
through a special purpose entity (&#147;SPE&#148;). This SPE was determined to be a VIE and required to be
consolidated by Bowater in accordance with FIN 46. As such, and as more fully described in Note
12, &#147;Long-Term and Short-Term Debt and Off-Balance Sheet Arrangements,&#148; in the third quarter of
2003, Bowater consolidated the assets and liabilities of the SPE and recorded a net charge of $2.4
million that is included in &#147;Cumulative effect of accounting changes, net of taxes&#148; in the 2003
Consolidated Statement of Operations.



<P align="left" style="font-size: 10pt">In December&nbsp;2003, the FASB issued a revision to FIN 46 (&#147;FIN 46R&#148;). Under the new FIN 46R
guidance, application of FIN 46R is required in financial statements of entities that have
interests in structures that are commonly referred to as special-purpose entities for periods
ending after December&nbsp;15, 2003. Application for all other types of variable interest entities is
required in financial statements for periods ending after March&nbsp;15, 2004. Bowater adopted the
remaining provisions of FIN 46R in the first quarter of 2004. Adoption of FIN 46R had no impact on
Bowater&#146;s Consolidated Financial Statements.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">stock-based compensation:</FONT>



<P align="left" style="font-size: 10pt">Bowater provides stock options and other stock-based compensation as more fully described in Note
19, &#147;Stock-Based Compensation.&#148; Bowater accounts for stock-based compensation using the intrinsic
value method in accordance with Accounting Principles Board Opinion No.&nbsp;25 (&#147;APB No.&nbsp;25&#148;),
&#147;Accounting for Stock Issued to Employees.&#148; Under APB No.&nbsp;25, compensation expense for employee
stock options is generally not recognized if the exercise price of the option equals or exceeds the
fair value of the underlying stock on the date of grant.



<P align="left" style="font-size: 10pt">The following table represents the pro forma effect on net loss and loss per share if we had
applied the fair value based method and recognition provisions of SFAS No.&nbsp;123, &#147;Accounting for
Stock-Based Compensation.&#148;


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions, except per-share amounts)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss as reported:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Stock-based compensation expense included in net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Stock-based compensation expense determined under
fair value based methods, net of related tax effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(7.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(93.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(210.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(149.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic, pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.64</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.63</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted, pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.64</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.63</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">The fair value of each option granted is estimated as of the date of grant using the Black-Scholes
option-pricing model with the following assumptions:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumptions:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expected dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>1.8</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expected stock price volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>30.6</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">31.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">30.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.4</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expected option lives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.8</B></TD>
    <TD nowrap><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD nowrap>years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.3</TD>
    <TD nowrap>years</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average fair value of each option</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>13.88</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">57
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">The estimated fair value of the option is amortized to expense over the vesting period of the
option award, in accordance with the provisions of SFAS No.&nbsp;123.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">pension, savings and other postretirement plans:</FONT>



<P align="left" style="font-size: 10pt">Bowater has contributory and noncontributory pension plans that cover substantially all employees.
Our cash contributions to the plans have been sufficient to provide pension benefits to
participants and meet the funding requirements of ERISA and applicable Pension Benefits Acts in
Canada. We also sponsor defined benefit health care
and life insurance plans for retirees at certain locations. Net periodic costs are recognized as
employees render the services necessary to earn postretirement benefits.



<P align="left" style="font-size: 10pt">In December&nbsp;2003, the FASB issued SFAS No.&nbsp;132, &#147;Employers&#146; Disclosures about Pensions and Other
Postretirement Benefits (revised 2003).&#148; This statement revises employers&#146; disclosures about
pension plans and other postretirement benefit plans. It does not change the measurement or
recognition of those plans required by SFAS No.&nbsp;87, &#147;Employers&#146; Accounting for Pensions,&#148; SFAS No.
88, &#147;Employers&#146; Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits,&#148; and SFAS No.&nbsp;106, &#147;Employers&#146; Accounting for Postretirement Benefits
Other Than Pensions.&#148; This statement retains the disclosure requirements contained in the original
SFAS No.&nbsp;132, which it replaces. It requires additional disclosures to those in the original SFAS
No.&nbsp;132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. This statement is effective for
financial statements with fiscal years ending after December&nbsp;15, 2003, thus, Bowater has included
the required additional disclosures in Note 14, &#147;Pension and Other Nonpension Postretirement
Benefits.&#148;



<P align="left" style="font-size: 10pt">In March&nbsp;2004, the FASB issued FSP 106-2, &#147;Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003&#148; (the Act) that provides
guidance on the accounting for the effects of the Act for employers that sponsor postretirement
health care plans that provide drug benefits. This FSP also requires those employers to provide
certain disclosures regarding the effect of the federal subsidy provided by the Act. Bowater
adopted FSP 106-2 effective July&nbsp;1, 2004 and has included the required disclosures in Note 14,
&#147;Pension and Other Nonpension Postretirement Benefits.&#148;



<P align="left" style="font-size: 10pt">In addition to the pension and postretirement plans, Bowater sponsors savings plans for
substantially all employees. Our contributions to these defined contribution plans are expensed as
incurred.



<P align="left" style="font-size: 10pt">Certain of the above plans are covered under collective bargaining agreements.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">comprehensive loss:</FONT>



<P align="left" style="font-size: 10pt">Comprehensive loss, net of taxes, consists of net loss, foreign currency translation adjustments,
minimum pension liability adjustments and unrealized gain on hedged transactions and is presented
in the Consolidated Statement of Operations. The components of &#147;Accumulated other comprehensive
loss&#148; in the Consolidated Balance Sheet are as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="8" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension plan additional minimum liabilities<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(113.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(156.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain on hedging transactions<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>76.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(28.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(47.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)&nbsp;&nbsp;</TD>
    <TD>Net of deferred tax benefit of $65.5&nbsp;million and $88.2&nbsp;million, in 2004 and 2003,
respectively.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)&nbsp;&nbsp;</TD>
    <TD>No tax effect is recorded for foreign currency translation since the foreign net assets
translated are deemed permanently invested.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)&nbsp;&nbsp;</TD>
    <TD>Net of deferred tax expense of $46.7&nbsp;million and $65.5&nbsp;million, in 2004 and 2003,
respectively.</TD>
</TR>



</TABLE>

<P align="center" style="font-size: 10pt">58
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">revenue recognition:</FONT>



<P align="left" style="font-size: 10pt">Approximately 90% of Bowater sales are for pulp and paper products. These products are primarily
delivered by either truck or rail and revenue recognition is dependent on shipping terms. These
products are primarily delivered to our customers directly from our mills and have the shipping
terms free on board (&#147;f.o.b.&#148;) shipping point. For these sales, revenue is recorded when the
product leaves the mill. With regard to these sales or any other sale of any Bowater product, the
following criteria must be met before revenue is recorded: persuasive evidence of an arrangement
exists; delivery has occurred; our price to the buyer is fixed and determinable; and collectibility
is reasonably assured.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">distribution costs:</FONT>



<P align="left" style="font-size: 10pt">Bowater&#146;s shipping and handling costs are classified as distribution costs and presented separately
on the Consolidated Statement of Operations, in accordance with the Emerging Issues Task Force
(&#147;EITF&#148;) issued EITF No.&nbsp;00-10, &#147;Accounting for Shipping and Handling Fees and Costs.&#148;



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">basic and diluted earnings per share:</FONT>



<P align="left" style="font-size: 10pt">Basic earnings per common share, including Exchangeable Shares issued by our subsidiary, Bowater
Canada Inc. (&#147;Exchangeable Shares&#148;), is calculated assuming no dilution. Diluted earnings per
common share is computed using the weighted average number of outstanding common shares, including
Exchangeable Shares, adjusted for the incremental shares attributed to dilutive common share
equivalents (stock options and restricted stock).



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">environmental costs</FONT>:



<P align="left" style="font-size: 10pt">Bowater expenses environmental costs related to existing conditions resulting from past or current
operations and from which no current or future benefit is discernible. Expenditures that extend
the life of the related property are capitalized. We determine our liability on a site-by-site
basis and record a liability at the time it is probable and can be reasonably estimated.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">use of estimates:</FONT>



<P align="left" style="font-size: 10pt">The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions (e.g. allowance for bad debts,
inventory valuation, valuation allowances on deferred taxes, tax liabilities, impairment of assets,
discount and return on assets rates and market valuations). These estimates and assumptions affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements. In addition, they affect the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from these
estimates and assumptions.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">reclassifications:</FONT>



<P align="left" style="font-size: 10pt">Certain prior-year amounts in the financial statements and the notes have been reclassified to
conform to the 2004 presentation. These reclassifications had no impact on previously reported net
loss or shareholders&#146; equity.



<P align="left" style="font-size: 10pt"><B><I>Note 2. Asset Retirement Obligations</I></B>



<P align="left" style="font-size: 10pt">Bowater adopted SFAS No.&nbsp;143, effective January&nbsp;1, 2003, and recorded a cumulative effect charge,
net of taxes, of $2.1&nbsp;million to our Consolidated Statement of Operations for the first quarter of
2003. The adoption adjustment also included increases to fixed assets, net, of $0.9&nbsp;million,
long-term liabilities of $4.3&nbsp;million and deferred tax assets of $1.3&nbsp;million. Asset retirement
obligations were recorded for those obligations where a legally enforceable obligation exists, the
life is determinable and a reasonable estimate of fair value can be made. Asset retirement
obligations recorded in connection with the adoption of SFAS No.&nbsp;143 were primarily for industrial
waste landfills, bark piles and sludge basins where we have a legally enforceable obligation to
perform capping and post closure monitoring procedures upon closing of these assets.



<P align="left" style="font-size: 10pt">Additionally, we have certain asset retirement obligations that have indeterminate useful lives and
therefore have an indeterminate settlement date for the related asset retirement obligation. As a
result, no asset retirement obligation has




<P align="center" style="font-size: 10pt">59
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">been recorded for these assets. These assets include,
for example, wastewater and effluent ponds that will be required to be drained once the related
operating facility is closed, and storage sites or owned facilities for which removal of chemicals
and other related materials will be required once the related operating facility is closed. Once
the life of these assets becomes determinable and an estimate of fair value can be made, an asset
retirement obligation will be recorded.



<P align="left" style="font-size: 10pt">Bowater has not had to legally restrict these assets for purposes of settling our asset retirement
obligations.



<P align="left" style="font-size: 10pt">The pro forma effects of the application of SFAS No.&nbsp;143 on net income (loss), basic earnings
(loss)&nbsp;per common share, diluted earnings (loss)&nbsp;per common share and the asset retirement
obligation liability, as if the statement had been adopted on January&nbsp;1, 2002 (rather than January
1, 2003), are presented below. There is no proforma impact on 2004 results as SFAS No.&nbsp;143 was in
effect for the entire year.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="8" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions, except per-share amounts)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(202.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right">(143.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3.56</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.51</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3.56</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.51</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset retirement obligation liability:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accretion expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><B><I>Note 3. Goodwill</I></B>



<P align="left" style="font-size: 10pt">In accordance with SFAS No.&nbsp;142, Bowater completed its annual goodwill impairment tests in the
fourth quarters of 2003 and 2004, none of which indicated impairment. However, in future
measurements of fair value, adverse changes in discounted cash flow assumptions could result in an
impairment of goodwill that would require a non-cash charge to the Consolidated Statement of
Operations and may have a material effect on the financial condition and operating results of the
company.



<P align="left" style="font-size: 10pt">As of December&nbsp;31, 2004 and 2003, we had unamortized goodwill in the amount of $828.2&nbsp;million and
no intangible assets with indefinite useful lives. For impairment testing purposes, goodwill of
$530.4&nbsp;million and $297.8&nbsp;million (including allocated corporate goodwill of $185.6&nbsp;million and
$107.8&nbsp;million, respectively) is included in the Newsprint Division of which the majority relates
to our Thunder Bay facility and the Canadian Forest Products Division reportable segments,
respectively, and relates to five pulp and paper mills.



<P align="left" style="font-size: 10pt"><B><I>Note 4. Asset Impairment</I></B>



<P align="left" style="font-size: 10pt">During the fourth quarter of 2002, Bowater announced that it would permanently close, at the end of
April&nbsp;2003, the older, high cost No.&nbsp;3 paper machine at its Donnacona, Quebec mill and record an
asset impairment charge of $26.4&nbsp;million. Fair value of the No.&nbsp;3 machine was determined based on
the estimated sale and salvage value of the machine plus projected cash generated from its
operations through April&nbsp;2003. In addition, an impairment charge of approximately $2.1&nbsp;million was
recorded in 2002 for Nuway assets no longer expected to be utilized. For segment reporting
purposes, the 2002 impairment charges are included in our Canadian Forest Products Division ($26.4
million) and our Coated and Specialty Papers Division ($2.1&nbsp;million).




<P align="center" style="font-size: 10pt">60
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B><I>Note 5. Net Gain on Sale of Assets</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of timberlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>5.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">122.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">85.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>6.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">124.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">85.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">In 2004, we completed the sale of approximately 3,200 acres of timberland for cash consideration of
$7.3&nbsp;million, resulting in a pre-tax gain of $5.7&nbsp;million. We also received cash proceeds of $4.7
million for other asset sales in 2004, resulting in pretax gains of $1.2&nbsp;million.



<P align="left" style="font-size: 10pt">In May&nbsp;2003, Bowater completed the sale of approximately 82,000 acres of owned and leased
timberlands for cash consideration of $121.8&nbsp;million. This transaction resulted in a pretax gain
of $97.5&nbsp;million. We also received cash proceeds of $32.5&nbsp;million for other timberland and asset
sales in 2003, resulting in pretax gains of $26.5&nbsp;million.



<P align="left" style="font-size: 10pt">In January&nbsp;2002, we completed the sale of approximately 116,000 acres of timberland for aggregate
consideration of $104.2&nbsp;million. We received $5.1&nbsp;million in cash after expenses and $99.1&nbsp;million
in notes receivable. In March&nbsp;2002, we monetized the notes receivable of $99.1&nbsp;million for net
cash proceeds of $88.1&nbsp;million. These transactions resulted in a net pretax gain of $70.4&nbsp;million.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#216;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The notes receivable were monetized through a bankruptcy-remote limited liability company.
The bankruptcy-remote entity is a qualified special purpose entity (QSPE)&nbsp;under SFAS No.&nbsp;140
and is not consolidated in our financial statements.</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#216;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">This QSPE has issued fixed rate senior secured notes totaling $89.2&nbsp;million, which are
secured by the notes receivable held by the QSPE. The value of these senior secured notes is
equal to approximately 90% of the value of the notes receivable. The full principal amount
of the notes receivable is backed by a letter of credit issued by a third party financial
institution.</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#216;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We retain an interest in the excess future cash flows of the QSPE (cash received from
notes receivable versus cash paid out on the senior secured notes). We retained an interest
in the QSPE valued at $7.1&nbsp;million. The principal variable in determining the fair value of
future expected excess cash flows of the retained interest is the discount rate, as it
consists of a note with a low level of credit risk, contractually due in 15&nbsp;years and not
subject to prepayment. The discount rate used for the note is 6.91%.</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-family: Wingdings">&#216;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">In 2002 we recorded a $3.9&nbsp;million loss on the monetization of the notes receivable, which
was based on the difference in the original carrying amount of the notes (allocated between
the asset monetized and the retained interest) and the fair value at the date of the
monetization.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Also in 2002, Bowater sold approximately 8,700 acres of other timberlands and recognized previously
deferred revenue in connection with a fourth quarter 2001 sale of 147,000 acres for a total net
pretax gain of $15.3&nbsp;million.



<P align="left" style="font-size: 10pt"><B><I>Note 6. Other Expense (Income)</I></B>



<P align="left" style="font-size: 10pt">Other expense (income)&nbsp;includes non-operating items. The breakdown of the components of &#147;Other,
net&#148; in the Consolidated Statement of Operations for the three years ended December&nbsp;31, 2004, 2003,
and 2002 is as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange (gain)&nbsp;loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(3.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Income) loss from joint venture</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miscellaneous income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(13.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">61
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><B><I>Note 7. Loss Per Share</I></B>



<P align="left" style="font-size: 10pt">Basic loss per common share is calculated assuming no dilution. Diluted loss per share reflects
the potential dilution that could occur if securities or other contracts to issue Common Stock were
exercised or converted into Common Stock. Because they are exchangeable for common stock,
Exchangeable shares are treated as common stock for this purpose. The reconciliation between basic
and diluted loss per common share for &#147;Net loss&#148; is as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions, except per-share amounts)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic computation:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss available to common shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Diluted computation:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss available to common shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss available to common shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(142.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2.50</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">The dilutive effect of options outstanding is computed using the treasury stock method. Options
for approximately 4.6&nbsp;million shares, 4.1&nbsp;million shares and 3.5&nbsp;million shares, outstanding at
December&nbsp;31, 2004, 2003 and 2002, respectively, were excluded from the calculation of diluted
earnings per share as the impact would have been antidilutive.



<P align="left" style="font-size: 10pt"><B><I>Note 8. Inventories</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="8" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At lower of cost or market:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>87.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Work in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>112.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mill stores and other supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>114.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>338.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Excess of current cost over LIFO inventory value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(10.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>327.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">293.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Inventories valued using the LIFO method comprised 7.8% and 5.2% of total inventories at December
31, 2004 and 2003, respectively.




<P align="center" style="font-size: 10pt">62
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B><I>Note 9. Fixed Assets</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Range of Estimated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Useful Lives in Years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land and land improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>10-20</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>50.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>20-40</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>383.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">377.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>5-20</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,865.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,802.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>10-20</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>49.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,350.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,279.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,049.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,721.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,301.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,557.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><B><I>Note 10. Accounts Payable and Accrued Liabilities</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="8" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>233.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">202.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payroll, bonuses and severance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>68.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>82.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>458.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">434.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><B><I>Note 11. Severance Related Liabilities</I></B>



<P align="left" style="font-size: 10pt">Through December&nbsp;31, 2003, Bowater reduced its salaried and hourly workforce at certain locations
by approximately 600 people and recorded approximately $47.9&nbsp;million for employee termination
costs, including severance, medical, pension and other benefits. The 600 terminations were part of
a multifaceted cost reduction initiative announced in the fourth quarter of 2002 and implemented
through voluntary or involuntary workforce reductions. Included in the 2003 termination charges
are pension related costs of $11.8&nbsp;million for a pension and postretirement plan curtailment of
approximately $5.3&nbsp;million and other pension plan benefits of approximately $6.5&nbsp;million related to
accelerated pension years of service in connection with certain voluntary workforce reductions. In
2004, additional severance expense of $2.1&nbsp;million was recorded related to these programs, of which
$1.0&nbsp;million related to pension plan benefits.




<P align="center" style="font-size: 10pt">63
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">Termination costs are classified as either cost of sales (manufacturing personnel) or selling and
administrative expense (administrative personnel) in our Consolidated Statement of Operations. The
following table summarizes the activity of our workforce reductions, by reportable segment:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="16" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Expensed in Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Cumulative</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Expense</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Incurred</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee termination costs by segment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Newsprint Division</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Coated and Specialty Papers Division</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian Forest Products Division</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forest Products Division</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate/ Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension related charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Severance, excluding pension</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">The tables below summarize the activity for the liabilities associated with the 2002 cost reduction
initiative (excluding the pension related charges noted above). The remaining severance related
accrual at December&nbsp;31, 2004 of $0.6&nbsp;million is expected to be paid in 2005, and is included in
&#147;Accounts payable and accrued liabilities&#148; in the Consolidated Balance Sheet.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="16" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Write-offs &#038;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Increase</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">beginning</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Payments Against</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(Decrease)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at end of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Reserve</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Reserve</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Year ended December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>9.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(9.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.6</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">In the fourth quarter of 2004, Bowater recorded severance charges of approximately $8.7
million of employee termination costs including severance, medical, pension and other benefits,
primarily from the voluntary termination of 35 employees related to the indefinite closure of the
groundwood pulp mill at our Thunder Bay facility, and 11 additional employees related to
retirements, and our streamlining of the Forest Products Division. These severance charges are
classified as either cost of sales (manufacturing personnel) or selling and administrative expense
(administrative personnel) in our Consolidated Statement of Operations. Approximately $3.2&nbsp;million
of the $8.7&nbsp;million employee termination costs were pension related costs. The remaining severance
related accrual of $5.5&nbsp;million at December&nbsp;31, 2004 is expected to be paid out in 2005 through
2007, and is included in &#147;Accounts payable and accrued liabilities&#148; in the Consolidated Balance
Sheet.



<P align="left" style="font-size: 10pt">The following table summarizes the fourth quarter severance charges by reportable segment:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="4" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">4<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Quarter</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Newsprint Division</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3.7</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Coated and Specialty Papers Division</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian Forest Products Division</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forest Products Division</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.7</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate/ Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>8.7</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">64
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><B><I>Note 12. Long-Term and Short-Term Debt and Off-Balance Sheet Arrangements</I></B>



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">short-term debt:</FONT>



<P align="left" style="font-size: 10pt">Short-term bank debt - credit facilities:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="20" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Amount Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Commitment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Interest</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Commitment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Available<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Rate</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>December 31, 2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revolving Credit Facility <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>435.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>38.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>305.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.75</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">364-day Accounts Receivable Securitization
Arrangement <SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>200.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>132.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>2.37</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Uncommitted line of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>635.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>73.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">200.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>437.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)&nbsp;&nbsp;</TD>
    <TD>Commitments available at December&nbsp;31, 2004. The commitment available under the 364-day
Accounts Receivable Securitization Arrangement is based on qualified trade accounts
receivable. The commitment available under the Revolving Credit Facility is subject to
covenant restrictions listed below and is reduced by outstanding letters of credit of $91.4
million.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)&nbsp;&nbsp;</TD>
    <TD>Borrowings under the revolving facility incur interest based, at our option, on specified
market interest rates plus a margin tied to the credit rating of our long-term debt.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)&nbsp;&nbsp;</TD>
    <TD>The interest rate on the 364-day Accounts Receivable Securitization Arrangement is based on
commercial paper issued by the lenders plus a margin.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">On April&nbsp;22, 2004, Bowater obtained a new three-year revolving credit facility due April&nbsp;2007. The
new facility provides $400&nbsp;million of revolving credit in the United States and $35&nbsp;million in
Canada. This new facility replaced the previous $500&nbsp;million three-year credit facility in the
United States and the $100&nbsp;million 364-day credit facility in Canada. Borrowings under the new
facility incur interest based, at our option, on specified market interest rates plus a margin tied
to the credit rating of our long-term debt. The facility contains various covenants, including
requirements to maintain a minimum consolidated net worth (generally defined as common
shareholders&#146; equity, plus any outstanding preferred stock plus minimum pension liability amounts)
of $1.5&nbsp;billion, a maximum 62.5% ratio of total debt to total capital (defined as total debt less
revaluation of debt assumed through acquisitions, plus net worth including minority interest, plus
minimum pension liability amounts), and to maintain an annual minimum EBITDA (generally defined as
net income, excluding extraordinary, non-recurring or non-cash items, plus income taxes plus
depreciation plus net interest expense) of $250.0&nbsp;million measured quarterly, beginning March&nbsp;31,
2005, through December&nbsp;31, 2005, and $400.0&nbsp;million at the end of each quarter thereafter. If
Bowater generates net income, the minimum net worth requirement increases by half of Bowater&#146;s
consolidated net income for each fiscal quarter (excluding gains from cash flow hedges in place as
of December&nbsp;31, 2003). At December&nbsp;31, 2004, our
consolidated net worth was approximately $1,620.4
million and our ratio of total debt to total capital was 59.1%, both as calculated according to our
credit facility&#146;s guidelines.



<P align="center" style="font-size: 10pt">65
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">Total debt as a percentage of total capitalization is the most directly comparable measure using
GAAP. A reconciliation of the GAAP items to the calculation of total debt as a percentage of total
capitalization, in accordance with our credit facilities, is as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="8" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">(in millions, except ratios)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,514.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,506.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Revaluation of debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(77.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,437.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,420.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Capitalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,090.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,188.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Revaluation of debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(77.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plus: Additional minimum pension liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>113.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,126.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,259.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt as a percentage of total capitalization
in accordance with credit facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>59.1</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">56.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total debt as a percentage of total capitalization, in accordance with GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>61.5</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">59.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">In addition to the amounts outstanding under the revolving credit facility, there were outstanding
letter of credit commitments totaling $91.4&nbsp;million at December&nbsp;31, 2004 (primarily for employee
benefit programs, certain debt obligations and other purchase commitments), reducing availability
under the revolving credit facility.



<P align="left" style="font-size: 10pt">In December&nbsp;2002, we entered into a 364-day $200&nbsp;million accounts receivable securitization
arrangement whereby we agree to sell a significant portion of our trade accounts receivable to a
special purpose entity and pledge those receivables as security for outstanding borrowings. In
December&nbsp;2004, the accounts receivable securitization arrangement was extended to December&nbsp;2005.
The securitization arrangement is accounted for as a secured borrowing in accordance with the
requirements of SFAS No.&nbsp;140. The securitization arrangement has been accounted for as on-balance
sheet and therefore the accounts receivable and related borrowings are recorded on our Consolidated
Balance Sheet. The special purpose entity that purchases the trade accounts receivable, Bowater
Funding Inc., is a wholly owned consolidated subsidiary of Bowater. Some of our accounts
receivable are required to be pledged as security for the outstanding borrowings even though the
receivables may not qualify as borrowings. The amount that Bowater Funding Inc. can borrow at any
time depends on the amount and nature of the accounts receivable. The interest rate is based on
commercial paper issued by the lenders plus a margin.




<P align="center" style="font-size: 10pt">66
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">long-term debt:</FONT>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt, net of current installments:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unsecured:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three-year Term Loan due 2005 with interest at floating rates (3.19% at
December&nbsp;31, 2003)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.95% Notes due 2011, net of unamortized original discount of $1.3 in
2004 and $1.5 in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>598.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.5% Notes due 2013, net of unamortized original discount of $1.3 in
2004 and $1.5 in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>398.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes due 2010 with interest at floating rates (5.49% at December&nbsp;31, 2004)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>250.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.00% Debentures due 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>250.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.38% Debentures due 2021, net of unamortized original discount of $0.8 in
2004 and $0.9 in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>199.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.50% Debentures due in 2012, net of unamortized original discount of $0.2
in 2004 and 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>124.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.63% Notes due 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>116.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.85% Debentures due 2014</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>129.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.50% Notes due at various dates from 2005 to 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>65.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.60% Notes due 2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>84.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.75% recycling facilities revenue bonds due 2022</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>62.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.40% recycling facilities revenue bonds due 2022</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Industrial revenue bonds due 2029 with interest at floating rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.62% recycling facilities revenue bonds due 2016</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.26% Notes due at various dates from 2005 to 2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pollution control revenue bonds due at various dates from 2005 to 2010
with interest at varying rates from 7.40% to 7.63%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-interest bearing loan with Government of Quebec</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">6.5% UDAG loan agreement due at various dates from 2005 to 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,427.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,292.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Long-term debt maturities for the next five years are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="7" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Balance Sheet Classification</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Current installments of long-term debt</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Long-term debt, net of current installments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Long-term debt, net of current installments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Long-term debt, net of current installments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Long-term debt, net of current installments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Total debt includes $77.4&nbsp;million at December&nbsp;31, 2004 and $85.7&nbsp;million at December&nbsp;31, 2003, due
to the revaluation of the debt balances acquired with the purchase of the Grenada Operations paper
mill in August&nbsp;2000, and the acquisition of Avenor Inc. in July&nbsp;1998.



<P align="left" style="font-size: 10pt">On March&nbsp;17, 2004, Bowater sold, in a registered offering, $250&nbsp;million of notes due March&nbsp;15,
2010. Interest on the notes accrue at a rate based on LIBOR plus 3% and is payable quarterly. On
or after March&nbsp;15, 2006, Bowater may redeem all or a portion of the notes at any time. The
redemption price will be 102% of the principal amount if redeemed from March&nbsp;15, 2006 to March&nbsp;14,
2007; 101% if redeemed from March&nbsp;15, 2007 to March&nbsp;14, 2008; and 100% if redeemed on or after
March&nbsp;15, 2008. We received net proceeds from the sale of the notes of $246.2&nbsp;million, which were
net of underwriting fees of $3.8
million. These fees are being amortized over the life of the notes. The



<P align="center" style="font-size: 10pt">67
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">proceeds were used to pay
amounts outstanding under the short-term bank debt credit facilities ($146.2&nbsp;million) and the
associated term loan ($100.0&nbsp;million).



<P align="left" style="font-size: 10pt">On June&nbsp;19, 2003, we sold, in a private placement, with registration rights, $400&nbsp;million notes due
2013. Interest on the notes accrues at the annual rate of 6.5% and is payable on June&nbsp;15 and
December&nbsp;15 of each year. We received net proceeds from the sale of the notes of approximately
$392.8&nbsp;million, which were net of the discount of $1.6&nbsp;million and financing fees of $5.6&nbsp;million.
The discount and financing fees are being amortized over the life of the notes. The proceeds were
used to pay amounts outstanding under short-term bank debt-credit facilities ($241.0&nbsp;million) and a
portion of the three-year term loan ($140.0&nbsp;million). In August&nbsp;2003, we used the $11.8&nbsp;million
balance of the net proceeds, plus new borrowings under our accounts receivable securitization
program, to pay off the debt ($51.8&nbsp;million) related to the Nuway facility (see below). In
November&nbsp;2003, Bowater completed a registered offering to exchange the notes issued in the private
placement for new, freely-tradeable notes with substantially identical terms.



<P align="left" style="font-size: 10pt">In October&nbsp;2004, Moody&#146;s downgraded Bowater&#146;s credit rating to Ba3 with a negative outlook. In
December&nbsp;2004, S&#038;P announced that Bowater&#146;s credit rating would remain at BB with a stable outlook.
There is no way to predict with certainty any future rating actions by these two agencies. The
interest rates associated with the bank lines of credit described above are based on Bowater&#146;s
highest credit rating. Any reduction in the highest rating will increase our cost of borrowing. In
addition to higher interest rates, although further downgrades would have no material impact on
availability under our present debt and credit agreements, it could impact our access to and cost
of capital and financial flexibility in the future.



<P align="left" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">Off-balance sheet arrangements:</FONT>



<P align="left" style="font-size: 10pt">Variable Interest Entities:



<P align="left" style="font-size: 10pt">The Nuway paper coating facility located in Covington, Tennessee was constructed for Bowater in
2002. Construction of the facility was financed through an SPE. Bowater has no ownership interest
in the SPE. Bowater Nuway Inc., a wholly-owned subsidiary of Bowater, had entered into a lease
commitment with the SPE, the lessor in the transaction, for this facility. The Nuway facility
commenced operations in March of 2002. Total costs incurred by the SPE for the construction of the
Nuway facility were approximately $52.3&nbsp;million. The assets and debt associated with this facility
were not consolidated in Bowater&#146;s financial statements prior to July&nbsp;1, 2003. The lease was
classified as an operating lease and the payments expensed in accordance with SFAS No.&nbsp;13,
&#147;Accounting for Leases.&#148; The base lease term for the facility was scheduled to expire on April&nbsp;30,
2006.



<P align="left" style="font-size: 10pt">Effective July&nbsp;1, 2003, Bowater early adopted FIN 46 specific to the Nuway facility under the
operating lease with the SPE. This special purpose entity was determined to be a VIE and required
to be consolidated by Bowater in accordance with FIN 46. Bowater consolidated assets of
approximately $49.4&nbsp;million and debt of approximately $51.8&nbsp;million and recorded a non-cash, after
tax cumulative effect charge of $2.4&nbsp;million, or $0.04 per diluted share, in the third quarter of
2003. On August&nbsp;11, 2003, Bowater terminated the lease agreement with the SPE and paid
approximately $51.8&nbsp;million to pay off the debt.



<P align="left" style="font-size: 10pt">The pro forma effects of the application of FIN 46, as if the statement had been adopted at the
time the Nuway facility commenced operations (March of 2002 rather than July&nbsp;1, 2003) are presented
below. There was no pro forma effect on 2004.<BR>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions, except per-share amounts)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(203.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(144.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3.57</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.53</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3.57</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.53</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">68
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">Off-Balance Sheet Debt Guarantees:



<P align="left" style="font-size: 10pt">Bowater has off-balance sheet debt guarantees of approximately $37.7&nbsp;million at December&nbsp;31, 2004,
with $28.6&nbsp;million related to Ponderay Newsprint Company and $9.1&nbsp;million related to Timber Note
Holdings LLC, one of our QSPEs.



<P align="left" style="font-size: 10pt">Bowater has a 40% interest in Ponderay Newsprint Company, an unconsolidated partnership. Ponderay
has a credit facility which is comprised of a term loan and a revolving credit facility. The term
loan balance at December&nbsp;31, 2004 was $71.5&nbsp;million and is guaranteed by the partners of Ponderay.
Bowater guarantees 40% or $28.6&nbsp;million of this term loan. The revolving credit facility has
commitments from the lender for $25&nbsp;million. This revolving credit facility is not guaranteed by
the partners. At December&nbsp;31, 2004 there is a $10&nbsp;million letter of credit reducing this
commitment. There are no other drawings on this facility. Ponderay&#146;s outstanding balance on the
term loan is reduced annually by its excess cash flows as defined in the credit facility and,
although the final balance is due at maturity on April&nbsp;12, 2006, we believe that Ponderay intends
to renew this facility. The term loan cannot be increased once paid down, therefore, Bowater&#146;s
guarantee is reduced as the outstanding balance is reduced. Bowater would be required to perform
on the guarantee if Ponderay were to default on its credit facility and Ponderay&#146;s assets, which
collateralize the debt, were insufficient to pay off the credit facility. Ponderay was in
compliance with all its debt covenants as of December&nbsp;31, 2004. Ponderay&#146;s total assets and
liabilities at December&nbsp;31, 2004 were approximately $164&nbsp;million and $88&nbsp;million (which includes
the above mentioned debt), respectively.



<P align="left" style="font-size: 10pt">In connection with Bowater&#146;s 1999 land sale and note monetization, we guarantee 25% of the
outstanding investor notes principal balance of Timber Note Holdings LLC, one of our QSPEs.
Bowater currently guarantees approximately $9.1&nbsp;million of the investor notes principal balance.
This guarantee is proportionately reduced by annual principal repayments on the investor notes
(annual minimum repayments of $2.0&nbsp;million) through 2008. The remaining investor notes principal
amount is to be repaid in 2009. Timber Note Holdings LLC has assets
of approximately $42&nbsp;million
and obligations of approximately $37&nbsp;million, which include the investor notes. Bowater would be
required to perform on the guarantee if the QSPE were to default on the investor notes or if there
were a default on the notes receivable.



<P align="left" style="font-size: 10pt">The following summarizes our retained interest with QSPEs as of December&nbsp;31, 2004 and 2003 (in
millions):


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Calhoun Note Holdings AT LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>6.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Calhoun Note Holdings TI LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bowater Catawba Note Holdings I LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bowater Catawba Note Holdings II LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Timber Note Holdings LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bowater Saluda LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>36.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><B><I>Note 13. Financial Instruments</I></B>



<P align="left" style="font-size: 10pt">Bowater utilizes certain derivative instruments to enhance its ability to manage risk relating to
cash flow exposure. Derivative instruments are entered into for periods consistent with related
underlying cash flow exposures and do not constitute positions independent of those exposures. We
do not enter into contracts for speculative purposes; however, we do, from time to time enter into
commodity and currency option contracts that are not accounted for as accounting hedges. On the
date in which the derivative contract is entered we designate the derivative as a cash flow hedge.



<P align="left" style="font-size: 10pt">We pay a significant portion of the operating expenses of our Canadian mill sites in Canadian
dollars. To reduce our exposure to U.S. and Canadian dollar exchange rate fluctuations, we enter
into and designate Canadian dollar forward contracts to hedge certain of our forecasted Canadian
dollar cash outflows at the Canadian mill operations.



<P align="center" style="font-size: 10pt">69
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">The components of the net gain (loss)&nbsp;related to cash flow hedges and included in &#147;Accumulated
other comprehensive income (loss)&#148; for the years ended December&nbsp;31, 2004, 2003, and 2002 are as
follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="13" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain (loss)&nbsp;resulting from reclassification of (gains)&nbsp;losses
from Accumulated other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(131.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(52.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain (loss)&nbsp;for change in value of cash flow hedges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>81.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(49.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax (expense)&nbsp;benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(68.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net gain (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(30.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">111.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">We expect to reclassify a gain of $100.2&nbsp;million ($62.1&nbsp;million, after taxes) from &#147;Accumulated
other comprehensive income (loss)&#148; to earnings during the next twelve months as the hedged items
affect earnings.



<P align="left" style="font-size: 10pt">We formally document all relationships between hedging instruments and hedged items, as well as our
risk-management objectives and strategies for undertaking various hedge transactions. We link all
hedges that are designated as cash flow hedges to forecasted transactions. The maximum time period
we have hedged transactions is two years. We also assess, both at the inception of the hedge and
on an on-going basis, whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows of hedged items. Our estimate of the ineffective
portion of the hedge was not material for the periods presented. When it is determined that a
derivative is not highly effective as a hedge, we discontinue hedge accounting prospectively.



<P align="left" style="font-size: 10pt">The carrying amounts of our short-term financial assets and liabilities (excluding derivatives)
approximate fair value. We estimate the fair value of our long-term debt using rates currently
available for debt with similar terms and remaining maturities. The fair value of derivative
financial instruments is based on current termination values or quoted market prices of comparable
contracts.



<P align="left" style="font-size: 10pt">Information regarding our Canadian dollar contracts&#146; notional amount, carrying value, fair market
value, and range of exchange rates of the contracts and long term debt is summarized in the table
below. The notional amount of these contracts represents the amount of foreign currencies to be
purchased or sold at maturity and does not represent our exposure on these contracts.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="21" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Net Asset (Liability)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Range Of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Notional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>U.S.$/CDN$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>U.S.$/CDN$</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Market</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exchange</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exchange</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 2px solid #000000"><B>December 31, 2004 (in millions)</B></TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 2px solid #000000"><B>Derivatives</B></TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 2px solid #000000"><B>Amount</B></TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2"  style="border-bottom: 2px solid #000000"><B>Value</B></TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 2px solid #000000"><B>Rate</B></TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 2px solid #000000"><B>Rate</B></TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign Currency Exchange Agreements
Buy Currency:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canadian dollar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Due in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>507.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>100.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>100.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>.7489-.6316</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>.6943</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Due in 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>183.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>.7609-.7124</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>.7384</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>690.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>123.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>123.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(2,441.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(2,564.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">70
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="21" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Range Of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Notional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Net Asset (Liability)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S.$/CDN$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">U.S.$/CDN$</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exchange</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exchange</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 2px solid #000000">December 31, 2003 (in millions)</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 2px solid #000000">Derivatives</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2"  style="border-bottom: 2px solid #000000">Amount</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2"  style="border-bottom: 2px solid #000000">Market Value</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 2px solid #000000">Rates</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 2px solid #000000">Rates</TD>
    <TD style="border-bottom: 2px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign Currency Exchange Agreements
Buy Currency:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canadian dollar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Due in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">572.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">126.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">126.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">.6476-.6124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.6247</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Due in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">507.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">.7489-.6316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.6943</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,079.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">172.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">172.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,305.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,426.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">In October&nbsp;2001, in connection with the forecasted issuance of the $600&nbsp;million notes issued
in a November&nbsp;2001 private placement, Bowater entered into a treasury lock derivative designated as
a cash flow hedge. The treasury lock derivative was entered into in order to hedge the exposure to
the variability in cash flows for the future semi-annual interest payments related to the interest
rate risk during the period from October&nbsp;2001 until the date of the private placement. The
treasury lock was settled on November&nbsp;6, 2001 for $8.5&nbsp;million. The settlement amount from 2001
has been deferred (included in &#147;Other assets&#148; on the Consolidated Balance Sheet) and is being
amortized to interest expense over the life of the notes. Interest expense of $0.9&nbsp;million was
recorded for 2004, 2003 and 2002, respectively, in the Consolidated Statement of Operations.



<P align="left" style="font-size: 10pt">In order to reduce our exposure to exchange rate fluctuations on our Canadian dollar denominated
long-term debt, we enter into Canadian dollar forward contracts with notional amounts of
approximately $100&nbsp;million. These economic hedge contracts are marked to market through earnings.
The contracts are settled quarterly and gains or losses are included in &#147;Other, net&#148; in our
Consolidated Statement of Operations. At December&nbsp;31, 2004, our outstanding Canadian dollar forward
contracts had notional amounts of $100
million due on March&nbsp;30, 2005. The fair value of the Canadian dollar forward contracts outstanding
at December&nbsp;31, 2004 was $0.1&nbsp;million liability. At December&nbsp;31, 2003, our outstanding Canadian
dollar forward contracts had notional amounts of $100&nbsp;million due on March&nbsp;28, 2004. The fair
value of the Canadian dollar forward contracts outstanding at December&nbsp;31, 2003 was $0.1&nbsp;million
liability. We recorded gains of approximately $8.9&nbsp;million for 2004, $21.6&nbsp;million for 2003 and
$2.2&nbsp;million for 2002 in the Consolidated Statement of Operations as a result of these economic
hedge contracts.



<P align="left" style="font-size: 10pt">The counterparties to our derivative financial instruments are substantial and creditworthy
multi-national financial institutions. Therefore, the risk of counterparty nonperformance is
considered to be remote.



<P align="left" style="font-size: 10pt"><B><I>Note 14. Pension and Other Nonpension Postretirement Benefits</I></B>



<P align="left" style="font-size: 10pt">Bowater has multiple defined benefit pension plans and other nonpension postretirement plans (the
&#147;Plans&#148;) covering substantially all employees. Benefits are based on years of service and,
depending on the Plan, average compensation earned by employees either during their last years of
employment or over their careers.



<P align="left" style="font-size: 10pt">A measurement date of September&nbsp;30 is used for all of our defined benefit pension plans and
nonpension postretirement plans. The following tables include both foreign and domestic Plans.
The benefit obligations of the Plans outside the United States are significant relative to the
total benefit obligation; however, the assumptions used to measure the obligations of those Plans
are not significantly different from those used for the United States Plans.



<P align="center" style="font-size: 10pt">71
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="17" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Pension Plans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Other Postretirement Plans</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in benefit obligation:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefit obligation at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,814.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,491.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>301.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">219.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.8</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>107.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amendments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Actuarial (gain)&nbsp;loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(23.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Participant contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8.8</B></TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Curtailment (gain)&nbsp;loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlement (gain)&nbsp;loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Special termination benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefits paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(109.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(16.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of foreign currency exchange rate changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>93.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefit obligation at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,968.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,814.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>300.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">301.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in Plan assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of Plan assets at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,281.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,024.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Actual return on Plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>160.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employer contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>52.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Participant contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefits paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(109.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(16.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of foreign currency exchange rate changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>75.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of Plan assets at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,468.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,281.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reconciliation of funded status:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Funded status excess (deficiency)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(499.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(533.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(300.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(301.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized actuarial (gain)&nbsp;loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>417.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>154.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized transition amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(23.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net liability recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(65.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(76.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(168.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(154.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amounts recognized in the Consolidated Balance
Sheet consist of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid benefit cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>53.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued benefit liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(309.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(339.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(168.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(154.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>179.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net liability recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(65.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(76.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(168.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(154.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">The components of our net periodic benefit cost consist of:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="25" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>Pension Plans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>Other Postretirement Plans</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Components of net periodic benefit cost:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>36.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>107.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on Plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(107.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(108.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of transition amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognized net actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Curtailment, settlement, and special
termination benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic benefit cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>53.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">46.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>24.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">72
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">The following weighted average assumptions were used to determine the projected benefit
obligation at the measurement date and the net periodic benefit cost for the year:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="17" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Pension Plans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Other Postretirement Plans</B></TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Projected benefit obligation:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rate of compensation increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic benefit cost:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expected return on assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>7.8</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rate of compensation increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>3.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">The assumed health care cost trend rates used to determine the projected benefit obligation
for the Postretirement Plans as of December&nbsp;31, 2004 and 2003 are as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>

</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Health care cost trend rate assumed for next year (pre-65&nbsp;year old)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>10.8</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Health care cost trend rate assumed for next year (post-65&nbsp;year old)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>11.2</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rate to which the cost trend rate is assumed to decline (ultimate rate)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>4.7</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year that the rate reaches the ultimate trend rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2011</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Variations in this health care cost trend rate can have a significant effect on the amounts
reported. A 1% change in this assumption would have the following effects:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="17" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>1% Increase</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>1% Decrease</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">%</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated postretirement benefit costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>34.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(28.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>%)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service and interest costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(2.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>%)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">In December&nbsp;2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
&#147;Act&#148;) was passed. The Act introduced a prescription drug benefit under Medicare Part D as well as
a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is
at least actuarially equivalent to Medicare Part D. Our postretirement benefits include
prescription drug benefits for Medicare-eligible retirees. In March&nbsp;2004, the FASB issued FASB
Staff Position (FSP)&nbsp;106-2, &#147;Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003&#148; (the Act) that provides guidance on
the accounting for the effects of the Act for employers that sponsor postretirement health care
plans that provide drug benefits. This FSP also requires those employers to provide certain
disclosures regarding the effect of the federal subsidy provided by the Act. Bowater adopted FSP
106-2 effective July&nbsp;1, 2004 and applied the prospective transition method. As a result, a
remeasurement of the plan&#146;s assets and accumulated postretirement benefit obligation (APBO),
including the effects of the subsidy was made. The remeasurement resulted in a reduction of our net
periodic benefit cost for 2004 of $2.5&nbsp;million. The $2.5&nbsp;million reduction consisted of $0.3
million for the reduction of current period service costs, $1.3&nbsp;million for the reduction of
amortization of actuarial experience loss and $0.9&nbsp;million for reduction in interest costs on our
APBO. The remeasurement decreased the actuarial loss component of our APBO by approximately $36.9
million.



<P align="left" style="font-size: 10pt">The sum of the projected benefit obligations and the sum of the fair value of Plan assets for
pension Plans with projected benefit obligations in excess of plan assets were $1,946.9&nbsp;million and
$1,446.5&nbsp;million, respectively, as of December&nbsp;31, 2004, and were $1,814.8&nbsp;million and $1,281.4
million, respectively, as of December&nbsp;31, 2003. The sum of the accumulated benefit obligations and
the sum of the fair value of Plan assets for pension Plans with accumulated benefit obligations in
excess of Plan assets were $1,335.8&nbsp;million and $1,011.6&nbsp;million, respectively, as of December&nbsp;31,
2004, and were $1,603.4&nbsp;million and $1,261.6&nbsp;million, respectively, as of December&nbsp;31, 2003. The
total accumulated benefit obligation for all pension plans was $1,783.0&nbsp;million and $1,623.2
million at December&nbsp;31, 2004 and 2003, respectively.



<P align="left" style="font-size: 10pt">The provisions of SFAS No.&nbsp;87, &#147;Employees&#146; Accounting for Pensions,&#148; required Bowater to record an
additional minimum liability of $190.9&nbsp;million and $257.4&nbsp;million at December&nbsp;31, 2004 and 2003,
respectively. This liability



<P align="center" style="font-size: 10pt">73
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">represents the amount by which the accumulated benefit obligation
exceeds the sum of the fair market value of Plan assets and accrued amounts previously recorded.
The additional liability may be offset by an intangible asset to the extent of previously
unrecognized prior service cost. The intangible assets of $11.6&nbsp;million and $9.5&nbsp;million at
December&nbsp;31, 2004 and 2003, respectively, are included on the line titled &#147;Other assets&#148; in the
Consolidated Balance Sheet. The remaining amounts of $113.1&nbsp;million and $156.9&nbsp;million, net of
minority interest and related tax benefits, are recorded as a component of shareholders&#146; equity on
the line titled &#147;Accumulated other comprehensive income (loss)&#148; in the Consolidated Balance Sheet
at December&nbsp;31, 2004 and 2003, respectively.



<P align="left" style="font-size: 10pt">To develop the expected long-term rate of return on assets assumption, the company considered the
historical returns and the future expectations for returns for each asset class, as well as the
target asset allocation of the pension portfolio. This resulted in the selection of the 7.8%
long-term rate of return on assets assumption.



<P align="left" style="font-size: 10pt">The percentage of fair value of total plan assets held by our pension plans as of the measurement
date were as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="13" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Asset Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Target Allocation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>64</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>64</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">63</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>100</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>100</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Our investment strategy for pension plans is to maximize the long-term rate of return on plan
assets within an acceptable level of risk in order to secure our obligation to pay pension benefits
to qualifying employees while minimizing and stabilizing pension expense and contributions. The
asset allocation for each plan is reviewed periodically and rebalancing toward target asset mix is
made when asset classes fall outside of a predetermined range. Risk is managed for each plan
through diversification of asset classes, specific constraints imposed within asset classes, annual
review of the investment policies to assess the need for changes, and monitoring of fund managers
for compliance with mandates as well as performance measurement. A series of permitted and
prohibited investments are listed in our respective investment policies. Prohibited investments
include investments in the equity securities of Bowater or its affiliates as well as investments in
our debt securities.



<P align="left" style="font-size: 10pt">During 2005, Bowater expects to contribute approximately $77.6&nbsp;million to its pension plans and
approximately $17.3&nbsp;million to its postretirement plans.



<P align="left" style="font-size: 10pt">The following benefit payments are expected to be paid from the Plans&#146; net assets. The other
postretirement plans&#146; projected benefit payments have been reduced by expected Medicare subsidy
receipts associated with the Act.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="13" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Expected</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pension</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Postretirement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Subsidy</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Plans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Plans<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Receipts</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">107.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Years 2010 - 2014</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">684.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Shown net of expected Medicare subsidy receipts</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">In addition to the previously described pension and non-pension postretirement Plans, we also
sponsor defined contribution Plans within the United States and for certain sites outside of the
United States. Employees are allowed to contribute to the Plans, and we make matching
contributions up to 7.2% of an individual employee&#146;s annual compensation. Our expense for the
defined contribution Plans totaled $6.5&nbsp;million in 2004, $3.6&nbsp;million in 2003, and $5.6&nbsp;million in
2002.



<P align="center" style="font-size: 10pt">74
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B><I>Note 15. Income Taxes</I></B>



<P align="left" style="font-size: 10pt">The components of &#147;Income (loss)&nbsp;before income taxes, minority interest, and cumulative effect of
accounting changes&#148; consist of the following for the years ended December&nbsp;31, 2004, 2003, and 2002:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="13" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>50.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(158.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(198.7</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(285.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(92.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss before
income taxes, minority
interests, and
cumulative effect of
accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(148.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(280.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(250.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">The provision for income tax expense (benefit)&nbsp;consists of:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="13" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(16.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(66.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(68.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(71.4</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(60.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(50.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(54.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(70.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(100.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">The components of deferred income taxes at December&nbsp;31, 2004 and 2003, in the accompanying
Consolidated Balance Sheet are as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="9" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Timber and timberlands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(52.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(45.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(632.0</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(640.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(116.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(114.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(22.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(822.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(825.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee benefits and other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>141.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States tax credit carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>104.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian investment tax credit carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>163.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(37.9</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>433.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(389.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(426.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Included in &#147;Other current assets&#148; in the accompanying Consolidated Balance Sheet.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">The increase in the valuation allowance during 2004, of $7.4&nbsp;million was due primarily to the
establishment of an allowance for certain investment tax credits in Canada.



<P align="center" style="font-size: 10pt">75
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">Significant strengthening of the Canadian dollar in 2004 resulted in significant unrealized
statutory foreign currency exchange gains on which the Company provided a deferred tax expense for
Canadian statutory taxes. On a consolidated basis, the unrealized statutory foreign currency
exchange gains are substantially offset by certain foreign currency exchange losses on which the
Company receives no U.S. tax benefit.



<P align="left" style="font-size: 10pt">During 2004 a statute of limitations expired for pre 2001 tax years. Income tax reserves of $6.8
million associated with the pre-2001 Canadian tax years were eliminated, resulting in a decrease to
income tax expense in 2004.



<P align="left" style="font-size: 10pt">The following is a reconciliation of the United States federal statutory and effective tax rates as
a percentage of income (loss)&nbsp;before income taxes, minority interests, and cumulative effect of
accounting changes:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="13" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2002</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States federal statutory income tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>35.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income taxes, net of federal income tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.6</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian investment tax credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(9.8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective income tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>36.9</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">40.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">At December&nbsp;31, 2004, we had United States federal and state net operating loss carryforwards
of $57.2&nbsp;million and $584.7&nbsp;million, respectively, and Canadian federal and provincial net
operating loss carryforwards of $288.4&nbsp;million and $578.8&nbsp;million, respectively. In addition,
$48.1&nbsp;million of Canadian investment tax credit carryforwards and $104.1&nbsp;million of United States
tax credit carryforwards were available to reduce future income taxes. The United States federal
and state loss carryforwards expire at various dates up to 2024. The Canadian noncapital loss and
investment tax credit carryforwards expire at various dates between 2005 and 2014. Of the United
States tax credit carryforwards, $97.1&nbsp;million consists of alternative minimum tax credits that
have no expiration. We believe that deferred tax assets, net of the existing valuation allowance
of $37.9&nbsp;million at December&nbsp;31, 2004, will be ultimately realized.



<P align="left" style="font-size: 10pt">The American Jobs Creation Act of 2004 (the &#147;AJCA&#148;) introduced a special one-time dividend-received
deduction on the repatriation of certain foreign earnings to a U.S. taxpayer (repatriation
provision) provided certain criteria are met. As of December&nbsp;31, 2004, Bowater has approximately
$266.4&nbsp;million of foreign earnings subject to the repatriation provision. Bowater&#146;s evaluation of
the AJCA with respect to the repatriation provision is still in process and it expects to complete
the evaluation process by the end of the third quarter of 2005. The range of reasonably possible
amounts of unremitted earnings that are still being considered for repatriation as a result of the
repatriation provision and the related tax effects of such repatriation cannot be reasonably
estimated as yet.



<P align="left" style="font-size: 10pt">Notwithstanding the AJCA, at December&nbsp;31, 2004, the unremitted earnings subject to the repatriation
provision were deemed to be permanently invested. No deferred tax liability has been recognized
with regard to such earnings. It is not practicable to estimate the income tax liability that
might be incurred if such earnings were remitted to the United States.



<P align="left" style="font-size: 10pt">In the normal course of business, we are subject to audits from the Federal, state, Canadian
provincial and other tax authorities regarding various tax liabilities. The Canadian taxing
authorities are auditing years 1999 through 2001 for our Canadian entities. The Internal Revenue
Service (IRS)&nbsp;has closed audits of our U.S. federal income tax returns through fiscal year 1997.
There were no material adjustments to the company&#146;s tax liabilities arising from the closed IRS
audits. The IRS chose not to audit our calendar years 1998 and 1999 tax returns; however, the IRS
may adjust our reported tax liabilities for these years to the extent of refunds generated by
operating loss carrybacks from subsequent tax years. The IRS audits of our federal income tax
returns for years 2000 through 2002 is currently in progress.



<P align="left" style="font-size: 10pt">These audits may alter the timing or amount of taxable income or deductions, or the allocation of
income among tax jurisdictions. The amount ultimately paid upon resolution of issues raised may
differ from the amount accrued. We believe that taxes accrued on the Consolidated Balance Sheet
fairly represent the amount of future tax liability due.




<P align="center" style="font-size: 10pt">76
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 16. Dividends to Minority Interest Shareholder</I></B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Board of Directors of CNC declared dividends of $9.2&nbsp;million in 2002. As a result, $4.5
million was paid in 2002 to the minority shareholder. No CNC dividends were declared or paid in
2004 or 2003.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 17. Commitments and Contingencies</I></B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B>Legal Items</B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater is involved in various legal proceedings relating to contracts, commercial disputes, taxes,
environmental issues, employment and workers&#146; compensation claims and other matters. We
periodically review the status of these proceedings with both inside and outside counsel. We
believe that the ultimate disposition of these matters will not have a material adverse effect on
our financial condition, but it could have a material adverse effect on the results of operations
in a given quarter or the year.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>a.</I>&nbsp;&nbsp;</TD>
    <TD>In late 2001, Bowater, several other paper companies, and 120 other companies were
named as defendants in asbestos personal injury actions based on product liability claims.
These actions generally allege occupational exposure to numerous products. We have denied the
allegations and no specific product of ours has been identified by the plaintiffs in any of
the actions as having caused or contributed to any individual plaintiff&#146;s alleged
asbestos-related injury.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;&nbsp;&nbsp;</TD>
    <TD>These suits have been filed by approximately 1,238 claimants who sought monetary damages in
civil actions pending in state courts in Georgia, Illinois, Mississippi, Missouri, New York and
Texas. Approximately 982 of these claims have been dismissed, either voluntarily or by summary
judgment, and approximately 256 claims remain. Insurers are defending these claims and we have
not settled or paid any of these claims. We believe that all of these asbestos-related claims
are covered by insurance, subject to any applicable deductibles and our insurers&#146; rights to
dispute coverage. While it is not possible to predict with certainty the outcome of these
matters, based upon the advice of special counsel, at this time we do not expect these claims to
have a material adverse impact on our business, financial position or results of operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>b.</I>&nbsp;&nbsp;</TD>
    <TD>On December&nbsp;28, 2001, we filed a lawsuit against the Tennessee Valley Authority
(TVA)&nbsp;alleging that TVA overcharged us for electricity it supplied to our Calhoun, Tennessee
and Grenada, Mississippi facilities. TVA has agreed to amend the agreements by which it
supplies electricity to these facilities. On March&nbsp;8, 2005, we voluntarily dismissed our
lawsuit.</TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B>Lumber Duties</B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The U.S. Department of Commerce (DOC)&nbsp;imposed antidumping duties (ADD)&nbsp;of 8.43% on all of Bowater&#146;s
Canadian softwood lumber imports and countervailing duties (CVD)&nbsp;of 18.79% on softwood lumber
imported from all provinces except New Brunswick and Nova Scotia. The duties became effective for
lumber shipments beginning May&nbsp;22, 2002. Bowater accrued lumber duties based upon the DOC&#146;s
preliminarily imposed effective dates of August&nbsp;16, 2001, for countervailing duties and November&nbsp;6,
2001, for antidumping duties. Since May&nbsp;22, 2002 Bowater has been posting cash deposits to cover
the duties. On December&nbsp;20, 2004 the CVD rate was adjusted to 17.18% and the ADD rate was adjusted to 4.03% for the
period of May&nbsp;22, 2002 to April&nbsp;30, 2003 pursuant to a review by the DOC. Bowater began to accrue
on this new published rate and will continue to accrue and pay duties based on rates established by
the DOC until new rates are published. The CVD rate was amended to 16.37% on February&nbsp;24, 2005 and the ADD rate was amended to 3.78% on January&nbsp;24, 2005.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Canadian government has appealed the duties to the World Trade Organization (WTO)&nbsp;and under the
terms of the North American Free Trade Agreement (NAFTA)&nbsp;and requested that the duties be refunded.
The final amount of CVD and ADD that may be assessed on Canadian softwood lumber imports into the
U.S. will depend upon negotiations among the governments involved in the dispute or upon
determinations made by the NAFTA, WTO or other adjudicatory panels to which the duties may be
appealed. Until the dispute about the duties is resolved, we will continue to pay the duties as
required by the DOC. To date, we have paid CV and AD duties of approximately $70.6&nbsp;million.
Should these duty rates be eliminated or decreased, a portion or all of the $70.6&nbsp;million could be
reversed into operating income in future periods.


<P align="center" style="font-size: 10pt">77
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B>Letters of Credit</B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">There were outstanding letter of credit commitments totaling $91.4&nbsp;million at December&nbsp;31,
2004 (primarily for employee benefit programs, certain debt obligations and other purchase
commitments), reducing availability under the revolving credit facility.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B>Employees</B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">As
of December&nbsp;31, 2004, Bowater employed 8,100 people, of whom 5,800 were represented by
bargaining units. Labor agreements covering approximately 2,200 employees at five of our six
Canadian paper mills expired on April&nbsp;30, 2004 and are currently under negotiation. Approximately
500 other employees are covered by bargaining unit contracts that will expire in 2005.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B>Environmental Matters</B>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>a.</I>&nbsp;&nbsp;</TD>
    <TD>Bowater may be a &#147;potentially responsible party&#148; with respect to three hazardous
waste sites that are being addressed pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (&#147;Superfund&#148;) or the Resource Conservation and
Recovery Act (&#147;RCRA&#148;) corrective action authority. The first two sites are on CNC timberland
tracts in South Carolina. One was contaminated when acquired, and subsequently, the prior
owner remediated the site and continues to monitor the groundwater. On the second site,
several hundred steel drums containing textile chemical residue were discarded by unknown
persons. The third site, at our mill in Coosa Pines, Alabama, contained buried drums and has
been remediated pursuant to RCRA. We continue to monitor the groundwater. We believe we will
not be liable for any significant amounts at any of these sites.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>b.</I>&nbsp;&nbsp;</TD>
    <TD>Bowater was one of numerous parties that shipped empty drums to a drum recycling
plant in South Carolina. The U.S. EPA has remediated the site pursuant to Superfund at a cost
of $6.2&nbsp;million. We have agreed to pay less than $100,000 to settle this matter with the EPA.
It is anticipated that the settlement will be finalized in the second quarter of 2005.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>c.</I>&nbsp;&nbsp;</TD>
    <TD>Bowater currently has recorded $20.7&nbsp;million for environmental liabilities.
Approximately $18.6&nbsp;million of this $20.7&nbsp;million relates to environmental reserves
established in connection with prior acquisitions. The majority of these liabilities are
recorded at undiscounted amounts and are included in pension, other postretirement benefits
and other long-term liabilities on the Consolidated Balance Sheet. The $20.7&nbsp;million
represents management&#146;s estimate based on an assessment of relevant factors and assumptions of
the ultimate settlement amounts for these liabilities. The amount of these liabilities could
be affected by changes in facts or assumptions not currently known to management.
Approximately $18.1&nbsp;million of the $20.7&nbsp;million relates to two previously owned Canadian
mills for costs primarily associated with soil remediation, air compliance and landfill
closure and one United States mill for costs primarily for soil testing and monitoring
acquired in connection with the Alliance acquisition.</TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The following tables summarize the activity for the liabilities associated with environmental costs
related to prior acquisitions:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Write-offs &#038;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Increase</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">beginning</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Reclassification</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(Decrease)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Foreign</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Against Reserve</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Reserve</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exchange</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">end of year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Year ended December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>17.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>18.6</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">16.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">78
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 18. Cumulative and Redeemable Preferred Stock</I></B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater is authorized to issue 10.0&nbsp;million shares of serial preferred stock, $1 par value. As of
December&nbsp;31, 2004, no preferred shares were issued or outstanding.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 19. Stock-Based Compensation</I></B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater has three stock option plans &#150; 1997, 2000 and 2002 pursuant to which stock options may be
granted. These plans authorized the grant of up to 5.4&nbsp;million shares of our Common Stock in the
form of incentive stock options, non-qualified stock options, stock appreciation rights, and
restricted stock awards. The option price for options granted under the 1997, 2000 and 2002 plans
was based on the fair market value of our Common Stock on the date of grant.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">All options granted through December&nbsp;31, 2002, were exercisable at December&nbsp;31, 2004. Options
granted in 2004 and 2003 generally become exercisable over a period of two years. Unless
terminated earlier in accordance with their terms, all options expire 10&nbsp;years from the date of
grant. The plans provide that any outstanding options will become immediately exercisable upon a
change in control of Bowater. In such event, grantees of options have the right to require us to
purchase such options for cash in lieu of the issuance of Common Stock. We received $6.6&nbsp;million
in 2004, $1.7&nbsp;million in 2003 and $7.5&nbsp;million in 2002 from the exercise of stock options. The
exercise of stock options also generated tax benefits for us of $1.2&nbsp;million in 2004, $0.4&nbsp;million
in 2003 and $1.5&nbsp;million in 2002.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater recorded a pretax charge of $0.1&nbsp;million, $0.4&nbsp;million and $0.8&nbsp;million, respectively, in
2004, 2003 and 2002 for intrinsic value on its 2002 and 2000 stock option grants per the provisions
of FIN 44 involving stock compensation transactions recorded under the rules outlined in APB No.
25. This charge was based on a measurement date that coincided with shareholder approval of the
2002 and 2000 stock option plan. Using a measurement date based on the 2002 and 2000 grant date
and the assumptions in the table in Note 1 &#147;Summary of Significant Accounting Policies -
Stock-Based Compensation&#148;, the weighted average fair value of each option would have been $15.18
and $17.51 for the 2002 and 2000 grant, respectively.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Information with respect to options granted under the stock option plans is as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares (000&#146;s)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">000&#146;s)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares (000&#146;s)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,072</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>44</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>862</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(224</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canceled during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(155</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,555</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,365</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>46</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>Options Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Options Exercisable</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>at December 31, 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>at December 31, 2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Range of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Prices</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares (000&#146;s)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Life (years)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares (000&#146;s)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$21 to $30</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>69</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>28</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>69</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>33</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$31 to $40</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>198</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>197</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$41 to $50</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,661</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,473</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$51 to $60</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>627</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>52</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>626</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>52</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,555</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>45</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,365</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>46</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">79
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On January&nbsp;28, 2003, Bowater granted 81,510 shares of restricted stock to certain officers
under the 2002 stock option plan. The 81,510 shares of restricted stock were issued under the 2002
stock option plan. In accordance with APB No.&nbsp;25, we are recognizing a compensation charge over
the vesting periods equal to the fair market value of these shares on the date of the grant. The
expense measured under SFAS No.&nbsp;123 does not differ from that under APB 25. Shares of restricted
stock awarded under the 2002 plan vest over a two year period. Restricted shares awarded under the
2002 stock option plan are subject to forfeiture in the event of termination of employment prior to
the vesting dates. Prior to vesting, the participants may vote and receive dividends. The market
value of the restricted shares granted on January&nbsp;28, 2003 was approximately $3.3&nbsp;million and was
recorded in the first quarter of 2003, as &#147;Unearned compensation,&#148; which is a separate component of
shareholders&#146; equity. We recorded compensation expense of approximately $0.9&nbsp;million and $2.3
million, respectively, in 2004 and 2003, related to the amortization of unearned compensation.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater has an Equity Participation Rights (&#147;EPR&#148;) Plan that allows it to grant equity
participation rights to its employees. These rights confer the right to receive cash based on the
appreciation of Bowater&#146;s Common Stock price, but no right to acquire stock ownership. The rights
have a vesting period of two years and, unless terminated earlier in accordance with their terms,
expire 10&nbsp;years after the grant date. The base price is the fair market value of Bowater Common
Stock on the day of grant. The rights may be redeemed only for cash, and the amount paid to the
employee at the time of exercise is the difference between the base price and the average high/low
of Bowater&#146;s Common Stock on the day of settlement.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Information with respect to rights granted under the EPR Plan is as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(000&#146;s)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(000&#146;s)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(000&#146;s)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,387</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>47</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settled during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(45</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(84</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canceled during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(74</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,268</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,142</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>48</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater-Halla Paper Co., Ltd. (&#147;Halla&#148;), our subsidiary located in South Korea, also has an
EPR plan. The stock of Halla is not publicly traded. Therefore, the fair market value of the
stock is determined annually by a third-party appraisal.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">We record a liability for the Bowater and Halla EPRs during the vesting period and adjust this
liability at each reporting period based on changes in the fair market value of the respective
stocks. The liability amounts recorded at December&nbsp;31, 2004 and 2003 are $2.7&nbsp;million and $4.8
million, respectively. The charges (income)&nbsp;reflected in the Consolidated Statement of Operations
pertaining to these rights and options were $(1.9) million, $3.9&nbsp;million, $(3.2) million for the
years 2004, 2003 and 2002, respectively.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 20. Exchangeable Shares</I></B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In conjunction with the 1998 acquisition of Avenor, Bowater&#146;s indirect wholly-owned subsidiary,
Bowater Canada Inc. (&#147;BCI&#148;), issued 3,773,547 shares ($183.6&nbsp;million) of no par value Exchangeable
Shares. Since 1998, BCI has issued an additional 1,359,620 Exchangeable Shares ($66.2&nbsp;million)
upon the redemption of Avenor&#146;s 7.50% Convertible Unsecured Subordinated Debentures and 5,505
Exchangeable Shares ($0.3&nbsp;million) for conversions prior to the redemption. BCI issued an
additional 856,237 Exchangeable Shares ($39.9&nbsp;million) in connection with the 2001 acquisition of
Alliance. The Exchangeable Shares are exchangeable at any time, at the option of the holder, on a
one-for-one basis for shares of Bowater Common Stock. Through December&nbsp;31, 2004, 4,523,027
Exchangeable Shares ($220.0&nbsp;million) had been exchanged for the same number of Bowater common
shares and 5,524 Exchangeable Shares ($0.3&nbsp;million) have been cancelled. Holders of Exchangeable
Shares have voting rights substantially equivalent to

<P align="center" style="font-size: 10pt">80
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">holders of Bowater Common Stock and are entitled to receive dividends equivalent, on a per-share
basis, to dividends paid by Bowater on its Common Stock. At December&nbsp;31, 2004, 1,466,358
Exchangeable Shares ($69.7&nbsp;million) were outstanding.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 21. Treasury Stock</I></B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">At December&nbsp;31, 2004, Bowater held 11,608,385 shares of its Common Stock as treasury stock to pay
for employee and director benefits and to fund its Dividend Reinvestment Plan. The shares are
valued at their acquisition cost of $485.9&nbsp;million. As of December&nbsp;31, 2003, we held 11,611,203
shares at a cost of $486.1&nbsp;million.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In May&nbsp;1999, the Board of Directors authorized the repurchase of up to 5.5&nbsp;million shares of
Bowater&#146;s Common Stock in the open market, subject to normal trading restrictions. We made no
purchases under the program during 2004, 2003 or 2002. Since the beginning of the program, we
purchased 3.1&nbsp;million shares at a total cost of $155.5&nbsp;million.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 22. Timberland Leases and Operating Leases</I></B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater controls 0.1&nbsp;million acres of timberlands under long-term leases expiring 2005 to 2058 for
which aggregate lease payments were $0.4&nbsp;million in 2004, $0.4&nbsp;million in 2003 and $0.5&nbsp;million in
2002. These lease costs are capitalized as part of timberlands and are charged against revenue at
the time the timber is harvested.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In addition, we lease certain office premises, office equipment and transportation equipment under
operating leases. Total rental expense for operating leases was $5.1&nbsp;million in 2004, $8.9&nbsp;million
in 2003 and $8.0&nbsp;million in 2002.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater enters into various agreements including supply and cutting rights agreements and purchase
commitments in the normal course of business. Our purchase obligations related to these various
agreements are presented in the table below. In connection with the acquisition of Alliance,
Bowater assumed various long-term supply contracts, the more significant including a fiber supply
contract, at market prices, for its Coosa Operation and a steam supply contract at its Dolbeau
Operation. The Coosa fiber supply contract expires in 2014 and has total commitments of
approximately $112.0&nbsp;million ($13.7&nbsp;million in year 2005, $54.9&nbsp;million in years 2006-2009 and
$43.4&nbsp;million thereafter). In addition, our Dolbeau Operation&#146;s steam supply contract expires in
2023 and has total commitments of approximately $188.4&nbsp;million ($8.0&nbsp;million in year 2005, $33.9
million in years 2006-2009 and $146.5&nbsp;million thereafter). In addition, we manage approximately 30
million acres of Crown-owned land in Canada on which we have cutting rights. We make payments to
various Canadian provinces based on the amount of timber harvested.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">At December&nbsp;31, 2004, the future minimum rental payments under timberland leases and operating
leases and commitments for purchase obligations are:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Timberland</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Operating</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Purchase</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Lease Payments</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Leases, Net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Obligations</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>5.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>81.1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>57.2</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42.4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42.0</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>41.8</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>272.9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>14.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>49.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>537.4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">As noted in Note 12, &#147;Long-Term and Short-Term Debt and Off-Balance Sheet Arrangements,&#148;
Bowater terminated the lease agreement associated with the Nuway facility in connection with its
repayment of the related debt. Prior to termination, the annual lease payments on the Nuway
facility lease were approximately $1.5&nbsp;million.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In July&nbsp;2002, Bowater terminated a lease arrangement related to the planned construction of a
second Nuway coating facility in the mid-Atlantic region. Construction of the mid-Atlantic
facility was being financed through a special purpose entity. The construction of the mid-Atlantic
facility has been indefinitely postponed. As a result of the lease termination, we purchased the
leased equipment for approximately $14&nbsp;million, which is included in cash invested in fixed assets,
timber and timberlands on the Consolidated Statement of Cash Flows. We utilized our existing
credit facilities to purchase the leased equipment from the special purpose entity.


<P align="center" style="font-size: 10pt">81
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 23. Segment Information</I></B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Below is a description of the types of products and services from which each reportable segment
derives its revenues:


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">NEWSPRINT DIVISION</FONT>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Newsprint Division operates seven manufacturing sites (including Ponderay Newsprint Company, an
unconsolidated partnership) in the United States, Canada and South Korea. The principal product at
these manufacturing sites is newsprint, but several of the sites also produce market pulp and
uncoated specialty papers. This division has primary responsibility for the domestic and
international marketing and sales of newsprint.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Effective January&nbsp;1, 2005, the Thunder Bay mill was merged into the Coated and Specialty Papers
division. In future periods, segment information will be reported under this new organizational
structure, including a restatement of prior period segment results to facilitate comparisons to
prior periods.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">COATED AND SPECIALTY PAPERS DIVISION</FONT>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Coated and Specialty Papers Division operates a manufacturing site that produces coated paper,
newsprint (until January&nbsp;2003), and market pulp, and two Nuway coating
facilities, all located in the United States. This division is responsible for the marketing and
sales of the full spectrum of all coated and uncoated specialty papers manufactured by Bowater.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">PULP DIVISION</FONT>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Pulp Division markets and distributes market pulp produced by other divisions. Financial
results for the production and sale of market pulp are included in the Newsprint Division or the
Coated and Specialty Papers Division, depending upon which site manufactures the product. The Pulp
Division&#146;s selling and administrative expenses are included in &#147;Corporate and Other Eliminations.&#148;
Accordingly, no separate results are reported for this division.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">FOREST PRODUCTS DIVISION</FONT>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">As of December&nbsp;31, 2004, the Forest Products Division managed 1.0&nbsp;million acres of timberland owned
or leased in the United States and the Canadian provinces of Ontario and Nova Scotia and
approximately 8.4&nbsp;million acres of Crown-owned land in the province of Ontario on which we have
cutting rights. The division also operated five softwood sawmills, supplied wood fiber to our pulp
and paper production sites and marketed and sold timber and southern yellow pine lumber in North
America.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Effective January&nbsp;1, 2005, the Forest Products Division was merged into the Newsprint and Canadian
Forest Products divisions. In future periods, segment information will be reported under this new
organizational structure, including a restatement of prior period segment results to facilitate
comparisons to prior periods.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><FONT style="font-variant: SMALL-CAPS">CANADIAN FOREST PRODUCTS DIVISION</FONT>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Canadian Forest Products Division operates four paper manufacturing sites in Canada. The
division manages 0.4&nbsp;million acres of owned or leased timberland and approximately 21.2&nbsp;million
acres of Crown-owned land in the Canadian provinces of Quebec and New Brunswick on which we have
cutting rights. The division also operates seven sawmills and one wood treatment plant, supplies
wood to four paper mills and seven sawmills, and is responsible for the marketing and sales of its
timber and lumber production.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B>Factors management used to identify our segments:</B>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Bowater&#146;s reportable segments are business units responsible for the marketing and sales of
different products. They are managed separately because of the different products they are
responsible for manufacturing and distributing.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The line entitled &#147;Segment income (loss)&#148; in the following tables is equivalent to &#147;Operating
income (loss)&#148; as presented in our Consolidated Statement of Operations. In addition, none of the
income or loss items following &#147;Operating

<P align="center" style="font-size: 10pt">82
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

 <DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">income (loss)&#148; in our Consolidated Statement of Operations are allocated to our segments, since
they are reviewed separately by Bowater&#146;s management.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The following tables summarize information about segment profit and loss and segment assets for the
three years ended December&nbsp;31, 2004, 2003 and 2002:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Coated and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Canadian</B></TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Specialty</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Forest</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Forest</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Corporate/</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Newsprint</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Papers</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Products</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Products</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Special</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B><I>2004 (In millions)</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Division</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Division</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Division</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Division</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Items</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Eliminations</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,626.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">611.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">173.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">819.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(40.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,190.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation, amortization
and cost of timber
harvested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">182.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(44.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,587.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">735.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">251.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,280.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">603.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,458.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">84.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Coated and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Canadian</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Specialty</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Forest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Forest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Corporate/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Newsprint</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Papers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Products</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Products</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Special</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">2003 <I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Items</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Eliminations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,448.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">493.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">118.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">730.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>

    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(69.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,721.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation,
amortization and
cost of timber
harvested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">188.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">68.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">339.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment income
(loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(98.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(47.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(45.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">124.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(27.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(100.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,619.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">788.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">243.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,300.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">663.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,615.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">139.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Coated and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Canadian</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Specialty</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Forest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Forest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Corporate/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Newsprint</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Papers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Products</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Products</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Special</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">2002 <I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Items</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Eliminations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,318.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">484.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">95.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">744.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(61.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,581.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation,
amortization and
cost of timber
harvested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">192.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">64.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.5</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">71.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">340.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment income
(loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(66.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(35.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">85.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(84.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(95.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,779.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">717.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">243.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,370.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">488.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,599.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">136.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">238.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Special items consist of gain on sale of assets (see Note 5, &#147;Net Gain on Sale of Assets&#148;).


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Sales to related
parties were $337.8&nbsp;million, $330.4&nbsp;million and $345.3&nbsp;million in 2004, 2003 and 2002,
respectively. Amounts due from related parties were $25.2&nbsp;million

<P align="center" style="font-size: 10pt">83
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">and $26.1&nbsp;million at December&nbsp;31, 2004 and 2003, respectively, and are included in &#147;Accounts
receivable, net&#148; on the Consolidated Balance Sheet.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Sales by Product</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Newsprint</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,340.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,236.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,199.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Coated and specialty papers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>904.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">726.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">613.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Market pulp</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>543.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">489.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lumber</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>370.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,190.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,721.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,581.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Sales by Country</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,310.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,950.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,862.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign Countries
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">
Canada</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>242.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Korea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>106.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">United Kingdom</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>65.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mexico</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Brazil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other countries <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>292.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>879.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">770.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">718.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,190.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,721.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,581.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Long-Lived Assets by Country </B><SUP style="font-size: 85%; vertical-align: text-top"><B>(3)</B></SUP></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><I>(In millions)</I></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,853.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,973.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,015.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canada</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,568.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,683.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,746.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>149.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,571.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,820.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,934.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Sales are attributed to countries based on the location of the customer. No single
customer, related or otherwise, accounted for 10% or more of Bowater&#146;s 2004, 2003 or 2002
consolidated sales.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">No country in this group exceeded 10% of consolidated sales.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Excludes goodwill, financial instruments and deferred tax assets.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">84
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B><I>Note 24. Quarterly Information (Unaudited)</I></B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Year ended December 31, 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>(In millions, except per-share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>amounts)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>First</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Year</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>745.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>788.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>834.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>823.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,190.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(23.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(7.6)</B></TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29.5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before cumulative effect of
accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(32.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(18.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(35.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(32.5</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.3</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(18.1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(35.2</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(87.1</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per common share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss before cumulative effect of
accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.57</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.32</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.61</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.57</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.32</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.61</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per common share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss before cumulative effect of
accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.57</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.32</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.61</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.57</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.02</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.32</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.61</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1.52</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year ended December 31, 2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">(In millions, except per-share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">First</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Second</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Third</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fourth</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">630.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">664.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">690.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">735.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,721.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">31.6</TD>
    <TD><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before cumulative effect of
accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(200.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per common share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss before cumulative effect of
accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.96</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.52</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.00</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per common share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss before cumulative effect of
accounting changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.96</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.52</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.00</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.60</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes severance charges of $9.8&nbsp;million.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes a net gain on sale of assets of $104.0&nbsp;million.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">85
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><B>Management&#146;s Report on Financial Statements and Assessment of Internal Control over Financial
Reporting</B>

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Financial
Statements</I>

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Management of Bowater Incorporated is responsible for the preparation of the financial information
included in this Annual Report on Form 10-K. The accompanying financial statements have been
prepared in accordance with U.S. generally accepted accounting principles and include amounts that
are based on the best estimates and judgments of management.

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt"><I>Assessment
of Internal Control over Financial Reporting</I>

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules&nbsp;13a-15(f) and 15d-15(f) under the Securities Exchange Act
of 1934. Bowater Incorporated&#146;s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America. Internal control over financial reporting includes those
policies and procedures that:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><font face="wingdings">&#216;&nbsp;&nbsp;</font></TD>
    <TD>pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of Bowater Incorporated;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><font face="wingdings">&#216;&nbsp;&nbsp;</font></TD>

    <TD>provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. generally accepted accounting
principles;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><font face="wingdings">&#216;&nbsp;&nbsp;</font></TD>

    <TD>provide reasonable assurance that receipts and expenditures of Bowater Incorporated are
being made only in accordance with the authorizations of management and directors of
Bowater Incorporated; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><font face="wingdings">&#216;&nbsp;&nbsp;</font></TD>

    <TD>provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of assets that could have a material effect on the
consolidated financial statements.</TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Management assessed the effectiveness of Bowater Incorporated&#146;s internal control over financial
reporting as of December&nbsp;31, 2004. Management based this assessment on the criteria for effective
internal control over financial reporting described in <I>Internal Control &#150; Integrated Framework</I>
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management&#146;s
assessment included an evaluation of the design of Bowater Incorporated&#146;s internal control over
financial reporting and testing of the operational effectiveness of its internal control over
financial reporting. Management reviewed the results of its assessment with the Audit Committee of
our Board of Directors.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Based on this assessment, management determined that, as of December&nbsp;31, 2004, Bowater
Incorporated&#146;s internal control over financial reporting was effective.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">KPMG LLP, the independent registered public accounting firm which audited and reported on the
consolidated financial statements of Bowater Incorporated included in this Form 10-K, has issued an
attestation report on management&#146;s assessment of internal control over financial reporting. This
report appears on page 87 of this Form 10-K.


<P align="center" style="font-size: 10pt">86
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="center" style="font-size: 10pt"><B>Report of Independent
Registered Public Accounting Firm on Internal Control over Financial
Reporting</B>


<P align="left" style="font-size: 10pt">The Board of Directors of Bowater Incorporated:


<P align="left" style="font-size: 10pt">We have audited
management&#146;s assessment, included in the section Assessment of
Internal Control over Financial Reporting in the accompanying
Management&#146;s Report on Financial Statements and Assessment of
Internal Control Over Financial Reporting, that Bowater Incorporated&#146;s internal control over
financial reporting was effective as of December&nbsp;31, 2004, based on criteria established in
<I>Internal Control&#151;Integrated Framework </I>issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Bowater Incorporated&#146;s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on
management&#146;s assessment and an opinion on the effectiveness of the Company&#146;s internal control over
financial reporting based on our audit.


<P align="left" style="font-size: 10pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management&#146;s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.


<P align="left" style="font-size: 10pt">A company&#146;s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company&#146;s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2)&nbsp;provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with the authorizations of management and directors of the
company; and (3)&nbsp;provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company&#146;s assets that could have a material
effect on the financial statements.


<P align="left" style="font-size: 10pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.


<P align="left" style="font-size: 10pt">In our opinion, management&#146;s assessment that Bowater Incorporated&#146;s internal control over financial
reporting was effective as of December&nbsp;31, 2004, is fairly stated, in all material respects, based
on criteria established in <I>Internal Control&#151;Integrated Framework </I>issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Also, in our opinion, Bowater
Incorporated maintained, in all material respects, effective internal control over financial
reporting as of December&nbsp;31, 2004, based on criteria established in <I>Internal Control&#151;Integrated
Framework </I>issued by the Committee of Sponsoring Organizations of
the Treadway Commission.


<P align="left" style="font-size: 10pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheet of Bowater Incorporated and subsidiaries as
of December&nbsp;31, 2004 and 2003, and the related consolidated statements of operations, capital
accounts and cash flows for each of the years in the three-year period ended December&nbsp;31, 2004. Our
report dated March&nbsp;11, 2005, expressed an unqualified opinion on those consolidated financial
statements and refers to the Company&#146;s change in its method of accounting for the effects of the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 in 2004, and the Company&#146;s
change in its method of accounting for variable interest entities and its method of accounting for
asset retirement obligations in 2003.



<P align="left" style="font-size: 10pt">/s/ KPMG LLP<BR>
Greenville, South Carolina<BR>
March&nbsp;11, 2005


<P align="center" style="font-size: 10pt">87
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements</B>



<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Board of Directors of Bowater Incorporated:


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">We have audited the accompanying consolidated balance sheet of Bowater Incorporated and
subsidiaries as of December&nbsp;31, 2004 and 2003, and the related consolidated statements of
operations, capital accounts and cash flows for each of the years in the three-year period ended
December&nbsp;31, 2004. In connection with our audits of the consolidated financial statements, we also
have audited financial statement schedule II. These consolidated financial statements and
financial statement schedule are the responsibility of the Company&#146;s management. Our responsibility
is to express an opinion on these consolidated financial statements and financial statement
schedule based on our audits.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Bowater Incorporated and subsidiaries as of December
31, 2004 and 2003, and the results of their operations and their cash flows for each of the years
in the three-year period ended December&nbsp;31, 2004, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">As discussed in note 1 to the consolidated financial statements, the Company changed its method of
accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of
2003 in 2004. The Company changed it method of accounting for variable interest entities and its
method of accounting for asset retirement obligations in 2003.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Bowater Incorporated&#146;s internal control over financial
reporting as of December&nbsp;31, 2004, based on criteria established in <I>Internal Control&#151;Integrated
Framework </I>issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
and our report dated March&nbsp;11, 2005 expressed an unqualified opinion on management&#146;s assessment of,
and the effective operation of, internal control over financial reporting.


<P align="left" style="font-size: 10pt">/s/ KPMG LLP<BR>
Greenville, South Carolina<BR>
March&nbsp;11, 2005



<P align="center" style="font-size: 10pt">88
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Item&nbsp;9. </B><B><I>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</I></B>



<P align="left" style="font-size: 10pt">None



<P align="left" style="font-size: 10pt"><B>Item&nbsp;9A. </B><B><I>Controls and Procedures</I></B>



<P align="left" style="font-size: 10pt"><B>Disclosure Controls and Procedures</B>


<P align="left" style="font-size: 10pt">Disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) are
our controls and other procedures that are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission&#146;s rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.


<P align="left" style="font-size: 10pt">We have evaluated the effectiveness of the design and operation of our disclosure controls and
procedures as of December&nbsp;31, 2004. Based on that evaluation, the Chairman, President and Chief
Executive Officer and the Chief Financial Officer concluded that our disclosure controls and
procedures are effective in recording, processing, summarizing, and timely reporting information
required to be disclosed in our reports to the Securities and Exchange Commission.



<P align="left" style="font-size: 10pt"><B>Internal Control over Financial Reporting</B>


<P align="left" style="font-size: 10pt">Management has issued its report on internal control over financial reporting, which included
management&#146;s assessment that the Company&#146;s internal control over financial reporting was effective
at December&nbsp;31, 2004. Management&#146;s report on internal control over financial reporting can be
found on page 86 of this Annual Report on Form 10-K. Our independent registered public accounting
firm has issued an attestation report on management&#146;s assessment of internal control over financial
reporting. This report can be found on page 87 of this Annual Report on Form 10-K.



<P align="left" style="font-size: 10pt"><B>Changes in Internal Control</B>


<P align="left" style="font-size: 10pt">There was no change in our internal control over financial reporting during the fourth quarter of
2004 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.



<P align="left" style="font-size: 10pt"><B>Item&nbsp;9B. </B><B><I>Other Information</I></B>



<P align="left" style="font-size: 10pt">None.



<P align="center" style="font-size: 10pt"><B>PART III</B>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;10. </B><B><I>Directors and Executive Officers of the Registrant</I></B>


<P align="left" style="font-size: 10pt">Information regarding Bowater&#146;s directors is incorporated by reference to the material under the
headings &#147;Election of Directors-Information on Nominees and Directors&#148; and &#147;Board and Committee
Meetings&#148; in our Proxy Statement with respect to the Annual Meeting of Shareholders scheduled to be
held May&nbsp;11, 2005, filed under Regulation&nbsp;14A under the Securities Exchange Act of 1934, as amended
(the &#147;Proxy Statement&#148;).


<P align="left" style="font-size: 10pt">Information regarding Bowater&#146;s Audit Committee Financial Expert is included by reference to
material under the heading &#147;Corporate Governance-Audit Committee&#148; in the Proxy Statement.



<P align="center" style="font-size: 10pt">89
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Information regarding changes to the procedures by which security holders may recommend nominees to
Bowater&#146;s board of directors is incorporated by reference to the material under the headings
&#147;Election of Directors-Corporate Governance Principles&#148; and &#147;Proposals by Shareholders&#148; in the
Proxy Statement.


<P align="left" style="font-size: 10pt">Information regarding Bowater&#146;s executive officers is provided under the caption &#147;Executive
Officers of the Registrant as of March&nbsp;1, 2005&#148; on pages 15-16 of this Form 10-K.


<P align="left" style="font-size: 10pt">Information regarding Section 16(a) beneficial ownership reporting compliance is incorporated by
reference to the material under the heading &#147;Section&nbsp;16(a) Beneficial Ownership Reporting
Compliance&#148; in the Proxy Statement.


<P align="left" style="font-size: 10pt">Bowater has adopted a code of business conduct that applies to all of Bowater&#146;s North American
employees, including but not limited to, Bowater&#146;s chief executive officer, principal financial and
accounting officer and controller. The code of business conduct is posted on Bowater&#146;s website
(http://www.bowater.com). Bowater will disclose amendments to its code of business conduct and any
waivers of its provisions with respect to its chief executive officer, chief financial officer,
principal accounting officer and controller on its website within five business days following the
date of the amendment or waiver.



<P align="left" style="font-size: 10pt"><B>Item&nbsp;11. </B><B><I>Executive Compensation</I></B>


<P align="left" style="font-size: 10pt">Information regarding executive compensation is incorporated by reference to the material under the
headings &#147;Election of Directors-Director Compensation,&#148; &#147;Human Resources and Compensation Committee
Report on Executive Compensation,&#148; &#147;Compensation Committee Interlocks and Insider Participation,&#148;
&#147;Total Shareholder Return&#148; and &#147;Executive Compensation&#148; in the Proxy Statement.



<P align="left" style="font-size: 10pt"><B>Item&nbsp;12. </B><B><I>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters</I></B>


<P align="left" style="font-size: 10pt">Information concerning (1)&nbsp;any person or group known to Bowater to be the beneficial owner of more
than 5% of its voting stock, and (2)&nbsp;ownership of its equity securities by management is
incorporated by reference to the material under the heading &#147;Stock Ownership&#148; in the Proxy
Statement.


<P align="left" style="font-size: 10pt">The following table provides information about our equity compensation plans (other than qualified
employee benefits plans and plans available to shareholders on a pro rata basis) as of December&nbsp;31,
2004.


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Common Shares</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining Available for</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Common Shares to be</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Future Issuance Under</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Issued upon Exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise Price per</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Equity Compensation</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Plan</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Outstanding Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Share</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Plan</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1988 Stock Option Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Plan expired<BR></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1992 Stock Option Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;&nbsp;&nbsp;240,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Plan expired<BR></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1997 Stock Option Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;&nbsp;&nbsp;738,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;&nbsp;71,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2000 Stock Option Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1,666,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">49.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">108,445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002 Stock Option Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="center">&nbsp;&nbsp;&nbsp;&nbsp;1,863,694<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="center">&nbsp;&nbsp;&nbsp;736,306<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total equity
compensation plans
approved by
shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">4,554,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="center">&nbsp;&nbsp;&nbsp;916,501<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Excludes 81,510 shares of restricted stock that were issued in January&nbsp;2003 to certain executive
officers under the 2002 stock option plan.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">In January&nbsp;2004, Bowater granted 862,000 shares at a weighted average exercise price of $45.02 per
share under the 2002 stock option plan.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">Bowater has no equity compensation plans that were adopted without the approval of Bowater&#146;s
shareholders. Bowater&#146;s Mid-Term Incentive Plan (the &#147;MTIP&#148;) and Bowater&#146;s Outside Director
Elective Stock Plan were adopted without shareholder approval and permit the issuance of equity
compensation; however, each plan requires that all equity awards must be issued pursuant to one of
Bowater&#146;s other equity compensation plans, which have been approved by its shareholders.



<P align="center" style="font-size: 10pt">90
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Item&nbsp;13. </B><B><I>Certain Relationships and Related Transactions</I></B>


<P align="left" style="font-size: 10pt">Information regarding certain relationships and related transactions is incorporated by reference
to the material under the heading &#147;Related Party Transactions&#148; in the Proxy Statement.



<P align="left" style="font-size: 10pt"><B>Item&nbsp;14. </B><B><I>Principal Accountant Fees and Services</I></B>


<P align="left" style="font-size: 10pt">Information regarding the fees and services of Bowater&#146;s principal accountants is incorporated by
reference to the material under the heading &#147;Appointment of Independent Auditors&#148; in the Proxy
Statement.



<P align="center" style="font-size: 10pt"><B>PART IV</B>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;15. </B><B><I>Exhibits and Financial Statement Schedules</I></B>



<P align="left" style="font-size: 10pt">(a)&nbsp;The following are filed as a part of this Annual Report on Form&nbsp;10-K:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">(1)&nbsp;&nbsp;</TD>
    <TD>The following are included at the indicated page of this Annual Report on Form 10-K:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page(s)</B></TD>
    <TD>&nbsp;</TD>

</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statement of Operations for Each of the Years in the
Three-Year Period Ended December&nbsp;31, 2004 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Balance Sheet at December&nbsp;31, 2004 and 2003 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statement of Capital Accounts for Each of the Years in the
Three-Year Period Ended December&nbsp;31, 2004 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statement of Cash Flows for Each of the Years in the Three-Year Period Ended December&nbsp;31, 2004 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes to Consolidated Financial Statements </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" nowrap valign="top">53-85</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Management&#146;s Report on Financial Statements and Assessment
of Internal Control over Financial Reporting </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">86</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">87</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Report of Independent Registered Public Accounting Firm on
Consolidated Financial Statements </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">88</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">(2)&nbsp;&nbsp;</TD>
    <TD>The following financial statement schedule for the year ended December&nbsp;31,
2004 is submitted:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Schedule&nbsp;II&#150;Valuation and Qualifying Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left:3%; font-size: 10pt">All other financial statement schedules are omitted because they are not applicable or
because the required information is included in the financial statements or notes.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="4%" nowrap align="left">(3)&nbsp;&nbsp;</TD>
    <TD>Exhibits (numbered in accordance with Item&nbsp;601 of Regulation&nbsp;S-K):</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><U><B>Exhibit No</B></U><B>.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><U><B>Description</B></U></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Arrangement Agreement dated as of April&nbsp;1, 2001, by and between the Company and
Alliance Forest Products Inc. (incorporated by reference to Exhibit&nbsp;2.1 to Bowater
Incorporated&#146;s Quarterly Report on Form&nbsp;10-Q for the period ending March&nbsp;31, 2001, File No.
1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Restated Certificate of Incorporation of Bowater Incorporated, as amended (incorporated by
reference to Exhibit&nbsp;4.1 to Bowater Incorporated&#146;s Registration Statement No.&nbsp;333-018168).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">91
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><U><B>Exhibit No</B></U><B>.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><U><B>Description</B></U></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designation of the special voting stock of Bowater Incorporated (incorporated
by reference to Exhibit&nbsp;4.11 to Amendment No.&nbsp;1 to Bowater Incorporated&#146;s Registration
Statement No.&nbsp;333-57839 (&#147;Amendment No.&nbsp;1 to the Registration Statement&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.3*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bylaws of Bowater Incorporated amended as of November&nbsp;10, 2004.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement pursuant to S-K Item&nbsp;601(b)(4)(iii)(A) to provide the Commission upon request
copies of certain other instruments with respect to long-term debt not being registered where
the amount of securities authorized under each such instrument does not exceed 10% of the
total assets of the registrant and its subsidiaries on a consolidated basis (incorporated by
reference to Exhibit&nbsp;4.3 to Bowater Incorporated&#146;s Registration Statement No.&nbsp;2-93455).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">See Exhibits 3.1, 3.2 and 3.3.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase Agreement dated June&nbsp;16, 2003, by and between Bowater Incorporated and UBS
Securities, LLC as Representative of the Several Initial Purchasers named in Schedule&nbsp;I
thereto (incorporated by reference to Exhibit&nbsp;4.1 to Bowater Incorporated&#146;s Quarterly Report
on Form&nbsp;10-Q for period ending June&nbsp;30, 2003, File No.&nbsp;1-8712 (the &#147;June&nbsp;2003 10-Q &#147;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indenture dated June&nbsp;19, 2003, by and between Bowater Incorporated, as Issuer, and The Bank
of New York, as Trustee (incorporated by reference to Exhibit&nbsp;4.2 to the June&nbsp;2003 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indenture dated as of October&nbsp;31, 2001 by and among Bowater Canada Finance Corporation (as
Issuer), Bowater Incorporated (as Guarantor) and The Bank of New York (as Trustee).
(incorporated by reference to Exhibit&nbsp;10.3 to the September&nbsp;2001 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of July&nbsp;20, 1994, by and between Bowater Incorporated and
Arnold M. Nemirow (incorporated by reference to Exhibit&nbsp;10.3 to Bowater Incorporated&#146;s Annual
Report on Form&nbsp;10-K for the period ending December&nbsp;31, 1994, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of August&nbsp;1, 1997, by and between Bowater Incorporated and
Arthur D. Fuller (incorporated by reference to Exhibit&nbsp;10.1 to Bowater Incorporated&#146;s
Quarterly Report on Form&nbsp;10-Q for the period ending September&nbsp;30, 1997, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of April&nbsp;1, 1995, by and between Bowater Incorporated and E.
Patrick Duffy (incorporated by reference to Exhibit&nbsp;10.4 to Bowater Incorporated&#146;s Quarterly
Report on Form&nbsp;10-Q for the period ending March&nbsp;31, 1995, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Modification of Employment Agreement and Cancellation of Change in Control Agreement dated
as of May&nbsp;31, 2004, by and between Bowater Incorporated and E. Patrick Duffy (incorporated by
reference to Exhibit&nbsp;10.1 to Bowater Incorporated&#146;s Quarterly Report on Form&nbsp;10-Q for the
period ending June&nbsp;30, 2004, File No.&nbsp;1-8712 (the &#147;June&nbsp;2004 10-Q&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of August&nbsp;1, 1997, by and between Bowater Incorporated and
Richard K. Hamilton (incorporated by reference to Exhibit&nbsp;10.16 to Bowater Incorporated&#146;s
Annual Report on Form&nbsp;10-K for the period ending December&nbsp;31, 1997, File No.&nbsp;1-8712 (the
&#147;1997 10-K&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Modification of Employment Agreement, dated November&nbsp;15, 2004, by and between Bowater
Incorporated and Richard K. Hamilton (incorporated by reference to Exhibit&nbsp;99.1 to Bowater
Incorporated Form&nbsp;8-K dated November&nbsp;10, 2004).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of July&nbsp;24, 1998, by and between Bowater Incorporated and
David J. Steuart (incorporated by reference to Exhibit&nbsp;10.5 to Bowater Incorporated&#146;s
Quarterly Report on Form&nbsp;10-Q for the period ending September&nbsp;30, 1998 (the &#147;September&nbsp;1998
10-Q&#148;)).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">92
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><U><B>Exhibit No</B></U><B>.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><U><B>Description</B></U></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement, dated as of July&nbsp;24, 1998, between David J. Steuart and Bowater Incorporated.
(incorporated by reference to Exhibit&nbsp;10.6 to Bowater Incorporated&#146;s Annual Report on Form
10-K for the period ending December&nbsp;31, 2000, File No.&nbsp;1-8712 (the &#147;2000 10-K&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.6.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Agreement, dated as of July&nbsp;24, 1998, between David J. Steuart and
Bowater Incorporated. (incorporated by reference to Exhibit&nbsp;10.8 to the September&nbsp;2001 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of November&nbsp;1, 1998, by and between Bowater Incorporated and
Jerry R. Gilmore (incorporated by reference to Exhibit&nbsp;10.3 to Bowater Incorporated&#146;s
Quarterly Report on Form&nbsp;10-Q for the period ending March&nbsp;31, 1999, File No.&nbsp;1-8712 (the
&#147;March&nbsp;1999 10-Q&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of August&nbsp;1, 1998, by and between Bowater Incorporated and
William G. Harvey (incorporated by reference to Exhibit&nbsp;10.3 to the September&nbsp;1998 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of October&nbsp;21, 1996, by and between Bowater Incorporated and
Steven G. Lanzl (incorporated by reference to Exhibit&nbsp;10.2 to Bowater Incorporated&#146;s Annual
Report on Form&nbsp;10-K for the period ending December&nbsp;31, 1996, File No.&nbsp;1-8712 (the &#147;1996
10-K&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of November&nbsp;1, 1995, by and between Bowater Incorporated and
David G. Maffucci (incorporated by reference to Exhibit&nbsp;10.12 to the 1995 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of July&nbsp;24, 1998, by and between Bowater Incorporated and R.
Donald Newman (incorporated by reference to Exhibit&nbsp;10.4 to the March&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bowater Incorporated 2002 Stock Option Plan, dated as of January&nbsp;30, 2002 (incorporated by
reference to Exhibit&nbsp;10.14 to Bowater Incorporated&#146;s Annual Report on Form&nbsp;10-K for the
period ending December&nbsp;31, 2001, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.12.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to the Bowater Incorporated 2002 Stock Option Plan dated September&nbsp;16,
2002. (incorporated by reference to Exhibit&nbsp;10.1 to Bowater Incorporated&#146;s Quarterly Report
on Form&nbsp;10-Q for the period ending September&nbsp;30, 2002, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.12.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Non-Qualified Stock Option Agreement for 2002 Stock Option Plan (incorporated by
reference to Exhibit&nbsp;10.1 to Bowater Incorporated&#146;s Quarterly Report on Form&nbsp;10-Q for the
period ending September&nbsp;30, 2004, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of March&nbsp;15, 1999, by and between Bowater Incorporated and
James T. Wright (incorporated by reference to Exhibit&nbsp;10.1 to the March&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Amended and Restated Change in Control Agreement, executed as of June&nbsp;9, 2000, by
and between Bowater Incorporated and each of E. Patrick Duffy, Arthur D. Fuller, Jerry R.
Gilmore, Richard K. Hamilton, William G. Harvey, Steven G. Lanzl, David G. Maffucci, Arnold
M. Nemirow, R. Donald Newman, Michael F. Nocito, David J. Steuart and James T. Wright
(incorporated by reference to Exhibit&nbsp;10.5 to Bowater Incorporated&#146;s Quarterly Report on Form
10-Q for the period ending September&nbsp;30, 2000, File No.&nbsp;1-8712 (the &#147;September&nbsp;2000 10-Q&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compensatory Benefits Plan of Bowater Incorporated, as amended and restated effective
February&nbsp;26, 1999 (incorporated by reference to Exhibit&nbsp;10.6 to Bowater Incorporated&#146;s
Quarterly Report on Form&nbsp;10-Q for the period ending June&nbsp;30, 1999, File No.&nbsp;1-8712 (the &#147;June
1999 10-Q&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director Elective Stock Option Plan, dated as of March&nbsp;2, 2001. (incorporated by
reference to Exhibit&nbsp;10.6 to the 2000 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deferred Compensation Plan for Outside Directors of Bowater Incorporated, as amended and
restated effective January&nbsp;1, 1997 (incorporated by reference to Exhibit&nbsp;10.18.1 to the 1996
10-K).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">93
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><U><B>Exhibit No</B></U><B>.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><U><B>Description</B></U></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.17.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;1 dated November&nbsp;1, 2001 to the Bowater Incorporated Deferred Compensation
Plan for Outside Directors (incorporated by reference to Exhibit&nbsp;10.3 to Bowater
Incorporated&#146;s Quarterly Report on Form&nbsp;10-Q for the period ending March&nbsp;31, 2002, File No.
1-8712 (the &#147;March&nbsp;2002 10-Q&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retirement Plan for Outside Directors of Bowater Incorporated, amended and restated as of
February&nbsp;26, 1999 (incorporated by reference to Exhibit&nbsp;10.7 to the June&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.18.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to the Bowater Incorporated Retirement Plan for Outside Directors,
executed on September&nbsp;13, 2000 (incorporated by reference to Exhibit&nbsp;10.6 to the September
2000 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.18.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment dated as of November&nbsp;6, 2001 to the Bowater Incorporated Retirement Plan
for Outside Directors as Amended and Restated February&nbsp;26, 1999 (incorporated by reference to
Exhibit&nbsp;10.2 to the March&nbsp;2002 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.19
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supplemental Benefit Plan for Designated Employees of Bowater Incorporated and Affiliated
Companies, as amended and restated effective February&nbsp;26, 1999 (incorporated by reference to
Exhibit&nbsp;10.8 to the June&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.19.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to the Supplemental Benefit Plan for Designated Employees of Bowater
Incorporated and Affiliated Companies, as amended and restated effective February&nbsp;26, 1999
(incorporated by reference to Exhibit&nbsp;10.1 to Bowater Incorporated&#146;s Quarterly Report on Form
10-Q for the period ending March&nbsp;31, 2000, File No.&nbsp;1-8712 (the &#147;March&nbsp;2000 10-Q&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.19.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment, effective as of November&nbsp;6, 2001, to the Supplemental Benefit Plan for
Designated Employees of Bowater Incorporated and Affiliated Companies, as amended and
restated effective February&nbsp;26, 1999( incorporated by reference to Exhibit&nbsp;10.21.2 to Bowater
Incorporated&#146;s Annual Report on Form&nbsp;10-K for the period ending December&nbsp;31, 2003, File No.
1-8712 (the &#147;2003 10-K&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.19.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment, effective as of September&nbsp;23, 2003, to the Supplemental Benefit Plan for
Designated Employees of Bowater Incorporated and Affiliated Companies, as amended and
restated effective February&nbsp;26, 1999 (incorporated by reference to Exhibit&nbsp;10.21.3 to the
2003 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Equity Participation Rights Plan of Bowater Incorporated, amended and restated as of
February&nbsp;26, 1999 (incorporated by reference to Exhibit&nbsp;10.9 to the June&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.20.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Equity Participation Rights Plan of Bowater Incorporated, dated as of
November&nbsp;22, 1999 (incorporated by reference to Exhibit&nbsp;10.32.1 to Bowater Incorporated&#146;s
Annual Report on Form&nbsp;10-K for the period ending December&nbsp;31, 1999, File No.&nbsp;1-8712 (the
&#147;1999 10-K&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1988 Stock Incentive Plan of Bowater Incorporated (incorporated by reference to Bowater
Incorporated&#146;s Proxy Statement for 1988, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.21.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to 1988 Stock Incentive Plan of Bowater Incorporated, dated as of August&nbsp;23,
1989 (incorporated by reference to Exhibit&nbsp;10.16A to Bowater Incorporated&#146;s Annual Report on
Form&nbsp;10-K for the period ending December&nbsp;31, 1989, File No.&nbsp;1-8712 (the &#147;1989 10-K&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.21.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment, effective April&nbsp;15, 1998, to the 1988 Stock Incentive Plan of Bowater
Incorporated (incorporated by reference to Exhibit&nbsp;10.32.2 to Bowater Incorporated&#146;s Annual
Report on Form&nbsp;10-K for the period ending December&nbsp;31, 1998, File No.&nbsp;1-8712 (the &#147;1998
10-K&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.21.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment, effective February&nbsp;26, 1999, to the 1988 Stock Incentive Plan of Bowater
Incorporated (incorporated by reference to Exhibit&nbsp;10.10 to the June&nbsp;1999 10-Q).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">94
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><U><B>Exhibit No</B></U><B>.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><U><B>Description</B></U></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Benefit Plan Grantor Trust of Bowater Incorporated, effective as of
April&nbsp;15, 1998 (incorporated by reference to Exhibit&nbsp;10.1 to Bowater Incorporated&#146;s Quarterly
Report on Form&nbsp;10-Q for the period ending June&nbsp;30, 1998, File No.&nbsp;1-8712 (the &#147;June&nbsp;1998
10-Q&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.22.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment, effective February&nbsp;26, 1999, to the Amended and Restated Benefit Plan
Grantor Trust of Bowater Incorporated (incorporated by reference to Exhibit&nbsp;10.11 to the June
1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Executive Severance Grantor Trust of Bowater Incorporated, effective
as of April&nbsp;15, 1998 (incorporated by reference to Exhibit&nbsp;10.3 to the June&nbsp;1998 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment, effective February&nbsp;26, 1999, to the Amended and Restated Executive
Severance Grantor Trust of Bowater Incorporated (incorporated by reference to Exhibit&nbsp;10.12
to the June&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Outside Directors Benefit Plan Grantor Trust of Bowater Incorporated,
effective as of April&nbsp;15, 1998 (incorporated by reference to Exhibit&nbsp;10.2 to the June&nbsp;1998
10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.24.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment, effective February&nbsp;26, 1999, to the Amended and Restated Outside
Directors Benefit Plan Grantor Trust of Bowater Incorporated (incorporated by reference to
Exhibit&nbsp;10.13 to the June&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Benefits Equalization Plan of Bowater Incorporated, amended and restated as of February&nbsp;26,
1999 (incorporated by reference to Exhibit&nbsp;10.14 to the June&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.25.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;1 dated December&nbsp;12, 2001 to the Bowater Incorporated Equalization Benefits
Plan effective February&nbsp;26, 1999 (incorporated by reference to Exhibit&nbsp;10.1 to the March&nbsp;2002
10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.25.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;2 dated September&nbsp;23, 2003 to the Bowater Incorporated Equalization
Benefits Plan effective February&nbsp;26, 1999 (incorporated by reference to Exhibit&nbsp;10.27.2 to
the 2003 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.26
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1992 Stock Incentive Plan (incorporated by reference to Exhibit&nbsp;10.23 to the Bowater
Incorporated Annual Report on Form&nbsp;10-K for the period ending December&nbsp;31, 1991, File No.
1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.26.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment, effective April&nbsp;15, 1998, to the 1992 Stock Incentive Plan (incorporated
by reference to Exhibit&nbsp;10.37.1 to the 1998 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.26.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment, effective February&nbsp;26, 1999, to the 1992 Stock Incentive Plan
(incorporated by reference to Exhibit&nbsp;10.15 to the June&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bowater Incorporated 1997 Stock Option Plan, effective as of January&nbsp;1, 1997, as amended
and restated (incorporated by reference to Exhibit&nbsp;10.31 to the 1996 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.27.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment, effective April&nbsp;15, 1998, to the Bowater Incorporated 1997 Stock Option
Plan, effective as of January&nbsp;1, 1997, as amended and restated (incorporated by reference to
Exhibit&nbsp;10.38.1 to the 1998 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.27.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment, effective February&nbsp;26, 1999, to the Bowater Incorporated 1997 Stock
Option Plan, as amended and restated January&nbsp;1, 1997 (incorporated by reference to Exhibit
10.16 to the June&nbsp;1999 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.28
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bowater Incorporated 2000 Stock Option Plan, effective as of January&nbsp;1, 2000 (incorporated
by reference to Exhibit&nbsp;10.40 to the 1999 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.29
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Executive Retirement Plan of Bowater Incorporated&#146;s subsidiary, Bowater Canadian
Forest Products Inc. (formerly Bowater Pulp and Paper Canada Inc., and formerly Avenor Inc.),
effective as of November&nbsp;28, 1997 (incorporated by reference to Exhibit&nbsp;10.40 to the 1998
10-K).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">95
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><U><B>Exhibit No</B></U><B>.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><U><B>Description</B></U></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.29.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Letter of Notification to Senior Managers of Alliance Forest Products, Inc. with
respect to the harmonization of methodology to be used to qualify termination benefits
payable under the Defined Benefits Supplemental Executive Retirement Plan (incorporated by
reference to Exhibit&nbsp;10.31.1 to the 2003 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.30
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bowater Incorporated Annual Incentive Plan, as amended and restated effective as of January
1, 1999 (incorporated by reference to Exhibit&nbsp;10.2 to Bowater Incorporated&#146;s Quarterly Report
on Form&nbsp;10-Q for the period ending March&nbsp;31, 2000, File No.&nbsp;1-8712 (&#147;the March&nbsp;2000 10-Q&#148;).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.31
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bowater Incorporated 2000-2002 Long-Term Incentive Plan, effective as of January&nbsp;1, 2000
(incorporated by reference to Exhibit&nbsp;10.1 to Bowater Incorporated&#146;s Quarterly Report on Form
10-Q for the period ending June&nbsp;30, 2000, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.32
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Licensing Agreement, dated as of December&nbsp;30, 1976, as amended, between Bowater
Incorporated and Bowater Industries plc (incorporated by reference to Exhibit&nbsp;10.13 to
Bowater Incorporated&#146;s Registration Statement No.&nbsp;2-90172).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.33
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Trademark Agreement, dated May&nbsp;8, 1984, between Bowater Incorporated and Bowater
Corporation plc (incorporated by reference to Exhibit&nbsp;10.17 to Bowater Incorporated&#146;s
Registration Statement No.&nbsp;2-90172).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.34
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">World-Wide Trademark Ownership, Use and Assignment Agreement, effective as of June&nbsp;30,
1997, by and between Bowater Incorporated and Rexam plc (formerly Bowater plc) (incorporated
by reference to Exhibit&nbsp;10.40 to the 1997 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.35
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Support Agreement, dated as of July&nbsp;24, 1998, between Bowater Incorporated, Bowater
Canadian Holdings Incorporated and Bowater Canada Inc. (incorporated by reference to Annex G
of the Joint Management Information Circular and Proxy Statement filed on June&nbsp;18, 1998, on
Schedule&nbsp;14A for Bowater Incorporated, File No.&nbsp;1-8712 (the &#147;Schedule&nbsp;14A&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.36
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Voting and Exchange Trust Agreement, dated as of July&nbsp;24, 1998, between Bowater
Incorporated, Bowater Canadian Holdings Incorporated, Bowater Canada Inc. and Montreal Trust
Company of Canada (incorporated by reference to Annex F to the Schedule&nbsp;14A).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.37
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Purchase Agreement, dated as of May&nbsp;18, 1999, by and between Inexcon Maine, Inc. and
Bowater Incorporated (incorporated by reference to Exhibit&nbsp;2.1 to Bowater Incorporated&#146;s
Current Report on Form&nbsp;8-K filed on September&nbsp;1, 1999, File No.&nbsp;1-8712 (the &#147;September&nbsp;1999
8-K&#148;)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.37.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;1, dated August&nbsp;17, 1999, to the Stock Purchase Agreement, dated May&nbsp;18,
1999, between Inexcon Maine, Inc. and Bowater Incorporated (incorporated by reference to
Exhibit&nbsp;2.1.1 to the September&nbsp;1999 8-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.38
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated as of September&nbsp;24, 2001, by and between the Company and Pierre
Monahan. (incorporated by reference to Exhibit&nbsp;10.5 to the September&nbsp;2001 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.38.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter of Amendment dated June&nbsp;3, 2003 to Employment Agreement by and between the Company
and Pierre Monahan (incorporated by reference to Exhibit&nbsp;10.44.1 to the 2003 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.39
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Agreement dated as of September&nbsp;24, 2001, by and between the Company and
Pierre Monahan (incorporated by reference to Exhibit&nbsp;10.6 to the September&nbsp;2001 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.40
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan Agreement dated December&nbsp;19, 2002 among Bowater Funding Inc. (as Borrower), Bowater
Incorporated (as Initial Servicer), Suntrust Capital Market, Inc. and Wachovia Bank, National
Association (as Co-Agents) and Suntrust Capital Markets, Inc. (as Administrative Agent)
(incorporated by reference to Exhibit&nbsp;10.49. to the 2002 10-K&#148;).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">96
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><U><B>Exhibit No</B></U><B>.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><U><B>Description</B></U></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.40.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;1, dated December&nbsp;18, 2003 to Loan Agreement dated December&nbsp;19, 2002 among
Bowater Funding Inc. (as Borrower), Bowater Incorporated (as Initial Servicer), Suntrust
Capital Market, Inc. and Wachovia Bank, National Association (as Co-Agents) and Suntrust
Capital Markets, Inc. (as Administrative Agent) (incorporated by reference to Exhibit&nbsp;10.47.1
to the 2003 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.41.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;2, dated December&nbsp;16, 2004 to Loan Agreement dated December&nbsp;19, 2002 among
Bowater Funding Inc. (as Borrower), Bowater Incorporated (as Initial Servicer), Suntrust
Capital Market, Inc. and Wachovia Bank, National Association (as Co-Agents) and Suntrust
Capital Markets, Inc. (as Administrative Agent) (incorporated by reference to the 8-K dated
December&nbsp;21, 2004).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.42
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Receivables Sales Agreement dated December&nbsp;19, 2002 among Bowater Incorporated and Bowater
America Inc. (as Sellers) and Bowater Funding Inc. (as Buyer) (incorporated by reference to
Exhibit&nbsp;10.50 to the 2002 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.42
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement dated as of January&nbsp;16, 2004, by and between Bowater Incorporated and
Ronald T. Lindsay) (incorporated by reference to Exhibit&nbsp;10.49 to the 2003 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.43
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Agreement dated as of January&nbsp;16, 2004, by and between Bowater
Incorporated and Ronald T. Lindsay) (incorporated by reference to Exhibit&nbsp;10.50 to the 2003
10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.44
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bowater Incorporated Mid-Term Incentive Plan, effective as of January&nbsp;1, 2003)
(incorporated by reference to Exhibit&nbsp;10.51 to the 2003 10-K).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.45
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated April&nbsp;22, 2004 between Bowater Incorporated and Bowater Canadian
Forest Products Inc. (as Borrowers) and JPMorgan Chase Bank, The Bank of Nova Scotia and
certain lenders (pursuant to Instruction 2 to Item&nbsp;601 of Regulation&nbsp;S-K, the Schedules to
the Credit Agreement are not being filed) (incorporated by reference to Exhibit&nbsp;10.1 of
Bowater Incorporated&#146;s Quarterly Report on Form&nbsp;10-Q for the period ending March&nbsp;30, 2004,
File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.46
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2004 Non-Employee Director Stock Unit Plan, effective May&nbsp;1, 2004 (incorporated by reference
to Exhibit&nbsp;10.2 to the June&nbsp;2004 10-Q).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.47
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Employment Agreement dated as of July&nbsp;1, 1993, by and between Bowater Incorporated
and Michael F. Nocito (incorporated by reference to Exhibit&nbsp;10.4 to Bowater Incorporated&#146;s
Annual Report on Form&nbsp;10-K for the period ending December&nbsp;31, 1993, File No.&nbsp;1-8712).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.48*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of August&nbsp;1, 1997, by and between Bowater Incorporated and
C. Randolph Ellington.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.49*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Change in Control Agreement, dated June&nbsp;9, 2000, by and between
Bowater Incorporated and C. Randolph Ellington.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.50*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Change in Control Agreement, dated June&nbsp;9, 2000, by and between
Bowater Incorporated and Roger A. Loney.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.51*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of August&nbsp;1, 1997, by and between Bowater Incorporated and
William C. Morris.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.52*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Change in Control Agreement, dated June&nbsp;9, 2000, by and between
Bowater Incorporated and William C. Morris.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.53*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated as of April&nbsp;1, 1998, by and between Bowater Incorporated and
Craig B. Stevens.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">97
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><U><B>Exhibit No</B></U><B>.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><U><B>Description</B></U></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.54*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Change in Control Agreement, dated June&nbsp;9, 2000, by and between
Bowater Incorporated and Craig B. Stevens.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#134;10.55*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Change in Control Agreement, dated June&nbsp;9, 2000, by and between
Bowater Incorporated and Colin R. Wolfe.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement regarding Computation of Ratio of Earnings to Fixed Charges.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries of the registrant.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Independent Registered
Public Accounting Firm</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of CEO Pursuant to Section&nbsp;302.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of CFO Pursuant to Section&nbsp;302.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of CEO Pursuant to Section&nbsp;906.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of CFO Pursuant to Section&nbsp;906.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="left">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Filed with this Form 10-K.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="left">&#134;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">This is a management contract or compensatory plan or arrangement.</TD>
</TR>

</TABLE>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">(b)&nbsp;&nbsp;</TD>
    <TD>The above-referenced exhibits are being filed with this report.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="left">(c)&nbsp;&nbsp;</TD>
    <TD>None.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">98
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;13 of 15(d) of the Securities Exchange Act of 1934,
Bowater has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">BOWATER INCORPORATED</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:
March 14, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Arnold M. Nemirow</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Arnold M. Nemirow</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman, President and Chief Executive Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of Bowater and in the capacities indicated, as of
March 14, 2005.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Arnold M. Nemirow</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Chairman, President and Chief Executive Officer</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Arnold M. Nemirow</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">William G. Harvey</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and Chief Financial Officer</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">William G. Harvey</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Michael F. Nocito</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President and Controller</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Michael F. Nocito</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Francis J. Aguilar</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Francis J. Aguilar</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Richard B. Evans</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Richard B. Evans</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Gordon D. Giffin</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Gordon D. Giffin</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Charles J. Howard</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Charles J. Howard</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">L. Jacques M&#233;nard</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">L. Jacques M&#233;nard</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Douglas A. Pertz</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Douglas A. Pertz</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">John A. Rolls</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">John A. Rolls</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Arthur R. Sawchuk</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Arthur R. Sawchuk</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;/s/
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-variant: SMALL-CAPS">Togo D. West Jr.</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Togo D. West, Jr.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">99
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>Bowater Incorporated<BR>
Schedule&nbsp;II&#150;Valuation and Qualifying Accounts<BR>
Years Ended December&nbsp;31, 2004, 2003 and 2002</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Charged to</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Beginning of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Cost and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Balance at</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Additions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Deductions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">End of Year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">

    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2004
Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2003
Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2002
Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-1




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.03
<SEQUENCE>2
<FILENAME>g93753exv3w03.txt
<DESCRIPTION>EX-3.03
<TEXT>
<PAGE>

                                                                     EXHIBIT 3.3

                                                                As amended as of
                                                               November 10, 2004

                                     BY-LAWS

                                       OF

                              BOWATER INCORPORATED

                                    ARTICLE 1

                          CERTIFICATE OF INCORPORATION

      The purpose of the Corporation, certain rights and powers of the
Corporation and of its directors and stockholders, the location of its
registered office in the State of Delaware and its capital stock shall all be as
set forth in the Certificate of Incorporation of the Corporation; and the
management of the business and the conduct of the affairs of the Corporation
shall be subject to the provisions of the said Certificate, which is hereby made
a part of these By-Laws. In case of any irreconcilable inconsistency between the
Certificate of Incorporation and these By-Laws, provisions in the Certificate of
Incorporation shall prevail.

      All references in these By-Laws to the Certificate of Incorporation shall
be construed to mean the Certificate of Incorporation of the Corporation as from
time to time amended.

                                    ARTICLE 2

                    PLACE OF MEETINGS AND LOCATION OF OFFICES

      The registered office of the Corporation in the State of Delaware shall be
in the City of Wilmington, County of New Castle, and the Corporation shall have
a resident agent, who may be either an individual or a corporation, in charge
thereof.

The stockholders and directors may hold their meetings and have an office or
offices outside of the State of Delaware.

As amended November 10, 2004

                                        1

<PAGE>

                                                                     EXHIBIT 3.3

                                    ARTICLE 3

                            MEETINGS OF STOCKHOLDERS

SECTION 3.1. ANNUAL MEETING.

      The annual meeting of stockholders for the election of Directors and for
such other matters as may be properly brought before the stockholders meeting
shall be held in each year on such date and at such time and place either within
or without the State of Delaware as shall be determined by resolution of the
Board of Directors of the Corporation.

      Any business properly brought before an annual meeting of stockholders may
be transacted at that meeting. To be properly brought before an annual meeting,
the business must be (i) specified in the written notice of the meeting (or any
supplement thereto) given by or at the direction of the Board of Directors or
otherwise brought before the meeting by or at the direction of the Board of
Directors, or (ii) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given written notice of the proposed
business, either by personal delivery or by United States mail, postage prepaid,
to the Secretary of the Corporation, such that the Secretary shall receive such
notice at least 120 days prior to the anniversary date of the immediately
preceding annual meeting or not later than 10 days after notice or public
disclosure of the date of the annual meeting shall be given or made to
stockholders, whichever date shall be earlier. Subject to Section 3.11 of these
By-Laws, any such notice shall set forth as to each item of business the
stockholder shall propose to bring before the annual meeting:

(a) a description of such item of business and the reasons for conducting it at
such meeting and, in the event that such item of business shall include a
proposal to amend either the Certificate of Incorporation or these By-Laws, the
text of the proposed amendment;

(b) the name and address of the stockholder proposing such item of business;

(c) the class and number of shares held of record, held beneficially and
represented by proxy by such stockholder as of the record date for the meeting
(if such a date has been established) and as of the date of such notice and a
representation that the stockholder intends to appear in person or by proxy at
the meeting to propose such item of business; and

(d) any material interest of the stockholder in such item of business.

      Only business that shall have been properly brought before an annual
meeting of stockholders in accordance with these By-Laws shall be conducted at
such meeting, and the officer or other person presiding over the meeting as
provided in Section 3.5 of these By-Laws may refuse to permit any business to be
brought before such meeting that shall not have been properly brought before it
in accordance with these By-Laws.

As amended November 10, 2004

                                        2

<PAGE>

                                                                     EXHIBIT 3.3

SECTION 3.2. SPECIAL MEETINGS.

      Special meetings of the stockholders may be called by the Board of
Directors, the Chairman of the Board of Directors, the President of the
Corporation, or a Committee of the Board of Directors which has been duly
designated by the Board of Directors and whose powers and authority, as provided
in a resolution of the Board of Directors or in these By-Laws, include the power
to call such meetings, and special meetings may not be called by any other
person or persons. Each such call shall state the time, place and purpose of the
meeting. The place of the meeting may be any place stated in the call, within or
outside the State of Delaware.

SECTION 3.3. NOTICE OF MEETINGS.

      No action shall be taken by the stockholders of the Corporation except at
an annual or special meeting of stockholders. Notice of each annual or special
meeting of the stockholders stating the place, day and hour thereof and the
purposes for which the meeting is to be held shall be given the manner specified
by Article 5 by the Secretary (or by a person designated for the purpose either
by the Secretary or by the person or persons calling the meeting or by the Board
of Directors), not less than ten (10) or more than sixty (60) days prior to the
meeting, except that where the matter to be acted on is a merger or
consolidation of the Corporation, or a sale, lease or exchange of all or
substantially all of its assets, such notice shall be given not less than twenty
(20) days nor more than sixty (60) days prior to such meeting.

      If any meeting action is proposed to be taken which, if taken, would
entitle any stockholders to appraisal rights pursuant to section 262 of the
Delaware General Corporation Law, the notice of such meeting shall also contain
a statement of such purpose and to that effect and shall be accompanied by a
copy of that statutory section.

SECTION 3.4. STOCKHOLDERS LIST.

      The officer who has charge of the transfer books for shares of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept open at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.

As amended November 10, 2004

                                       3

<PAGE>

                                                                     EXHIBIT 3.3

SECTION 3.5. ORGANIZATION OF MEETINGS.

      At each meeting of the stockholders the Chairman, or, in his absence, the
President, or, in their absence, any Vice President, or in all their absence, a
stockholder, director or officer appointed by the Board of Directors, or if they
fail to act, chosen by a majority vote of the stockholders present in person or
by proxy and entitled to vote thereat, shall act as chairman; and the Secretary,
or, in his absence, an Assistant Secretary, or, in the absence of the Secretary
and all Assistant Secretaries , a person whom the chairman of such meeting shall
appoint, shall act as secretary of such meeting and keep the minutes thereof.

SECTION 3.6. QUORUM.

      At any meeting of the stockholders, unless otherwise provided by law or by
the Certificate of Incorporation, the holders of shares of stock of the
Corporation representing one-third of the voting power of the stock of the
Corporation issued and outstanding and entitled to vote upon a question to be
considered at the meeting, present in person or by proxy, shall be necessary to
and shall constitute a quorum for the consideration of such question. If at any
time the Corporation has outstanding shares of stock ("contingent vote shares")
the voting power of which is dependent upon the receipt by the record holder of
such contingent vote shares of instructions from holders of securities of a
subsidiary of the Corporation, then for purposes of determining the voting power
of the stock of the Corporation issued and outstanding and entitled to vote upon
a question to be considered at the meeting, the record holder of such contingent
vote shares shall be deemed to have received instructions from each holder of
such subsidiary securities entitled to provide such instructions, and for
purposes of determining the voting power of the shares of stock present in
person or by proxy at such meeting, such contingent vote shares shall only have
the voting power to which they would otherwise be entitled based on the
instructions actually received by such record holder. If, however, a meeting of
stockholders cannot be organized because a quorum has not attended, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting at which the adjournment is taken of the
time and place of the adjourned meeting, until a quorum shall be present or
represented. In case of a meeting for the election of directors, such meeting
may be adjourned only from day to day or for such longer periods, not exceeding
fifteen days each, until such directors have been elected. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted that might have been transacted had a quorum been present at the time
originally fixed for the meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.

As amended November 10, 2004

                                       4

<PAGE>

                                                                     EXHIBIT 3.3

SECTION 3.7. VOTE REQUIRED.

      When a quorum is present at any meeting, all elections of directors shall
be determined by plurality vote, and all other questions brought before such
meeting shall be determined by the vote of stockholders present, in person or by
proxy, entitled to cast at least a majority of the votes which all stockholders
present are entitled to cast on the particular matter, unless the question is
one upon which, by express provision of the laws of the State of Delaware or of
the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.

SECTION 3.8. VOTING.

      Each stockholder having the right to vote shall at every meeting of the
stockholders be entitled to vote in person or by proxy; and unless otherwise
provided by statute or the Certificate of Incorporation, each stockholder of
record shall be entitled to one vote for each outstanding share registered in
his name on the books of the Corporation as of the record date for determining
the stockholders entitled to notice of and to vote at such meeting.

SECTION 3.9. PROXIES; APPOINTMENT AND REVOCATION.

      Each proxy shall be in writing, executed by the stockholder giving the
proxy or by his attorney thereunto authorized, or by a telegram, cable or telex,
filed with the Secretary of the Corporation; but no proxy shall be voted after
three years from its date, unless the proxy expressly provides for a longer
period. A proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until notice
thereof has been given to the Secretary of the Corporation. A proxy shall not be
revoked by the death or incapacity of the maker unless, before the vote is
counted or the authority is exercised, written notice of such death or
incapacity is given to the Secretary of the Corporation.

SECTION 3.10. JUDGES OF ELECTION.

      In advance of any meeting of stockholders, the Board of Directors may
appoint judges of election, who need not be stockholders, to act at such meeting
or any adjournment thereof. If judges of election be not so appointed, the
chairman of any such meeting may, and on the request of any stockholder or his
proxy shall, make such appointment at the meeting. The number of judges shall be
one or three as shall be determined by the Board of Directors, except that, if
appointed at the meeting on the request of any stockholder or his proxy shall,
make such appointment at the meeting. The number of judges shall be one or three
as shall be determined by the Board of Directors, except that, if appointed at
the meeting on the request of one or more stockholders or proxies, the holders
of a majority of the shares of the Corporation present and

As amended November 10, 2004

                                       5

<PAGE>

                                                                     EXHIBIT 3.3

entitled to vote shall determine whether one or three judges are to be
appointed. No person who is a candidate for office shall act as a judge.

      In case any person appointed as a judge fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Board of
Directors in advance of the convening of the meeting, or at the meeting by the
officer or person acting as chairman.

      The judges of election shall determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies, receive
votes or ballots, hear and determine all challenges and questions in any way
arising in connection with the right to vote, count and tabulate all votes,
determine the result, and do such other acts as may be proper to conduct the
election or vote with fairness to all stockholders. The judges of election shall
perform their duties impartially, in good faith, to the best of their ability,
and as expeditiously as is practical. If there be three judges of election, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act or certificate of all.

      On request of the chairman of the meeting, or of any stockholder or his
proxy, the judges shall make a report in writing of any challenge or question or
matter determined by them, and execute a certificate of any fact found by them.
Any report or certificate made by them shall be prima facie evidence of the
facts stated therein.

SECTION 3.11. NOTIFICATION OF NOMINATIONS.

      Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or by any stockholder entitled to vote for the election of directors. Any
stockholder entitled to vote for the election of directors at a meeting may
nominate persons for election as directors only if written notice of the intent
of such stockholder to make such nomination shall be given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders, 120 days prior to the anniversary date of the
immediately preceding annual meeting and (ii) with respect to an election to be
held at a special meeting of stockholders for the election of directors, the
close of business on the seventh day following the date on which notice of such
meeting shall first be given to stockholders. Each such notice shall set forth:

(a) the name and address of the stockholder who shall intend to make the
nomination and of the person or persons to be nominated;

(b) the class and number of shares held of record, held beneficially and
represented by proxy by such stockholder as of the record date of the meeting
(if such a date has been established ) and

As amended November 10, 2004

                                       6

<PAGE>

                                                                     EXHIBIT 3.3

as of the date of such notice and a representation that the stockholder intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice;

(c) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder;

(d) such other information regarding each nominee proposed by such stockholder
as would have been required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had each nominee
been nominated, or intended to be nominated, by the Board of Directors; and

(e) the consent in writing of each nominee to serve as a director of the
Corporation if so elected.

      The officer or other person presiding over the meeting as provided in
Section 3.5 of these By-Laws may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure.

                                    ARTICLE 4

                               BOARD OF DIRECTORS

SECTION 4.1. NUMBER, ELECTION AND TENURE.

      A Board of Directors shall be chosen by ballot at the annual meeting of
stockholders or at a special meeting for that purpose held in place thereof. No
director need be a stockholder.

      The number of directors constituting the whole Board shall be not less
than nine nor more than fifteen as fixed from time to time by resolution of the
whole Board; provided, that no decrease in the number of directors shall shorten
the term of any incumbent director.

      The Board of Directors shall be and is divided into three classes, Class
I, Class II and Class III. No one class shall have more than one director more
than any other class. If a fraction is contained in the quotient arrived at by
dividing the authorized number of directors by three, then if such fraction is
one-third, the extra director shall be a member of Class III, and if such
fraction is two-thirds, one of the extra directors shall be a member of Class
III and one of the extra directors shall be a member of Class II, unless
otherwise provided for from time to time by resolution of the Board of
Directors.

As amended November 10, 2004

                                       7

<PAGE>

                                                                     EXHIBIT 3.3

      Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected;
provided, however, that each initial director in Class I shall serve for a term
ending on the date of the annual meeting next following the end of calendar year
1984; each initial director in Class II shall serve for a term ending on the
date of the annual meeting next following the end of calendar year 1985; and
each initial director in Class III shall serve for a term ending on the date of
the annual meeting next following the end of calendar year 1986.

      In the event of any increase or decrease in the authorized number of
directors, (i) each director then serving as such shall nevertheless continue as
director of the class of which he is a member until the expiration of his
current term, or his prior death, retirement or resignation, and (ii) the newly
created or eliminated directorships resulting from such increase or decrease
shall be apportioned by the Board of Directors among the three classes of
directors so as to ensure that no one class has more than one director more than
any other class. To the extent possible consistent with the foregoing rule, any
newly created directorships shall be added to those classes whose terms of
office are to expire at the latest dates following such allocation, and any
newly eliminated directorships shall be subtracted from those classes whose
terms of office are to expire at the earliest dates following such allocation,
unless otherwise provided for from time to time by resolution of the Board of
Directors. Notwithstanding any provisions to the contrary contained herein, each
director shall serve until a successor is elected and qualified or until his
earlier death, resignation or removal.

SECTION 4.2. RESIGNATION.

      Any director may resign at any time by written notice to the Board of
Directors, the Chairman, the President or the Secretary. Such resignation shall
take effect immediately upon receipt thereof or at any later time specified
therein. Unless otherwise specified in any such notice, acceptance of such
resignation shall not be necessary to make it effective.

SECTION 4.3. REMOVAL.

      A director may be removed only for cause and only by the affirmative vote
of the holders of at least 75% of the shares then entitled to vote at an
election of directors, at a special meeting of the stockholders called and held
for that purpose.

SECTION 4.4. VACANCIES; NEW DIRECTORSHIPS.

      Any vacancies in the Board of Directors occurring for any reason and any
newly created directorships resulting from any increase in the number of
directors may be filled only by the Board of Directors, acting by (i) a vote of
at least a majority of the remaining directors then in office, though less than
a quorum, if no Acquiring Stockholder (as defined in the Certificate of

As amended November 10, 2004

                                       8

<PAGE>

                                                                     EXHIBIT 3.3

Incorporation) has become such in the twelve months immediately preceding the
occurrence of such vacancy or the creation of such new directorship, or (ii) a
vote of at least 75% of the Continuing Directors (as defined in the Certificate
of Incorporation) then in office, though less than a quorum, if an Acquiring
Stockholder has become such in the twelve months immediately preceding in the
occurrence of such vacancy or the creation of such new directorship. Each
director so chosen shall hold office until the next election of directors of the
class of which he is a member and until his successor is duly elected and shall
qualify, or until his earlier death, resignation or removal. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute. When one or more directors shall resign from the board
effective at a future date, the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies by acting
in the manner specified in the first sentence of this Section (except that for
purposes of determining whether clause (i) or clause (ii) shall be applicable, a
vacancy shall be deemed to have occurred at the time of such resignation), the
vote thereon to take effect when such resignation or resignations shall become
effective; and each such director so chosen shall hold office as provided in
this Section in the filling of other vacancies.

SECTION 4.5. POWERS OF DIRECTORS.

      The business and affairs of the Corporation shall be managed by or under
the direction of its Board of Directors which shall have and may exercise
without limit all the powers of the Corporation and do all lawful acts and
things on its behalf, except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws.

SECTION 4.6. MEETINGS OF THE BOARD OF DIRECTORS.

      Regular meetings of the Board of Directors may be held at such place and
at such times as the Board may by vote from time to time determine, and, if so
determined, no notice thereof need be given. If any meeting date shall fall upon
a legal holiday, such meeting shall be held on the next succeeding business day
at the same hour and at the same place at which the meeting was to have been
held.

      Special meetings of the Board of Directors may be held at any time and at
any place when called by the Chairman, Vice Chairman, President or by any four
or more directors, upon five days' notice thereof (which may include Sundays and
holidays) being given to each director in the manner specified in Article 5
hereof, or at any time without call or formal notice, provided all the directors
are present or waive notice thereof in writing, signed before or after the
meeting.

As amended November 10, 2004

                                       9

<PAGE>

                                                                     EXHIBIT 3.3

SECTION 4.7. MEETINGS BY TELEPHONE CONFERENCE.

      Members of the Board of Directors, or any committee designated by the
Board, may participate in any meeting of the Board or such Committee by
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to these By-Laws shall constitute presence in person at such
meeting.

SECTION 4.8. QUORUM OF THE BOARD OF DIRECTORS.

      A majority of the whole Board of Directors shall constitute a quorum for
the transaction of business. A majority of the directors present, whether or not
a quorum, may adjourn any meeting from time to time, and the meeting may be held
as adjourned without further notice. When a quorum is present at any meeting,
the vote of a majority of the directors in attendance thereat shall be the act
of the Board of Directors, except where a vote of a larger number of the
directors is required by law, by the Certificate of Incorporation or by these
By-Laws.

SECTION 4.9. ORGANIZATION OF MEETINGS.

      At each meeting of the Board of Directors the Chairman, or, in his
absence, the Vice Chairman, or, in their absence, the President, or, in all
their absence, a director chosen by a majority of the directors present, shall
act as chairman; and the Secretary, or, in his absence, an Assistant Secretary,
or, in the absence of the Secretary and all Assistant Secretaries, a person whom
the chairman of such meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof.

SECTION 4.10. ACTION BY WRITTEN CONSENT.

      Any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the board or committee.

SECTION 4.11. COMMITTEES OF DIRECTORS.

      The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the Corporation, which, to the extent
provided in said resolution or resolutions, and subject to the authority of the
Board of Directors, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation when
the

As amended November 10, 2004

                                       10

<PAGE>

                                                                     EXHIBIT 3.3

Board is not in session, and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. The Board of
Directors may designate one or more directors as alternate members of any
committee who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of any member of such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of such absent or disqualified member. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. The foregoing and any other
provision of these By-Laws notwithstanding, any delegation to a committee of the
power of the Board of Directors to take such actions as would require a greater
than majority vote or a specified vote of a specified class of the directors in
order for the Board itself to adopt such actions must be made by such greater
than majority vote or such specified vote of the specified class of directors.

SECTION 4.12. RESTRICTIONS ON AUTHORITY OF COMMITTEES.

      No committee shall have any power or authority to amend the Certificate of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), to adopt an agreement of
merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
to recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, to amend the By-Laws of the Corporation, or, unless
the resolution creating such committee expressly so provides, to declare a
dividend, authorize the issuance of stock or adopt a certificate of ownership
and merger pursuant to Section 253 of the Delaware General Corporation Law.

SECTION 4.13. PROCEDURES FOR COMMITTEES.

      Each committee shall keep regular minutes of its proceedings and all
action by such committee shall be reported to the Board of Directors at its
meeting next succeeding such action. Each committee shall fix its own rules of
procedure, provided that such rules are consistent with these By-Laws, and shall
meet where and as provided by such rules or by resolution of the Board of
Directors. The presence of a majority of the then appointed number of each
committee shall constitute a quorum and in every case in which a quorum is
present an affirmative vote by a majority of the members of the Committee
present shall be the act of the committee.

As amended November 10, 2004

                                       11

<PAGE>

                                                                     EXHIBIT 3.3

SECTION 4.14. COMPENSATION OF DIRECTORS.

      The directors shall receive such compensation for their services as the
Board of Directors may from time to time determine; provided, however, that
directors who are also officers or employees of the Corporation or a subsidiary
of the Corporation shall not be entitled to any such compensation as a director;
and all directors shall be reimbursed for their expenses of attendance at each
regular or special meeting of the Board of Directors. Members of any committee
of directors may be allowed like compensation and reimbursement for expenses for
serving as members of any such committee and for attending committee meetings.

SECTION 4.15. MANDATORY RETIREMENT.

      Inside directors - those employed by the company - are required to resign
at age 65 (or at the time of retirement or other termination from company
employment, if earlier). Except as provided in the following sentence, no
Outside Director shall be eligible to stand for re-election to a term on the
Board of Directors after he or she has reached age 72 and each Outside Director
is required to resign at age 72. The Board of Directors may, however, by
resolution waive the mandatory retirement requirement with respect to an Outside
Director if the Board of Directors determines that such action is in the best
interests of the Corporation.

                                    ARTICLE 5

                                     NOTICES

SECTION 5.1. METHOD OF GIVING NOTICE.

      Whenever, under the provisions of any statute, or the Certificate of
Incorporation or these By-laws, notice is required to be given to any director
or stockholder, such notice shall be in writing and may be delivered personally
or by mail. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to such person at this address as it appears on the
records of the Corporation. Notice to any director may also be given by
telegram, cable or telex or by leaving he notice at the residence or usual place
of business of such director.

SECTION 5.2. WAIVER OF NOTICE.

      Whenever any notice is required to be given under the provisions of any
statute, the Certificate of Incorporation or these By-laws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether given
before or after the time stated therein, shall be deemed equivalent thereto.
Attendance of a person at a meeting of stockholders, in person or by

As amended November 10, 2004

                                       12

<PAGE>

                                                                     EXHIBIT 3.3

proxy, or at a meeting of the Board of Directors shall constitute a waiver of
notice of such meeting, except when a person attends such meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Except in the case of a special meeting of stockholders or of the
Board of Directors, neither the business to be transacted at, nor the purpose
of, any meeting need be specified in any written waiver of notice unless so
required by the Certificate of Incorporation or these By-laws.

                                    ARTICLE 6

                               OFFICERS AND AGENTS

SECTION 6.1. ELECTION, TENURE, ETC.

      The Board of Directors shall choose a President and a Secretary, and it
may, if it so determines, choose a Chairman of the Board and a Vice Chairman of
the Board from among its members. The Board of Directors may determine from time
to time which officers shall be designated Chief Executive Officer and Chief
Financial Officer, respectively, of the Corporation. The Board of Directors may
also choose one or more Vice Presidents, a Controller and one or more Assistant
Controllers, a General Counsel and one or more Assistant General Counsels, one
or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers.
Each such officer shall hold such office until the first meeting of the Board of
Directors after the annual meeting of stockholders next succeeding his election,
and until his successor is elected and qualified or until his earlier death,
resignation or removal. Any officer may resign by written notice to the
Corporation and may be removed at any time with or without cause by the Board of
Directors. The officers shall receive such remuneration for services under such
terms as the Board of Directors shall determine. Except in respect of the
offices of President and Secretary, any person may hold two or more offices.
Each officer shall have in addition to such duties and powers herein set forth
such duties and powers not inconsistent with these By-laws as the Board of
Directors shall from time to time designate.

SECTION 6.2. EXECUTIVE OFFICERS.

      The Chairman, the Vice Chairman, the President, and the Vice President(s)
shall have such powers and functions as shall be determined by the Board of
Directors.

As amended November 10, 2004

                                       13

<PAGE>

                                                                     EXHIBIT 3.3

SECTION 6.3. TREASURER.

      The Treasurer shall, subject to the direction and the supervision of the
Board of Directors (or such officer as the Board may appoint), have the care and
control of the funds of the Corporation. He shall maintain banking arrangements
and receive, have custody of and distribute the Corporation's monies. He shall
invest the surplus funds of the Corporation as required and provide for the
custody and delivery of the investment securities in exchange for cash when
appropriate. The Treasurer shall have such number of Assistant Treasurers to
assist him in his duties having such powers as the Board of Directors shall from
time to time determine and appoint.

SECTION 6.4. CONTROLLER.

      The Controller shall, subject to the direction and under the supervision
of the Board of Directors (or such officer as the Board may appoint), keep or
cause to be kept accurate books of accounts which shall be the property of the
Corporation. He shall establish, coordinate and administer, as an integral part
of management, an adequate system for the control of operations. He shall
maintain systems for measuring actual operations with operating plans and
standards and report thereon. He shall establish and maintain internal fiscal
controls. The Controller shall have such number of Assistant Controllers to
assist him in his duties, having such powers as the Board of Directors shall
from time to time determine and appoint.

SECTION 6.5. SECRETARY.

      The Secretary shall have custody of the valuable papers of the Corporation
(except the books of account) and of the corporate seal and shall record all the
proceedings of the meetings of the stockholders, the Board of Directors and the
various committees of the Board in books kept for those purposes and in the
absence of the Secretary from any such meeting an Assistant Secretary or a
Secretary pro tempore shall record the proceedings thereof.

      The Secretary shall have such number of Assistant Secretaries to assist
him in his duties having such powers as the Board of Directors may from time to
time determine.

As amended November 10, 2004

                                       14

<PAGE>

                                                                     EXHIBIT 3.3

                                    ARTICLE 7

                 CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

SECTION 7.1. AUTHORITY OF OFFICERS.

      The Board of Directors, except as otherwise provided in these By-laws, may
authorize any officer or officers, agent or agents or employee or employees of
the Corporation to enter into any contract or execute and deliver any instrument
in the name and on behalf of the Corporation, and such authority may be general
or confined to specific instances; and, unless so authorized by the Board of
Directors, no officer, agent or employee shall have any power or authority to
bind the Corporation by any contract or engagement or to pledge its credit or to
render it liable pecuniarily for any purpose or to any amount.

SECTION 7.2. AUTHORIZED LOAN; SECURITY.

      No loan shall be contracted on behalf of the Corporation, and no
negotiable paper shall be issued, endorsed or accepted in its name, unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances. When so authorized, the officer or officers thereunder
authorized may effect loans and advances at any time for the Corporation from
any bank, trust company or other institution, or from any firm, corporation or
individual, and of such loans and advances may make, execute and deliver
promissory notes or other evidences of indebtedness of the Corporation; and,
when authorized as aforesaid, as security for the payment of any and all loans,
advances, indebtedness and liabilities of the Corporation, such officers may
mortgage, pledge, hypothecate or transfer any real or personal property at any
time owned or held by the Corporation, and to that end execute instruments of
mortgage or pledge or otherwise transfer such property.

SECTION 7.3. ENDORSEMENT OF CHECKS, ETC.

      All checks, drafts, bills of exchange or other orders for the payment of
money, obligations, notes or other evidences of indebtedness, bills of lading,
warehouse receipts and insurance certificates of the Corporation shall be signed
or endorsed by such officer or officers, agent or agents, attorney or attorneys
or employee or employees of the Corporation as shall from time to time be
determined by resolution of the Board of Directors. Each such officer or
employee shall give such bond, if any, as the Board of Directors may require.

As amended November 10, 2004

                                       15

<PAGE>

                                                                     EXHIBIT 3.3

SECTION 7.4. DEPOSIT OF FUNDS.

      All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositaries as the Board of Directors may from time to time
designate, or as may be designated by an officer of officers, agent or agents,
attorney or attorneys or employee or employees of the Corporation to whom such
power may be delegated by the Board of Directors.

SECTION 7.5. BANK ACCOUNTS.

      The Board of Directors may from time to time authorize the opening and
keeping of general and special bank accounts with such banks, trust companies or
other depositaries as it may designate or as may be designated by an officer or
officers, agent or agents, attorney or attorneys or employee or employees of the
Corporation to whom power in that respect shall have been delegated by the Board
of Directors. The Board may make such special rules and regulations with respect
to such bank accounts, not inconsistent with the provisions of these By-laws, as
it may deem expedient.

SECTION 7.6. RIGHTS OF CORPORATION AS STOCKHOLDER.

      Unless otherwise provided by resolution adopted by the Board of Directors,
the President or any Vice President may from time to time appoint an attorney or
attorneys, or agent or agents, to exercise in the name and on behalf of the
Corporation the powers and rights which the Corporation may have as the holder
of stock or other securities in any other corporation, to vote or to consent in
respect of such stock or other securities; and the President or any Vice
President may instruct the person or persons so appointed as to the manner of
exercising such powers and rights and may execute or cause to be executed in the
name and on behalf of the Corporation and under its corporate seal, or
otherwise, all such written proxies, powers of attorney or other written
instruments as he may deem necessary or appropriate in order that the
Corporation may exercise such powers and rights.

                                    ARTICLE 8

                  UNCERTIFICATED SHARES AND STOCK CERTIFICATES

SECTION 8.1. UNCERTIFICATED SHARES.

      The Board of Directors may provide by resolution or resolutions that some
or all of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Any such resolution

As amended November 10, 2004

                                       16

<PAGE>

                                                                     EXHIBIT 3.3

shall not apply to shares represented by a certificate until such certificate is
surrendered to the corporation. Within a reasonable time after the issuance or
transfer or uncertificated stock, the Corporation shall send to the registered
owner thereof a written notice containing (a) any written restriction on the
transfer or registration of transfer of such stock which is imposed by the
Certificate of Incorporation or these By-Laws, (b) if such stock is issued
pursuant to a voting trust agreement, a statement of that fact and (c) if the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, a full or summary statement of, or a statement
that the Corporation will furnish without charge to each stockholder who so
requests, the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Except as expressly provided by law, the rights and obligations of the
holders of uncertificated stock and the rights and obligations of the holders of
certificates representing stock of the same class and series shall be identical.

SECTION 8.2. STOCK CERTIFICATES.

      Notwithstanding the adoption by the Board of Directors of a resolution
providing for uncertificated shares, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to a certificate, in such form as shall in conformity to law be
prescribed from time to time by the Board of Directors, representing the number
of shares owned by him in the Corporation and registered in certificate form.
Such certificate shall be signed by, or in the name of the Corporation by the
Chairman, the Vice Chairman, the President or a Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
and shall bear the seal of the Corporation; provided, however, that, where such
certificate is signed (1) by a transfer agent or an assistant transfer agent or
(2) by a transfer clerk acting on behalf of the Corporation and a registrar, the
signatures of the Chairman, Vice Chairman, President, Vice President, Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary may be facsimile. In case
any officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or certificates shall
have ceased to be such officer or officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates is
issued, such certificate or certificates may be issued by the Corporation with
the same effect as if he were such officer at the date of issue.

SECTION 8.3. REGISTRATION OF TRANSFER.

      The Board of Directors shall cause suitable records to be kept for the
registry and transfer of the shares of the capital stock of the Corporation.
Upon presentation to the Corporation or its transfer agent of a certificate for
shares duly indorsed by an appropriate person or an instruction requesting the
transfer, pledge or release of uncertificated shares originated by the
appropriate person, together with reasonable assurance that such indorsement or
instruction is genuine and effective and such evidence of the payment of
transfer taxes and compliance with other

As amended November 10, 2004

                                       17

<PAGE>

                                                                     EXHIBIT 3.3

provisions of law as the Corporation or its transfer agent may require, the
transfer, pledge or release shall be registered as requested. No transfer of
shares of stock represented by a certificate shall be valid except upon the
surrender and cancellation of the old certificate or as provided in section 8.4
of these By-Laws.

SECTION 8.4. LOSS OF CERTIFICATE.

      In case of the mutilation or of the alleged loss, theft or destruction of
a certificate of stock, a new certificate of stock or uncertificated shares may
be issued in the place thereof. In the case of the mutilation, loss, theft or
destruction of a certificate, the Board of Directors may, in its discretion,
require the owner of the mutilated, lost, stolen or destroyed certificate, or
his legal representative, to give the Corporation a bond sufficient to indemnify
the Corporation against any claim that may be made against it on account of the
alleged mutilation, loss, theft or destruction of such certificate or the
issuance of such new certificate or uncertificated shares, accompanied by
appropriate affidavit of mutilation, loss, theft or destruction. A new
certificate or uncertificated shares may be issued without requiring a bond when
in the judgment of the Board of Directors it is proper to do so. The Board of
Directors, however, may in its discretion refuse to issue any such new
certificates or uncertificated shares except pursuant to legal proceedings under
the laws of the State of Delaware.

SECTION 8.5. RESTRICTIONS ON TRANSFER.

      The Board of Directors may impose restrictions on the transfer of the
rights, to be distributed as a dividend pursuant to the Rights Agreement, dated
as of April 22, 1986, by and between the Corporation and Morgan Guaranty Trust
Company of New York, as and to the extent required by such Rights Agreement, as
amended from time to time.

                                    ARTICLE 9

                               GENERAL PROVISIONS

SECTION 9.1. FIXING RECORD DATE.

      In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders of any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any

As amended November 10, 2004

                                       18

<PAGE>

                                                                     EXHIBIT 3.3

other action. If no record date is fixed, then (a) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held and (b) the record
date for determining stockholder for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of, or to vote at, a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting in which case notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.

SECTION 9.2. REGISTERED STOCKHOLDERS.

      The Corporation shall be entitled to recognize a person registered on its
books as the holder of shares as the sole owner of such shares for all purposes,
and to hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware. Without limiting the generality of
the foregoing, the Corporation shall be entitled to recognize the exclusive
right of a person whose holding of shares is so registered on its books as of
any record dated fixed or determined pursuant to section 9.1 of these By-Laws to
be treated as the sole owner of such shares for the purpose for which such
record date was so fixed or determined.

SECTION 9.3. DIVIDENDS.

      Dividends upon the outstanding stock of the Corporation, of any class or
series, subject to the provisions of the Certificate of Incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of the
corporation of any class or series, subject to the provisions of the Certificate
of Incorporation.

SECTION 9.4. RESERVES.

      Before payment of any dividend, there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the directors from
time to time in their absolute discretion, think proper as a reserve or reserves
to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.

As amended November 10, 2004

                                       19

<PAGE>

                                                                     EXHIBIT 3.3

SECTION 9.5. FISCAL YEAR.

      Except as from time to time otherwise provided by the Board of Directors,
the fiscal year of the Corporation shall be the calendar year.

SECTION 9.6. SEAL.

      The seal of the Corporation shall, subject to alteration by the Board of
Directors, consist of a flat faced circular die with the words "Bowater
Incorporated, Delaware, 1964, Corporate Seal" cut or engraved thereon. The seal
may be used by causing it or a facsimile thereof, to be impressed or affixed or
in any other manner reproduced.

                                   ARTICLE 10

                                   AMENDMENTS

      New By-Laws of the Corporation may be adopted or the By-Laws of the
Corporation may be amended or repealed by a vote of either a majority of the
directors of the Corporation or a majority of the voting power of the
Corporation; provided, however, that any By-Laws concerning the election of
removal of directors, the range of the number of directors, the exact number of
directors within such range or the method of fixing either such range or the
exact number of directors within such range, the classification of the Board of
Directors, the filling of vacancies on the Board of Directors, the requirement,
if then in the Certificate of Incorporation and these By-Laws, that all
stockholder action must be taken at an annual or special meeting, the calling of
special meetings of the stockholders, or the method of adopting, amending or
repealing of By-Laws may not be amended, adopted or repealed, nor shall any
other By-Law be amended, adopted or repealed which will have the effect of
modifying or permitting the circumvention of such By-Laws, unless such adoption,
amendment or repeal is approved by the affirmative vote of 75% of the Continuing
Directors (where such adoption, amendment or repeal may be effected by the Board
of Directors) or by the affirmative vote of the holders of not less than 75% of
the voting power of the Corporation. The foregoing notwithstanding, in case of
any irreconcilable inconsistency between the Certificate of Incorporation and
the By-Laws of the Corporation, provisions in the Certificate of Incorporation
shall prevail.

As amended November 10, 2004

                                       20
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.48
<SEQUENCE>3
<FILENAME>g93753exv10w48.txt
<DESCRIPTION>EX-10.48
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.48

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT, is made as of this 1st day of August , 1997, by and
between BOWATER INCORPORATED, a Delaware corporation having a mailing address of
55 East Camperdown Way, Greenville, South Carolina 29601 (the "Corporation"),
and C. Randolph Ellington, 10 Belfrey Drive, Greer, SC 29650 (the "Executive").

      WHEREAS, the Corporation desires to employ the Executive as Vice
President, Newsprint and Directory Sales, of the Newsprint and Directory
Division; and

      WHEREAS, the Executive is desirous of serving the Corporation in such
capacity;

      NOW, THEREFORE, the parties hereto agree as follows:

      1. Employment. During the term of this Agreement the Corporation agrees to
continue to employ the Executive, and the Executive agrees to continue in the
employ of the Corporation, in accordance with and subject to the provisions of
this Agreement.

      2.    Term.

            (a)   Subject to the provisions of subparagraphs (b) and (c) of this
                  Section 2, the term of this Agreement shall begin on the Date
                  hereof and shall continue thereafter until terminated by
                  either party by written notice given to the other party at
                  least thirty (30) days prior to the effective date of any such
                  termination. The effective date of the termination shall be
                  the date stated in such notice, provided that if the
                  Corporation specifies an effective date that is more than (30)
                  days following the date of such notice, the Executive may,
                  upon thirty (30) days' written notice to the Corporation,
                  accelerate the effective date of such termination.

                                       1

<PAGE>

            (b)   Notwithstanding Section 2(a), upon the occurrence of a Change
                  in Control as defined in the Change in Control Agreement of
                  even date herewith between the Corporation and the Executive
                  (the "Change in Control Agreement"), the term of this
                  Agreement shall be deemed to continue until terminated, but in
                  any event, for a period of not less than three (3) years
                  following the date of the Change in Control, unless such
                  termination shall be at the Executive's election for other
                  than "Good Reason" as that term is defined in the Change in
                  Control Agreement.

            (c)   Notwithstanding Section 2(a), the term of this Agreement shall
                  end upon:

                  (i)   the death of the Executive;

                  (ii)  the inability of the Executive to perform his duties
                        properly, whether by reason of ill-health, accident or
                        other cause, for a period of one hundred and eighty
                        (180) consecutive days or for periods totaling one
                        hundred and eighty (180) days occurring within any
                        twelve (12) consecutive calendar months; or

                  (iii) the executive's retirement on his early or normal
                        retirement date.

      3. Position and Duties. Throughout the term hereof, the Executive shall be
employed as Vice President, Newsprint and Directory Sales, of the Newsprint and
Directory Division (Salary Grade 32), with the duties and responsibilities
customarily attendant to that office, provided that the Executive shall
undertake such other and further assignments and responsibilities of at least
comparable status as the Board of Directors may direct. The Executive shall
diligently and faithfully devote his full working time and best efforts to the
performance of the services under this Agreement and to the furtherance of the
best interests of the Corporation.

      4. Place of Employment. The Executive will be employed at the corporate
offices in the City of Greenville, South Carolina or at such other place as the
Corporation shall designate from time to time, provided, however, that if the
Executive is transferred to another place of employment, necessitating a change
in his residence, the Executive shall be entitled to financial assistance in
accordance with the terms of the Corporation's relocation policy then in effect.

                                        2

<PAGE>

      5.    Compensation and Benefits.

            (a)   Base Salary. The Corporation shall pay to the Executive a base
                  salary of $192,500 payable in substantially equal periodic
                  installments on the Corporation's regular payroll dates. The
                  Executive's base salary shall be reviewed at least annually
                  and from time to time may be increased (or reduced, if such
                  reduction is effected pursuant to across-the-board salary
                  reductions similarly affecting all management personnel of the
                  Corporation).

            (b)   Bonus Plan. In addition to his base salary, the Executive
                  shall be entitled to receive a bonus under the Corporation's
                  bonus plan in effect from time to time determined in the
                  manner, at the time, and in the amounts set forth under such
                  plan.

            (c)   Benefit Plans. The Corporation shall make contributions on the
                  Executive's behalf to the various benefit plans and programs
                  of the Corporation in which the Executive is eligible to
                  participate in accordance with the provisions thereof as in
                  effect from time to time.

            (d)   Vacations. The Executive shall be entitled to paid vacation,
                  in keeping with the Corporate policy as in effect from time to
                  time, to be taken at such time or times as may be approved by
                  the Corporation.

            (e)   Expenses. The Corporation shall reimburse the Executive for
                  all reasonable expenses properly incurred, and appropriately
                  documented, by the Executive in connection with the business
                  of the Corporation.

            (f)   Perquisites. The Corporation shall make available to the
                  Executive all perquisites to which he is entitled by virtue of
                  his position.

      6. Nondisclosure. During and after the term of this Agreement, the
Executive shall not, without the written consent of the Board of Directors of
the Corporation, disclose or use directly or indirectly, (except in the course
of employment hereunder and in furtherance of the business of the Corporation or
any of its subsidiaries and affiliates) any of the trade secrets or other
confidential information or proprietary data of the Corporation or its
subsidiaries or affiliates; provided, however, that confidential information
shall not include any information known generally to the public (other than as

                                       3

<PAGE>

a result of unauthorized disclosure by the Executive) or any information of a
type not otherwise considered confidential by persons engaged in the same or
similar businesses.

      7. Noncompetition. During the term of this Agreement, and for a period of
one (1) year after the date the Executive's employment terminates, the Executive
shall not, without the prior approval of the Board of Directors of the
Corporation in the same or a similar capacity engage in or invest in, or aid or
assist anyone else in the conduct of any business (other than the businesses of
the Corporation and its subsidiaries and affiliates) which directly competes
with the business of the Corporation and its subsidiaries and affiliates as
conducted during the term hereof. If any court of competent jurisdiction shall
determine that any of the provisions of this Section 7 shall not be enforceable
because of the duration or scope thereof, the parties hereto agree that said
court shall have the power to reduce the duration and scope of such provision to
the extent necessary to make it enforceable and this Agreement in its reduced
form shall be valid and enforceable to the extent permitted by law. The
Executive acknowledges that the Corporation's remedy at law for a breach by the
Executive of the provisions of this Section 7 will be inadequate. Accordingly,
in the event of the breach or threatened breach by the Executive of this Section
7, the Corporation shall be entitled to injunctive relief in addition to any
other remedy it may have.

      8. Severance Pay. If the Executive's employment hereunder is involuntarily
terminated for any reason other than those set forth in Section 2(c) hereof,
then unless the Corporation shall have terminated the Executive for "Cause", the
Corporation shall pay the Executive severance pay in an amount equal to
twenty-four (24) months of the Executive's base salary on the effective date of
the termination, plus 1/12 of the amount of the last bonus paid to the Executive
under the Corporation's bonus plan applicable to the Executive for each month in
the period beginning on January 1 of the year in which the date of the
termination occurs and ending on the date of the termination and for each
months' base salary to which the Executive is entitled under this Section 8,
provided, however, that any amount paid to the Executive by the Corporation for
services rendered subsequent to the thirtieth (30th) day following the
communication to the Executive of notice of termination shall be deducted from
the severance pay otherwise due hereunder. Such payment shall be made in a lump
sum within ten (10) business days following the effective date of the
termination. The severance pay shall be in lieu of all other compensation or
payments of any kind relating to the termination of the Executive's employment
hereunder; provided that the Executive's entitlement to compensation or payments
under the Corporation's retirement plans, stock option or incentive plans,
savings plans or bonus plans attributable to service rendered prior to the
effective date of the termination shall not be affected by this clause and shall
continue to be governed by

                                       4

<PAGE>

the applicable provisions of such plans; and further provided that in lieu
hereof, at his election, the Executive shall be entitled to the benefits of the
Change in Control Agreement of even date hereof between the Corporation and the
Executive, if termination occurs in a manner and at a time when such Change in
Control Agreement is applicable. For purposes of this Agreement, the term for
"Cause" shall mean because of gross negligence or willful misconduct by the
Executive either in the course of his employment hereunder or which has a
material adverse effect on the Corporation or the Executive's ability to perform
adequately and effectively his duties hereunder.

      9. Notices. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered or mailed, by registered or certified mail, return receipt requested
to the respective addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in writing
pursuant to the terms of this Section 9.

      10. Severability. The provisions of this Agreement are severable, and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of any other provision.

      11. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the substantive laws of the State of Delaware.

      12. Supersedure. This Agreement shall cancel and supersede all prior
agreements relating to employment between the Executive and the Corporation,
except the Change in Control Agreement.

      13. Waiver of Breach. The waiver by a party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by any of the parties hereto.

                                       5

<PAGE>

      14. Binding Effect. The terms of this Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Corporation and the
heirs, executors, administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.

      IN WITNESS WHEREOF, the Corporation and the Executive have executed this
Agreement as of the day and year first above written.

BOWATER INCORPORATED

By /s/ Richard F. Frisch                              /s/ C. Randolph Ellington
   ------------------------------------               -------------------------
       Richard F. Frisch,                                 C. Randolph Ellington
       Vice President - Human Resources

                                       6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.49
<SEQUENCE>4
<FILENAME>g93753exv10w49.txt
<DESCRIPTION>EX-10.49
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.49

                              AMENDED AND RESTATED

                           CHANGE IN CONTROL AGREEMENT

THIS AGREEMENT, made as of the 9th day of June, 2000, by and between Bowater
Incorporated, a Delaware corporation having a mailing address of 55 East
Camperdown Way, P.O. Box 1028, Greenville, South Carolina 29602 (the
"Corporation"), and C. Randolph Ellington of 10 Belfrey Drive, Greer, SC 29650
(the "Executive").

      WHEREAS, the Corporation and the Executive have previously entered into a
Change in Control Agreement for the purpose of reinforcing and encouraging the
continued attention and dedication of members of the Corporation's management,
including the Executive, to their assigned duties in the event of a Change in
Control or potential Change in Control of the Corporation; and

      WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that certain changes should be made to the Change in Control
Agreement to better achieve its objectives, and the Executive has agreed to such
changes;

      NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree to amend and restate the
previous Change in Control Agreement as follows:

1.    DEFINITIONS

      The following terms shall have the meanings assigned to them below:

      (a)   "Accrued Compensation" shall mean all amounts earned or accrued
            through the Termination Date but not paid as of the Termination Date
            including (i) the Base Amount, (ii) reimbursement for reasonable and
            necessary expenses incurred by the Executive on behalf of the
            Corporation during the period ending on the Termination Date, (iii)
            vacation pay, and (iv) any bonus award with respect to the
            Corporation's fiscal year ended prior to the Termination Date.

      (b)   "Acquiring Person" shall mean the Beneficial Owner, directly or
            indirectly, of securities representing 20% or more of the combined
            voting power of the Corporation's then outstanding securities, not
            including (except as provided in clause (i) of the next sentence)
            securities of such Beneficial Owner acquired pursuant to an
            agreement allowing the acquisition of up to and including 50% of
            such voting power approved by two-thirds of the members of the Board
            who are Board members before the Person becomes Beneficial Owner,
            directly or indirectly, of securities representing 5% or more of the
            combined voting power of the Corporation's then outstanding
            securities. Notwithstanding the foregoing, (i) securities acquired
            pursuant to an agreement described in the preceding sentence will be
            included in determining whether a Beneficial Owner is an

<PAGE>

            Acquiring Person if, subsequent to the approved acquisition, the
            Beneficial Owner acquires 5% or more of such voting power other than
            pursuant to such an agreement so approved; and (ii) a Person shall
            not be an Acquiring Person if such Person is eligible to and files a
            Schedule 13G under the Exchange Act with respect to such Person's
            status as a Beneficial Owner of all securities of the Corporation of
            which the Person is a Beneficial Owner.

      (c)   "Affiliate" and "Associate" shall have the respective meanings
            ascribed to such terms in Rule 12b-2 of the General Rules and
            Regulations under the Exchange Act, as in effect on the date hereof.

      (d)   "Base Amount" shall mean the greater of (i) the Executive's annual
            base salary at the rate in effect immediately prior to the Change in
            Control and (ii) the Executive's annual base salary at the rate in
            effect on the Termination Date.

      (e)   "Beneficial Owner" of securities shall mean (i) a Person who
            beneficially owns such securities, directly or indirectly, or (ii) a
            Person who has the right to acquire such securities (whether such
            right is exercisable immediately or only with the passage of time)
            pursuant to any agreement, arrangement or understanding (whether or
            not in writing) or upon the exercise of conversion rights, exchange
            rights, warrants, options or otherwise.

      (f)   "Bonus Amount" shall mean an amount equal to the maximum amount the
            Executive could have been paid under the Corporation's annual or
            other short term cash incentive plans in effect immediately prior to
            the Change in Control for the fiscal year in which the Change in
            Control occurred or, if higher, the maximum amount under such plans
            in effect at the Termination Date based on the Executive's then base
            salary and position.

      (g)   "Cause" shall mean and be limited to the Executive's gross
            negligence, willful misconduct or conviction of a felony, which has
            a demonstrable and material adverse effect upon the Corporation;
            provided that if Cause exists by virtue of the Executive's gross
            negligence or willful misconduct that is capable of being cured, the
            Corporation shall give the Executive written notice of the alleged
            negligence or misconduct and if the Executive cures the negligence
            or misconduct within thirty (30) days after receipt of the notice,
            such Cause shall cease to exist and the Corporation shall not
            terminate the Executive's employment therefor. The Executive shall
            be deemed to have been terminated for Cause as of the effective date
            stated in a Notice of Termination delivered by the Corporation to
            the Executive, which shall not be delivered before the end of the
            thirty (30) day period described in the preceding sentence, if
            applicable. The Notice of Termination must be accompanied by a
            certified copy of a resolution duly adopted by the affirmative vote
            of not less than three-quarters (3/4) of the membership of the Board
            after reasonable notice to the Executive and an opportunity for the
            Executive, with the Executive's counsel present, to be heard before
            the Board, finding that, in the good faith opinion of the Board, the

                                       2

<PAGE>

            Executive was guilty of conduct constituting Cause hereunder and
            setting forth in reasonable detail the facts and circumstances
            claimed to provide the basis for the Executive's termination.

      (h)   "Change in Control" shall be deemed to have occurred upon:

            (i)   the date that any Person is or becomes an Acquiring Person;

            (ii)  the date that the Corporation's stockholders approve a merger,
                  consolidation or reorganization of the Corporation with
                  another corporation or other Person, unless, immediately
                  following such merger, consolidation or reorganization, (A) at
                  least 50% of the combined voting power of the outstanding
                  securities of the resulting entity would be held in the
                  aggregate by the stockholders of the Corporation as of the
                  record date for such approval (provided that securities held
                  by any individual or entity that is an Acquiring Person, or
                  who would be an Acquiring Person if 5% were substituted for
                  20% in the definition of such term, shall not be counted as
                  securities held by the stockholders of the Corporation, but
                  shall be counted as outstanding securities for purposes of
                  this determination), or (B) at least 50% of the board of
                  directors or similar body of the resulting entity are
                  Continuing Directors;

            (iii) the date the Corporation sells or otherwise transfers all or
                  substantially all of the Corporation's assets to another
                  corporation or other Person, unless, immediately following
                  such sale or transfer, (A) at least 50% of the combined voting
                  power of the outstanding securities of the acquiring entity
                  would be held in the aggregate by the stockholders of the
                  Corporation as of the record date for such approval (provided
                  that securities held by any individual or entity that is an
                  Acquiring Person, or who would be an Acquiring Person if 5%
                  were substituted for 20% in the definition of such term, shall
                  not be counted as securities held by the stockholders of the
                  Corporation, but shall be counted as outstanding securities
                  for purposes of this determination), or (B) at least 50% of
                  the board of directors or similar body of the acquiring entity
                  are Continuing Directors; or

            (iv)  the date on which less than 50% of the total membership of the
                  Board consists of Continuing Directors.

      (i)   "Code" shall mean the United States Internal Revenue Code of 1986,
            amended.

      (j)   "Continuing Directors" shall mean any member of the Board who (i)
            was a member of the Board immediately prior to the date of the event
            that would constitute a Change in Control, and any successor of a
            Continuing Director while such successor is a member of the Board,
            (ii) who is not an Acquiring Person or

                                       3

<PAGE>

            an Affiliate or Associate of an Acquiring Person and (iii) is
            recommended or elected to succeed the Continuing Director by a
            majority of the Continuing Directors.

      (k)   "Corporation" shall mean Bowater Incorporated; provided that, if the
            Executive is employed by a subsidiary of the Corporation,
            "Corporation" shall mean such subsidiary of the Corporation for
            purposes of references to the Executive's compensation and benefits,
            and the plans, programs and arrangements pursuant to which
            compensation and benefits are provided.

      (l)   "Disability" shall mean a physical or mental condition that is
            defined as a disability in the Corporation's long term disability
            insurance plan covering the Executive immediately prior to the
            Change in Control.

      (m)   "Employer Match" shall mean an amount equal to the maximum matching
            contribution the Corporation could have made (regardless of actual
            circumstances) on the Executive's behalf to the Corporation's
            Statutory and non-Statutory defined contribution or savings plans
            for the fiscal year in which the Change in Control occurred, or, if
            higher, the maximum matching contribution the Corporation could have
            made for the fiscal year in which the Executive's employment
            terminated.

      (n)   "Exchange Act" shall mean the United States Securities Exchange Act
            of 1934, as amended.

      (o)   "Good Reason" shall mean:

            (i)   a change in the Executive's status, title, position or
                  responsibilities (including in reporting line relationships)
                  that, in the Executive's reasonable judgment, represents a
                  substantial adverse change from the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or at any
                  time thereafter; the assignment to the Executive of any duties
                  or responsibilities that, in the Executive's reasonable
                  judgment, are inconsistent with the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or any time
                  thereafter; or any removal of the Executive from or failure to
                  reappoint or reelect the Executive to any office or position
                  held prior to the Change in Control, except in connection with
                  the termination of the Executive's employment for Disability,
                  Cause, as a result of the Executive's death or by the
                  Executive other than for Good Reason;

            (ii)  the failure by the Corporation to provide the Executive with
                  compensation and benefits, in the aggregate, at least equal
                  (in terms of benefit levels and/or reward opportunities which
                  opportunities will be evaluated in light of the performance
                  requirements therefor) to those provided for under the

                                       4

<PAGE>

                  employee compensation and benefit plans, programs and
                  practices in which the Executive was participating at any time
                  within one-hundred eighty (180) days preceding the date of a
                  Change in Control or at any time thereafter;

            (iii) the reduction of the Executive's salary as in effect on the
                  date of the Change in Control or any time thereafter;

            (iv)  a failure by the Corporation to obtain from any Successor its
                  assent to this Agreement contemplated by Section 12 hereof; or

            (v)   the relocation of the principal office at which the Executive
                  is to perform services on behalf of the Corporation to a
                  location more than thirty-five (35) miles from its location
                  immediately prior to the Change in Control or a substantial
                  increase in the Executive's business travel obligations
                  subsequent to the Change in Control.

      (p)   "Notice of Termination" shall mean a notice sent by either the
            Executive or the Corporation to the other party terminating the
            Executive's employment as of a certain date and setting forth the
            reasons therefor.

      (q)   "Person" shall mean any individual, corporation, partnership, group,
            association or other "person" as such term is used in Sections 13(d)
            and 14(d) of the Exchange Act.

      (r)   "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
            multiplied by a fraction, the numerator of which is the number of
            months and partial months through the Termination Date and the
            denominator of which is twelve (12).

      (s)   "Statutory Plan" shall mean a retirement plan that is intended to be
            qualified (for purposes of United States tax law) or registered (for
            purposes of Canadian tax law), as the case may be.

      (t)   "Successor" shall mean the direct or indirect successor by purchase,
            merger, consolidation or otherwise, to all or substantially all of
            the business and/or assets of the Corporation.

      (u)   "Termination Date" shall mean (i) in the case of the Executive's
            death, the date of death, (ii) in the case of a termination by the
            Executive in accordance with Section 3, the last day of employment
            as set forth in the Notice of Termination given by the Executive,
            (iii) in the case of a termination by the Corporation for Cause, a
            date not less than thirty (30) days after receipt of the Notice of
            Termination by the Executive, (iv) in the case of a termination by
            the Corporation due to the Executive's Disability, the date not less
            than thirty (30) days after receipt of the Notice of Termination by
            the Executive, provided that the Executive shall not have returned
            to the full-time performance of duties within thirty (30) days after
            such receipt, and (v) in all other cases, the date specified in the
            Notice

                                       5

<PAGE>

            of Termination or if no Notice of Termination is sent, the last day
            of the Executive's employment (an Executive receiving periodic
            severance pay is no longer considered employed for the purposes of
            this Agreement).

2.    TERM OF AGREEMENT

      This Agreement shall commence as of the date hereof and shall continue in
      effect until the date the Executive's employment is terminated (an
      Executive being paid periodic severance benefits is no longer considered
      employed for these purposes); provided, however, that if the Executive's
      employment is terminated following, or in anticipation of, a Change in
      Control, the term shall continue in effect until all payments and benefits
      have been made or provided to the Executive hereunder.

3.    EXECUTIVE'S RIGHT OF TERMINATION

      After a Change in Control and for thirty-six (36) months thereafter, the
      Executive shall have the right to terminate employment for Good Reason by
      sending a Notice of Termination to the Corporation setting forth in
      reasonable detail the facts and circumstances claimed to constitute Good
      Reason. In addition, on the first (1st) anniversary date of the Change in
      Control and for a period of thirty (30) days thereafter, the Executive
      shall have the unconditional right to terminate employment by giving
      written notice to the Corporation within such thirty (30) day period. If
      the Executive's employment is terminated in accordance with the provisions
      of this Section 3, the Executive shall be entitled to the compensation and
      benefits described in Section 4(b) below.

4.    COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY CERTAIN TERMINATIONS

      If the Executive's employment with the Corporation shall be terminated
      within thirty-six (36) months following a Change in Control, the Executive
      shall be entitled to the following compensation and benefits:

            (a) If the Executive's employment is terminated (i) by the
      Corporation for Cause or Disability, (ii) by reason of the Executive's
      death or (iii) by the Executive other than in accordance with Section 3,
      the Corporation shall pay to the Executive the Accrued Compensation and,
      if such termination is other than by the Corporation for Cause, the Pro
      Rata Bonus, computed as of the applicable Termination Date.

            (b) If the Executive's employment with the Corporation shall be
      terminated (x) by the Corporation for any reason other than for Cause or
      Disability, or (y) by the Executive pursuant to the provisions of Section
      3, the Executive shall be entitled to the following as of the applicable
      Termination Date:

            (i)   the Accrued Compensation and the Pro-Rata Bonus;

            (ii)  an amount equal to three (3) times the Base Amount;

                                       6

<PAGE>

            (iii) an amount equal to three (3) times the Bonus Amount;

            (iv)  an amount equal to three (3) times the Employer Match;

            (v)   An amount equal to 30% of the Base Amount for certain lost
                  benefits;

            (vi)  An amount equal to the present value of the additional
                  retirement benefits the Executive would have earned under the
                  Corporation's defined benefit retirement plans (Statutory and
                  non-Statutory) for the three (3) years following the
                  Termination Date, computed assuming the following:

                  (A)   the Executive's salary continues at the Base Amount with
                        a bonus or target bonus equal to the Bonus Amount;

                  (B)   the payment of the Executive's retirement benefits
                        commences as of the later of (x) the Executive's age
                        three (3) years after the Termination Date or (y) the
                        earliest retirement age (without regard to service)
                        allowed under the Statutory Plan applicable to the
                        Executive;

                  (C)   all vesting requirements are waived;

                  (D)   mortality and interest rate assumptions applicable to
                        the computation of lump sum values in the applicable
                        Statutory Plan are used; and

                  (E)   the benefits are paid in the form of a single life
                        annuity;

            (vii) As of the Executive's Termination Date, or, if later, when the
                  Executive attains age fifty (50), the Executive (and the
                  Executive's spouse or surviving spouse and dependents) will be
                  provided the retiree health care and life insurance coverage
                  provided by the Corporation to executive retirees as of the
                  date of the Change in Control. If and to the extent that the
                  benefits described in this paragraph cannot be provided under
                  the Corporation's plans or programs without the benefits
                  provided thereunder being taxable to the Executive, the
                  Corporation shall procure an insurance policy or policies on
                  substantially similar terms and conditions for the Executive
                  and the Executive's spouse or surviving spouse and dependents,
                  or if such policy or policies cannot be obtained, shall
                  provide a lump sum payment equal to the value of the lost
                  benefits; and

           (viii) The Corporation shall pay for or provide the Executive
                  either: (i) individual out-placement assistance as offered by
                  a member firm of the Association of Out-Placement Consulting
                  Firms, or (ii) a cash payment of $20,000 in lieu of individual
                  outplacement services, as elected by the Executive at any time
                  within twelve (12) months after the Executive's termination of
                  employment.

                                       7

<PAGE>

5.    EXCISE TAX GROSS-UP

      If any payment or benefit made available to the Executive in connection
      with a Change in Control (including, without limitation, any payment made
      pursuant to any long-term incentive plans, stock option or equity
      participation right plans) or termination of the Executive's employment
      following a Change in Control (in either category, a "Change in Control
      Payment") is subject to the Excise Tax (as hereinafter defined), the
      Corporation shall pay to the Executive additional amounts (the "Gross Up
      Amounts") such that the total amount of all Change in Control Payments net
      of the Excise Tax shall equal the total amount of all Change in Control
      Payments to which the Executive would have been entitled if the Excise Tax
      had not been imposed. For purposes of this Section 5, the term "Excise
      Tax" shall mean the tax imposed by Section 4999 of the Code and any
      similar tax that may hereafter be imposed.

      The Gross Up Amounts due to the Executive under this Section 5 shall be
      estimated by a nationally recognized firm of certified public accountants
      (other than the firm that audited the financial statements of the
      Corporation for the most recently preceding fiscal year) selected by the
      individual holding the position of Chief Financial Officer immediately
      before the Change in Control or such officer's designee, at any time that
      the Executive is to receive a Change in Control Payment. The Gross Up
      Amounts will be based upon the following assumptions:

            (a) all Change in Control Payments shall be deemed to be "parachute
      payments" within the meaning of Section 280(G)(b)(2) of the Code, and all
      "excess parachute payments" shall be deemed to be subject to the Excise
      Tax except to the extent that, in the opinion of the certified public
      accountants charged with estimating the Gross Up Amounts for the Executive
      under this Section 5, such Change in Control Payments are not subject to
      the Excise Tax; and

            (b) the Executive shall be deemed to pay federal, state and local
      taxes at the highest marginal rate of taxation for the applicable calendar
      year.

      The estimated Gross Up Amount due the Executive with respect to any Change
      in Control Payment pursuant to this Section 5 shall be paid to the
      Executive in a lump sum not later than thirty (30) business days after
      such Change in Control Payment is provided to the Executive. In the event
      that the Gross Up Amount is less than the amount actually due to the
      Executive under this Section 5, the amount of any such shortfall shall be
      paid to the Executive within ten (10) days after the existence of the
      shortfall is discovered. In the event the Gross Up Amount is more than the
      amount actually due the Executive under this Section 5, the Executive
      shall repay the amount of such overpayment to the Corporation within a
      reasonable time after the overpayment is discovered.

                                       8

<PAGE>

6.    LUMP SUM PENSION OPTION

      If the Executive is entitled to the payments and benefits in Section 4(b),
      then, in accordance with the election requirements described in Section 7,
      the Executive shall be entitled to elect a lump sum payment of the present
      value of any retirement benefits to which the Executive is entitled under
      any of the Corporation's non-Statutory retirement plans computed based
      upon the same assumptions listed in Section 4(b)(vi) above, except
      4(b)(vi)(A). The Corporation's non-Statutory retirement plans are hereby
      deemed amended as necessary to conform to the provisions of this Section
      6. To the extent that a payment on account of the foregoing may not be
      made under a non-Statutory plan, the Corporation shall make such payment
      separately in lieu of payment under such plan.

7.    DEFERRAL OR LUMP SUM ELECTION

      During each December after the date of this Agreement (the "Election
      Period"), the Executive may, in writing, direct the Corporation to pay any
      amounts to which the Executive is entitled under Section 4(b) in equal
      annual installments not to exceed ten (10), with each installment
      including accrued interest at the Federal short-term rate (as set under
      Section 1274(d) of the Code as in effect at the time such installment is
      paid), with the first such installment payable within ten (10) business
      days of the Termination Date and each successive installment payable on
      the anniversary of the Termination Date (the "Deferred Payment Election").
      During the Election Period, the Executive may also elect to be paid the
      amount described in Section 6 in a lump sum (the "Lump Sum Election").
      Neither a Deferred Payment Election nor a Lump Sum Election, once made,
      can be revoked except during an Election Period. Notwithstanding the
      foregoing, however, no Deferred Payment Election or Lump Sum Election can
      be made or revoked by the Executive during an Election Period that occurs
      after a Change in Control or at a time when, in the judgment of the
      Corporation, a Change in Control may occur within sixty (60) days after
      such Election Period.

8.    NO MITIGATION REQUIRED

      The Executive shall not be required to mitigate the amount of any payment
      provided for in this Agreement, nor shall any payment or benefit provided
      for in this Agreement be offset by any compensation earned by the
      Executive as the result of employment by another employer, by retirement
      benefits (provided that the foregoing shall not cause Section 6 to result
      in a duplication of benefits provided under any retirement plan), or be
      offset against any amount claimed to be owed by the Executive to the
      Corporation, or otherwise.

9.    INTEREST

      If any payment to the Executive required by this Agreement is not made
      within the time for such payment specified herein, the Corporation shall
      pay to the Executive interest on such payment at the legal rate payable
      from time to time upon judgments in the State of Delaware from the date
      such payment is payable under the terms hereof until paid.

                                       9

<PAGE>

10.   NON-COMPETE CANCELLATION

      If the Executive is entitled to the payments and benefits described in
      Section 4(b), then any agreement by the Executive not to compete with the
      Corporation or its Affiliates after the Executive's Termination Date shall
      be null and void and any such agreement shall be deemed to be amended
      accordingly.

11.   EXECUTIVE'S EXPENSES

      The Corporation shall pay or reimburse the Executive for all costs,
      including reasonable attorney's, accountants' and actuary's fees and
      expenses, incurred by the Executive (i) to confirm the Executive's rights
      to and amounts of payments hereunder, (ii) to contest or dispute any
      termination of the Executive's employment following a Change in Control or
      seek to obtain or enforce any right or benefit provided by this Agreement
      in litigation or arbitration, or (iii) in connection with any audit by a
      taxing authority related to any payment or benefit hereunder, or any
      subsequent contest or litigation relating to the tax treatment of such
      payment or benefit. Upon demand therefor, the Corporation shall advance to
      the Executive any amount as to which the Executive reasonably believes he
      or she will be entitled pursuant to this Section 11 for costs that the
      Executive has incurred or will incur during the ninety (90) days following
      such demand.

12.   BINDING AGREEMENT

      This Agreement shall inure to the benefit of and be enforceable by the
      Executive, and the Executive's heirs, executors, administrators,
      successors and assigns. This Agreement shall be binding upon the
      Corporation, its Successors and assigns. The Corporation shall require any
      Successor to assume and agree to perform this Agreement in accordance with
      its terms. The Corporation shall obtain such assumption and agreement
      prior to the effectiveness of any such succession.

13.   NOTICE

      Any notices and all other communications provided for herein shall be in
      writing and shall be delivered personally or sent by facsimile
      transmission (with written confirmation sent at the same time), prepaid
      air courier or prepaid certified or registered mail. Any such notice shall
      be deemed to have been given (a) when received, if delivered in person,
      sent by facsimile transmission, or sent by prepaid air courier, or (b)
      three (3) business days following the mailing thereof, if mailed by
      prepaid certified or registered mail, return receipt requested, addressed
      to the respective addresses set forth on the first page of this Agreement
      or to such other address as either party may have furnished to the other
      in writing in accordance herewith, except that notices of change of
      address shall be effective only upon receipt. All notices to the
      Corporation shall be addressed to the attention of the Board with a copy
      to the General Counsel.

                                       10

<PAGE>

14.   SOLE SEVERANCE; OTHER BENEFITS

      If the Executive is paid the entitlements due under Section 4(b), such
      payments shall be in lieu of any other severance amounts to which the
      Executive may be entitled under any other severance arrangement, including
      under any employment agreement, severance pay plan, or applicable
      legislation entitling the Executive to severance benefits. However, the
      parties acknowledge that the benefits paid hereunder are only exclusive as
      to other severance payments and that the Executive may be entitled to
      other benefits or payments triggered by a Change in Control under certain
      other of the Corporation's benefit or compensation arrangements,
      including, without limitation, any long term incentive plans, stock option
      plans or equity participation rights plans. This Agreement supercedes any
      Change in Control Agreement previously in effect between the Executive and
      the Corporation.

15.   AMENDMENTS; WAIVERS

      No provision of this Agreement may be modified, waived or discharged
      except in a writing specifically referring to such provision and signed by
      the party against which enforcement of such modification, waiver or
      discharge is sought. No waiver by either party hereto of the breach of any
      condition or provision of this Agreement shall be deemed a waiver of any
      other condition or provision at the same or any other time.

16.   GOVERNING LAW

      The validity, interpretation, construction and performance of this
      Agreement shall be governed by the substantive laws of the State of
      Delaware without regard to the choice of law provisions thereof.

17.   VALIDITY

      The invalidity or unenforceability of any provision of this Agreement
      shall not affect the validity or enforceability of any other provision of
      this Agreement, which shall remain in full force and effect.

18.   ARBITRATION

      If the Executive so elects, any dispute or controversy arising under or in
      connection with this Agreement shall be settled exclusively by arbitration
      in Greenville, South Carolina, or at the Executive's election in the city
      nearest to the Executive's principal residence that has an office of the
      American Arbitration Association, by one arbitrator in accordance with the
      rules of the American Arbitration Association then in effect. Judgment may
      be entered on the arbitrator's award in any court having jurisdiction. The
      Corporation hereby waives its right to contest the personal jurisdiction
      or venue of any court, federal or state, in an action brought to enforce
      this Agreement or any award of an

                                       11

<PAGE>

      arbitrator hereunder which action is brought in the jurisdiction in which
      such arbitration was conducted, or, if no arbitration was elected, in
      which arbitration could have been conducted pursuant to this Section 18.

19.   COUNTERPARTS

      This Agreement may be executed in one or more counterparts, each of which
      shall be deemed to be an original but all of which together will
      constitute one and the same instrument.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

                                    BOWATER INCORPORATED

                                    By /s/ Arnold M. Nemirow
                                       ---------------------
                                    Name: Arnold M. Nemirow
                                    Title: Chairman and Chief Executive Officer

                                       /s/ C. Randolph Ellington
                                    ----------------------------
                                    Name: C. Randolph Ellington

                                       12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.50
<SEQUENCE>5
<FILENAME>g93753exv10w50.txt
<DESCRIPTION>EX-10.50
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.50

                           CHANGE IN CONTROL AGREEMENT

      THIS AGREEMENT, made as of the _____ day of _________, 2000, by and
between Bowater Incorporated, a Delaware corporation having a mailing address of
55 East Camperdown Way, P.O. Box 1028, Greenville, South Carolina 29602 (the
"Corporation"), and Roger A. Loney of 1114 Riverwalk Drive, Simpsonville, South
Carolina 29681 (the "Executive").

      WHEREAS, the Corporation considers it essential to the best interests of
its stockholders to foster the continued employment of key management personnel;
and

      WHEREAS, the uncertainty attendant to a change in control of the
Corporation may result in the departure or distraction of management personnel
to the detriment of the Corporation and its stockholders; and

      WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Corporation's management,
including Executive, to their assigned duties in the event of a change in
control of the Corporation.

      NOW THEREFORE, it is hereby agreed as follows:

1.    DEFINITIONS

      The following terms shall have the meanings assigned to them below.

      (a)   "Accrued Compensation" shall mean all amounts earned or accrued
            through the Termination Date but not paid as of the Termination Date
            including (i) the Base Amount, (ii) reimbursement for reasonable and
            necessary expenses incurred by the Executive on behalf of the
            Corporation during the period ending on the Termination Date, (iii)
            vacation pay, and (iv) any bonus award with respect to the
            Corporation's fiscal year ended prior to the Termination Date.

      (b)   "Acquiring Person" shall mean the Beneficial Owner, directly or
            indirectly, of securities representing 20% or more of the combined
            voting power of the Corporation's then outstanding securities, not
            including (except as provided in clause (i) of the next sentence)
            securities of such Beneficial Owner acquired pursuant to an
            agreement allowing the acquisition of up to and including 50% of
            such voting power approved by two-thirds of the members of the Board
            who are Board members before the Person becomes Beneficial Owner,
            directly or indirectly, of securities representing 5% or more of the
            combined voting power of the Corporation's then outstanding
            securities. Notwithstanding the foregoing, (i) securities acquired
            pursuant to an agreement described in the preceding sentence will be
            included in determining whether a Beneficial Owner is an

<PAGE>

            Acquiring Person if, subsequent to the approved acquisition, the
            Beneficial Owner acquires 5% or more of such voting power other than
            pursuant to such an agreement so approved; and (ii) a Person shall
            not be an Acquiring Person if such Person is eligible to and files a
            Schedule 13G under the Exchange Act with respect to such Person's
            status as a Beneficial Owner of all securities of the Corporation of
            which the Person is a Beneficial Owner.

      (c)   "Affiliate" and "Associate" shall have the respective meanings
            ascribed to such terms in Rule 12b-2 of the General Rules and
            Regulations under the Exchange Act, as in effect on the date hereof.

      (d)   "Base Amount" shall mean the greater of (i) the Executive's annual
            base salary at the rate in effect immediately prior to the Change in
            Control and (ii) the Executive's annual base salary at the rate in
            effect on the Termination Date.

      (e)   "Beneficial Owner" of securities shall mean (i) a Person who
            beneficially owns such securities, directly or indirectly, or (ii) a
            Person who has the right to acquire such securities (whether such
            right is exercisable immediately or only with the passage of time)
            pursuant to any agreement, arrangement or understanding (whether or
            not in writing) or upon the exercise of conversion rights, exchange
            rights, warrants, options or otherwise.

      (f)   "Bonus Amount" shall mean an amount equal to the maximum amount the
            Executive could have been paid under the Corporation's annual or
            other short term cash incentive plans in effect immediately prior to
            the Change in Control for the fiscal year in which the Change in
            Control occurred or, if higher, the maximum amount under such plans
            in effect at the Termination Date based on the Executive's then base
            salary and position.

      (g)   "Cause" shall mean and be limited to the Executive's gross
            negligence, willful misconduct or conviction of a felony, which has
            a demonstrable and material adverse effect upon the Corporation;
            provided that if Cause exists by virtue of the Executive's gross
            negligence or willful misconduct that is capable of being cured, the
            Corporation shall give the Executive written notice of the alleged
            negligence or misconduct and if the Executive cures the negligence
            or misconduct within thirty (30) days after receipt of the notice,
            such Cause shall cease to exist and the Corporation shall not
            terminate the Executive's employment therefor. The Executive shall
            be deemed to have been terminated for Cause as of the effective date
            stated in a Notice of Termination delivered by the Corporation to
            the Executive, which shall not be delivered before the end of the
            thirty (30) day period described in the preceding sentence, if
            applicable. The Notice of Termination must be accompanied by a
            certified copy of a resolution duly adopted by the affirmative vote
            of not less than three-quarters (3/4) of the membership of the Board
            after reasonable notice to the Executive and an opportunity for the
            Executive, with the Executive's counsel present, to be heard before
            the Board, finding that, in the good faith opinion of the Board, the

                                       2

<PAGE>

            Executive was guilty of conduct constituting Cause hereunder and
            setting forth in reasonable detail the facts and circumstances
            claimed to provide the basis for the Executive's termination.

      (h)   "Change in Control" shall be deemed to have occurred upon:

            (i)   the date that any Person is or becomes an Acquiring Person;

            (ii)  the date that the Corporation's stockholders approve a merger,
                  consolidation or reorganization of the Corporation with
                  another corporation or other Person, unless, immediately
                  following such merger, consolidation or reorganization, (A) at
                  least 50% of the combined voting power of the outstanding
                  securities of the resulting entity would be held in the
                  aggregate by the stockholders of the Corporation as of the
                  record date for such approval (provided that securities held
                  by any individual or entity that is an Acquiring Person, or
                  who would be an Acquiring Person if 5% were substituted for
                  20% in the definition of such term, shall not be counted as
                  securities held by the stockholders of the Corporation, but
                  shall be counted as outstanding securities for purposes of
                  this determination), or (B) at least 50% of the board of
                  directors or similar body of the resulting entity are
                  Continuing Directors;

            (iii) the date the Corporation sells or otherwise transfers all or
                  substantially all of the Corporation's assets to another
                  corporation or other Person, unless, immediately following
                  such sale or transfer, (A) at least 50% of the combined voting
                  power of the outstanding securities of the acquiring entity
                  would be held in the aggregate by the stockholders of the
                  Corporation as of the record date for such approval (provided
                  that securities held by any individual or entity that is an
                  Acquiring Person, or who would be an Acquiring Person if 5%
                  were substituted for 20% in the definition of such term, shall
                  not be counted as securities held by the stockholders of the
                  Corporation, but shall be counted as outstanding securities
                  for purposes of this determination), or (B) at least 50% of
                  the board of directors or similar body of the acquiring entity
                  are Continuing Directors; or

            (iv)  the date on which less than 50% of the total membership of the
                  Board consists of Continuing Directors.

      (i)   "Code" shall mean the United States Internal Revenue Code of 1986,
            amended.

      (j)   "Continuing Directors" shall mean any member of the Board who (i)
            was a member of the Board immediately prior to the date of the event
            that would constitute a Change in Control, and any successor of a
            Continuing Director while such successor is a member of the Board,
            (ii) who is not an Acquiring Person or

                                       3

<PAGE>

            an Affiliate or Associate of an Acquiring Person and (iii) is
            recommended or elected to succeed the Continuing Director by a
            majority of the Continuing Directors.

      (k)   "Corporation" shall mean Bowater Incorporated; provided that, if the
            Executive is employed by a subsidiary of the Corporation,
            "Corporation" shall mean such subsidiary of the Corporation for
            purposes of references to the Executive's compensation and benefits,
            and the plans, programs and arrangements pursuant to which
            compensation and benefits are provided.

      (l)   "Disability" shall mean a physical or mental condition that is
            defined as a disability in the Corporation's long term disability
            insurance plan covering the Executive immediately prior to the
            Change in Control.

      (m)   "Employer Match" shall mean an amount equal to the maximum matching
            contribution the Corporation could have made (regardless of actual
            circumstances) on the Executive's behalf to the Corporation's
            Statutory and non-Statutory defined contribution or savings plans
            for the fiscal year in which the Change in Control occurred, or, if
            higher, the maximum matching contribution the Corporation could have
            made for the fiscal year in which the Executive's employment
            terminated.

      (n)   "Exchange Act" shall mean the United States Securities Exchange Act
            of 1934, as amended.

      (o)   "Good Reason" shall mean:

            (i)   a change in the Executive's status, title, position or
                  responsibilities (including in reporting line relationships)
                  that, in the Executive's reasonable judgment, represents a
                  substantial adverse change from the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or at any
                  time thereafter; the assignment to the Executive of any duties
                  or responsibilities that, in the Executive's reasonable
                  judgment, are inconsistent with the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or any time
                  thereafter; or any removal of the Executive from or failure to
                  reappoint or reelect the Executive to any office or position
                  held prior to the Change in Control, except in connection with
                  the termination of the Executive's employment for Disability,
                  Cause, as a result of the Executive's death or by the
                  Executive other than for Good Reason;

            (ii)  the failure by the Corporation to provide the Executive with
                  compensation and benefits, in the aggregate, at least equal
                  (in terms of benefit levels and/or reward opportunities which
                  opportunities will be evaluated in light of the performance
                  requirements therefor) to those provided for under the

                                       4

<PAGE>

                  employee compensation and benefit plans, programs and
                  practices in which the Executive was participating at any time
                  within one-hundred eighty (180) days preceding the date of a
                  Change in Control or at any time thereafter;

            (iii) the reduction of the Executive's salary as in effect on the
                  date of the Change in Control or any time thereafter;

            (iv)  a failure by the Corporation to obtain from any Successor its
                  assent to this Agreement contemplated by Section 12 hereof; or

            (v)   the relocation of the principal office at which the Executive
                  is to perform services on behalf of the Corporation to a
                  location more than thirty-five (35) miles from its location
                  immediately prior to the Change in Control or a substantial
                  increase in the Executive's business travel obligations
                  subsequent to the Change in Control.

      (p)   "Notice of Termination" shall mean a notice sent by either the
            Executive or the Corporation to the other party terminating the
            Executive's employment as of a certain date and setting forth the
            reasons therefor.

      (q)   "Person" shall mean any individual, corporation, partnership, group,
            association or other "person" as such term is used in Sections 13(d)
            and 14(d) of the Exchange Act.

      (r)   "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
            multiplied by a fraction, the numerator of which is the number of
            months and partial months through the Termination Date and the
            denominator of which is twelve (12).

      (s)   "Statutory Plan" shall mean a retirement plan that is intended to be
            qualified (for purposes of United States tax law) or registered (for
            purposes of Canadian tax law), as the case may be.

      (t)   "Successor" shall mean the direct or indirect successor by purchase,
            merger, consolidation or otherwise, to all or substantially all of
            the business and/or assets of the Corporation.

      (u)   "Termination Date" shall mean (i) in the case of the Executive's
            death, the date of death, (ii) in the case of a termination by the
            Executive in accordance with Section 3, the last day of employment
            as set forth in the Notice of Termination given by the Executive,
            (iii) in the case of a termination by the Corporation for Cause, a
            date not less than thirty (30) days after receipt of the Notice of
            Termination by the Executive, (iv) in the case of a termination by
            the Corporation due to the Executive's Disability, the date not less
            than thirty (30) days after receipt of the Notice of Termination by
            the Executive, provided that the Executive shall not have returned
            to the full-time performance of duties within thirty (30) days after
            such receipt, and (v) in all other cases, the date specified in the
            Notice

                                       5

<PAGE>

            of Termination or if no Notice of Termination is sent, the last day
            of the Executive's employment (an Executive receiving periodic
            severance pay is no longer considered employed for the purposes of
            this Agreement).

2.    TERM OF AGREEMENT

      This Agreement shall commence as of the date hereof and shall continue in
      effect until the date the Executive's employment is terminated (an
      Executive being paid periodic severance benefits is no longer considered
      employed for these purposes); provided, however, that if the Executive's
      employment is terminated following, or in anticipation of, a Change in
      Control, the term shall continue in effect until all payments and benefits
      have been made or provided to the Executive hereunder.

3.    EXECUTIVE'S RIGHT OF TERMINATION

      After a Change in Control and for thirty-six (36) months thereafter, the
      Executive shall have the right to terminate employment for Good Reason by
      sending a Notice of Termination to the Corporation setting forth in
      reasonable detail the facts and circumstances claimed to constitute Good
      Reason. In addition, on the first (1st) anniversary date of the Change in
      Control and for a period of thirty (30) days thereafter, the Executive
      shall have the unconditional right to terminate employment by giving
      written notice to the Corporation within such thirty (30) day period. If
      the Executive's employment is terminated in accordance with the provisions
      of this Section 3, the Executive shall be entitled to the compensation and
      benefits described in Section 4(b) below.

4.    COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY CERTAIN TERMINATIONS

      If the Executive's employment with the Corporation shall be terminated
      within thirty-six (36) months following a Change in Control, the Executive
      shall be entitled to the following compensation and benefits:

            (a) If the Executive's employment is terminated (i) by the
      Corporation for Cause or Disability, (ii) by reason of the Executive's
      death or (iii) by the Executive other than in accordance with Section 3,
      the Corporation shall pay to the Executive the Accrued Compensation and,
      if such termination is other than by the Corporation for Cause, the Pro
      Rata Bonus, computed as of the applicable Termination Date.

            (b) If the Executive's employment with the Corporation shall be
      terminated (x) by the Corporation for any reason other than for Cause or
      Disability, or (y) by the Executive pursuant to the provisions of Section
      3, the Executive shall be entitled to the following as of the applicable
      Termination Date:

            (i)   the Accrued Compensation and the Pro-Rata Bonus;

            (ii)  an amount equal to three (3) times the Base Amount;

                                       6

<PAGE>

            (iii) an amount equal to three (3) times the Bonus Amount;

            (iv)  an amount equal to three (3) times the Employer Match;

            (v)   An amount equal to 30% of the Base Amount for certain lost
                  benefits;

            (vi)  An amount equal to the present value of the additional
                  retirement benefits the Executive would have earned under the
                  Corporation's defined benefit retirement plans (Statutory and
                  non-Statutory) for the three (3) years following the
                  Termination Date, computed assuming the following:

                  (A)   the Executive's salary continues at the Base Amount with
                        a bonus or target bonus equal to the Bonus Amount;

                  (B)   the payment of the Executive's retirement benefits
                        commences as of the later of (x) the Executive's age
                        three (3) years after the Termination Date or (y) the
                        earliest retirement age (without regard to service)
                        allowed under the Statutory Plan applicable to the
                        Executive;

                  (C)   all vesting requirements are waived;

                  (D)   mortality and interest rate assumptions applicable to
                        the computation of lump sum values in the applicable
                        Statutory Plan are used; and

                  (E)   the benefits are paid in the form of a single life
                        annuity;

            (vii) As of the Executive's Termination Date, or, if later, when the
                  Executive attains age fifty (50), the Executive (and the
                  Executive's spouse or surviving spouse and dependents) will be
                  provided the retiree health care and life insurance coverage
                  provided by the Corporation to executive retirees as of the
                  date of the Change in Control. If and to the extent that the
                  benefits described in this paragraph cannot be provided under
                  the Corporation's plans or programs without the benefits
                  provided thereunder being taxable to the Executive, the
                  Corporation shall procure an insurance policy or policies on
                  substantially similar terms and conditions for the Executive
                  and the Executive's spouse or surviving spouse and dependents,
                  or if such policy or policies cannot be obtained, shall
                  provide a lump sum payment equal to the value of the lost
                  benefits; and

           (viii) The Corporation shall pay for or provide the Executive
                  either: (i) individual out-placement assistance as offered by
                  a member firm of the Association of Out-Placement Consulting
                  Firms, or (ii) a cash payment of $20,000 in lieu of individual
                  outplacement services, as elected by the Executive at any time
                  within twelve (12) months after the Executive's termination of
                  employment.

                                       7

<PAGE>

5.    EXCISE TAX GROSS-UP

      If any payment or benefit made available to the Executive in connection
      with a Change in Control (including, without limitation, any payment made
      pursuant to any long-term incentive plans, stock option or equity
      participation right plans) or termination of the Executive's employment
      following a Change in Control (in either category, a "Change in Control
      Payment") is subject to the Excise Tax (as hereinafter defined), the
      Corporation shall pay to the Executive additional amounts (the "Gross Up
      Amounts") such that the total amount of all Change in Control Payments net
      of the Excise Tax shall equal the total amount of all Change in Control
      Payments to which the Executive would have been entitled if the Excise Tax
      had not been imposed. For purposes of this Section 5, the term "Excise
      Tax" shall mean the tax imposed by Section 4999 of the Code and any
      similar tax that may hereafter be imposed.

      The Gross Up Amounts due to the Executive under this Section 5 shall be
      estimated by a nationally recognized firm of certified public accountants
      (other than the firm that audited the financial statements of the
      Corporation for the most recently preceding fiscal year) selected by the
      individual holding the position of Chief Financial Officer immediately
      before the Change in Control or such officer's designee, at any time that
      the Executive is to receive a Change in Control Payment. The Gross Up
      Amounts will be based upon the following assumptions:

      (a)   all Change in Control Payments shall be deemed to be "parachute
            payments" within the meaning of Section 280(G)(b)(2) of the Code,
            and all "excess parachute payments" shall be deemed to be subject to
            the Excise Tax except to the extent that, in the opinion of the
            certified public accountants charged with estimating the Gross Up
            Amounts for the Executive under this Section 5, such Change in
            Control Payments are not subject to the Excise Tax; and

      (b)   the Executive shall be deemed to pay federal, state and local taxes
            at the highest marginal rate of taxation for the applicable calendar
            year.

      The estimated Gross Up Amount due the Executive with respect to any Change
      in Control Payment pursuant to this Section 5 shall be paid to the
      Executive in a lump sum not later than thirty (30) business days after
      such Change in Control Payment is provided to the Executive. In the event
      that the Gross Up Amount is less than the amount actually due to the
      Executive under this Section 5, the amount of any such shortfall shall be
      paid to the Executive within ten (10) days after the existence of the
      shortfall is discovered. In the event the Gross Up Amount is more than the
      amount actually due the Executive under this Section 5, the Executive
      shall repay the amount of such overpayment to the Corporation within a
      reasonable time after the overpayment is discovered.

                                       8

<PAGE>

6.    LUMP SUM PENSION OPTION

      If the Executive is entitled to the payments and benefits in Section 4(b),
      then, in accordance with the election requirements described in Section 7,
      the Executive shall be entitled to elect a lump sum payment of the present
      value of any retirement benefits to which the Executive is entitled under
      any of the Corporation's non-Statutory retirement plans computed based
      upon the same assumptions listed in Section 4(b)(vi) above, except
      4(b)(vi)(A). The Corporation's non-Statutory retirement plans are hereby
      deemed amended as necessary to conform to the provisions of this Section
      6. To the extent that a payment on account of the foregoing may not be
      made under a non-Statutory plan, the Corporation shall make such payment
      separately in lieu of payment under such plan.

7.    DEFERRAL OR LUMP SUM ELECTION

      During each December after the date of this Agreement (the "Election
      Period"), the Executive may, in writing, direct the Corporation to pay any
      amounts to which the Executive is entitled under Section 4(b) in equal
      annual installments not to exceed ten (10), with each installment
      including accrued interest at the Federal short-term rate (as set under
      Section 1274(d) of the Code as in effect at the time such installment is
      paid), with the first such installment payable within ten (10) business
      days of the Termination Date and each successive installment payable on
      the anniversary of the Termination Date (the "Deferred Payment Election").
      During the Election Period, the Executive may also elect to be paid the
      amount described in Section 6 in a lump sum (the "Lump Sum Election").
      Neither a Deferred Payment Election nor a Lump Sum Election, once made,
      can be revoked except during an Election Period. Notwithstanding the
      foregoing, however, no Deferred Payment Election or Lump Sum Election can
      be made or revoked by the Executive during an Election Period that occurs
      after a Change in Control or at a time when, in the judgment of the
      Corporation, a Change in Control may occur within sixty (60) days after
      such Election Period.

8.    NO MITIGATION REQUIRED

      The Executive shall not be required to mitigate the amount of any payment
      provided for in this Agreement, nor shall any payment or benefit provided
      for in this Agreement be offset by any compensation earned by the
      Executive as the result of employment by another employer, by retirement
      benefits (provided that the foregoing shall not cause Section 6 to result
      in a duplication of benefits provided under any retirement plan), or be
      offset against any amount claimed to be owed by the Executive to the
      Corporation, or otherwise.

9.    INTEREST

      If any payment to the Executive required by this Agreement is not made
      within the time for such payment specified herein, the Corporation shall
      pay to the Executive interest on such payment at the legal rate payable
      from time to time upon judgments in the State of Delaware from the date
      such payment is payable under the terms hereof until paid.

                                       9

<PAGE>

10.   NON-COMPETE CANCELLATION

      If the Executive is entitled to the payments and benefits described in
      Section 4(b), then any agreement by the Executive not to compete with the
      Corporation or its Affiliates after the Executive's Termination Date shall
      be null and void and any such agreement shall be deemed to be amended
      accordingly.

11.   EXECUTIVE'S EXPENSES

      The Corporation shall pay or reimburse the Executive for all costs,
      including reasonable attorney's, accountants' and actuary's fees and
      expenses, incurred by the Executive (i) to confirm the Executive's rights
      to and amounts of payments hereunder, (ii) to contest or dispute any
      termination of the Executive's employment following a Change in Control or
      seek to obtain or enforce any right or benefit provided by this Agreement
      in litigation or arbitration, or (iii) in connection with any audit by a
      taxing authority related to any payment or benefit hereunder, or any
      subsequent contest or litigation relating to the tax treatment of such
      payment or benefit. Upon demand therefor, the Corporation shall advance to
      the Executive any amount as to which the Executive reasonably believes he
      or she will be entitled pursuant to this Section 11 for costs that the
      Executive has incurred or will incur during the ninety (90) days following
      such demand.

12.   BINDING AGREEMENT

      This Agreement shall inure to the benefit of and be enforceable by the
      Executive, and the Executive's heirs, executors, administrators,
      successors and assigns. This Agreement shall be binding upon the
      Corporation, its Successors and assigns. The Corporation shall require any
      Successor to assume and agree to perform this Agreement in accordance with
      its terms. The Corporation shall obtain such assumption and agreement
      prior to the effectiveness of any such succession.

13.   NOTICE

      Any notices and all other communications provided for herein shall be in
      writing and shall be delivered personally or sent by facsimile
      transmission (with written confirmation sent at the same time), prepaid
      air courier or prepaid certified or registered mail. Any such notice shall
      be deemed to have been given (a) when received, if delivered in person,
      sent by facsimile transmission, or sent by prepaid air courier, or (b)
      three (3) business days following the mailing thereof, if mailed by
      prepaid certified or registered mail, return receipt requested, addressed
      to the respective addresses set forth on the first page of this Agreement
      or to such other address as either party may have furnished to the other
      in writing in accordance herewith, except that notices of change of
      address shall be effective only upon receipt. All notices to the
      Corporation shall be addressed to the attention of the Board with a copy
      to the General Counsel.

                                       10

<PAGE>

14.   SOLE SEVERANCE; OTHER BENEFITS

      If the Executive is paid the entitlements due under Section 4(b), such
      payments shall be in lieu of any other severance amounts to which the
      Executive may be entitled under any other severance arrangement, including
      under any employment agreement, severance pay plan, or applicable
      legislation entitling the Executive to severance benefits. However, the
      parties acknowledge that the benefits paid hereunder are only exclusive as
      to other severance payments and that the Executive may be entitled to
      other benefits or payments triggered by a Change in Control under certain
      other of the Corporation's benefit or compensation arrangements,
      including, without limitation, any long term incentive plans, stock option
      plans or equity participation rights plans.

15.   AMENDMENTS; WAIVERS

      No provision of this Agreement may be modified, waived or discharged
      except in a writing specifically referring to such provision and signed by
      the party against which enforcement of such modification, waiver or
      discharge is sought. No waiver by either party hereto of the breach of any
      condition or provision of this Agreement shall be deemed a waiver of any
      other condition or provision at the same or any other time.

16.   GOVERNING LAW

      The validity, interpretation, construction and performance of this
      Agreement shall be governed by the substantive laws of the State of
      Delaware without regard to the choice of law provisions thereof.

17.   VALIDITY

      The invalidity or unenforceability of any provision of this Agreement
      shall not affect the validity or enforceability of any other provision of
      this Agreement, which shall remain in full force and effect.

18.   ARBITRATION

      If the Executive so elects, any dispute or controversy arising under or in
      connection with this Agreement shall be settled exclusively by arbitration
      in Greenville, South Carolina, or at the Executive's election in the city
      nearest to the Executive's principal residence that has an office of the
      American Arbitration Association, by one arbitrator in accordance with the
      rules of the American Arbitration Association then in effect. Judgment may
      be entered on the arbitrator's award in any court having jurisdiction. The
      Corporation hereby waives its right to contest the personal jurisdiction
      or venue of any court, federal or state, in an action brought to enforce
      this Agreement or any award of an arbitrator hereunder which action is
      brought in the jurisdiction in which such arbitration was conducted, or,
      if no arbitration was elected, in which arbitration could have been
      conducted pursuant to this Section 18.

                                       11

<PAGE>

19.   COUNTERPARTS

      This Agreement may be executed in one or more counterparts, each of which
      shall be deemed to be an original but all of which together will
      constitute one and the same instrument.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

                                     BOWATER INCORPORATED

                                     By /s/ Arnold M. Nemirow
                                        ---------------------
                                     Name: Arnold M. Nemirow
                                     Title: Chairman and Chief Executive Officer

                                       /s/ Roger A. Loney
                                     --------------------
                                     Name: Roger A. Loney

                                       12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.51
<SEQUENCE>6
<FILENAME>g93753exv10w51.txt
<DESCRIPTION>EX-10.51
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.51

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT, is made as of this 1st day of August, 1997, by and between
BOWATER INCORPORATED, a Delaware corporation having a mailing address of 55 East
Camperdown Way, Greenville, South Carolina 29601 (the "Corporation"), and
William C. Morris, 165 Green Valley Drive, Greenville, SC 29609 (the
"Executive").

      WHEREAS, the Corporation desires to employ the Executive as Vice
President, International Newsprint and Directory Sales, of the Newsprint and
Directory Division, and

      WHEREAS, the Executive is desirous of serving the Corporation in such
capacity;

      NOW, THEREFORE, the parties hereto agree as follows:

      1. Employment. During the term of this Agreement the Corporation agrees to
continue to employ the Executive, and the Executive agrees to continue in the
employ of the Corporation, in accordance with and subject to the provisions of
this Agreement.

      2. Term.

            (a)   Subject to the provisions of subparagraphs (b) and (c) of this
                  Section 2, the term of this Agreement shall begin on the Date
                  hereof and shall continue thereafter until terminated by
                  either party by written notice given to the other party at
                  least thirty (30) days prior to the effective date of any such
                  termination. The effective date of the termination shall be
                  the date stated in such notice, provided that if the
                  Corporation specifies an effective date that is more than
                  thirty (30) days following the date of such notice, the
                  Executive may, upon thirty (30) days" written notice to the
                  Corporation, accelerate the effective date of such
                  termination.

                                       1

<PAGE>

            (b)   Notwithstanding Section 2(a), upon the occurrence of a Change
                  in Control as defined in the Change in Control Agreement of
                  even date herewith between the Corporation and the Executive
                  (the "Change in Control Agreement"), the term of this
                  Agreement shall be deemed to continue until terminated, but in
                  any event, for a period of not less than three (3) years
                  following the date of the Change in Control, unless such
                  termination shall be at the Executive"s election for other
                  than "Good Reason" as that term is defined in the Change in
                  Control Agreement.

            (c)   Notwithstanding Section 2(a), the term of this Agreement shall
                  end upon:

                  (i)   the death of the Executive;

                  (ii)  the inability of the Executive to perform his duties
                        properly, whether by reason of ill-health, accident or
                        other cause, for a period of one hundred and eighty
                        (180) consecutive days or for periods totaling one
                        hundred and eighty (180) days occurring within any
                        twelve (12) consecutive calendar months; or

                  (iii) the executive's retirement on his early or normal
                        retirement date.

      3. Position and Duties. Throughout the term hereof, the Executive shall be
employed as Vice President, International Newsprint and Directory Sales, of the
Newsprint and Directory Division (Salary Grade 32), with the duties and
responsibilities customarily attendant to that office, provided that the
Executive shall undertake such other and further assignments and
responsibilities of at least comparable status as the Board of Directors may
direct. The Executive shall diligently and faithfully devote his full working
time and best efforts to the performance of the services under this Agreement
and to the furtherance of the best interests of the Corporation.

      4. Place of Employment. The Executive will be employed at the corporate
offices in the City of Greenville, South Carolina or at such other place as the
Corporation shall designate from time to time, provided, however, that if the
Executive is transferred to another place of employment, necessitating a change
in his residence, the Executive shall be entitled to financial assistance in
accordance with the terms of the Corporation's

                                       2

<PAGE>

relocation policy then in effect.

      5. Compensation and Benefits.

            (a)   Base Salary. The Corporation shall pay to the Executive a base
                  salary of $176,000 payable in substantially equal periodic
                  installments on the Corporation's regular payroll dates. The
                  Executive's base salary shall be reviewed at least annually
                  and from time to time may be increased (or reduced, if such
                  reduction is effected pursuant to across-the-board salary
                  reductions similarly affecting all management personnel of the
                  Corporation).

            (b)   Bonus Plan. In addition to his base salary, the Executive
                  shall be entitled to receive a bonus under the Corporation's
                  bonus plan in effect from time to time determined in the
                  manner, at the time, and in the amounts set forth under such
                  plan.

            (c)   Benefit Plans. The Corporation shall make contributions on the
                  Executive's behalf to the various benefit plans and programs
                  of the Corporation in which the Executive is eligible to
                  participate in accordance with the provisions thereof as in
                  effect from time to time.

            (d)   Vacations. The Executive shall be entitled to paid vacation,
                  in keeping with the Corporate policy as in effect from time to
                  time, to be taken at such time or times as may be approved by
                  the Corporation.

            (e)   Expenses. The Corporation shall reimburse the Executive for
                  all reasonable expenses properly incurred, and appropriately
                  documented, by the Executive in connection with the business
                  of the Corporation.

            (f)   Perquisites. The Corporation shall make available to the
                  Executive all perquisites to which he is entitled by virtue of
                  his position.

      6. Nondisclosure. During and after the term of this Agreement, the
Executive shall not, without the written consent of the Board of Directors of
the Corporation, disclose or use directly or indirectly, (except in the course
of employment hereunder and in furtherance of the business of the Corporation or
any of its subsidiaries and affiliates) any of the trade secrets or other
confidential information or proprietary data of the Corporation or its
subsidiaries or affiliates; provided, however, that confidential information
shall not include any information known generally to the public (other than as

                                       3

<PAGE>

a result of unauthorized disclosure by the Executive) or any information of a
type not otherwise considered confidential by persons engaged in the same or
similar businesses.

      7. Noncompetition. During the term of this Agreement, and for a period of
one (1) year after the date the Executive's employment terminates, the Executive
shall not, without the prior approval of the Board of Directors of the
Corporation in the same or a similar capacity engage in or invest in, or aid or
assist anyone else in the conduct of any business (other than the businesses of
the Corporation and its subsidiaries and affiliates) which directly competes
with the business of the Corporation and its subsidiaries and affiliates as
conducted during the term hereof. If any court of competent jurisdiction shall
determine that any of the provisions of this Section 7 shall not be enforceable
because of the duration or scope thereof, the parties hereto agree that said
court shall have the power to reduce the duration and scope of such provision to
the extent necessary to make it enforceable and this Agreement in its reduced
form shall be valid and enforceable to the extent permitted by law. The
Executive acknowledges that the Corporation's remedy at law for a breach by the
Executive of the provisions of this Section 7 will be inadequate. Accordingly,
in the event of the breach or threatened breach by the Executive of this Section
7, the Corporation shall be entitled to injunctive relief in addition to any
other remedy it may have.

      8. Severance Pay. If the Executive's employment hereunder is involuntarily
terminated for any reason other than those set forth in Section 2(c) hereof,
then unless the Corporation shall have terminated the Executive for "Cause", the
Corporation shall pay the Executive severance pay in an amount equal to
twenty-four (24) months of the Executive's base salary on the effective date of
the termination, plus 1/12 of the amount of the last bonus paid to the Executive
under the Corporation's bonus plan applicable to the Executive for each month in
the period beginning on January 1 of the year in which the date of the
termination occurs and ending on the date of the termination and for each
months' base salary to which the Executive is entitled under this Section 8,
provided, however, that any amount paid to the Executive by the Corporation for
services rendered subsequent to the thirtieth (30th) day following the
communication to the Executive of notice of termination shall be deducted from
the severance pay otherwise due hereunder. Such payment shall be made in a lump
sum within ten (10) business days following the effective date of the
termination. The severance pay shall be in lieu of all other compensation or
payments of any kind relating to the termination of the Executive's employment
hereunder; provided that the Executive's entitlement to compensation or payments
under the Corporation's retirement plans, stock option or incentive plans,
savings plans or bonus plans attributable to service rendered prior to the
effective date of

                                       4

<PAGE>

the termination shall not be affected by this clause and shall continue to be
governed by the applicable provisions of such plans; and further provided that
in lieu hereof, at his election, the Executive shall be entitled to the benefits
of the Change in Control Agreement of even date hereof between the Corporation
and the Executive, if termination occurs in a manner and at a time when such
Change in Control Agreement is applicable. For purposes of this Agreement, the
term for "Cause" shall mean because of gross negligence or willful misconduct by
the Executive either in the course of his employment hereunder or which has a
material adverse effect on the Corporation or the Executive's ability to perform
adequately and effectively his duties hereunder.

      9. Notices. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered or mailed, by registered or certified mail, return receipt requested
to the respective addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in writing
pursuant to the terms of this Section 9.

      10. Severability. The provisions of this Agreement are severable, and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of any other provision.

      11. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the substantive laws of the State of Delaware.

      12. Supersedure. This Agreement shall cancel and supersede all prior
agreements relating to employment between the Executive and the Corporation,
except the Change in Control Agreement.

      13. Waiver of Breach. The waiver by a party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by any of the parties hereto.

                                       5

<PAGE>

      14. Binding Effect. The terms of this Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Corporation and the
heirs, executors, administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.

      IN WITNESS WHEREOF, the Corporation and the Executive have executed this
Agreement as of the day and year first above written.

BOWATER INCORPORATED

By /s/ Richard F. Frisch                     /s/ William C. Morris
   ----------------------                    ---------------------
   Richard F. Frisch,                        William C. Morris
   Vice President - Human Resources

                                       6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.52
<SEQUENCE>7
<FILENAME>g93753exv10w52.txt
<DESCRIPTION>EX-10.52
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.52

                              AMENDED AND RESTATED

                           CHANGE IN CONTROL AGREEMENT

THIS AGREEMENT, made as of the 9th day of June, 2000, by and between Bowater
Incorporated, a Delaware corporation having a mailing address of 55 East
Camperdown Way, P.O. Box 1028, Greenville, South Carolina 29602 (the
"Corporation"), and William C. Morris of 165 Green Valley Drive, Greenville, SC
29609 (the "Executive").

      WHEREAS, the Corporation and the Executive have previously entered into a
Change in Control Agreement for the purpose of reinforcing and encouraging the
continued attention and dedication of members of the Corporation's management,
including the Executive, to their assigned duties in the event of a Change in
Control or potential Change in Control of the Corporation; and

      WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that certain changes should be made to the Change in Control
Agreement to better achieve its objectives, and the Executive has agreed to such
changes;

      NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree to amend and restate the
previous Change in Control Agreement as follows:

1.    DEFINITIONS

      The following terms shall have the meanings assigned to them below:

      (a)   "Accrued Compensation" shall mean all amounts earned or accrued
            through the Termination Date but not paid as of the Termination Date
            including (i) the Base Amount, (ii) reimbursement for reasonable and
            necessary expenses incurred by the Executive on behalf of the
            Corporation during the period ending on the Termination Date, (iii)
            vacation pay, and (iv) any bonus award with respect to the
            Corporation's fiscal year ended prior to the Termination Date.

      (b)   "Acquiring Person" shall mean the Beneficial Owner, directly or
            indirectly, of securities representing 20% or more of the combined
            voting power of the Corporation's then outstanding securities, not
            including (except as provided in clause (i) of the next sentence)
            securities of such Beneficial Owner acquired pursuant to an
            agreement allowing the acquisition of up to and including 50% of
            such voting power approved by two-thirds of the members of the Board
            who are Board members before the Person becomes Beneficial Owner,
            directly or indirectly, of securities representing 5% or more of the
            combined voting power of the Corporation's then outstanding
            securities. Notwithstanding the foregoing, (i) securities acquired
            pursuant to an agreement described in the preceding sentence will be
            included in determining whether a Beneficial Owner is an

<PAGE>

            Acquiring Person if, subsequent to the approved acquisition, the
            Beneficial Owner acquires 5% or more of such voting power other than
            pursuant to such an agreement so approved; and (ii) a Person shall
            not be an Acquiring Person if such Person is eligible to and files a
            Schedule 13G under the Exchange Act with respect to such Person's
            status as a Beneficial Owner of all securities of the Corporation of
            which the Person is a Beneficial Owner.

      (c)   "Affiliate" and "Associate" shall have the respective meanings
            ascribed to such terms in Rule 12b-2 of the General Rules and
            Regulations under the Exchange Act, as in effect on the date hereof.

      (d)   "Base Amount" shall mean the greater of (i) the Executive's annual
            base salary at the rate in effect immediately prior to the Change in
            Control and (ii) the Executive's annual base salary at the rate in
            effect on the Termination Date.

      (e)   "Beneficial Owner" of securities shall mean (i) a Person who
            beneficially owns such securities, directly or indirectly, or (ii) a
            Person who has the right to acquire such securities (whether such
            right is exercisable immediately or only with the passage of time)
            pursuant to any agreement, arrangement or understanding (whether or
            not in writing) or upon the exercise of conversion rights, exchange
            rights, warrants, options or otherwise.

      (f)   "Bonus Amount" shall mean an amount equal to the maximum amount the
            Executive could have been paid under the Corporation's annual or
            other short term cash incentive plans in effect immediately prior to
            the Change in Control for the fiscal year in which the Change in
            Control occurred or, if higher, the maximum amount under such plans
            in effect at the Termination Date based on the Executive's then base
            salary and position.

      (g)   "Cause" shall mean and be limited to the Executive's gross
            negligence, willful misconduct or conviction of a felony, which has
            a demonstrable and material adverse effect upon the Corporation;
            provided that if Cause exists by virtue of the Executive's gross
            negligence or willful misconduct that is capable of being cured, the
            Corporation shall give the Executive written notice of the alleged
            negligence or misconduct and if the Executive cures the negligence
            or misconduct within thirty (30) days after receipt of the notice,
            such Cause shall cease to exist and the Corporation shall not
            terminate the Executive's employment therefor. The Executive shall
            be deemed to have been terminated for Cause as of the effective date
            stated in a Notice of Termination delivered by the Corporation to
            the Executive, which shall not be delivered before the end of the
            thirty (30) day period described in the preceding sentence, if
            applicable. The Notice of Termination must be accompanied by a
            certified copy of a resolution duly adopted by the affirmative vote
            of not less than three-quarters (3/4) of the membership of the Board
            after reasonable notice to the Executive and an opportunity for the
            Executive, with the Executive's counsel present, to be heard before
            the Board, finding that, in the good faith opinion of the Board, the

                                       2

<PAGE>

            Executive was guilty of conduct constituting Cause hereunder and
            setting forth in reasonable detail the facts and circumstances
            claimed to provide the basis for the Executive's termination.

      (h)   "Change in Control" shall be deemed to have occurred upon:

            (i)   the date that any Person is or becomes an Acquiring Person;

            (ii)  the date that the Corporation's stockholders approve a merger,
                  consolidation or reorganization of the Corporation with
                  another corporation or other Person, unless, immediately
                  following such merger, consolidation or reorganization, (A) at
                  least 50% of the combined voting power of the outstanding
                  securities of the resulting entity would be held in the
                  aggregate by the stockholders of the Corporation as of the
                  record date for such approval (provided that securities held
                  by any individual or entity that is an Acquiring Person, or
                  who would be an Acquiring Person if 5% were substituted for
                  20% in the definition of such term, shall not be counted as
                  securities held by the stockholders of the Corporation, but
                  shall be counted as outstanding securities for purposes of
                  this determination), or (B) at least 50% of the board of
                  directors or similar body of the resulting entity are
                  Continuing Directors;

            (iii) the date the Corporation sells or otherwise transfers all or
                  substantially all of the Corporation's assets to another
                  corporation or other Person, unless, immediately following
                  such sale or transfer, (A) at least 50% of the combined voting
                  power of the outstanding securities of the acquiring entity
                  would be held in the aggregate by the stockholders of the
                  Corporation as of the record date for such approval (provided
                  that securities held by any individual or entity that is an
                  Acquiring Person, or who would be an Acquiring Person if 5%
                  were substituted for 20% in the definition of such term, shall
                  not be counted as securities held by the stockholders of the
                  Corporation, but shall be counted as outstanding securities
                  for purposes of this determination), or (B) at least 50% of
                  the board of directors or similar body of the acquiring entity
                  are Continuing Directors; or

            (iv)  the date on which less than 50% of the total membership of the
                  Board consists of Continuing Directors.

      (i)   "Code" shall mean the United States Internal Revenue Code of 1986,
            amended.

      (j)   "Continuing Directors" shall mean any member of the Board who (i)
            was a member of the Board immediately prior to the date of the event
            that would constitute a Change in Control, and any successor of a
            Continuing Director while such successor is a member of the Board,
            (ii) who is not an Acquiring Person or

                                       3

<PAGE>

            an Affiliate or Associate of an Acquiring Person and (iii) is
            recommended or elected to succeed the Continuing Director by a
            majority of the Continuing Directors.

      (k)   "Corporation" shall mean Bowater Incorporated; provided that, if the
            Executive is employed by a subsidiary of the Corporation,
            "Corporation" shall mean such subsidiary of the Corporation for
            purposes of references to the Executive's compensation and benefits,
            and the plans, programs and arrangements pursuant to which
            compensation and benefits are provided.

      (l)   "Disability" shall mean a physical or mental condition that is
            defined as a disability in the Corporation's long term disability
            insurance plan covering the Executive immediately prior to the
            Change in Control.

      (m)   "Employer Match" shall mean an amount equal to the maximum matching
            contribution the Corporation could have made (regardless of actual
            circumstances) on the Executive's behalf to the Corporation's
            Statutory and non-Statutory defined contribution or savings plans
            for the fiscal year in which the Change in Control occurred, or, if
            higher, the maximum matching contribution the Corporation could have
            made for the fiscal year in which the Executive's employment
            terminated.

      (n)   "Exchange Act" shall mean the United States Securities Exchange Act
            of 1934, as amended.

      (o)   "Good Reason" shall mean:

            (i)   a change in the Executive's status, title, position or
                  responsibilities (including in reporting line relationships)
                  that, in the Executive's reasonable judgment, represents a
                  substantial adverse change from the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or at any
                  time thereafter; the assignment to the Executive of any duties
                  or responsibilities that, in the Executive's reasonable
                  judgment, are inconsistent with the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or any time
                  thereafter; or any removal of the Executive from or failure to
                  reappoint or reelect the Executive to any office or position
                  held prior to the Change in Control, except in connection with
                  the termination of the Executive's employment for Disability,
                  Cause, as a result of the Executive's death or by the
                  Executive other than for Good Reason;

            (ii)  the failure by the Corporation to provide the Executive with
                  compensation and benefits, in the aggregate, at least equal
                  (in terms of benefit levels and/or reward opportunities which
                  opportunities will be evaluated in light of the performance
                  requirements therefor) to those provided for under the

                                       4

<PAGE>

                  employee compensation and benefit plans, programs and
                  practices in which the Executive was participating at any time
                  within one-hundred eighty (180) days preceding the date of a
                  Change in Control or at any time thereafter;

            (iii) the reduction of the Executive's salary as in effect on the
                  date of the Change in Control or any time thereafter;

            (iv)  a failure by the Corporation to obtain from any Successor its
                  assent to this Agreement contemplated by Section 12 hereof; or

            (v)   the relocation of the principal office at which the Executive
                  is to perform services on behalf of the Corporation to a
                  location more than thirty-five (35) miles from its location
                  immediately prior to the Change in Control or a substantial
                  increase in the Executive's business travel obligations
                  subsequent to the Change in Control.

      (p)   "Notice of Termination" shall mean a notice sent by either the
            Executive or the Corporation to the other party terminating the
            Executive's employment as of a certain date and setting forth the
            reasons therefor.

      (q)   "Person" shall mean any individual, corporation, partnership, group,
            association or other "person" as such term is used in Sections 13(d)
            and 14(d) of the Exchange Act.

      (r)   "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
            multiplied by a fraction, the numerator of which is the number of
            months and partial months through the Termination Date and the
            denominator of which is twelve (12).

      (s)   "Statutory Plan" shall mean a retirement plan that is intended to be
            qualified (for purposes of United States tax law) or registered (for
            purposes of Canadian tax law), as the case may be.

      (t)   "Successor" shall mean the direct or indirect successor by purchase,
            merger, consolidation or otherwise, to all or substantially all of
            the business and/or assets of the Corporation.

      (u)   "Termination Date" shall mean (i) in the case of the Executive's
            death, the date of death, (ii) in the case of a termination by the
            Executive in accordance with Section 3, the last day of employment
            as set forth in the Notice of Termination given by the Executive,
            (iii) in the case of a termination by the Corporation for Cause, a
            date not less than thirty (30) days after receipt of the Notice of
            Termination by the Executive, (iv) in the case of a termination by
            the Corporation due to the Executive's Disability, the date not less
            than thirty (30) days after receipt of the Notice of Termination by
            the Executive, provided that the Executive shall not have returned
            to the full-time performance of duties within thirty (30) days after
            such receipt, and (v) in all other cases, the date specified in the
            Notice

                                       5

<PAGE>

            of Termination or if no Notice of Termination is sent, the last day
            of the Executive's employment (an Executive receiving periodic
            severance pay is no longer considered employed for the purposes of
            this Agreement).

2.    TERM OF AGREEMENT

      This Agreement shall commence as of the date hereof and shall continue in
      effect until the date the Executive's employment is terminated (an
      Executive being paid periodic severance benefits is no longer considered
      employed for these purposes); provided, however, that if the Executive's
      employment is terminated following, or in anticipation of, a Change in
      Control, the term shall continue in effect until all payments and benefits
      have been made or provided to the Executive hereunder.

3.    EXECUTIVE'S RIGHT OF TERMINATION

      After a Change in Control and for thirty-six (36) months thereafter, the
      Executive shall have the right to terminate employment for Good Reason by
      sending a Notice of Termination to the Corporation setting forth in
      reasonable detail the facts and circumstances claimed to constitute Good
      Reason. In addition, on the first (1st) anniversary date of the Change in
      Control and for a period of thirty (30) days thereafter, the Executive
      shall have the unconditional right to terminate employment by giving
      written notice to the Corporation within such thirty (30) day period. If
      the Executive's employment is terminated in accordance with the provisions
      of this Section 3, the Executive shall be entitled to the compensation and
      benefits described in Section 4(b) below.

4.    COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY CERTAIN TERMINATIONS

      If the Executive's employment with the Corporation shall be terminated
      within thirty-six (36) months following a Change in Control, the Executive
      shall be entitled to the following compensation and benefits:

            (a) If the Executive's employment is terminated (i) by the
      Corporation for Cause or Disability, (ii) by reason of the Executive's
      death or (iii) by the Executive other than in accordance with Section 3,
      the Corporation shall pay to the Executive the Accrued Compensation and,
      if such termination is other than by the Corporation for Cause, the Pro
      Rata Bonus, computed as of the applicable Termination Date.

            (b) If the Executive's employment with the Corporation shall be
      terminated (x) by the Corporation for any reason other than for Cause or
      Disability, or (y) by the Executive pursuant to the provisions of Section
      3, the Executive shall be entitled to the following as of the applicable
      Termination Date:

            (i)   the Accrued Compensation and the Pro-Rata Bonus;

            (ii)  an amount equal to three (3) times the Base Amount;

                                       6

<PAGE>

            (iii) an amount equal to three (3) times the Bonus Amount;

            (iv)  an amount equal to three (3) times the Employer Match;

            (v)   An amount equal to 30% of the Base Amount for certain lost
                  benefits;

            (vi)  An amount equal to the present value of the additional
                  retirement benefits the Executive would have earned under the
                  Corporation's defined benefit retirement plans (Statutory and
                  non-Statutory) for the three (3) years following the
                  Termination Date, computed assuming the following:

                  (A)   the Executive's salary continues at the Base Amount with
                        a bonus or target bonus equal to the Bonus Amount;

                  (B)   the payment of the Executive's retirement benefits
                        commences as of the later of (x) the Executive's age
                        three (3) years after the Termination Date or (y) the
                        earliest retirement age (without regard to service)
                        allowed under the Statutory Plan applicable to the
                        Executive;

                  (C)   all vesting requirements are waived;

                  (D)   mortality and interest rate assumptions applicable to
                        the computation of lump sum values in the applicable
                        Statutory Plan are used; and

                  (E)   the benefits are paid in the form of a single life
                        annuity;

            (vii) As of the Executive's Termination Date, or, if later, when the
                  Executive attains age fifty (50), the Executive (and the
                  Executive's spouse or surviving spouse and dependents) will be
                  provided the retiree health care and life insurance coverage
                  provided by the Corporation to executive retirees as of the
                  date of the Change in Control. If and to the extent that the
                  benefits described in this paragraph cannot be provided under
                  the Corporation's plans or programs without the benefits
                  provided thereunder being taxable to the Executive, the
                  Corporation shall procure an insurance policy or policies on
                  substantially similar terms and conditions for the Executive
                  and the Executive's spouse or surviving spouse and dependents,
                  or if such policy or policies cannot be obtained, shall
                  provide a lump sum payment equal to the value of the lost
                  benefits; and

           (viii) The Corporation shall pay for or provide the Executive
                  either: (i) individual out-placement assistance as offered by
                  a member firm of the Association of Out-Placement Consulting
                  Firms, or (ii) a cash payment of $20,000 in lieu of individual
                  outplacement services, as elected by the Executive at any time
                  within twelve (12) months after the Executive's termination of
                  employment.

                                       7

<PAGE>

5.    EXCISE TAX GROSS-UP

      If any payment or benefit made available to the Executive in connection
      with a Change in Control (including, without limitation, any payment made
      pursuant to any long-term incentive plans, stock option or equity
      participation right plans) or termination of the Executive's employment
      following a Change in Control (in either category, a "Change in Control
      Payment") is subject to the Excise Tax (as hereinafter defined), the
      Corporation shall pay to the Executive additional amounts (the "Gross Up
      Amounts") such that the total amount of all Change in Control Payments net
      of the Excise Tax shall equal the total amount of all Change in Control
      Payments to which the Executive would have been entitled if the Excise Tax
      had not been imposed. For purposes of this Section 5, the term "Excise
      Tax" shall mean the tax imposed by Section 4999 of the Code and any
      similar tax that may hereafter be imposed.

      The Gross Up Amounts due to the Executive under this Section 5 shall be
      estimated by a nationally recognized firm of certified public accountants
      (other than the firm that audited the financial statements of the
      Corporation for the most recently preceding fiscal year) selected by the
      individual holding the position of Chief Financial Officer immediately
      before the Change in Control or such officer's designee, at any time that
      the Executive is to receive a Change in Control Payment. The Gross Up
      Amounts will be based upon the following assumptions:

      (a)   all Change in Control Payments shall be deemed to be "parachute
            payments" within the meaning of Section 280(G)(b)(2) of the Code,
            and all "excess parachute payments" shall be deemed to be subject to
            the Excise Tax except to the extent that, in the opinion of the
            certified public accountants charged with estimating the Gross Up
            Amounts for the Executive under this Section 5, such Change in
            Control Payments are not subject to the Excise Tax; and

      (b)   the Executive shall be deemed to pay federal, state and local taxes
            at the highest marginal rate of taxation for the applicable calendar
            year.

      The estimated Gross Up Amount due the Executive with respect to any Change
      in Control Payment pursuant to this Section 5 shall be paid to the
      Executive in a lump sum not later than thirty (30) business days after
      such Change in Control Payment is provided to the Executive. In the event
      that the Gross Up Amount is less than the amount actually due to the
      Executive under this Section 5, the amount of any such shortfall shall be
      paid to the Executive within ten (10) days after the existence of the
      shortfall is discovered. In the event the Gross Up Amount is more than the
      amount actually due the Executive under this Section 5, the Executive
      shall repay the amount of such overpayment to the Corporation within a
      reasonable time after the overpayment is discovered.

                                       8

<PAGE>

6.    LUMP SUM PENSION OPTION

      If the Executive is entitled to the payments and benefits in Section 4(b),
      then, in accordance with the election requirements described in Section 7,
      the Executive shall be entitled to elect a lump sum payment of the present
      value of any retirement benefits to which the Executive is entitled under
      any of the Corporation's non-Statutory retirement plans computed based
      upon the same assumptions listed in Section 4(b)(vi) above, except
      4(b)(vi)(A). The Corporation's non-Statutory retirement plans are hereby
      deemed amended as necessary to conform to the provisions of this Section
      6. To the extent that a payment on account of the foregoing may not be
      made under a non-Statutory plan, the Corporation shall make such payment
      separately in lieu of payment under such plan.

7.    DEFERRAL OR LUMP SUM ELECTION

      During each December after the date of this Agreement (the "Election
      Period"), the Executive may, in writing, direct the Corporation to pay any
      amounts to which the Executive is entitled under Section 4(b) in equal
      annual installments not to exceed ten (10), with each installment
      including accrued interest at the Federal short-term rate (as set under
      Section 1274(d) of the Code as in effect at the time such installment is
      paid), with the first such installment payable within ten (10) business
      days of the Termination Date and each successive installment payable on
      the anniversary of the Termination Date (the "Deferred Payment Election").
      During the Election Period, the Executive may also elect to be paid the
      amount described in Section 6 in a lump sum (the "Lump Sum Election").
      Neither a Deferred Payment Election nor a Lump Sum Election, once made,
      can be revoked except during an Election Period. Notwithstanding the
      foregoing, however, no Deferred Payment Election or Lump Sum Election can
      be made or revoked by the Executive during an Election Period that occurs
      after a Change in Control or at a time when, in the judgment of the
      Corporation, a Change in Control may occur within sixty (60) days after
      such Election Period.

8.    NO MITIGATION REQUIRED

      The Executive shall not be required to mitigate the amount of any payment
      provided for in this Agreement, nor shall any payment or benefit provided
      for in this Agreement be offset by any compensation earned by the
      Executive as the result of employment by another employer, by retirement
      benefits (provided that the foregoing shall not cause Section 6 to result
      in a duplication of benefits provided under any retirement plan), or be
      offset against any amount claimed to be owed by the Executive to the
      Corporation, or otherwise.

9.    INTEREST

      If any payment to the Executive required by this Agreement is not made
      within the time for such payment specified herein, the Corporation shall
      pay to the Executive interest on such payment at the legal rate payable
      from time to time upon judgments in the State of Delaware from the date
      such payment is payable under the terms hereof until paid.

                                       9

<PAGE>

10.   NON-COMPETE CANCELLATION

      If the Executive is entitled to the payments and benefits described in
      Section 4(b), then any agreement by the Executive not to compete with the
      Corporation or its Affiliates after the Executive's Termination Date shall
      be null and void and any such agreement shall be deemed to be amended
      accordingly.

11.   EXECUTIVE'S EXPENSES

      The Corporation shall pay or reimburse the Executive for all costs,
      including reasonable attorney's, accountants' and actuary's fees and
      expenses, incurred by the Executive (i) to confirm the Executive's rights
      to and amounts of payments hereunder, (ii) to contest or dispute any
      termination of the Executive's employment following a Change in Control or
      seek to obtain or enforce any right or benefit provided by this Agreement
      in litigation or arbitration, or (iii) in connection with any audit by a
      taxing authority related to any payment or benefit hereunder, or any
      subsequent contest or litigation relating to the tax treatment of such
      payment or benefit. Upon demand therefor, the Corporation shall advance to
      the Executive any amount as to which the Executive reasonably believes he
      or she will be entitled pursuant to this Section 11 for costs that the
      Executive has incurred or will incur during the ninety (90) days following
      such demand.

12.   BINDING AGREEMENT

      This Agreement shall inure to the benefit of and be enforceable by the
      Executive, and the Executive's heirs, executors, administrators,
      successors and assigns. This Agreement shall be binding upon the
      Corporation, its Successors and assigns. The Corporation shall require any
      Successor to assume and agree to perform this Agreement in accordance with
      its terms. The Corporation shall obtain such assumption and agreement
      prior to the effectiveness of any such succession.

13.   NOTICE

      Any notices and all other communications provided for herein shall be in
      writing and shall be delivered personally or sent by facsimile
      transmission (with written confirmation sent at the same time), prepaid
      air courier or prepaid certified or registered mail. Any such notice shall
      be deemed to have been given (a) when received, if delivered in person,
      sent by facsimile transmission, or sent by prepaid air courier, or (b)
      three (3) business days following the mailing thereof, if mailed by
      prepaid certified or registered mail, return receipt requested, addressed
      to the respective addresses set forth on the first page of this Agreement
      or to such other address as either party may have furnished to the other
      in writing in accordance herewith, except that notices of change of
      address shall be effective only upon receipt. All notices to the
      Corporation shall be addressed to the attention of the Board with a copy
      to the General Counsel.

                                       10

<PAGE>

14.   SOLE SEVERANCE; OTHER BENEFITS

      If the Executive is paid the entitlements due under Section 4(b), such
      payments shall be in lieu of any other severance amounts to which the
      Executive may be entitled under any other severance arrangement, including
      under any employment agreement, severance pay plan, or applicable
      legislation entitling the Executive to severance benefits. However, the
      parties acknowledge that the benefits paid hereunder are only exclusive as
      to other severance payments and that the Executive may be entitled to
      other benefits or payments triggered by a Change in Control under certain
      other of the Corporation's benefit or compensation arrangements,
      including, without limitation, any long term incentive plans, stock option
      plans or equity participation rights plans. This Agreement supercedes any
      Change in Control Agreement previously in effect between the Executive and
      the Corporation.

15.   AMENDMENTS; WAIVERS

      No provision of this Agreement may be modified, waived or discharged
      except in a writing specifically referring to such provision and signed by
      the party against which enforcement of such modification, waiver or
      discharge is sought. No waiver by either party hereto of the breach of any
      condition or provision of this Agreement shall be deemed a waiver of any
      other condition or provision at the same or any other time.

16.   GOVERNING LAW

      The validity, interpretation, construction and performance of this
      Agreement shall be governed by the substantive laws of the State of
      Delaware without regard to the choice of law provisions thereof.

17.   VALIDITY

      The invalidity or unenforceability of any provision of this Agreement
      shall not affect the validity or enforceability of any other provision of
      this Agreement, which shall remain in full force and effect.

18.   ARBITRATION

      If the Executive so elects, any dispute or controversy arising under or in
      connection with this Agreement shall be settled exclusively by arbitration
      in Greenville, South Carolina, or at the Executive's election in the city
      nearest to the Executive's principal residence that has an office of the
      American Arbitration Association, by one arbitrator in accordance with the
      rules of the American Arbitration Association then in effect. Judgment may
      be entered on the arbitrator's award in any court having jurisdiction. The
      Corporation hereby waives its right to contest the personal jurisdiction
      or venue of any court, federal or state, in an action brought to enforce
      this Agreement or any award of an

                                       11

<PAGE>

      arbitrator hereunder which action is brought in the jurisdiction in which
      such arbitration was conducted, or, if no arbitration was elected, in
      which arbitration could have been conducted pursuant to this Section 18.

19.   COUNTERPARTS

      This Agreement may be executed in one or more counterparts, each of which
      shall be deemed to be an original but all of which together will
      constitute one and the same instrument.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

                                    BOWATER INCORPORATED

                                    By /s/ Arnold M. Nemirow
                                       ---------------------
                                    Name: Arnold M. Nemirow
                                    Title:  Chairman and Chief Executive Officer

                                      /s/ William C. Morris
                                    -----------------------
                                    Name: William C. Morris

                                       12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.53
<SEQUENCE>8
<FILENAME>g93753exv10w53.txt
<DESCRIPTION>EX-10.53
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.53

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT, is made as of this 1st day of April, 1998, by and between
BOWATER INCORPORATED, a Delaware corporation having a mailing address of 55 East
Camperdown Way, Greenville, South Carolina 29601 (the "Corporation"), and Craig
B. Stevens, 3 Anna's Place, Simpsonville, SC 29681 (the "Executive").

      WHEREAS, the Corporation desires to employ the Executive as Vice President
of Administration and Planning for the Newsprint and Directory Division; and

      WHEREAS, the Executive is desirous of serving the Corporation in such
capacity;

      NOW, THEREFORE, the parties hereto agree as follows:

      1. Employment. During the term of this Agreement the Corporation agrees to
continue to employ the Executive, and the Executive agrees to continue in the
employ of the Corporation, in accordance with and subject to the provisions of
this Agreement.

      2.    Term.

            (a)   Subject to the provisions of subparagraphs (b) and (c) of this
                  Section 2, the term of this Agreement shall begin on the Date
                  hereof and shall continue thereafter until terminated by
                  either party by written notice given to the other party at
                  least thirty (30) days prior to the effective date of any such
                  termination. The effective date of the termination shall be
                  the date stated in such notice, provided that if the
                  Corporation specifies an effective date that is more than
                  thirty (30) days following the date of such notice, the
                  Executive may, upon thirty (30) days" written notice to the
                  Corporation, accelerate the effective date of such
                  termination.

            (b)   Notwithstanding Section 2(a), upon the occurrence of a Change
                  in Control as defined in the Change in Control Agreement of
                  even date herewith between the Corporation and the Executive
                  (the "Change in Control Agreement"), the term of this
                  Agreement shall be deemed to continue until terminated, but in
                  any event, for a period of not less than three (3) years
                  following the date of the Change in Control,

                                        1
<PAGE>

                  unless such termination shall be at the Executive"s election
                  for other than "Good Reason" as that term is defined in the
                  Change in Control Agreement.

            (c)   Notwithstanding Section 2(a), the term of this Agreement shall
                  end upon:

                  (i)   the death of the Executive;

                  (ii)  the inability of the Executive to perform his duties
                        properly, whether by reason of ill-health, accident or
                        other cause, for a period of one hundred and eighty
                        (180) consecutive days or for periods totaling one
                        hundred and eighty (180) days occurring within any
                        twelve (12) consecutive calendar months; or

                  (iii) the Executive's retirement on his early or normal
                        retirement date.

      3. Position and Duties. Throughout the term hereof, the Executive shall be
employed as Vice President of Administration and Planning for the Newsprint and
Directory Division (Salary Grade 32), with the duties and responsibilities
customarily attendant to that office, provided that the Executive shall
undertake such other and further assignments and responsibilities of at least
comparable status as the Board of Directors may direct. The Executive shall
diligently and faithfully devote his full working time and best efforts to the
performance of the services under this Agreement and to the furtherance of the
best interests of the Corporation.

      4. Place of Employment. The Executive will be employed at the
Corporation's offices in the City of Greenville, South Carolina or at such other
place as the Corporation shall designate from time to time, provided, however,
that if the Executive is transferred to another place of employment,
necessitating a change in his residence, the Executive shall be entitled to
financial assistance in accordance with the terms of the Corporation's
relocation policy then in effect.

      5. Compensation and Benefits.

          (a)   Base Salary. The Corporation shall pay to the Executive a base
                salary of $219,000 payable in substantially equal periodic
                installments on the Corporation's regular payroll dates. The
                Executive's base salary

                                        2
<PAGE>

                shall be reviewed at least annually and from time to time may be
                increased (or reduced, if such reduction is effected pursuant to
                across-the-board salary reductions similarly affecting all
                management personnel of the Corporation).

          (b)   Bonus Plan. In addition to his base salary, the Executive shall
                be entitled to receive a bonus under the Corporation's bonus
                plan in effect from time to time determined in the manner, at
                the time, and in the amounts set forth under such plan.

          (c)   Benefit Plans. The Corporation shall make contributions on the
                Executive's behalf to the various benefit plans and programs of
                the Corporation in which the Executive is eligible to
                participate in accordance with the provisions thereof as in
                effect from time to time.

          (d)   Vacations. The Executive shall be entitled to paid vacation, in
                keeping with the Corporate policy as in effect from time to
                time, to be taken at such time or times as may be approved by
                the Corporation.

          (e)   Expenses. The Corporation shall reimburse the Executive for all
                reasonable expenses properly incurred, and appropriately
                documented, by the Executive in connection with the business of
                the Corporation.

          (f)   Perquisites. The Corporation shall make available to the
                Executive all perquisites to which he is entitled by virtue of
                his position.

      6. Nondisclosure. During and after the term of this Agreement, the
Executive shall not, without the written consent of the Board of Directors of
the Corporation, disclose or use directly or indirectly, (except in the course
of employment hereunder and in furtherance of the business of the Corporation or
any of its subsidiaries and affiliates) any of the trade secrets or other
confidential information or proprietary data of the Corporation or its
subsidiaries or affiliates; provided, however, that confidential information
shall not include any information known generally to the public (other than as a
result of unauthorized disclosure by the Executive) or any information of a type
not otherwise considered confidential by persons engaged in the same or similar
businesses.

                                        3
<PAGE>

      7. Noncompetition. During the term of this Agreement, and for a period of
one (1) year after the date the Executive's employment terminates, the Executive
shall not, without the prior approval of the Board of Directors of the
Corporation in the same or a similar capacity engage in or invest in, or aid or
assist anyone else in the conduct of any business (other than the businesses of
the Corporation and its subsidiaries and affiliates) which directly competes
with the business of the Corporation and its subsidiaries and affiliates as
conducted during the term hereof. If any court of competent jurisdiction shall
determine that any of the provisions of this Section 7 shall not be enforceable
because of the duration or scope thereof, the parties hereto agree that said
court shall have the power to reduce the duration and scope of such provision to
the extent necessary to make it enforceable and this Agreement in its reduced
form shall be valid and enforceable to the extent permitted by law. The
Executive acknowledges that the Corporation's remedy at law for a breach by the
Executive of the provisions of this Section 7 will be inadequate. Accordingly,
in the event of the breach or threatened breach by the Executive of this Section
7, the Corporation shall be entitled to injunctive relief in addition to any
other remedy it may have.

      8. Severance Pay. If the Executive's employment hereunder is involuntarily
terminated for any reason other than those set forth in Section 2(c) hereof,
then unless the Corporation shall have terminated the Executive for "Cause", the
Corporation shall pay the Executive severance pay in an amount equal to
twenty-four (24) months of the Executive's base salary on the effective date of
the termination, plus 1/12 of the amount of the last bonus paid to the Executive
under the Corporation's bonus plan applicable to the Executive for each month in
the period beginning on January 1 of the year in which the date of the
termination occurs and ending on the date of the termination and for each
months' base salary to which the Executive is entitled under this Section 8,
provided, however, that any amount paid to the Executive by the Corporation for
services rendered subsequent to the thirtieth (30th) day following the
communication to the Executive of notice of termination shall be deducted from
the severance pay otherwise due hereunder. Such payment shall be made in a lump
sum within ten (10) business days following the effective date of the
termination. The severance pay shall be in lieu of all other compensation or
payments of any kind relating to the termination of the Executive's employment
hereunder; provided that the Executive's entitlement to compensation or payments
under the Corporation's retirement plans, stock option or incentive plans,
savings plans or bonus plans attributable to service rendered prior to the
effective date of the termination shall not be affected by this clause and shall
continue to be governed by the applicable provisions of such plans; and further
provided that in lieu hereof, at his election, the Executive shall be entitled
to the benefits of the Change in Control Agreement of even date hereof between
the Corporation and the Executive, if termination occurs in a manner and at a
time when such Change in Control Agreement is applicable. For purposes of this
Agreement, the term for "Cause" shall mean because of gross

                                        4
<PAGE>

negligence or willful misconduct by the Executive either in the course of his
employment hereunder or which has a material adverse effect on the Corporation
or the Executive's ability to perform adequately and effectively his duties
hereunder.

      9. Notices. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered or mailed, by registered or certified mail, return receipt requested
to the respective addresses of the parties set forth above, or to such other
address as any party hereto shall designate to the other party in writing
pursuant to the terms of this Section 9.

      10. Severability. The provisions of this Agreement are severable, and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of any other provision.

      11. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the substantive laws of the State of Delaware.

      12. Supersedure. This Agreement shall cancel and supersede all prior
agreements relating to employment between the Executive and the Corporation,
except the Change in Control Agreement.

      13. Waiver of Breach. The waiver by a party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any prior or
subsequent breach by any of the parties hereto.

      14. Binding Effect. The terms of this Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Corporation and the
heirs, executors, administrators and successors of the Executive, but this
Agreement may not be assigned by the Executive.

                                        5
<PAGE>

      IN WITNESS WHEREOF, the Corporation and the Executive have executed this
Agreement as of the day and year first above written.

BOWATER INCORPORATED

By  /s/ Richard F. Frisch                       /s/ Craig B. Stevens
    ----------------------                      --------------------
    Richard F. Frisch,                          Craig B. Stevens
    Vice President - Human Resources

                                        6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.54
<SEQUENCE>9
<FILENAME>g93753exv10w54.txt
<DESCRIPTION>EX-10.54
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.54

                              AMENDED AND RESTATED
                           CHANGE IN CONTROL AGREEMENT

THIS AGREEMENT, made as of the 9th day of June, 2000, by and between Bowater
Incorporated, a Delaware corporation having a mailing address of 55 East
Camperdown Way, P.O. Box 1028, Greenville, South Carolina 29602 (the
"Corporation"), and Craig B. Stevens of 3 Anna's Place, Simpsonville, SC 29681
(the "Executive").

      WHEREAS, the Corporation and the Executive have previously entered into a
Change in Control Agreement for the purpose of reinforcing and encouraging the
continued attention and dedication of members of the Corporation's management,
including the Executive, to their assigned duties in the event of a Change in
Control or potential Change in Control of the Corporation; and

      WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that certain changes should be made to the Change in Control
Agreement to better achieve its objectives, and the Executive has agreed to such
changes;

      NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree to amend and restate the
previous Change in Control Agreement as follows:

1.    DEFINITIONS

      The   following terms shall have the meanings assigned to them below:

      (a)   "Accrued Compensation" shall mean all amounts earned or accrued
            through the Termination Date but not paid as of the Termination Date
            including (i) the Base Amount, (ii) reimbursement for reasonable and
            necessary expenses incurred by the Executive on behalf of the
            Corporation during the period ending on the Termination Date, (iii)
            vacation pay, and (iv) any bonus award with respect to the
            Corporation's fiscal year ended prior to the Termination Date.

      (b)   "Acquiring Person" shall mean the Beneficial Owner, directly or
            indirectly, of securities representing 20% or more of the combined
            voting power of the Corporation's then outstanding securities, not
            including (except as provided in clause (i) of the next sentence)
            securities of such Beneficial Owner acquired pursuant to an
            agreement allowing the acquisition of up to and including 50% of
            such voting power approved by two-thirds of the members of the Board
            who are Board members before the Person becomes Beneficial Owner,
            directly or indirectly, of securities representing 5% or more of the
            combined voting power of the Corporation's then outstanding
            securities. Notwithstanding the foregoing, (i) securities acquired
            pursuant to an agreement described in the preceding sentence will be
            included in determining whether a Beneficial Owner is an

<PAGE>

            Acquiring Person if, subsequent to the approved acquisition, the
            Beneficial Owner acquires 5% or more of such voting power other than
            pursuant to such an agreement so approved; and (ii) a Person shall
            not be an Acquiring Person if such Person is eligible to and files a
            Schedule 13G under the Exchange Act with respect to such Person's
            status as a Beneficial Owner of all securities of the Corporation of
            which the Person is a Beneficial Owner.

      (c)   "Affiliate" and "Associate" shall have the respective meanings
            ascribed to such terms in Rule 12b-2 of the General Rules and
            Regulations under the Exchange Act, as in effect on the date hereof.

      (d)   "Base Amount" shall mean the greater of (i) the Executive's annual
            base salary at the rate in effect immediately prior to the Change in
            Control and (ii) the Executive's annual base salary at the rate in
            effect on the Termination Date.

      (e)   "Beneficial Owner" of securities shall mean (i) a Person who
            beneficially owns such securities, directly or indirectly, or (ii) a
            Person who has the right to acquire such securities (whether such
            right is exercisable immediately or only with the passage of time)
            pursuant to any agreement, arrangement or understanding (whether or
            not in writing) or upon the exercise of conversion rights, exchange
            rights, warrants, options or otherwise.

      (f)   "Bonus Amount" shall mean an amount equal to the maximum amount the
            Executive could have been paid under the Corporation's annual or
            other short term cash incentive plans in effect immediately prior to
            the Change in Control for the fiscal year in which the Change in
            Control occurred or, if higher, the maximum amount under such plans
            in effect at the Termination Date based on the Executive's then base
            salary and position.

      (g)   "Cause" shall mean and be limited to the Executive's gross
            negligence, willful misconduct or conviction of a felony, which has
            a demonstrable and material adverse effect upon the Corporation;
            provided that if Cause exists by virtue of the Executive's gross
            negligence or willful misconduct that is capable of being cured, the
            Corporation shall give the Executive written notice of the alleged
            negligence or misconduct and if the Executive cures the negligence
            or misconduct within thirty (30) days after receipt of the notice,
            such Cause shall cease to exist and the Corporation shall not
            terminate the Executive's employment therefor. The Executive shall
            be deemed to have been terminated for Cause as of the effective date
            stated in a Notice of Termination delivered by the Corporation to
            the Executive, which shall not be delivered before the end of the
            thirty (30) day period described in the preceding sentence, if
            applicable. The Notice of Termination must be accompanied by a
            certified copy of a resolution duly adopted by the affirmative vote
            of not less than three-quarters (3/4) of the membership of the Board
            after reasonable notice to the Executive and an opportunity for the
            Executive, with the Executive's counsel present, to be heard before
            the Board, finding that, in the good faith opinion of the Board, the

                                        2
<PAGE>

            Executive was guilty of conduct constituting Cause hereunder and
            setting forth in reasonable detail the facts and circumstances
            claimed to provide the basis for the Executive's termination.

      (h)   "Change in Control" shall be deemed to have occurred upon:

            (i)   the date that any Person is or becomes an Acquiring Person;

            (ii)  the date that the Corporation's stockholders approve a merger,
                  consolidation or reorganization of the Corporation with
                  another corporation or other Person, unless, immediately
                  following such merger, consolidation or reorganization, (A) at
                  least 50% of the combined voting power of the outstanding
                  securities of the resulting entity would be held in the
                  aggregate by the stockholders of the Corporation as of the
                  record date for such approval (provided that securities held
                  by any individual or entity that is an Acquiring Person, or
                  who would be an Acquiring Person if 5% were substituted for
                  20% in the definition of such term, shall not be counted as
                  securities held by the stockholders of the Corporation, but
                  shall be counted as outstanding securities for purposes of
                  this determination), or (B) at least 50% of the board of
                  directors or similar body of the resulting entity are
                  Continuing Directors;

            (iii) the date the Corporation sells or otherwise transfers all or
                  substantially all of the Corporation's assets to another
                  corporation or other Person, unless, immediately following
                  such sale or transfer, (A) at least 50% of the combined voting
                  power of the outstanding securities of the acquiring entity
                  would be held in the aggregate by the stockholders of the
                  Corporation as of the record date for such approval (provided
                  that securities held by any individual or entity that is an
                  Acquiring Person, or who would be an Acquiring Person if 5%
                  were substituted for 20% in the definition of such term, shall
                  not be counted as securities held by the stockholders of the
                  Corporation, but shall be counted as outstanding securities
                  for purposes of this determination), or (B) at least 50% of
                  the board of directors or similar body of the acquiring entity
                  are Continuing Directors; or

            (iv)  the date on which less than 50% of the total membership of the
                  Board consists of Continuing Directors.

      (i)   "Code" shall mean the United States Internal Revenue Code of 1986,
            amended.

      (j)   "Continuing Directors" shall mean any member of the Board who (i)
            was a member of the Board immediately prior to the date of the event
            that would constitute a Change in Control, and any successor of a
            Continuing Director while such successor is a member of the Board,
            (ii) who is not an Acquiring Person or

                                        3
<PAGE>

            an Affiliate or Associate of an Acquiring Person and (iii) is
            recommended or elected to succeed the Continuing Director by a
            majority of the Continuing Directors.

      (k)   "Corporation" shall mean Bowater Incorporated; provided that, if the
            Executive is employed by a subsidiary of the Corporation,
            "Corporation" shall mean such subsidiary of the Corporation for
            purposes of references to the Executive's compensation and benefits,
            and the plans, programs and arrangements pursuant to which
            compensation and benefits are provided.

      (l)   "Disability" shall mean a physical or mental condition that is
            defined as a disability in the Corporation's long term disability
            insurance plan covering the Executive immediately prior to the
            Change in Control.

      (m)   "Employer Match" shall mean an amount equal to the maximum matching
            contribution the Corporation could have made (regardless of actual
            circumstances) on the Executive's behalf to the Corporation's
            Statutory and non-Statutory defined contribution or savings plans
            for the fiscal year in which the Change in Control occurred, or, if
            higher, the maximum matching contribution the Corporation could have
            made for the fiscal year in which the Executive's employment
            terminated.

      (n)   "Exchange Act" shall mean the United States Securities Exchange Act
            of 1934, as amended.

      (o)   "Good Reason" shall mean:

            (i)   a change in the Executive's status, title, position or
                  responsibilities (including in reporting line relationships)
                  that, in the Executive's reasonable judgment, represents a
                  substantial adverse change from the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or at any
                  time thereafter; the assignment to the Executive of any duties
                  or responsibilities that, in the Executive's reasonable
                  judgment, are inconsistent with the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or any time
                  thereafter; or any removal of the Executive from or failure to
                  reappoint or reelect the Executive to any office or position
                  held prior to the Change in Control, except in connection with
                  the termination of the Executive's employment for Disability,
                  Cause, as a result of the Executive's death or by the
                  Executive other than for Good Reason;

            (ii)  the failure by the Corporation to provide the Executive with
                  compensation and benefits, in the aggregate, at least equal
                  (in terms of benefit levels and/or reward opportunities which
                  opportunities will be evaluated in light of the performance
                  requirements therefor) to those provided for under the

                                        4
<PAGE>

                  employee compensation and benefit plans, programs and
                  practices in which the Executive was participating at any time
                  within one-hundred eighty (180) days preceding the date of a
                  Change in Control or at any time thereafter;

            (iii) the reduction of the Executive's salary as in effect on the
                  date of the Change in Control or any time thereafter;

            (iv)  a failure by the Corporation to obtain from any Successor its
                  assent to this Agreement contemplated by Section 12 hereof; or

            (v)   the relocation of the principal office at which the Executive
                  is to perform services on behalf of the Corporation to a
                  location more than thirty-five (35) miles from its location
                  immediately prior to the Change in Control or a substantial
                  increase in the Executive's business travel obligations
                  subsequent to the Change in Control.

      (p)   "Notice of Termination" shall mean a notice sent by either the
            Executive or the Corporation to the other party terminating the
            Executive's employment as of a certain date and setting forth the
            reasons therefor.

      (q)   "Person" shall mean any individual, corporation, partnership, group,
            association or other "person" as such term is used in Sections 13(d)
            and 14(d) of the Exchange Act.

      (r)   "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
            multiplied by a fraction, the numerator of which is the number of
            months and partial months through the Termination Date and the
            denominator of which is twelve (12).

      (s)   "Statutory Plan" shall mean a retirement plan that is intended to be
            qualified (for purposes of United States tax law) or registered (for
            purposes of Canadian tax law), as the case may be.

      (t)   "Successor" shall mean the direct or indirect successor by purchase,
            merger, consolidation or otherwise, to all or substantially all of
            the business and/or assets of the Corporation.

      (u)   "Termination Date" shall mean (i) in the case of the Executive's
            death, the date of death, (ii) in the case of a termination by the
            Executive in accordance with Section 3, the last day of employment
            as set forth in the Notice of Termination given by the Executive,
            (iii) in the case of a termination by the Corporation for Cause, a
            date not less than thirty (30) days after receipt of the Notice of
            Termination by the Executive, (iv) in the case of a termination by
            the Corporation due to the Executive's Disability, the date not less
            than thirty (30) days after receipt of the Notice of Termination by
            the Executive, provided that the Executive shall not have returned
            to the full-time performance of duties within thirty (30) days after
            such receipt, and (v) in all other cases, the date specified in the
            Notice

                                        5
<PAGE>

            of Termination or if no Notice of Termination is sent, the last day
            of the Executive's employment (an Executive receiving periodic
            severance pay is no longer considered employed for the purposes of
            this Agreement).

2.    TERM OF AGREEMENT

      This Agreement shall commence as of the date hereof and shall continue in
      effect until the date the Executive's employment is terminated (an
      Executive being paid periodic severance benefits is no longer considered
      employed for these purposes); provided, however, that if the Executive's
      employment is terminated following, or in anticipation of, a Change in
      Control, the term shall continue in effect until all payments and benefits
      have been made or provided to the Executive hereunder.

3.    EXECUTIVE'S RIGHT OF TERMINATION

      After a Change in Control and for thirty-six (36) months thereafter, the
      Executive shall have the right to terminate employment for Good Reason by
      sending a Notice of Termination to the Corporation setting forth in
      reasonable detail the facts and circumstances claimed to constitute Good
      Reason. In addition, on the first (1st) anniversary date of the Change in
      Control and for a period of thirty (30) days thereafter, the Executive
      shall have the unconditional right to terminate employment by giving
      written notice to the Corporation within such thirty (30) day period. If
      the Executive's employment is terminated in accordance with the provisions
      of this Section 3, the Executive shall be entitled to the compensation and
      benefits described in Section 4(b) below.

4.    COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY CERTAIN TERMINATIONS

      If the Executive's employment with the Corporation shall be terminated
      within thirty-six (36) months following a Change in Control, the Executive
      shall be entitled to the following compensation and benefits:

            (a) If the Executive's employment is terminated (i) by the
      Corporation for Cause or Disability, (ii) by reason of the Executive's
      death or (iii) by the Executive other than in accordance with Section 3,
      the Corporation shall pay to the Executive the Accrued Compensation and,
      if such termination is other than by the Corporation for Cause, the Pro
      Rata Bonus, computed as of the applicable Termination Date.

            (b) If the Executive's employment with the Corporation shall be
      terminated (x) by the Corporation for any reason other than for Cause or
      Disability, or (y) by the Executive pursuant to the provisions of Section
      3, the Executive shall be entitled to the following as of the applicable
      Termination Date:

            (i) the Accrued Compensation and the Pro-Rata Bonus;

            (ii) an amount equal to three (3) times the Base Amount;

                                        6
<PAGE>

            (iii) an amount equal to three (3) times the Bonus Amount;

            (iv) an amount equal to three (3) times the Employer Match;

            (v)   An amount equal to 30% of the Base Amount for certain lost
                  benefits;

            (vi)  An amount equal to the present value of the additional
                  retirement benefits the Executive would have earned under the
                  Corporation's defined benefit retirement plans (Statutory and
                  non-Statutory) for the three (3) years following the
                  Termination Date, computed assuming the following:

                  (A)   the Executive's salary continues at the Base Amount with
                        a bonus or target bonus equal to the Bonus Amount;

                  (B)   the payment of the Executive's retirement benefits
                        commences as of the later of (x) the Executive's age
                        three (3) years after the Termination Date or (y)
                        earliest retirement age (without regard to service)
                        allowed under the Statutory Plan applicable to the
                        Executive;

                  (C)   all vesting requirements are waived;

                  (D)   mortality and interest rate assumptions applicable to
                        the computation of lump sum values in the applicable
                        Statutory Plan are used; and

                  (E)   the benefits are paid in the form of a single life
                        annuity;

            (vii) As of the Executive's Termination Date, or, if later, when the
                  Executive attains age fifty (50), the Executive (and the
                  Executive's spouse or surviving spouse and dependents) will be
                  provided the retiree health care and life insurance coverage
                  provided by the Corporation to executive retirees as of the
                  date of the Change in Control. If and to the extent that the
                  benefits described in this paragraph cannot be provided under
                  the Corporation's plans or programs without the benefits
                  provided thereunder being taxable to the Executive, the
                  Corporation shall procure an insurance policy or policies on
                  substantially similar terms and conditions for the Executive
                  and the Executive's spouse or surviving spouse and dependents,
                  or if such policy or policies cannot be obtained, shall
                  provide a lump sum payment equal to the value of the lost
                  benefits; and

            (viii) The Corporation shall pay for or provide the Executive
                  either: (i) individual out-placement assistance as offered by
                  a member firm of the Association of Out-Placement Consulting
                  Firms, or (ii) a cash payment of $20,000 in lieu of individual
                  outplacement services, as elected by the Executive at any time
                  within twelve (12) months after the Executive's termination of
                  employment.

                                        7
<PAGE>

5.    EXCISE TAX GROSS-UP

      If any payment or benefit made available to the Executive in connection
      with a Change in Control (including, without limitation, any payment made
      pursuant to any long-term incentive plans, stock option or equity
      participation right plans) or termination of the Executive's employment
      following a Change in Control (in either category, a "Change in Control
      Payment") is subject to the Excise Tax (as hereinafter defined), the
      Corporation shall pay to the Executive additional amounts (the "Gross Up
      Amounts") such that the total amount of all Change in Control Payments net
      of the Excise Tax shall equal the total amount of all Change in Control
      Payments to which the Executive would have been entitled if the Excise Tax
      had not been imposed. For purposes of this Section 5, the term "Excise
      Tax" shall mean the tax imposed by Section 4999 of the Code and any
      similar tax that may hereafter be imposed.

      The Gross Up Amounts due to the Executive under this Section 5 shall be
      estimated by a nationally recognized firm of certified public accountants
      (other than the firm that audited the financial statements of the
      Corporation for the most recently preceding fiscal year) selected by the
      individual holding the position of Chief Financial Officer immediately
      before the Change in Control or his designee, at any time that the
      Executive is to receive a Change in Control Payment. The Gross Up Amounts
      will be based upon the following assumptions:

      (a)   all Change in Control Payments shall be deemed to be "parachute
            payments" within the meaning of Section 280(G)(b)(2) of the Code,
            and all "excess parachute payments" shall be deemed to be subject to
            the Excise Tax except to the extent that, in the opinion of the
            certified public accountants charged with estimating the Gross Up
            Amounts for the Executive under this Section 5, such Change in
            Control Payments are not subject to the Excise Tax; and

      (b)   the Executive shall be deemed to pay federal, state and local taxes
            at the highest marginal rate of taxation for the applicable calendar
            year.

      The estimated Gross Up Amount due the Executive with respect to any Change
      in Control Payment pursuant to this Section 5 shall be paid to the
      Executive in a lump sum not later than thirty (30) business days after
      such Change in Control Payment is provided to the Executive. In the event
      that the Gross Up Amount is less than the amount actually due to the
      Executive under this Section 5, the amount of any such shortfall shall be
      paid to the Executive within ten (10) days after the existence of the
      shortfall is discovered. In the event the Gross Up Amount is more than the
      amount actually due the Executive under this Section 5, the Executive
      shall repay the amount of such overpayment to the Corporation within a
      reasonable time after the overpayment is discovered.

                                        8
<PAGE>

6.    LUMP SUM PENSION OPTION

      If the Executive is entitled to the payments and benefits in Section 4(b),
      then, in accordance with the election requirements described in Section 7,
      the Executive shall be entitled to elect a lump sum payment of the present
      value of any retirement benefits to which the Executive is entitled under
      any of the Corporation's non-Statutory retirement plans computed based
      upon the same assumptions listed in Section 4(b)(vi) above, except
      4(b)(vi)(A). The Corporation's non-Statutory retirement plans are hereby
      deemed amended as necessary to conform to the provisions of this Section
      6. To the extent that a payment on account of the foregoing may not be
      made under a non-Statutory plan, the Corporation shall make such payment
      separately in lieu of payment under such plan.

7.    DEFERRAL OR LUMP SUM ELECTION

      During each December after the date of this Agreement (the "Election
      Period"), the Executive may, in writing, direct the Corporation to pay any
      amounts to which the Executive is entitled under Section 4(b) in equal
      annual installments not to exceed ten (10), with each installment
      including accrued interest at the Federal short-term rate (as set under
      Section 1274(d) of the Code as in effect at the time such installment is
      paid), with the first such installment payable within ten (10) business
      days of the Termination Date and each successive installment payable on
      the anniversary of the Termination Date (the "Deferred Payment Election").
      During the Election Period, the Executive may also elect to be paid the
      amount described in Section 6 in a lump sum (the "Lump Sum Election").
      Neither a Deferred Payment Election nor a Lump Sum Election, once made,
      can be revoked except during an Election Period. Notwithstanding the
      foregoing, however, no Deferred Payment Election or Lump Sum Election can
      be made or revoked by the Executive during an Election Period that occurs
      after a Change in Control or at a time when, in the judgment of the
      Corporation, a Change in Control may occur within sixty (60) days after
      such Election Period.

8.    NO MITIGATION REQUIRED

      The Executive shall not be required to mitigate the amount of any payment
      provided for in this Agreement, nor shall any payment or benefit provided
      for in this Agreement be offset by any compensation earned by the
      Executive as the result of employment by another employer, by retirement
      benefits (provided that the foregoing shall not cause Section 6 to result
      in a duplication of benefits provided under any retirement plan), or be
      offset against any amount claimed to be owed by the Executive to the
      Corporation, or otherwise.

9.    INTEREST

      If any payment to the Executive required by this Agreement is not made
      within the time for such payment specified herein, the Corporation shall
      pay to the Executive interest on such payment at the legal rate payable
      from time to time upon judgments in the State of Delaware from the date
      such payment is payable under the terms hereof until paid.

                                        9
<PAGE>

10.   NON-COMPETE CANCELLATION

      If the Executive is entitled to the payments and benefits described in
      Section 4(b), then any agreement by the Executive not to compete with the
      Corporation or its Affiliates after the Executive's Termination Date shall
      be null and void and any such agreement shall be deemed to be amended
      accordingly.

11.   EXECUTIVE'S EXPENSES

      The Corporation shall pay or reimburse the Executive for all costs,
      including reasonable attorney's, accountants' and actuary's fees and
      expenses, incurred by the Executive (i) to confirm the Executive's rights
      to and amounts of payments hereunder, (ii) to contest or dispute any
      termination of the Executive's employment following a Change in Control or
      seek to obtain or enforce any right or benefit provided by this Agreement
      in litigation or arbitration, or (iii) in connection with any audit by a
      taxing authority related to any payment or benefit hereunder, or any
      subsequent contest or litigation relating to the tax treatment of such
      payment or benefit. Upon demand therefor, the Corporation shall advance to
      the Executive any amount as to which the Executive reasonably believes he
      or she will be entitled pursuant to this Section 11 for costs that the
      Executive has incurred or will incur during the ninety (90) days following
      such demand.

12.   BINDING AGREEMENT

      This Agreement shall inure to the benefit of and be enforceable by the
      Executive, and the Executive's heirs, executors, administrators,
      successors and assigns. This Agreement shall be binding upon the
      Corporation, its Successors and assigns. The Corporation shall require any
      Successor to assume and agree to perform this Agreement in accordance with
      its terms. The Corporation shall obtain such assumption and agreement
      prior to the effectiveness of any such succession.

13.   NOTICE

      Any notices and all other communications provided for herein shall be in
      writing and shall be delivered personally or sent by facsimile
      transmission (with written confirmation sent at the same time), prepaid
      air courier or prepaid certified or registered mail. Any such notice shall
      be deemed to have been given (a) when received, if delivered in person,
      sent by facsimile transmission, or sent by prepaid air courier, or (b)
      three (3) business days following the mailing thereof, if mailed by
      prepaid certified or registered mail, return receipt requested, addressed
      to the respective addresses set forth on the first page of this Agreement
      or to such other address as either party may have furnished to the other
      in writing in accordance herewith, except that notices of change of
      address shall be effective only upon receipt. All notices to the
      Corporation shall be addressed to the attention of the Board with a copy
      to the General Counsel.

                                       10
<PAGE>

14.   SOLE SEVERANCE; OTHER BENEFITS

      If the Executive is paid the entitlements due under Section 4(b), such
      payments shall be in lieu of any other severance amounts to which the
      Executive may be entitled under any other severance arrangement, including
      under any employment agreement, severance pay plan, or applicable
      legislation entitling the Executive to severance benefits. However, the
      parties acknowledge that the benefits paid hereunder are only exclusive as
      to other severance payments and that the Executive may be entitled to
      other benefits or payments triggered by a Change in Control under certain
      other of the Corporation's benefit or compensation arrangements,
      including, without limitation, any long term incentive plans, stock option
      plans or equity participation rights plans. This Agreement supercedes any
      Change in Control Agreement previously in effect between the Executive and
      the Corporation.

15.   AMENDMENTS; WAIVERS

      No provision of this Agreement may be modified, waived or discharged
      except in a writing specifically referring to such provision and signed by
      the party against which enforcement of such modification, waiver or
      discharge is sought. No waiver by either party hereto of the breach of any
      condition or provision of this Agreement shall be deemed a waiver of any
      other condition or provision at the same or any other time.

16.   GOVERNING LAW

      The validity, interpretation, construction and performance of this
      Agreement shall be governed by the substantive laws of the State of
      Delaware without regard to the choice of law provisions thereof.

17.   VALIDITY

      The invalidity or unenforceability of any provision of this Agreement
      shall not affect the validity or enforceability of any other provision of
      this Agreement, which shall remain in full force and effect.

18.   ARBITRATION

      If the Executive so elects, any dispute or controversy arising under or in
      connection with this Agreement shall be settled exclusively by arbitration
      in Greenville, South Carolina, or at the Executive's election in the city
      nearest to the Executive's principal residence which has an office of the
      American Arbitration Association, by one arbitrator in accordance with the
      rules of the American Arbitration Association then in effect. Judgment may
      be entered on the arbitrator's award in any court having jurisdiction. The
      Corporation hereby waives its right to contest the personal jurisdiction
      or venue of any court, federal or state, in an action brought to enforce
      this Agreement or any award of an

                                       11
<PAGE>

      arbitrator hereunder which action is brought in the jurisdiction in which
      such arbitration was conducted, or, if no arbitration was elected, in
      which arbitration could have been conducted pursuant to this Section 18.

19.   COUNTERPARTS

      This Agreement may be executed in one or more counterparts, each of which
      shall be deemed to be an original but all of which together will
      constitute one and the same instrument.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

                                          BOWATER INCORPORATED

                                          By  /s/ Arnold M. Nemirow
                                               ---------------------
                                          Name:  Arnold M. Nemirow
                                          Title: Chairman and Chief Executive
                                                 Officer

                                                /s/ Craig B. Stevens
                                          --------------------------
                                          Name: Craig B. Stevens

                                       12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.55
<SEQUENCE>10
<FILENAME>g93753exv10w55.txt
<DESCRIPTION>EX-10.55
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.55

                              AMENDED AND RESTATED
                           CHANGE IN CONTROL AGREEMENT

THIS AGREEMENT, made as of the 9th day of June, 2000, by and between Bowater
Incorporated, a Delaware corporation having a mailing address of 55 East
Camperdown Way, P.O. Box 1028, Greenville, South Carolina 29602 (the
"Corporation"), and Colin R. Wolfe of 1895 Partridge Lane, NW, Cleveland, TN
37312 (the "Executive").

      WHEREAS, the Corporation and the Executive have previously entered into a
Change in Control Agreement for the purpose of reinforcing and encouraging the
continued attention and dedication of members of the Corporation's management,
including the Executive, to their assigned duties in the event of a Change in
Control or potential Change in Control of the Corporation; and

      WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that certain changes should be made to the Change in Control
Agreement to better achieve its objectives, and the Executive has agreed to such
changes;

      NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree to amend and restate the
previous Change in Control Agreement as follows:

1.    DEFINITIONS

      The following terms shall have the meanings assigned to them below:

      (a)   "Accrued Compensation" shall mean all amounts earned or accrued
            through the Termination Date but not paid as of the Termination Date
            including (i) the Base Amount, (ii) reimbursement for reasonable and
            necessary expenses incurred by the Executive on behalf of the
            Corporation during the period ending on the Termination Date, (iii)
            vacation pay, and (iv) any bonus award with respect to the
            Corporation's fiscal year ended prior to the Termination Date.

      (b)   "Acquiring Person" shall mean the Beneficial Owner, directly or
            indirectly, of securities representing 20% or more of the combined
            voting power of the Corporation's then outstanding securities, not
            including (except as provided in clause (i) of the next sentence)
            securities of such Beneficial Owner acquired pursuant to an
            agreement allowing the acquisition of up to and including 50% of
            such voting power approved by two-thirds of the members of the Board
            who are Board members before the Person becomes Beneficial Owner,
            directly or indirectly, of securities representing 5% or more of the
            combined voting power of the Corporation's then outstanding
            securities. Notwithstanding the foregoing, (i) securities acquired
            pursuant to an agreement described in the preceding sentence will be
            included in determining whether a Beneficial Owner is an

<PAGE>

            Acquiring Person if, subsequent to the approved acquisition, the
            Beneficial Owner acquires 5% or more of such voting power other than
            pursuant to such an agreement so approved; and (ii) a Person shall
            not be an Acquiring Person if such Person is eligible to and files a
            Schedule 13G under the Exchange Act with respect to such Person's
            status as a Beneficial Owner of all securities of the Corporation of
            which the Person is a Beneficial Owner.

      (c)   "Affiliate" and "Associate" shall have the respective meanings
            ascribed to such terms in Rule 12b-2 of the General Rules and
            Regulations under the Exchange Act, as in effect on the date hereof.

      (d)   "Base Amount" shall mean the greater of (i) the Executive's annual
            base salary at the rate in effect immediately prior to the Change in
            Control and (ii) the Executive's annual base salary at the rate in
            effect on the Termination Date.

      (e)   "Beneficial Owner" of securities shall mean (i) a Person who
            beneficially owns such securities, directly or indirectly, or (ii) a
            Person who has the right to acquire such securities (whether such
            right is exercisable immediately or only with the passage of time)
            pursuant to any agreement, arrangement or understanding (whether or
            not in writing) or upon the exercise of conversion rights, exchange
            rights, warrants, options or otherwise.

      (f)   "Bonus Amount" shall mean an amount equal to the maximum amount the
            Executive could have been paid under the Corporation's annual or
            other short term cash incentive plans in effect immediately prior to
            the Change in Control for the fiscal year in which the Change in
            Control occurred or, if higher, the maximum amount under such plans
            in effect at the Termination Date based on the Executive's then base
            salary and position.

      (g)   "Cause" shall mean and be limited to the Executive's gross
            negligence, willful misconduct or conviction of a felony, which has
            a demonstrable and material adverse effect upon the Corporation;
            provided that if Cause exists by virtue of the Executive's gross
            negligence or willful misconduct that is capable of being cured, the
            Corporation shall give the Executive written notice of the alleged
            negligence or misconduct and if the Executive cures the negligence
            or misconduct within thirty (30) days after receipt of the notice,
            such Cause shall cease to exist and the Corporation shall not
            terminate the Executive's employment therefor. The Executive shall
            be deemed to have been terminated for Cause as of the effective date
            stated in a Notice of Termination delivered by the Corporation to
            the Executive, which shall not be delivered before the end of the
            thirty (30) day period described in the preceding sentence, if
            applicable. The Notice of Termination must be accompanied by a
            certified copy of a resolution duly adopted by the affirmative vote
            of not less than three-quarters (3/4) of the membership of the Board
            after reasonable notice to the Executive and an opportunity for the
            Executive, with the Executive's counsel present, to be heard before
            the Board, finding that, in the good faith opinion of the Board, the

                                        2
<PAGE>

            Executive was guilty of conduct constituting Cause hereunder and
            setting forth in reasonable detail the facts and circumstances
            claimed to provide the basis for the Executive's termination.

      (h)   "Change in Control" shall be deemed to have occurred upon:

            (i)   the date that any Person is or becomes an Acquiring Person;

            (ii)  the date that the Corporation's stockholders approve a merger,
                  consolidation or reorganization of the Corporation with
                  another corporation or other Person, unless, immediately
                  following such merger, consolidation or reorganization, (A) at
                  least 50% of the combined voting power of the outstanding
                  securities of the resulting entity would be held in the
                  aggregate by the stockholders of the Corporation as of the
                  record date for such approval (provided that securities held
                  by any individual or entity that is an Acquiring Person, or
                  who would be an Acquiring Person if 5% were substituted for
                  20% in the definition of such term, shall not be counted as
                  securities held by the stockholders of the Corporation, but
                  shall be counted as outstanding securities for purposes of
                  this determination), or (B) at least 50% of the board of
                  directors or similar body of the resulting entity are
                  Continuing Directors;

            (iii) the date the Corporation sells or otherwise transfers all or
                  substantially all of the Corporation's assets to another
                  corporation or other Person, unless, immediately following
                  such sale or transfer, (A) at least 50% of the combined voting
                  power of the outstanding securities of the acquiring entity
                  would be held in the aggregate by the stockholders of the
                  Corporation as of the record date for such approval (provided
                  that securities held by any individual or entity that is an
                  Acquiring Person, or who would be an Acquiring Person if 5%
                  were substituted for 20% in the definition of such term, shall
                  not be counted as securities held by the stockholders of the
                  Corporation, but shall be counted as outstanding securities
                  for purposes of this determination), or (B) at least 50% of
                  the board of directors or similar body of the acquiring entity
                  are Continuing Directors; or

            (iv)  the date on which less than 50% of the total membership of the
                  Board consists of Continuing Directors.

      (i)   "Code" shall mean the United States Internal Revenue Code of 1986,
            amended.

      (j)   "Continuing Directors" shall mean any member of the Board who (i)
            was a member of the Board immediately prior to the date of the event
            that would constitute a Change in Control, and any successor of a
            Continuing Director while such successor is a member of the Board,
            (ii) who is not an Acquiring Person or

                                        3
<PAGE>

            an Affiliate or Associate of an Acquiring Person and (iii) is
            recommended or elected to succeed the Continuing Director by a
            majority of the Continuing Directors.

      (k)   "Corporation" shall mean Bowater Incorporated; provided that, if the
            Executive is employed by a subsidiary of the Corporation,
            "Corporation" shall mean such subsidiary of the Corporation for
            purposes of references to the Executive's compensation and benefits,
            and the plans, programs and arrangements pursuant to which
            compensation and benefits are provided.

      (l)   "Disability" shall mean a physical or mental condition that is
            defined as a disability in the Corporation's long term disability
            insurance plan covering the Executive immediately prior to the
            Change in Control.

      (m)   "Employer Match" shall mean an amount equal to the maximum matching
            contribution the Corporation could have made (regardless of actual
            circumstances) on the Executive's behalf to the Corporation's
            Statutory and non-Statutory defined contribution or savings plans
            for the fiscal year in which the Change in Control occurred, or, if
            higher, the maximum matching contribution the Corporation could have
            made for the fiscal year in which the Executive's employment
            terminated.

      (n)   "Exchange Act" shall mean the United States Securities Exchange Act
            of 1934, as amended.

      (o)   "Good Reason" shall mean:

            (i)   a change in the Executive's status, title, position or
                  responsibilities (including in reporting line relationships)
                  that, in the Executive's reasonable judgment, represents a
                  substantial adverse change from the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or at any
                  time thereafter; the assignment to the Executive of any duties
                  or responsibilities that, in the Executive's reasonable
                  judgment, are inconsistent with the Executive's status, title,
                  position or responsibilities as in effect at any time within
                  180 days preceding the date of a Change in Control or any time
                  thereafter; or any removal of the Executive from or failure to
                  reappoint or reelect the Executive to any office or position
                  held prior to the Change in Control, except in connection with
                  the termination of the Executive's employment for Disability,
                  Cause, as a result of the Executive's death or by the
                  Executive other than for Good Reason;

            (ii)  the failure by the Corporation to provide the Executive with
                  compensation and benefits, in the aggregate, at least equal
                  (in terms of benefit levels and/or reward opportunities which
                  opportunities will be evaluated in light of the performance
                  requirements therefor) to those provided for under the

                                        4
<PAGE>

                  employee compensation and benefit plans, programs and
                  practices in which the Executive was participating at any time
                  within one-hundred eighty (180) days preceding the date of a
                  Change in Control or at any time thereafter;

            (iii) the reduction of the Executive's salary as in effect on the
                  date of the Change in Control or any time thereafter;

            (iv)  a failure by the Corporation to obtain from any Successor its
                  assent to this Agreement contemplated by Section 12 hereof; or

            (v)   the relocation of the principal office at which the Executive
                  is to perform services on behalf of the Corporation to a
                  location more than thirty-five (35) miles from its location
                  immediately prior to the Change in Control or a substantial
                  increase in the Executive's business travel obligations
                  subsequent to the Change in Control.

      (p)   "Notice of Termination" shall mean a notice sent by either the
            Executive or the Corporation to the other party terminating the
            Executive's employment as of a certain date and setting forth the
            reasons therefor.

      (q)   "Person" shall mean any individual, corporation, partnership, group,
            association or other "person" as such term is used in Sections 13(d)
            and 14(d) of the Exchange Act.

      (r)   "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
            multiplied by a fraction, the numerator of which is the number of
            months and partial months through the Termination Date and the
            denominator of which is twelve (12).

      (s)   "Statutory Plan" shall mean a retirement plan that is intended to be
            qualified (for purposes of United States tax law) or registered (for
            purposes of Canadian tax law), as the case may be.

      (t)   "Successor" shall mean the direct or indirect successor by purchase,
            merger, consolidation or otherwise, to all or substantially all of
            the business and/or assets of the Corporation.

      (u)   "Termination Date" shall mean (i) in the case of the Executive's
            death, the date of death, (ii) in the case of a termination by the
            Executive in accordance with Section 3, the last day of employment
            as set forth in the Notice of Termination given by the Executive,
            (iii) in the case of a termination by the Corporation for Cause, a
            date not less than thirty (30) days after receipt of the Notice of
            Termination by the Executive, (iv) in the case of a termination by
            the Corporation due to the Executive's Disability, the date not less
            than thirty (30) days after receipt of the Notice of Termination by
            the Executive, provided that the Executive shall not have returned
            to the full-time performance of duties within thirty (30) days after
            such receipt, and (v) in all other cases, the date specified in the
            Notice

                                        5
<PAGE>

            of Termination or if no Notice of Termination is sent, the last day
            of the Executive's employment (an Executive receiving periodic
            severance pay is no longer considered employed for the purposes of
            this Agreement).

2.    TERM OF AGREEMENT

      This Agreement shall commence as of the date hereof and shall continue in
      effect until the date the Executive's employment is terminated (an
      Executive being paid periodic severance benefits is no longer considered
      employed for these purposes); provided, however, that if the Executive's
      employment is terminated following, or in anticipation of, a Change in
      Control, the term shall continue in effect until all payments and benefits
      have been made or provided to the Executive hereunder.

3.    EXECUTIVE'S RIGHT OF TERMINATION

      After a Change in Control and for thirty-six (36) months thereafter, the
      Executive shall have the right to terminate employment for Good Reason by
      sending a Notice of Termination to the Corporation setting forth in
      reasonable detail the facts and circumstances claimed to constitute Good
      Reason. In addition, on the first (1st) anniversary date of the Change in
      Control and for a period of thirty (30) days thereafter, the Executive
      shall have the unconditional right to terminate employment by giving
      written notice to the Corporation within such thirty (30) day period. If
      the Executive's employment is terminated in accordance with the provisions
      of this Section 3, the Executive shall be entitled to the compensation and
      benefits described in Section 4(b) below.

4.    COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY CERTAIN TERMINATIONS

      If the Executive's employment with the Corporation shall be terminated
      within thirty-six (36) months following a Change in Control, the Executive
      shall be entitled to the following compensation and benefits:

            (a) If the Executive's employment is terminated (i) by the
      Corporation for Cause or Disability, (ii) by reason of the Executive's
      death or (iii) by the Executive other than in accordance with Section 3,
      the Corporation shall pay to the Executive the Accrued Compensation and,
      if such termination is other than by the Corporation for Cause, the Pro
      Rata Bonus, computed as of the applicable Termination Date.

            (b) If the Executive's employment with the Corporation shall be
      terminated (x) by the Corporation for any reason other than for Cause or
      Disability, or (y) by the Executive pursuant to the provisions of Section
      3, the Executive shall be entitled to the following as of the applicable
      Termination Date:

            (i)   the Accrued Compensation and the Pro-Rata Bonus;

            (ii)  an amount equal to three (3) times the Base Amount;

                                        6
<PAGE>

            (iii) an amount equal to three (3) times the Bonus Amount;

            (iv)  an amount equal to three (3) times the Employer Match;

            (v)   An amount equal to 30% of the Base Amount for certain lost
                  benefits;

            (vi)  An amount equal to the present value of the additional
                  retirement benefits the Executive would have earned under the
                  Corporation's defined benefit retirement plans (Statutory and
                  non-Statutory) for the three (3) years following the
                  Termination Date, computed assuming the following:

                  (A)   the Executive's salary continues at the Base Amount with
                        a bonus or target bonus equal to the Bonus Amount;

                  (B)   the payment of the Executive's retirement benefits
                        commences as of the later of (x) the Executive's age
                        three (3) years after the Termination Date or (y) the
                        earliest retirement age (without regard to service)
                        allowed under the Statutory Plan applicable to the
                        Executive;

                  (C)   all vesting requirements are waived;

                  (D)   mortality and interest rate assumptions applicable to
                        the computation of lump sum values in the applicable
                        Statutory Plan are used; and

                  (E)   the benefits are paid in the form of a single life
                        annuity;

            (vii) As of the Executive's Termination Date, or, if later, when the
                  Executive attains age fifty (50), the Executive (and the
                  Executive's spouse or surviving spouse and dependents) will be
                  provided the retiree health care and life insurance coverage
                  provided by the Corporation to executive retirees as of the
                  date of the Change in Control. If and to the extent that the
                  benefits described in this paragraph cannot be provided under
                  the Corporation's plans or programs without the benefits
                  provided thereunder being taxable to the Executive, the
                  Corporation shall procure an insurance policy or policies on
                  substantially similar terms and conditions for the Executive
                  and the Executive's spouse or surviving spouse and dependents,
                  or if such policy or policies cannot be obtained, shall
                  provide a lump sum payment equal to the value of the lost
                  benefits; and

            (viii) The Corporation shall pay for or provide the Executive
                  either: (i) individual out-placement assistance as offered by
                  a member firm of the Association of Out-Placement Consulting
                  Firms, or (ii) a cash payment of $20,000 in lieu of individual
                  outplacement services, as elected by the Executive at any time
                  within twelve (12) months after the Executive's termination of
                  employment.

                                        7
<PAGE>

5.    EXCISE TAX GROSS-UP

      If any payment or benefit made available to the Executive in connection
      with a Change in Control (including, without limitation, any payment made
      pursuant to any long-term incentive plans, stock option or equity
      participation right plans) or termination of the Executive's employment
      following a Change in Control (in either category, a "Change in Control
      Payment") is subject to the Excise Tax (as hereinafter defined), the
      Corporation shall pay to the Executive additional amounts (the "Gross Up
      Amounts") such that the total amount of all Change in Control Payments net
      of the Excise Tax shall equal the total amount of all Change in Control
      Payments to which the Executive would have been entitled if the Excise Tax
      had not been imposed. For purposes of this Section 5, the term "Excise
      Tax" shall mean the tax imposed by Section 4999 of the Code and any
      similar tax that may hereafter be imposed.

      The Gross Up Amounts due to the Executive under this Section 5 shall be
      estimated by a nationally recognized firm of certified public accountants
      (other than the firm that audited the financial statements of the
      Corporation for the most recently preceding fiscal year) selected by the
      individual holding the position of Chief Financial Officer immediately
      before the Change in Control or such officer's designee, at any time that
      the Executive is to receive a Change in Control Payment. The Gross Up
      Amounts will be based upon the following assumptions:

      (a)   all Change in Control Payments shall be deemed to be "parachute
            payments" within the meaning of Section 280(G)(b)(2) of the Code,
            and all "excess parachute payments" shall be deemed to be subject to
            the Excise Tax except to the extent that, in the opinion of the
            certified public accountants charged with estimating the Gross Up
            Amounts for the Executive under this Section 5, such Change in
            Control Payments are not subject to the Excise Tax; and

      (b)   the Executive shall be deemed to pay federal, state and local taxes
            at the highest marginal rate of taxation for the applicable calendar
            year.

      The estimated Gross Up Amount due the Executive with respect to any Change
      in Control Payment pursuant to this Section 5 shall be paid to the
      Executive in a lump sum not later than thirty (30) business days after
      such Change in Control Payment is provided to the Executive. In the event
      that the Gross Up Amount is less than the amount actually due to the
      Executive under this Section 5, the amount of any such shortfall shall be
      paid to the Executive within ten (10) days after the existence of the
      shortfall is discovered. In the event the Gross Up Amount is more than the
      amount actually due the Executive under this Section 5, the Executive
      shall repay the amount of such overpayment to the Corporation within a
      reasonable time after the overpayment is discovered.

                                        8
<PAGE>

6.    LUMP SUM PENSION OPTION

      If the Executive is entitled to the payments and benefits in Section 4(b),
      then, in accordance with the election requirements described in Section 7,
      the Executive shall be entitled to elect a lump sum payment of the present
      value of any retirement benefits to which the Executive is entitled under
      any of the Corporation's non-Statutory retirement plans computed based
      upon the same assumptions listed in Section 4(b)(vi) above, except
      4(b)(vi)(A). The Corporation's non-Statutory retirement plans are hereby
      deemed amended as necessary to conform to the provisions of this Section
      6. To the extent that a payment on account of the foregoing may not be
      made under a non-Statutory plan, the Corporation shall make such payment
      separately in lieu of payment under such plan.

7.    DEFERRAL OR LUMP SUM ELECTION

      During each December after the date of this Agreement (the "Election
      Period"), the Executive may, in writing, direct the Corporation to pay any
      amounts to which the Executive is entitled under Section 4(b) in equal
      annual installments not to exceed ten (10), with each installment
      including accrued interest at the Federal short-term rate (as set under
      Section 1274(d) of the Code as in effect at the time such installment is
      paid), with the first such installment payable within ten (10) business
      days of the Termination Date and each successive installment payable on
      the anniversary of the Termination Date (the "Deferred Payment Election").
      During the Election Period, the Executive may also elect to be paid the
      amount described in Section 6 in a lump sum (the "Lump Sum Election").
      Neither a Deferred Payment Election nor a Lump Sum Election, once made,
      can be revoked except during an Election Period. Notwithstanding the
      foregoing, however, no Deferred Payment Election or Lump Sum Election can
      be made or revoked by the Executive during an Election Period that occurs
      after a Change in Control or at a time when, in the judgment of the
      Corporation, a Change in Control may occur within sixty (60) days after
      such Election Period.

8.    NO MITIGATION REQUIRED

      The Executive shall not be required to mitigate the amount of any payment
      provided for in this Agreement, nor shall any payment or benefit provided
      for in this Agreement be offset by any compensation earned by the
      Executive as the result of employment by another employer, by retirement
      benefits (provided that the foregoing shall not cause Section 6 to result
      in a duplication of benefits provided under any retirement plan), or be
      offset against any amount claimed to be owed by the Executive to the
      Corporation, or otherwise.

9.    INTEREST

      If any payment to the Executive required by this Agreement is not made
      within the time for such payment specified herein, the Corporation shall
      pay to the Executive interest on such payment at the legal rate payable
      from time to time upon judgments in the State of Delaware from the date
      such payment is payable under the terms hereof until paid.

                                        9
<PAGE>

10.   NON-COMPETE CANCELLATION

      If the Executive is entitled to the payments and benefits described in
      Section 4(b), then any agreement by the Executive not to compete with the
      Corporation or its Affiliates after the Executive's Termination Date shall
      be null and void and any such agreement shall be deemed to be amended
      accordingly.

11.   EXECUTIVE'S EXPENSES

      The Corporation shall pay or reimburse the Executive for all costs,
      including reasonable attorney's, accountants' and actuary's fees and
      expenses, incurred by the Executive (i) to confirm the Executive's rights
      to and amounts of payments hereunder, (ii) to contest or dispute any
      termination of the Executive's employment following a Change in Control or
      seek to obtain or enforce any right or benefit provided by this Agreement
      in litigation or arbitration, or (iii) in connection with any audit by a
      taxing authority related to any payment or benefit hereunder, or any
      subsequent contest or litigation relating to the tax treatment of such
      payment or benefit. Upon demand therefor, the Corporation shall advance to
      the Executive any amount as to which the Executive reasonably believes he
      or she will be entitled pursuant to this Section 11 for costs that the
      Executive has incurred or will incur during the ninety (90) days following
      such demand.

12.   BINDING AGREEMENT

      This Agreement shall inure to the benefit of and be enforceable by the
      Executive, and the Executive's heirs, executors, administrators,
      successors and assigns. This Agreement shall be binding upon the
      Corporation, its Successors and assigns. The Corporation shall require any
      Successor to assume and agree to perform this Agreement in accordance with
      its terms. The Corporation shall obtain such assumption and agreement
      prior to the effectiveness of any such succession.

13.   NOTICE

      Any notices and all other communications provided for herein shall be in
      writing and shall be delivered personally or sent by facsimile
      transmission (with written confirmation sent at the same time), prepaid
      air courier or prepaid certified or registered mail. Any such notice shall
      be deemed to have been given (a) when received, if delivered in person,
      sent by facsimile transmission, or sent by prepaid air courier, or (b)
      three (3) business days following the mailing thereof, if mailed by
      prepaid certified or registered mail, return receipt requested, addressed
      to the respective addresses set forth on the first page of this Agreement
      or to such other address as either party may have furnished to the other
      in writing in accordance herewith, except that notices of change of
      address shall be effective only upon receipt. All notices to the
      Corporation shall be addressed to the attention of the Board with a copy
      to the General Counsel.

                                       10
<PAGE>

14.   SOLE SEVERANCE; OTHER BENEFITS

      If the Executive is paid the entitlements due under Section 4(b), such
      payments shall be in lieu of any other severance amounts to which the
      Executive may be entitled under any other severance arrangement, including
      under any employment agreement, severance pay plan, or applicable
      legislation entitling the Executive to severance benefits. However, the
      parties acknowledge that the benefits paid hereunder are only exclusive as
      to other severance payments and that the Executive may be entitled to
      other benefits or payments triggered by a Change in Control under certain
      other of the Corporation's benefit or compensation arrangements,
      including, without limitation, any long term incentive plans, stock option
      plans or equity participation rights plans. This Agreement supercedes any
      Change in Control Agreement previously in effect between the Executive and
      the Corporation.

15.   AMENDMENTS; WAIVERS

      No provision of this Agreement may be modified, waived or discharged
      except in a writing specifically referring to such provision and signed by
      the party against which enforcement of such modification, waiver or
      discharge is sought. No waiver by either party hereto of the breach of any
      condition or provision of this Agreement shall be deemed a waiver of any
      other condition or provision at the same or any other time.

16.   GOVERNING LAW

      The validity, interpretation, construction and performance of this
      Agreement shall be governed by the substantive laws of the State of
      Delaware without regard to the choice of law provisions thereof.

17.   VALIDITY

      The invalidity or unenforceability of any provision of this Agreement
      shall not affect the validity or enforceability of any other provision of
      this Agreement, which shall remain in full force and effect.

18.   ARBITRATION

      If the Executive so elects, any dispute or controversy arising under or in
      connection with this Agreement shall be settled exclusively by arbitration
      in Greenville, South Carolina, or at the Executive's election in the city
      nearest to the Executive's principal residence that has an office of the
      American Arbitration Association, by one arbitrator in accordance with the
      rules of the American Arbitration Association then in effect. Judgment may
      be entered on the arbitrator's award in any court having jurisdiction. The
      Corporation hereby waives its right to contest the personal jurisdiction
      or venue of any court, federal or state, in an action brought to enforce
      this Agreement or any award of an

                                       11
<PAGE>

      arbitrator hereunder which action is brought in the jurisdiction in which
      such arbitration was conducted, or, if no arbitration was elected, in
      which arbitration could have been conducted pursuant to this Section 18.

19.   COUNTERPARTS

      This Agreement may be executed in one or more counterparts, each of which
      shall be deemed to be an original but all of which together will
      constitute one and the same instrument.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

                                            BOWATER INCORPORATED

                                            By /s/ Arnold M. Nemirow
                                               ---------------------
                                            Name:  Arnold M. Nemirow
                                            Title: Chairman and Chief Executive
                                                   Officer

                                            /s/ Colin R. Wolfe
                                            ------------------
                                            Name: Colin R. Wolfe

                                       12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>11
<FILENAME>g93753exv12w1.txt
<DESCRIPTION>EX-12.1
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                    EXHIBIT 12.1

BOWATER INCORPORATED
STATEMENT OF COMPUTATION OF UNAUDITED RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIO INFORMATION)

<TABLE>
<CAPTION>
                                                                        Year ended and at December 31,
                                                                       --------------------------------
                                                                         2002        2003        2004
                                                                       --------    --------    --------
<S>                                                                    <C>         <C>         <C>
EARNINGS:

Loss before income taxes, minority interests and                       $ (250.8)   $ (280.9)   $ (148.4)
cumulative effect of accounting change

Add: Fixed charges from below                                             178.2       188.6       200.5
Less: Capitalized interest                                                  8.7         7.4         0.1
                                                                       --------    --------    --------
                                                                       $  (81.3)   $  (99.7)   $   52.0
                                                                       ========    ========    ========
FIXED CHARGES:

Interest expense, net of interest capitalized                             163.0       174.5       195.3
Capitalized interest                                                        8.7         7.4         0.1
Estimate of interest within rental expense                                  2.8         3.1         1.9
Amortized premium and discounts related to indebtedness                     3.7         3.6         3.2
                                                                       --------    --------    --------
                                                                       $  178.2    $  188.6    $  200.5
                                                                       ========    ========    ========
DEFICIENCY OF EARNINGS TO FIXED CHARGES                                $  259.5    $  288.3    $  148.6
                                                                       ========    ========    ========
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>12
<FILENAME>g93753exv21w1.txt
<DESCRIPTION>EX-21.1
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                    EXHIBIT 21.1

                              BOWATER INCORPORATED
                               SUBSIDIARY LISTING

<TABLE>
<CAPTION>
                                                       Jurisdiction of
         Name                                           Incorporation
         ----                                          ---------------
<S>                                                    <C>
Alliance Forest Products (2001) Inc.                   Canada
Bowater Alabama Inc.                                   Alabama
Bowater America Inc.                                   Delaware
Bowater Asia Pte Ltd.                                  Singapore
Bowater Canada Finance Corporation                     Nova Scotia
Bowater Canada Inc.                                    Canada
Bowater Canadian Forest Products Inc.                  Canada
Bowater Canadian Holdings Incorporated                 Nova Scotia
Bowater Canadian Limited                               Canada
Bowater Europe Limited                                 United Kingdom
Bowater Finance Company Inc.                           Delaware
Bowater Funding Inc.                                   Delaware
Bowater-Halla Paper Co., Ltd.                          Korea
Bowater Maritimes Inc.(1)                              New Brunswick
Bowater Mersey Paper Company Limited(2)                Nova Scotia
Bowater Mississippi LLC                                Delaware
Bowater Nuway Inc.                                     Delaware
Bowater S. America Ltda.                               Brazil
Calhoun Newsprint Company(3)                           Delaware
Lake Superior Forest Products Inc.                     Delaware
</TABLE>

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

(1) 67 percent owned

(2) 51 percent owned

(3) Approximately 51 percent owned
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>13
<FILENAME>g93753exv23w1.txt
<DESCRIPTION>EX-23.1
<TEXT>
<PAGE>
                                                                    EXHIBIT 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Bowater Incorporated:

We consent to incorporation by reference in the following registration
statements of Bowater Incorporated of our reports dated March 11, 2005, with
respect to the consolidated balance sheet of Bowater Incorporated and
subsidiaries as of December 31, 2004 and 2003, and the related consolidated
statements of operations, capital accounts, and cash flows for each of the years
in the three-year period ended December 31, 2004, and the related financial
statement schedule, management's assessment of the effectiveness of internal
control over financial reporting as of December 31, 2004 and the effectiveness
of internal control over financial reporting as of December 31, 2004, which
reports appear in the December 31, 2004 annual report on Form 10-K of Bowater
Incorporated:

<TABLE>
<CAPTION>
                                                                                           Filing Date or
                                                                                           Last Amendment
                                                                                           --------------
<S>                                                                                        <C>
Form S-1
No. 33-2444         -    Dividend Reinvestment and Stock Purchase Plan of Bowater
                         Incorporated                                                         12/27/85

Form S-3
No. 333-57839       -    Bowater Incorporated common stock offered in exchange for
                         Exchangeable shares of Bowater Canada Inc.                            6/26/98

No. 333-62348       -    Bowater Incorporated common stock offered in exchange for
                         Exchangeable shares of Bowater Canada Inc.                            9/20/01

No. 333-108166      -    Bowater Incorporated securities to be
                         offered from time to time up to $750,000,000                          3/12/04

Form S-4
No. 333-74870       -    Exchange offer of Bowater Canada Finance Corporation 7.95% notes
                         due 2011                                                             12/10/01

No. 333-108168      -    Exchange offer of Bowater Incorporated 6.5% notes due 2013            8/22/03
</TABLE>

<PAGE>

Page 2

<TABLE>
<S>                                                                                           <C>
Form S-8
No. 33-25166        -    Bowater Incorporated 1988 Stock Incentive Plan                       10/27/88

No. 33-50152        -    Bowater Incorporated 1992 Stock Incentive Plan                        7/28/92

No. 33-61219        -    The Deferred Compensation Plan for Outside
                         Directors of Bowater Incorporated                                     7/21/95

No. 333-41473       -    Bowater Incorporated 1997 Stock Option Plan                           12/4/97

No. 333-61236       -    Bowater Incorporated 2000 Stock Option Plan                           5/18/01

No. 333-89462       -    Bowater Incorporated Savings Plan                                     5/31/02

No. 333-103797      -    Bowater Incorporated 2002 Stock Option Plan                           3/13/03
</TABLE>

Our report with respect to the consolidated financial statements refers to the
Company's change in its method of accounting for the effects of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 in 2004, and the
Company's change in its method of accounting for variable interest entities and
its method of accounting for asset retirement obligations in 2003.

/s/KPMG LLP
Greenville, South Carolina
March 11, 2005
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>14
<FILENAME>g93753exv31w1.txt
<DESCRIPTION>EX-31.1
<TEXT>
<PAGE>

                                                                    EXHIBIT 31.1

                                  CERTIFICATION

I,    Arnold M. Nemirow, Chairman, President and Chief Executive Officer of
      Bowater Incorporated, certify that:

1.    I have reviewed this annual report on Form 10-K of Bowater Incorporated;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act
      Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

      a)    designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      b)    designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

      c)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      d)    disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal controls over financial
      reporting, to the registrant's auditors and the audit committee of
      registrant's board of directors (or persons performing the equivalent
      function):

      a)    all significant deficiencies and material weaknesses in the design
            or operation of internal controls over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls over financial reporting.

Date: March 14, 2005

         /s/ Arnold M. Nemirow
--------------------------------
Arnold M. Nemirow
Chairman, President and Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>15
<FILENAME>g93753exv31w2.txt
<DESCRIPTION>EX-31.2
<TEXT>
<PAGE>

                                                                    Exhibit 31.2

                                  CERTIFICATION

I,    William G. Harvey, Senior Vice President and Chief Financial Officer of
      Bowater Incorporated, certify that:

1.    I have reviewed this annual report on Form 10-K of Bowater Incorporated;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act
      Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

      a)    Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      b)    Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed under
            our supervision, to provide reasonable assurance regarding the
            reliability of financial reporting and the preparation of financial
            statements for external purposes in accordance with generally
            accepted accounting principles;

      c)    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      d)    Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant's board of directors (or persons performing the equivalent
      functions):

      a)    All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      b)    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: March 14, 2005

 /s/ William G. Harvey
 ---------------------
William G. Harvey
Senior Vice President and Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>16
<FILENAME>g93753exv32w1.txt
<DESCRIPTION>EX-32.1
<TEXT>
<PAGE>

                                                                    EXHIBIT 32.1

                                  CERTIFICATION

            Pursuant to 18 U.S.C. Section 1350, the undersigned officer of
Bowater Incorporated (the "Company"), hereby certifies, to such officer's
knowledge, that the Company's Annual Report on Form 10-K for the year ended
December 31, 2004 (the "Report") fully complies with the requirements of Section
13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

Dated:   March 14, 2005                       /s/ Arnold M. Nemirow
                                              --------------------------
                                              Name:  Arnold M. Nemirow
                                              Title: Chief Executive Officer

            The foregoing certification is being furnished solely pursuant to 18
U.S.C. Section 1350 and is not being filed as part of the Report or as a
separate disclosure document.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>17
<FILENAME>g93753exv32w2.txt
<DESCRIPTION>EX-32.2
<TEXT>
<PAGE>

                                                                    EXHIBIT 32.2

                                  CERTIFICATION

            Pursuant to 18 U.S.C. Section 1350, the undersigned officer of

Bowater Incorporated (the "Company"), hereby certifies, to such officer's
knowledge, that the Company's Annual Report on Form 10-K for the year ended
December 31, 2004 (the "Report") fully complies with the requirements of Section
13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

Dated: March 14, 2005                                /s/ William G. Harvey
                                               ---------------------------
                                               Name:  William G. Harvey
                                               Title: Chief Financial Officer

            The foregoing certification is being furnished solely pursuant to 18
U.S.C. Section 1350 and is not being filed as part of the Report or as a
separate disclosure document.
</TEXT>
</DOCUMENT>
</SUBMISSION>
