[7.1.1.1] The present paper has shown that the experimental observations on hysteresis and process dependence of capillary pressure and relative permeabilities can be reproduced within a macroscopic phenomenological theory. [7.1.1.2] The approach is based on the distinction between percolating and nonpercolating fluid phases introduced in [14, 16, 15]. [7.1.1.3] Contrary to what was expected, the introduction of interfacial areas can be avoided at the expense of some rather drastic constitutive assumptions. [7.1.1.4] In spite of these assumptions the present theory is more general than the traditional theory because the [page 8, §0] latter can be obtained as a special case. [8.0.0.1] In this special case capillary pressure and relative permeability functions can be identified, and are found to show similar hysteresis and process dependence as observed in experiment.