Exhibit
      2


MANAGEMENT’S
      DISCUSSION AND ANALYSIS





Management’s
      discussion and analysis of the financial position and results of operations
      for
      the fiscal year ended August 31, 2005 is prepared at October 31, 2005. This
      should be read in conjunction with the Company’s August 31, 2005 annual report
      and audited consolidated financial statements and notes therein.




The
      financial information presented herein has been prepared on the basis of
      Canadian generally accepted accounting principles [“GAAP”]. Please refer to note
      21 of the consolidated financial statements of the Company for a summary of
      differences between Canadian and United States [“U.S.”] GAAP.




All
      dollar amounts are in Canadian dollars unless otherwise indicated.




**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**


Certain
      statements in this report may constitute forward-looking statements and are
      subject to important risks and uncertainties. The results or events predicted
      in
      these statements may differ materially from actual results or events. Factors
      that could cause results or events to differ from current expectations include,
      among other things: our ability to attract and retain advertising revenues;
      audience acceptance of our television programs and cable networks; our ability
      to recoup production costs; the availability of tax credits and the existence
      of
      co-production treaties; our ability to compete in any of the industries in
      which
      we do business; the opportunities [or lack thereof] that may be presented to
      and
      pursued by us; conditions in the entertainment, information and communications
      industries and technological developments therein; changes in laws or
      regulations or the interpretation or application of those laws and regulations;
      our ability to integrate and realize anticipated benefits from our acquisitions
      and to effectively manage our growth; and, changes in accounting standards.
      Consequently, all of the forward-looking statements made in this report are
      qualified by these cautionary statements, and there can be no assurance that
      the
      actual results or developments anticipated by us will be realized or, even
      if
      substantially realized, that they will have the expected consequences to, or
      effects on, us. Unless otherwise required by applicable securities laws, we
      disclaim any intention or obligation to publicly update or revise any
      forward-looking statements whether as a result of new information, events or
      circumstances that arise after the date thereof or otherwise.




**OVERVIEW**


Corus
      Entertainment Inc. [“Corus” or the “Company”] commenced operations on September
      1, 1999. On that date, pursuant to a statutory plan of arrangement, Corus was
      separated from Shaw Communications Inc. [“Shaw”] as an independently operated,
      publicly traded company and assumed ownership of Shaw’s radio broadcasting,
      specialty television, digital audio services and cable advertising services
      businesses, as well as certain investments held by Shaw.




Corus
      manages its business in three operating segments: Radio, Television and Content.
      Generally, Corus’ financial results depend on a number of factors, including the
      strength of the Canadian national economy and the local economies of Corus’
served markets, local and national market competition from other broadcasting
      stations and other advertising media, government regulation, market competition
      from other distributors of children’s animated programming and Corus’ ability to
      continue to provide popular programming.




**[a] Radio**


The
      Radio segment comprises 51 radio stations situated primarily in nine of the
      ten
      largest Canadian markets by population, and in the densely populated area of
      Southern Ontario. Revenues are derived from advertising aired over these
      stations. Corus is Canada’s leading radio operator in terms of audience reach
      and tune-in.




**[b] Television**


The
      Television segment is composed of the following: specialty television networks
      YTV, W Network, Treehouse TV, Corus’ 80% interest in Country Music Television
      Limited [“CMT”], 50.5% interest in Telelatino, 40% interest in TELETOON and a
      20% interest in Food Network; Corus’ premium television services Movie Central
      and Encore Avenue; interests in three digital television channels, SCREAM,
      Discovery Kids and The Documentary Channel; Corus Custom Networks, a cable






20
      / Corus
      Entertainment











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





advertising
      service; three local television stations; and Max Trax, a residential digital
      audio service. Revenues for specialty television networks and digital television
      channels are generated from affiliate subscriber fees and advertising. Revenues
      for premium television and digital audio services are generated from affiliate
      subscriber fees. Revenues for the local television stations and cable
      advertising services are derived from advertising.




**[c] Content**


The
      Content segment consists of the production and distribution of television
      programs and the sale and licensing of related products. Revenues are generated
      from licensing of television programs, merchandise licensing and publishing.




**KEY
      PERFORMANCE INDICATORS**


The
      Company measures the success of its strategies using a number of key performance
      indicators. These have been outlined below, including a discussion as to their
      relevance, definitions, calculation methods and underlying assumptions. With
      the
      exception of revenue, direct cost of sales, general and administrative expenses,
      and segment profit and segment profit margin, the following key performance
      indicators are not measurements in accordance with Canadian or U.S. GAAP and
      should not be considered as an alternative to net income or any other measure
      of
      performance under Canadian or U.S. GAAP.




**Revenue**


Revenue
      is a measurement defined by Canadian and U.S. GAAP. Revenue is the inflow of
      cash, receivables or other consideration arising from the sale of product and
      services and is net of items such as trade or volume discounts and certain
      excise and sales taxes. It is the basis on which free cash flow, a key
      performance indicator defined below, is determined; therefore, it measures
      the
      potential to deliver free cash flow as well as indicates the level of growth
      in
      a competitive marketplace.




The
      primary sources of revenues for the Company are outlined in the “Overview”
section on page 20.




Corus
      is well diversified by revenue source with revenue streams for the year ended
      August 31, 2005 derived primarily from three areas: advertising [58%],
      subscriber fees [27%] and license fees [9%] [2004 - 55%, 27% and 14%,
      respectively].




**Direct
      cost of sales, general and administrative expenses**


Consolidated
      direct cost of sales, general and administrative expenses include amortization
      of program and film rights [costs of programming intended for broadcast, from
      which advertising and subscriber fee revenues are derived], amortization of
      film
      investments [costs associated with internally produced and acquired television
      and film programming, from which distribution and licensing revenues are
      derived], employee remuneration, regulatory license fees, cost of goods sold
      relating to publishing, marketing [research and advertising costs], selling,
      general administration and overhead costs. Cost of goods sold relating to
      publishing include the material cost of the product, printing, freight, customs
      and duties, and royalties to authors and illustrators based upon sales and
      is
      included in direct cost of sales, general and administrative expenses.
      Approximately 36% and 30% of consolidated direct cost of sales, general and
      administrative expenses in fiscal 2005 [2004 - 27% and 41%, respectively] were
      composed of employee remuneration and programming and film costs, respectively.




**Segment
      profit and segment profit margin**


Segment
      profit is calculated as revenues less direct cost of sales, general and
      administrative expenses as reported in the Company’s consolidated statements of
      income (loss) and retained earnings (deficit). The Company believes this is
      an
      important measure as it allows the Company to evaluate the operating performance
      of its business segments and its ability to service and/or incur debt;
      therefore, it is calculated before [i] interest on long-term debt, [ii] non-cash
      expenses such as depreciation and amortization and [iii] items not indicative
      of
      the Company’s core operating results, and not used in




2005
      Annual Report / **21**











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





management’s
      evaluation of the business segments’ performance, such as restructuring charges
      and other income, net. Segment profit is also one of the measures used by the
      investing community to value the Company and is included in note 16 to the
      consolidated financial statements. Segment profit margin is calculated by
      dividing segment profit by revenues.




**Free
      cash flow**


Free
      cash flow is calculated as cash provided by (used in) operating activities
      plus
      cash provided by (used in) investing activities as reported in the consolidated
      statements of cash flows. Free cash flow measures the Company’s ability to repay
      debt, finance the business and pay dividends.




[thousands
                of Canadian dollars]
            
            **2005**
            
            2004
            
            2003Cash
                provided by (used in):Operating
                activities
            
            
            **102,416**
            
            
            84,912
            
            
            64,622Investing
                activities
            
            
            **(22,455**
            **)**
            
            (32,425
            )
            
            (27,803
            )**Free
                cash flow**
            
            
            **79,961**
            
            
            52,487
            
            
            36,819





**Net
      debt and adjusted net debt**


Net
      debt is calculated as long-term debt less cash and cash equivalents as reported
      in the consolidated balance sheets. Adjusted net debt is calculated as net
      debt
      adjusted for the unrealized cumulative foreign exchange gains on the Company’s
      Senior Subordinated Notes. Adjusted net debt is an important measure as it
      reflects the principal amount of debt owing by the Company as at a particular
      date.




[thousands
                of Canadian dollars]
            
            **2005**
            
            2004Long-term
                debt
            
            
            **445,162**
            
            
            529,139Cash
                and cash equivalents
            
            
            **(138,086**
            **)**
            
            (95,231
            )Net
                debt
            
            
            **307,076**
            
            
            433,908Unrealized
                cumulative foreign exchange gains
            
            
            **158,838**
            
            
            111,625**Adjusted
                net debt**
            
            
            **465,914**
            
            
            545,533





**Adjusted
      net debt to adjusted segment profit**


Net
      debt to adjusted segment profit is calculated as net debt divided by adjusted
      segment profit. Adjusted segment profit is calculated as segment profit adjusted
      for items not considered as being in the ordinary course of business. It is
      one
      of the key metrics used by the investing community to measure the Company’s
      ability to repay debt through ongoing operations.




[thousands
                of Canadian dollars except ratios]
            
            **2005**
            
            2004
            
            2003Adjusted
                net debt [numerator]
            
            
            **465,914**
            
            
            545,533
            
            
            598,925Adjusted
                segment profitSegment
                profit
            
            
            **195,311**
            
            
            90,398
            
            
            165,312Writedown
                of
                investment in film
            
            
            **-**
            
            
            85,000
            
            
            -Adjusted
                segment profit [denominator]
            
            
            **195,311**
            
            
            175,398
            
            
            165,312**Adjusted
                net debt to adjusted segment profit**
            
            
            **2.4**
            
            
            3.1
            
            
            3.6








22
        / Corus
        Entertainment








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**ANNUAL
      SELECTED FINANCIAL INFORMATION**


The
      following table presents summary financial information for Corus for each of
      the
      listed years ended August 31:




%
                Increase (decrease)[millions
                of Canadian dollars except
            
            
            
            
            
            
            
            2005
            
            2004percentages
                and per share amounts]
            
            **2005**
            
            2004
            
            2003
            
            over
                2004
            
            over
                2003**Revenues**
            
            
            **683.1**
            
            
            666.8
            
            
            643.9
            
            
            2.4
            
            
            3.6**Segment
                profit**1
            
            
            **195.3**
            
            
            90.4
            
            
            165.3
            
            
            116.1
            
            
            (45.3
            )**Net
                income (loss)**
            
            
            **71.1**
            
            
            (23.1
            )
            
            40.0**Earnings
                (loss) per share**Basic
            
            **$**
            **1.66**
            
            $
            (0.54
            )
            $
            0.94Diluted
            
            **$**
            **1.65**
            
            $
            (0.54
            )
            $
            0.94Total
                assets
            
            
            **1,928.4**
            
            
            1,871.9
            
            
            1,940.6Total
                long-term financial liabilities
            
            
            **660.4**
            
            
            690.9
            
            
            693.5**Cash
                dividends declared per share**Class
                A Voting Shares
            
            **$**
            **0.065**
            
            $
            0.04
            
            
            -Class
                B Non-Voting Shares
            
            **$**
            **0.075**
            
            $
            0.05
            
            
            -





1
      As defined in “Key performance indicators - Segment profit and segment profit
      margin.”




**HIGHLIGHTS
      FOR FISCAL 2005**


**Operations**




•
            Revenue
                from operations increased by 2% to $683 million in 2005.


•
            Segment
                profit increased by 116% to $195.3 million in 2005.


•
            Segment
                profit margins were 29% in 2005 compared to 14% in 2004.


•
            Television
                delivered double-digit segment profit growth.


•
            Corus
                Radio outperformed market growth in 2005.


•
            Corus
                Radio entered an additional top ten market in Canada in Québec City.


•
            Content
                continued to deliver positive cash flow.





**Financial**




•
            Free
                cash flow of $80 million, up 52% from 2004.


•
            Adjusted
                net debt reduced to $466 million from $546 million at August 31,
                2004.


•
            Adjusted
                net debt to adjusted segment profit reduced to 2.4 from 3.1 at August
                31,
                2004.


•
            Corus
                increased semi-annual dividend for holders of its Class A and Class
                B
                shares to $0.045 and $0.05, respectively.





**Regulatory**




•
            Corus
                secured Canadian Radio-television and Telecommunications Commission
                [“CRTC”] approval to swap five radio stations located in Québec with
                Astral Media Inc. [“Astral”] for eight radio stations also located in that
                province.




2005
        Annual Report / **23**











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**HIGHLIGHTS
      FOR FISCAL 2004**


**Operations**




•
            Revenue
                from operations increased by 4% to $667 million in 2004.


•
            Segment
                profit decreased by 45% to $90.4 million in 2004 as a result of a
                non-cash
                writedown of film investments of $85 million in the third quarter.


•
            Segment
                profit margins were 14% in 2004 compared to 26% in 2003.


•
            The
                specialty television networks delivered double-digit segment profit
                growth
                in 2004.


•
            Ontario
                and Québec Radio outperformed market growth in 2004.


•
            Positive
                cash delivered from Content on a reduced production slate.


•
            In
                the first quarter, two strategic deals for the new Home Entertainment
                Division were announced with U.S.-based distributor FUNimation, acquiring
                the rights to release 44 back-catalogue titles and Maverick in the
                U.K. to
                market 33 Nelvana library titles, plus options on new releases.


•
            Non-cash
                negative impact of $0.42 per share was recognized for changes in
                Ontario
                tax rates in the first quarter.





**Financial**




•
            Free
                cash flow of $52 million, up 43% from August 31, 2003.


•
            Adjusted
                net debt reduced to $546 million at August 31, 2004 from $599 million
                at
                August 31, 2003.


•
            Adjusted
                net debt to segment profit target achieved at 3.1 times.


•
            Corus
                commenced payment of semi-annual dividends for holders of its Class
                A and
                Class B shares of $0.02 and $0.025, respectively, on December 31,
                2003 and
                June 30, 2004.





24
        / Corus
        Entertainment











MANAGEMENT’S
      DISCUSSION AND ANALYSIS








**RESULTS
      OF OPERATIONS**


The
      following table presents summary financial information for Corus’ operating
      business segments and a reconciliation of net income (loss) to segment profit
      for each of the listed years ended August 31:




%
                Increase (decrease)[millions
                of Canadian dollars except
            
            
            
            
            
            
            
            
            
            
            
            
            
            2005
            
            2004percentages
                and per share amounts]
            
            **2005**
            
            %
                1
            
            2004
            
            %
                1
            
            2003
            
            %
                1
            
            over
                2004
            
            over
                2003**Revenues**Radio
            
            
            **252.7**
            
            
            **37.0**
            
            
            227.9
            
            
            34.2
            
            
            226.0
            
            
            35.1
            
            
            10.9
            
            
            0.8Television
            
            
            **354.2**
            
            
            **51.9**
            
            
            332.3
            
            
            49.8
            
            
            306.9
            
            
            47.7
            
            
            6.6
            
            
            8.3Content
            
            
            **82.3**
            
            
            **12.0**
            
            
            112.6
            
            
            16.9
            
            
            116.3
            
            
            18.0
            
            
            (26.9
            )
            
            (3.2
            )Eliminations
            
            
            **(6.1**
            **)**
            
            **(0.9**
            **)**
            
            (6.0
            )
            
            (0.9
            )
            
            (5.3
            )
            
            (0.8
            )
            
            -
            
            
            -**683.1**
            
            
            **100.0**
            
            
            666.8
            
            
            100.0
            
            
            643.9
            
            
            100.0
            
            
            2.4
            
            
            3.6**Direct
                cost of sales, general and administrative
                expenses**Radio
            
            
            **183.7**
            
            
            **72.7**
            
            
            167.9
            
            
            73.7
            
            
            167.9
            
            
            74.3
            
            
            9.4
            
            
            -Television
            
            
            **213.4**
            
            
            **60.2**
            
            
            207.2
            
            
            62.4
            
            
            193.5
            
            
            63.0
            
            
            3.0
            
            
            7.1Content
            
            
            **78.7**
            
            
            **95.6**
            
            
            196.3
            
            
            174.3
            
            
            113.1
            
            
            97.2
            
            
            (59.9
            )
            
            73.6Corporate
            
            
            **18.6**
            
            
            **2.7**
            
            
            11.0
            
            
            1.6
            
            
            8.8
            
            
            1.4
            
            
            69.1
            
            
            25.0Eliminations
            
            
            **(6.6**
            **)**
            
            **(1.0**
            **)**
            
            (6.0
            )
            
            (0.9
            )
            
            (4.7
            )
            
            (0.7
            )
            
            -
            
            
            -**487.8**
            
            
            **71.4**
            
            
            576.4
            
            
            86.4
            
            
            478.6
            
            
            74.3
            
            
            (15.4
            )
            
            20.4**Segment
                profit (loss)**2Radio
            
            
            **69.0**
            
            
            **27.3**
            
            
            60.0
            
            
            26.3
            
            
            58.1
            
            
            25.7
            
            
            15.0
            
            
            3.3Television
            
            
            **140.8**
            
            
            **39.8**
            
            
            125.1
            
            
            37.6
            
            
            113.4
            
            
            37.0
            
            
            12.5
            
            
            10.3Content
            
            
            **3.6**
            
            
            **4.4**
            
            
            (83.7
            )
            
            (74.3
            )
            
            3.2
            
            
            2.8
            
            
            (104.3
            )
            
            (2,715.6
            )Corporate
            
            
            **(18.6**
            **)**
            
            **(2.7**
            **)**
            
            (11.0
            )
            
            (1.6
            )
            
            (8.8
            )
            
            (1.4
            )
            
            69.1
            
            
            25.0Eliminations
            
            
            **0.5**
            
            
            **0.1**
            
            
            -
            
            
            -
            
            
            (0.6
            )
            
            (0.1
            )
            
            -
            
            
            -**195.3**
            
            
            **28.6**
            
            
            90.4
            
            
            13.6
            
            
            165.3
            
            
            25.7
            
            
            116.0
            
            
            (45.3
            )Depreciation
            
            
            **23.7**
            
            
            **3.5**
            
            
            25.7
            
            
            3.9
            
            
            24.7
            
            
            3.8
            
            
            (7.8
            )
            
            4.0Amortization
            
            
            **4.6**
            
            
            **0.7**
            
            
            7.3
            
            
            1.1
            
            
            9.8
            
            
            1.5
            
            
            (37.0
            )
            
            (25.5
            )Interest
                on long-term debt
            
            
            **55.6**
            
            
            **8.1**
            
            
            55.3
            
            
            8.3
            
            
            61.0
            
            
            9.5
            
            
            0.5
            
            
            (9.3
            )Other
                income, net
            
            
            **(5.5**
            **)**
            
            
            
            
            (5.0
            )
            
            
            
            
            (6.0
            )Restructuring
                charges
            
            
            **-**
            
            
            
            
            
            -
            
            
            
            
            
            5.0Income
                before income taxes and non-controlling interest
            
            
            **116.9**
            
            
            
            
            
            7.1
            
            
            
            
            
            70.8Income
                tax expense
            
            
            **42.8**
            
            
            
            
            
            26.9
            
            
            
            
            
            28.6Non-controlling
                interest
            
            
            **3.0**
            
            
            
            
            
            3.3
            
            
            
            
            
            2.2**Net
                income (loss) for the year**
            
            
            **71.1**
            
            
            
            
            
            (23.1
            )
            
            
            
            
            40.0





1 Direct
      cost of sales, general and administrative expenses and segment profit for each
      business segment are expressed as a percentage of revenues for the segment.
      Other items are expressed as a percentage of total revenues.




2 As
      defined in “Key performance indicators - Segment profit and segment profit
      margin.”




2005
        Annual Report / **25**








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**FISCAL
      2005 COMPARED TO FISCAL 2004**


Revenues
      for fiscal 2005 were $683.1 million, up 2% from $666.8 million last year. Radio
      and Television experienced increases of 11% and 7%, respectively, while Content
      was down 27% compared to the prior year.




Direct
      cost of sales, general and administrative expenses were $487.8 million, down
      15%
      from $576.4 million in the prior year. The fiscal 2004 results include a
      writedown in film investments of $85.0 million. Excluding the writedown, direct
      cost of sales, general and administrative expenses experienced a 1% decrease.




Segment
      profit for fiscal 2005 was $195.3 million, up 116% from $90.4 million last
      year.
      The Radio division achieved segment profit of $69.0 million, an increase of
      15%.
      The Television division’s segment profit of $140.8 million represents a segment
      profit growth of 13%. The Content division generated segment profit of $3.6
      million, after incurring a loss of $83.7 million in the prior year. Segment
      profit as a percentage of revenues for the year ended August 31, 2005, was
      29%
      compared to 14% in fiscal 2004.




**Radio**


Radio
      revenues for the year were $252.7 million, up 11% from the prior year, as our
      stations were well positioned to take advantage of a strong advertising market.
      This growth was experienced across Canada, and in both local and national
      advertising. According to the Trans-Canada Radio Advertising by Market [“TRAM”]
      report for the year ended August 31, 2005, Corus stations generated advertising
      growth of 11.3%, compared to total market growth of 8.7%.




Direct
      cost of sales, general and administrative expenses for the year were $183.7
      million, up 9% from last year, mainly due to higher variable costs such as
      commissions and copyright fees, as well as higher on-air talent compensation
      costs and Québec integration costs.




Segment
      profit for the year was $69.0 million, 15% higher than the prior year. Segment
      profit margin for the year was 27%, up from 26% last year. Segment profit for
      fiscal 2005 includes the $2.6 million negative impact of the newly announced
      tariff rates imposed by the Copyright Board for 2005. The retroactive portion
      for fiscals 2003 and 2004 of $3.8 million has been reflected in other income,
      net.




**Television**


Television
      revenues for the year were $354.2 million, up 7% over last year. Advertising
      and
      subscriber revenues increased in the year by 9% and 5%, respectively, with
      Movie
      Central, Corus’ western-based pay television service, finishing the year with
      748,000 subscribers, up 6% from 707,000 at August 31, 2004. Specialty
      advertising revenues grew 13% over the prior year.




Direct
      cost of sales, general and administrative expenses for fiscal 2005 were $213.4
      million, up 3% from the prior year. The increase was primarily due to higher
      costs of sales and higher variable costs associated with higher revenues.
      Amortization of program and film rights, included in cost of sales, increased
      as
      a result of a higher proportion of blockbuster movies acquired at Movie Central.
      These increased costs were offset by effective cost containment in general
      and
      administrative overhead.




Segment
      profit for the year was $140.8 million, up 13% from the prior year. Segment
      profit margin was 40%, up from 38% last year.




**Content**


Content
      revenues for the year were $82.3 million, a decrease of 27% from the prior
      year.
      Revenues were down for the year primarily due to the decline in *Beyblade* revenue
      in both broadcast sales and licensing. Included in Content’s revenues are $6.1
      million in intercompany revenues, unchanged from the prior year. These revenues
      are eliminated upon consolidation.




26
        / Corus
        Entertainment








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





Direct
      cost of sales, general and administrative expenses for the year were $78.7
      million, down 60% from the prior year. In the third quarter of fiscal 2004,
      the
      Content division recorded an $85.0 million writedown of its film investments.
      Excluding the writedown, direct cost of sales, general and administrative
      expenses were down 29%, reflecting lower cost of sales associated with lower
      revenues.




Segment
      profit for the year was $3.6 million, up from a loss of $83.7 million last
      year.
      The Content division continues to perform in line with the Company’s
      expectations.




**Corporate**


The
      Corporate segment results represent the incremental cost of Corporate overhead
      in excess of the amount allocated to the other operating divisions. Corporate
      overhead in fiscal 2005 was $18.6 million, up from $11.0 million in 2004.
      Stock-based compensation expenses increased to $6.8 million in fiscal 2005
      from
      $3.0 million last year. This increase reflects the impact of Corus’ higher
      average share price in fiscal 2005 on expenses related to the Company’s
      Performance Share Units [“PSUs”], as well as an additional year of expensing
      stock options. Other general and administrative costs increased to $11.8 million
      in fiscal 2005 from $8.0 million last year. This increase relates primarily
      to
      the increased cost of information technology and implementation costs associated
      with implementing the requirements of the *Sarbanes-Oxley
      Act* .




**Depreciation**


Depreciation
      expense for the year was $23.7 million, a decrease of $2.0 million from $25.7
      million last year. This change reflects a lower capital cost base due to reduced
      capital expenditures and existing assets becoming fully amortized.




**Amortization**


Amortization
      expense for the year was $4.6 million, down from $7.3 million last year. The
      decrease is a result of certain deferred pre-operating costs and radio
      reformatting costs becoming fully amortized.




**Interest
      on long-term debt**


Interest
      expense for the year was $55.6 million, up from $55.3 million last year
      primarily due to lower savings generated by a fixed-to-floating interest rate
      swap in fiscal 2005 compared to fiscal 2004. The effective interest rate for
      the
      year was 9.1% compared to 8.6% in the prior year. This increase reflects a
      higher ratio of fixed debt in fiscal 2005 as the Company repaid its floating
      rate bank loans in the first quarter.




**Other
      income, net**


Other
      income for the year was $5.5 million, compared to $4.9 million in the prior
      year. The current year includes net derivative transaction gains of $4.4
      million, foreign exchange gains of $3.3 million, realized contingent
      consideration gains of $4.1 million, a broadcast license impairment of $4.1
      million and the retroactive portion of a performing rights tariff increase
      in
      the amount of $3.8 million, while the prior year includes net derivative
      transaction gains of $1.0 million and foreign exchange gains of $2.2 million.




**Income
      taxes**


The
      effective tax rate for the year was 36.6%, compared to the statutory rate of
      35.4%. This difference reflects the geographical allocation of the Company’s
      taxable income and the non-deductibility of stock-based compensation.




**Net
      income (loss)**


Net
      income for the year was $71.1 million, up from a loss of $23.1 million last
      year. Earnings per share for the year were $1.66 basic and $1.65 diluted,
      compared with a loss per share of $0.54 basic and diluted last year.




2005
        Annual Report / **27**








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**FISCAL
      2004 COMPARED TO FISCAL 2003**


Revenues
      for fiscal 2004 were $666.8 million, up 4% from $643.9 million in fiscal 2003.
      Television and Radio experienced increases of 8% and 1%, respectively, while
      Content was down 3% compared to the prior year.




Direct
      cost of sales, general and administrative expenses were $576.4 million, up
      from
      $478.6 million in the prior year. The fiscal 2004 results include a writedown
      in
      film investments of $85.0 million. Excluding the writedown, direct cost of
      sales, general and administrative expenses were up 3% from the prior year.
      The
      increase was primarily due to increased selling costs associated with increased
      revenues and higher programming costs.




Segment
      profit for fiscal 2004 was $90.4 million, down 45% from $165.3 million in fiscal
      2003. The Radio division achieved segment profit of $60.0 million, an increase
      of 3%. The Television division’s segment profit of $125.1 million represented a
      segment profit growth of 10%. The Content division generated a loss of $83.7
      million, after earning a profit of $3.2 million in the prior year. Segment
      profit as a percentage of revenues for the year ended August 31, 2004 was 14%
      compared to 26% in fiscal 2003.




**Radio**


Radio
      revenues for the year were $227.9 million, up 1% from the prior year. The
      Ontario and Québec regions delivered strong performances for the year. According
      to the TRAM report for the year ended August 31, 2004, advertising sales growth
      for Corus’ Ontario and Québec regions exceeded overall market growth for those
      regions. This helped to offset weaker results from the western regions as the
      Company made changes to address competitive challenges in key markets. While
      the
      western region lagged behind overall market growth for the region in the year,
      as indicated by the TRAM report, Corus’ strategy, which included reformatting
      several stations, translated into improved summer Bureau of Broadcast
      Measurement ratings.




Direct
      cost of sales, general and administrative expenses for the year were $167.8
      million, essentially unchanged from the prior year.




Segment
      profit for the year was $60.0 million, 3% higher than the prior year. Segment
      profit margin for the year remained unchanged at 26%.




**Television**


Television
      revenues for the year were $332.3 million, up 8% over the prior year.
      Advertising and subscriber revenues increased in the year by 13% and 5%,
      respectively, with Movie Central, Corus’ western-based pay television service,
      finishing the year with 707,000 subscribers, up 7% from August 31, 2003.




Direct
      cost of sales, general and administrative expenses for fiscal 2004 were $207.3
      million, up 7% from the prior year. Amortization of program and film rights
      increased as a result of increased programming expenditures at W Network and
      Movie Central. Selling costs increased in proportion to increases in revenues,
      while savings were realized in general and administrative expenses.




Segment
      profit for the year was $125.1 million, up 10% from the prior year. Segment
      profit margin was 38%, up from 37% in the prior year.




**Content**


Content
      revenues for the year were $112.6 million, a decrease of 3% from the prior
      year.
      This decrease resulted from a reduced production slate, as 121 episodes and
      three direct-to-video features were delivered in the year, compared to 140
      episodes and two direct-to-video features in the prior year. This decrease
      was
      offset to a degree by increased merchandising revenue driven by the success
      of
      the *Beyblade* brand.




Direct
      cost of sales, general and administrative expenses for the year were $196.4
      million, up from $113.1 million in the prior year, reflecting a writedown of
      the
      film investments of $85.0 million recorded in the third quarter of fiscal 2004.




28
        / Corus
        Entertainment








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





This
      writedown resulted from a challenging library market and foreign exchange,
      specifically a lower U.S. dollar, which caused the Company to lower estimates
      of
      future revenues.




Segment
      loss for the year was $83.7 million, down from a profit of $3.2 million in
      fiscal 2003.




**Corporate**


The
      Corporate segment results represented the incremental cost of Corporate overhead
      in excess of the amount allocated to the other operating divisions. Corporate
      overhead in fiscal 2004 was $11.0 million, up from $8.8 million in 2003. This
      was a planned increase due to the Company’s decision to expense stock options,
      as well as the introduction of the PSU program in fiscal 2003. The PSU program
      is designed to restrict and reduce the number of stock options issued. Payment
      is linked to prescribed share growth, and a stock purchase and retention
      requirement.




**Depreciation**


Depreciation
      expense was $25.7 million, compared to $24.7 million in fiscal 2003. The
      increase was primarily due to increased capital expenditures.




**Amortization**


Amortization
      expense was $7.3 million, down from $9.8 million in fiscal 2003. The decrease
      was due to a reduced cost base as deferred pre-operating costs and radio
      reformatting costs became fully amortized.




**Interest
      on long-term debt**


Interest
      expense was $55.3 million, down from $61.0 million in fiscal 2003 primarily
      due
      to a lower average debt balance and savings generated by a fixed-to-floating
      interest rate swap entered into in the first quarter of fiscal 2004. The
      effective interest rate for the year was 8.6% compared to 8.7% in the prior
      year.




**Other
      income, net**


Other
      income for the year was $4.9 million, compared to $6.0 million in the prior
      year. Fiscal 2004 included net derivative transaction gains of $1.0 million
      and
      foreign exchange gains of $2.2 million, while the prior year included foreign
      exchange gains of $6.6 million.




**Restructuring
      charges**


The
      restructuring charges of $5.0 million in fiscal 2003 represented primarily
      workforce reductions in the Content division, reflective of the reduced level
      of
      production slated for fiscal 2003 and beyond.




**Income
      taxes**


Income
      tax expense was $26.9 million for the year on income before income taxes and
      non-controlling interest of $7.1 million. The first quarter was impacted by
      the
      Ontario government’s decision to cancel previously announced reductions to
      future tax rates and to increase current tax rates. The change in Ontario rates
      caused an increase in the Company’s non-cash income tax expense and net future
      tax liability position of $17.8 million. The third quarter was impacted by
      the
      tax benefit recognized on the writedown of film investments. The effective
      tax
      rate for the year excluding the impact of the Ontario tax rate change and the
      film investment writedown was 36.7%, in line with the statutory rate of 36.3%.




**Net
      income (loss)**


Net
      loss for fiscal 2004 was $23.1 million, down from income of $40.0 million in
      fiscal 2003. Loss per share for the year was $0.54 basic and diluted, compared
      with earnings of $0.94 basic and diluted in fiscal 2003. The impacts of the
      writedown in film investments and of the Ontario tax rate change were $1.41
      and
      $0.42 per share, respectively.




2005
        Annual Report / **29**











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**QUARTERLY
      CONSOLIDATED FINANCIAL INFORMATION [UNAUDITED]**


The
      following tables set forth certain unaudited data from the consolidated
      statements of income (loss) and retained earnings (deficit) for each of the
      eight most recent quarters ended August 31, 2005. The information has been
      derived from the Company’s unaudited consolidated financial statements that, in
      management’s opinion, have been prepared on a basis consistent with the audited
      consolidated financial statements contained elsewhere in this report.




[thousands
                of Canadian dollars
            
            
            
            
            
            
            
            Earnings
                (loss) per shareexcept
                per share amounts]
            
            Revenues
            
            Segment
                profit1
            
            Net
                income (loss)
            
            Basic
            
            Diluted**2005****4th
                Qtr**
            
            
            **175,279**
            
            
            **42,571**
            
            
            **9,662**
            
            **$**
            **0.23**
            
            **$**
            **0.22****3rd
                Qtr**
            
            
            **171,890**
            
            
            **52,351**
            
            
            **19,430**
            
            
            **0.45**
            
            
            **0.45****2nd
                Qtr**
            
            
            **155,300**
            
            
            **38,024**
            
            
            **12,945**
            
            
            **0.30**
            
            
            **0.30****1st
                Qtr**
            
            
            **180,600**
            
            
            **62,365**
            
            
            **29,077**
            
            
            **0.68**
            
            
            **0.68**20044th
                Qtr
            
            
            162,959
            
            
            42,837
            
            
            14,018
            
            $
            0.33
            
            $
            0.333rd
                Qtr
            
            
            163,864
            
            
            (43,777
            )
            
            (51,160
            )
            
            (1.20
            )
            
            (1.20
            )2nd
                Qtr
            
            
            155,019
            
            
            34,069
            
            
            8,305
            
            
            0.19
            
            
            0.191st
                Qtr
            
            
            184,962
            
            
            57,269
            
            
            5,700
            
            
            0.13
            
            
            0.13




1 As
      defined in “Key performance indicators - Segment profit and segment profit
      margin.”





**Seasonal
      fluctuations**


Corus’
      operating results are subject to seasonal fluctuations that can significantly
      impact quarter-to-quarter operating results. Accordingly, one quarter’s
      operating results are not necessarily indicative of what a subsequent quarter’s
      operating results will be. Our broadcasting businesses [Radio and Television]
      and our Content business each have unique seasonal aspects.




For
      our broadcasting businesses, operating results are dependent on general
      advertising and retail cycles associated with consumer spending activity.
      Accordingly, operating results for the first quarter tend to be the strongest,
      reflecting pre-Christmas advertising activity, and the second quarter tends
      to
      be the weakest, consistent with lower consumer spending in winter months.




For
      our Content business, operating results are dependent on the timing and number
      of television programs made available for delivery in the period, as well as
      timing of merchandising royalties received, none of which can be predicted
      with
      certainty. Consequently, Content’s operating results may fluctuate significantly
      from quarter to quarter. Cash flows may fluctuate and are not necessarily
      closely related to revenue recognition.




**Significant
      items causing variations in quarterly results**


• First
      quarter fiscal 2004 was impacted by the Ontario government’s decision to cancel
      previously announced reductions to future tax rates and to increase current
      tax
      rates. This change in Ontario tax rates caused an increase in the Company’s
      non-cash income tax expense and net future tax liability position of $17.8
      million [$0.42 per share].


• Third
      quarter fiscal 2004 was impacted by a non-cash, after-tax writedown in film
      investments of $60.3 million [$1.41 per share] resulting from the Company’s
      decision to lower estimates of future revenue as a result of a challenging
      library market and lower U.S. dollar. The pre-tax writedown of $85.0 million
      was
      recorded in direct cost of sales, general and administrative expenses.




30
        / Corus
        Entertainment








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**FOURTH
      QUARTER**


Revenues
      for the fourth quarter were $175.3 million, an increase of 8% over $163.0
      million last year. Radio revenues for the fourth quarter were $65.3 million,
      up
      12% from the corresponding period last year. Revenue growth continued across
      Canada, particularly in Québec, which benefited from the newly acquired
      stations. Local and national airtime sales for the division increased over
      the
      prior year by 9% and 15%, respectively. Advertising spending across Canada
      has
      been strong and, collectively, Corus Radio stations outpaced the growth in
      advertising in important Toronto and Montréal markets, according to the TRAM
      report for the quarter ended August 31, 2005. Television revenues for the fourth
      quarter were $83.4 million, up 7% over the corresponding period last year.
      Revenue growth was driven by continued advertising growth of 7% and subscriber
      growth of 6%, while other non-broadcast related revenues were down in the
      quarter. On the advertising side, the strong growth was driven by CMT, W Network
      and TELETOON. Specialty advertising revenues grew 11% over the prior year’s
      fourth quarter. The subscriber revenue growth was driven by Movie Central,
      Corus’ western-based pay television service, which grew by 10% in the fourth
      quarter. Content revenues for the fourth quarter were $28 million, an increase
      of 1% from the prior year. During the quarter, Content produced 12 episodes,
      primarily of *6Teen* and *The
      Backyardigans* ,
      plus four direct-to-video features, compared to 33 episodes in the prior year.
      The increase in revenues despite lower episode delivery came as a result of
      service revenue and music royalties, as well as first-window sales related
      to
      earlier deliveries.




Direct
      cost of sales, general and administrative expenses for the fourth quarter were
      $132.7 million, up 10% from $120.1 million in the prior year. Radio expenses
      were up 18% as the ex-Astral stations acquired at the beginning of the quarter
      were integrated into the Québec cluster. Television expenses were $52.7 million
      for the fourth quarter, up 6% from the prior year. The increase was primarily
      due to higher overall cost of sales and higher variable costs associated with
      increased revenues. These increased costs were offset by effective cost
      containment in general and administrative overhead. Content expenses for the
      quarter were $26.2 million, down by 5% from the prior year. Corporate overhead
      for the fourth quarter increased to $6.0 million from $2.6 million in the prior
      year, reflecting higher expenses for stock-based compensation, as well as
      increased costs of information technology and the requirements of the *Sarbanes-Oxley
      Act* .




Depreciation
      expense for the fourth quarter was $5.9 million, a decrease of $0.5 million
      from
      last year. This decrease reflects a lower capital cost base. Amortization
      expense for the fourth quarter was $1.1 million, down from $1.3 million last
      year. The decrease is a result of certain deferred start-up and reformatting
      costs becoming fully amortized. Interest expense for the fourth quarter was
      $14.3 million, up from $13.6 million last year. The increase results from the
      fact that the Company terminated its fixed-to-floating interest rate swap
      agreement in the third quarter of fiscal 2005. The effective interest rate
      for
      the fourth quarter was 9.4% compared to 8.5% in the prior year, reflecting
      the
      absence of interest savings from the fixed-to-floating interest rate swap.
      Other
      expense for the fourth quarter was $5.3 million, compared to income of $3.2
      million in the prior year. The current year’s quarter includes a realized
      contingent consideration gain of $4.1 million, a broadcast license impairment
      of
      $4.1 million and the retroactive portion of a performing rights tariff increase
      in the amount of $3.8 million, while the prior year’s quarter includes an
      unrealized derivative transaction gain of $2.5 million and foreign exchange
      losses of $1.4 million. The effective tax rate for the fourth quarter was 36.0%,
      compared to the statutory rate of 35.4%. This difference reflects the
      geographical allocation of the Company’s taxable income.




Net
      income for the fourth quarter was $9.7 million, down from $14.0 million last
      year. Earnings per share for the fourth quarter were $0.23 basic and $0.22
      diluted, compared with $0.33 basic and diluted last year.




2005
        Annual Report / 3**1**











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**RISKS
      AND UNCERTAINTIES**


**Impact
      of regulation on Corus’ results of operations**


Radio
      and Television


Corus’
      Radio and Television business activities are regulated by the CRTC under the *Broadcasting
      Act* and,
      accordingly, Corus’ results of operations may be adversely affected by changes
      in regulations, policies and decisions by the CRTC. The CRTC, among other
      things, issues licenses to operate radio and television stations and regulates
      the rates Corus may charge for its specialty television services if such
      services are distributed as part of the basic service by a cable distributor.
      Corus’ radio stations must also meet technical operating requirements under the *Radiocommunication
      Act* and
      regulations promulgated under the *Broadcasting
      Act* .
      Changes in the regulation of Corus’ business activities, including decisions by
      the CRTC affecting Corus’ operations [such as the granting or renewal of
      licenses, decisions as to the subscriber fees Corus may charge its customers,
      or
      the granting of additional distribution, broadcasting or programming licenses
      to
      competitors in Corus’ markets] or changes in interpretations of existing
      regulations by courts or the CRTC, could materially adversely affect Corus’
business and results of operations.




In
      addition, in order to maintain eligibility under the *Broadcasting
      Act* and
      the *Radiocommunication
      Act* ,
      there are limitations on the ownership by non-Canadians of Corus Class A Voting
      Shares. Under certain circumstances, Corus’ Board of Directors may refuse to
      issue or register the transfer of Corus Class A Voting Shares to any person
      that
      is a non-Canadian or may sell the Corus Class A Voting Shares of a non-Canadian
      as if they were the owner of such Corus Class A Voting Shares.




Corus’
      radio, conventional television, specialty television, pay television and digital
      audio undertakings rely upon licenses under the *Copyright
      Act* [Canada]
      in order to make use of the music component of the programming distributed
      by
      these undertakings. Under these licenses, Corus is required to pay royalties
      established by the Copyright Board pursuant to the requirements of the *Copyright
      Act* to
      collecting societies that represent the copyright owners in such music
      component. These royalties are paid by these undertakings on a monthly basis
      in
      the normal course of their business.




The
      levels of the royalties payable by Corus are subject to change upon application
      by the collecting societies and approval by the Copyright Board. The Government
      of Canada may, from time to time, make amendments to the *Copyright
      Act* to
      implement Canada’s international treaty obligations and for other obligations
      and for other purposes. Any such amendments could result in Corus’ broadcasting
      undertakings being required to pay additional royalties for these licenses.
      Effective October 14, 2005, the Copyright Board increased the royalties that
      commercial radio stations will pay to the Society of Composers, Authors and
      Music Publishers of Canada [“SOCAN”] and to the Neighbouring Rights Collective
      of Canada [“NRCC”] for their use of music from 2003 to 2007. Rates will vary
      according to a station’s advertising revenues. On their first $1.25 million of
      annual revenues, music stations will continue to pay 3.2% of that amount to
      SOCAN and $100 to NRCC. For the rest, the rate increases from 3.2% to 4.4%
      for
      SOCAN and from 1.44% to 2.1% for NRCC. The rate for stations that use less
      music
      increases from 1.4% to 1.5% for SOCAN and from 0.64% to 0.75% for NRCC.




32
        / Corus
        Entertainment








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





Content


Corus
      licenses a significant portion of its programming to Canadian conventional
      television stations, specialty and premium television networks, which are
      required by the CRTC to devote a certain portion of their programming schedules
      to Canadian productions. In addition to these scheduling requirements, the
      CRTC
      generally requires Canadian specialty services to devote a certain amount of
      their revenues to certified Canadian programming. There can be no assurance
      that
      such policies will not be eliminated or scaled back, thereby reducing the
      advantages that they currently provide to Corus as a supplier of such programs.
      Also, there can be no assurance that our programming will continue to qualify
      as
      certified Canadian programming. If Corus’ programming fails to so qualify,
      Canadian broadcasters would not be able to use the programs to meet their
      Canadian programming obligations and, as a result, license fees paid to Corus
      by
      Canadian broadcasters would not reflect the current premium paid for certified
      Canadian programs and Corus would not qualify for certain Canadian tax credits
      and industry incentives. Canadian Heritage, the Canadian ministry that oversees
      the tax credits, has conducted a review of the definition of Canadian content,
      as it applies to film and television production, but no formal changes to the
      definition have been announced.




**Competition**


Corus
      encounters aggressive competition in all areas of its business. Corus’ failure
      to compete in these areas could materially adversely affect Corus’ results of
      operations.




The
      television production industry, specialty and pay television channel
      broadcasting and radio broadcasting have always involved a substantial degree
      of
      risk. There can be no assurance of the economic success of radio stations,
      television programs or specialty television channels as revenue derived depends
      on audience acceptance of other competing programs released into, or channels
      existing in, the marketplace at or near the same time, the availability of
      alternative forms of entertainment and leisure time activities, general economic
      conditions, public tastes generally and other intangible factors, all of which
      could change rapidly and many of which are beyond our control. The lack of
      audience acceptance for our radio stations, television programs and specialty
      and pay television channels would have an adverse impact on our businesses,
      results of operations, prospects and financial condition.




Radio


The
      financial success of each of Corus’ radio stations is dependent principally upon
      its share of the overall advertising revenue within its geographic market,
      its
      promotional and other expenses incurred to obtain the revenue and the economic
      strength of its geographic market. Corus’ radio advertising revenues are, in
      turn, highly dependent upon audience share. Other stations may change
      programming formats to compete directly with Corus’ stations for listeners and
      advertisers or launch aggressive promotional campaigns in support of already
      existing competitive formats. If a competitor, particularly one with substantial
      financial resources, were to attempt to compete in either of these fashions,
      ratings at Corus’ affected station could be negatively impacted, resulting in
      lower net revenues.




Radio
      broadcasting is also subject to competition from electronic and print media.
      Potential advertisers can substitute advertising through broadcast television,
      cable television systems [which can offer concurrent exposure on a number of
      cable networks to enlarge the potential audience], daily, weekly, and
      free-distribution newspapers, other print media, direct mail, and on-line
      computer services for radio advertising. Competing media commonly target the
      customers of their competitors, and advertisers regularly shift dollars from
      radio to these competing media and vice versa. Accordingly, there can be no
      assurance that any of Corus’ radio stations will be able to maintain or increase
      their current audience share and advertising revenue share.




2005
        Annual Report / **33**








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





Television


The
      financial success of Corus’ specialty television business depends on obtaining
      revenue from advertising as well as from subscription fees. Numerous broadcast
      and specialty television networks compete with Corus for advertising revenue,
      and a failure by Corus to obtain its necessary share of such revenue could
      materially adversely affect Corus’ results of operations. Corus’ services also
      compete with a number of foreign programming services such as A&E and CNN,
      which have been authorized for distribution in Canada by the CRTC. Moreover,
      increasingly Corus’ specialty, pay and conventional television services are
      competing with alternative forms of entertainment that are not regulated by
      the
      CRTC, such as the Internet and video and DVD rentals. In addition, competition
      among specialty television services in Canada is highly dependent upon the
      offering of prices, marketing and advertising support and other incentives
      to
      cable operators and other distributors for carriage so as to favourably position
      and package the services to subscribers. As well, the CRTC has licensed a number
      of specialty services for digital distribution, which increases competition.
      Any
      failure by Corus to compete effectively in the area of specialty television
      services could materially adversely affect Corus’ results of operations.




Corus’
      pay television services are exclusive providers of premium movies and series,
      as
      well as classical movie offerings to western Canadian subscribers. These
      services compete with pay-per-view movie offerings as well as video-on-demand
      offerings.




Content


The
      production and distribution of children’s television, books and other media
      content are very competitive. There are numerous suppliers of media content,
      including vertically integrated major motion picture studios, television
      networks, independent television production companies and children’s book
      publishers around the world. Many of these competitors are significantly larger
      than Corus and have substantially greater resources, including easier access
      to
      capital, than we do. Corus competes with other television and motion picture
      production companies for ideas and storylines created by third parties as well
      as for actors, directors and other personnel required for a production.




Further,
      vertical integration of the television broadcast industry and the creation
      and
      expansion of new networks, which create a substantial portion of their own
      programming, have decreased the number of available time slots for programs
      produced by third party production companies. There can be no assurances that
      Corus will be able to compete successfully in the future or that we will
      continue to produce or acquire rights to additional successful programming
      or
      enter into agreements for the financing, production, distribution or licensing
      of programming on terms favourable to us. There continues to be intense
      competition for the most attractive time slots offered by those services. There
      can be no assurances that Corus will be able to increase or maintain our
      penetration of broadcast schedules.




**Risks
      associated with production of film and television programs**


Each
      production is an individual artistic work and its commercial success is
      determined primarily by audience acceptance, which cannot be accurately
      predicted. The success of a program is also dependent on the type and extent
      of
      promotion and marketing activities, the quality and acceptance of other
      competing programs, general economic conditions and other factors, all of which
      can change rapidly and many of which are beyond Corus’ control.




Production
      of film and television programs requires a significant amount of capital.
      Factors such as labour disputes, technology changes or other disruptions
      affecting aspects of production may affect Corus or its co-production partners
      and cause cost overruns and delay or hamper completion of a production.




34
        / Corus
        Entertainment








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





Financial
      risks exist in productions relating to tax credits and co-production treaties.
      The aggregate amount of government tax credits a project may receive can
      constitute a material portion of a production budget and typically can be as
      much as 30% of total budgeted costs. There is no assurance that government
      tax
      credits and industry funding assistance programs will continue to be available
      at current levels or that Corus’ production projects will continue to qualify
      for them. As well, the majority of Corus’ productions are co-productions
      involving international treaties that allow Corus to access foreign financing
      and reduce production risk as well as qualify for Canadian government tax
      credits. If an existing treaty between Canada and the government of one of
      the
      current co-production partners were to be abandoned, one or more co-productions
      currently underway may also need to be abandoned. Losing the ability to rely
      on
      co-productions would have a significant adverse effect on Corus’ production
      capabilities and production financing.




Results
      of operations for the production and distribution business for any period are
      dependent on the number, timing and commercial success of television programs
      and feature films delivered or made available to various media, none of which
      can be predicted with certainty. Consequently, current revenue from production
      and distribution may fluctuate materially from period to period and the results
      of any one period are not necessarily indicative of results for future periods.
      Cash flows may also fluctuate and are not necessarily closely correlated with
      revenue recognition.




Library
      revenue from production and distribution can vary substantially from year to
      year, both by geographic territory and by year of production. The timing of
      Nelvana’s ability to sell library product in certain territories will depend on
      the market outlook in the particular territory and the availability of product
      by territory, which depends on the extent and term of any prior sale in that
      territory.




**Intellectual
      property rights**


Corus’
      trademarks, copyrights and other proprietary rights are important to the
      Company’s competitive position. In particular, the Content group must be able to
      protect its trademarks, copyrights and other proprietary rights in order to
      competitively produce, distribute and license its television programs and
      published materials, and market its merchandise. Accordingly, Corus devotes
      the
      Company’s resources to the establishment and protection of our trademarks,
      copyrights and other proprietary rights on a worldwide basis. However, from
      time
      to time, various third parties contest or infringe upon the Company’s
      intellectual property rights. The Company reviews these matters to determine
      what, if any, actions may be required or should be taken, including legal action
      or negotiated settlement. There can be no assurance that the Company’s actions
      to establish and protect our trademarks, copyrights and other proprietary rights
      will be adequate to prevent imitation or unauthorized reproduction of the
      Company’s products by others or prevent third parties from seeking to block
      sales, licensing or reproduction of these products as a violation of their
      trademarks, copyrights and proprietary rights.




Moreover,
      there can be no assurance that others will not assert rights in, or ownership
      of, the Company’s trademarks, copyrights and other proprietary rights, or that
      the Company will be able to successfully resolve these conflicts. In addition,
      the laws of certain foreign countries may not protect proprietary rights to
      the
      same extent as do the laws of the United States or Canada.





2005
        Annual Report / **35**








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**Technological
      developments**


New
      or alternative media technologies and business models such as digital radio
      services, satellite radio, direct-to-home satellite, wireless and wired cable
      television, Internet and video programming, and on-line publications have
      recently begun to compete, or may in the future compete, for programming,
      audiences and advertising revenues. These technologies and business models
      may
      increase audience fragmentation, reduce the Company’s ratings or have an adverse
      effect on advertising revenues from local and national audiences. These or
      other
      technologies and business models may have a material adverse effect on our
      business, results of operations or financial conditions.




**Interest
      rate and foreign exchange risk**


The
      Company manages its exposure to floating interest rates and U.S. dollar foreign
      exchange fluctuation through the use of interest rate and cross-currency
      exchange agreements or “swaps.” All such agreements are used for risk management
      purposes only. In order to minimize the risk of counterparty default under
      its
      swap agreements, Corus assesses the creditworthiness of its swap counterparties.
      Currently 100% of the Company’s total swap portfolio is held by financial
      institutions with Standard & Poor’s ratings [or the equivalent] ranging from
      A to AA-.




Corus
      has the following financial exposures to risk in its day-to-day operations:




Interest
      rates


The
      Company utilizes long-term financing extensively in its capital structure,
      which
      includes banking facilities, and U.S. dollar denominated Senior Subordinated
      Notes [the “Notes”] as more fully described in note 12 to the consolidated
      financial statements.




Interest
      on bank indebtedness is based on floating rates, while the Notes are fixed
      rate
      obligations. Corus utilizes its credit facility when appropriate to finance
      day-to-day operations.




As
      at August 31, 2005, 100% of the Company’s consolidated long-term debt was fixed
      with respect to interest rates.




Foreign
      exchange


A
      significant portion of revenues and expenses for the Content business is in
      currencies other than Canadian dollars and, therefore, is subject to
      fluctuations in exchange rates. Approximately 9% of Corus’ total revenues was in
      foreign currencies, the majority of which was U.S. dollars. The foreign exchange
      risk is mitigated as the net cash flow from operations acts as a natural hedge
      against interest on unhedged U.S. dollar denominated debt. As at August 31,
      2005, 100% of the Company’s long-term debt was fixed to exchange rates relative
      to Canadian dollars.




**Contingencies**


The
      Company and its subsidiaries are involved in litigation arising in the ordinary
      course and conduct of its business. The Company recognizes liabilities for
      contingencies when a loss is probable and capable of being estimated. As at
      August 31, 2005, there were no actions, suits or proceedings pending or against
      the Company or its subsidiaries that would, in management’s estimation, likely
      be determined in such a manner as to have a material adverse effect on the
      business of the Company.


36
        / Corus
        Entertainment











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**FINANCIAL
      POSITION**


Total
      assets at August 31, 2005 were $1.93 billion compared to $1.87 billion at August
      31, 2004. The following discussion describes the significant changes in the
      consolidated balance sheet since August 31, 2004.




Current
      assets increased by $49.5 million. Cash and cash equivalents increased by $42.9
      million. Accounts receivable increased by $11.7 million as a result of increased
      revenues in Radio and Television.




Non-current
      assets increased by $6.9 million. Tax credits receivable increased by $1.5
      million due to accruals made related to film production. Property, plant and
      equipment decreased by $6.1 million as capital expenditures of $19.2 million
      were offset by depreciation of $23.7 million and asset disposals of $2.1
      million. Program and film rights [current and non-current] increased by $23.1
      million, as accruals for acquired rights of $133.5 million were offset by
      amortization of $110.6 million. Film investments increased by $1.6 million,
      as
      net film spending of $49.4 million was offset by film amortization and accruals
      for tax credits. Deferred charges decreased by $3.7 million due primarily to
      amortization. Broadcast licenses increased by $5.5 million as a result of the
      Québec radio station swap with Astral and an impairment provision of $4.1
      million, while goodwill decreased by $9.2 million as a result of the sale of
      Locomotion Channel’s assets and the Québec radio station swap.




Current
      liabilities increased by $9.3 million. Accounts payable and accrued liabilities
      increased by $10.8 million and income taxes payable decreased by $1.5 million.
      Accounts payable and accrued liabilities related to working capital increased
      by
      $10.3 million, due to the timing of trade accounts payable and the impact of
      higher performing rights tariffs, while non-working capital accruals for program
      rights and film investments increased by $0.5 million.




Non-current
      liabilities decreased by $21.9 million. Long-term debt decreased by $84.0
      million, resulting from repayments of $34.0 million and foreign exchange
      translation adjustments. Deferred credits increased by $49.6 million, as
      payments of $9.9 million for public benefits associated with acquisitions were
      offset by $47.2 million in translation adjustments for cross-currency agreements
      and other working capital adjustments. Net future tax liability [including
      current asset] increased by $10.9 million primarily as a result of the
      utilization of tax loss carryforwards. Other long-term liabilities increased
      by
      $6.7 million as a result of an increase in the long-term portion of program
      rights accruals.




Share
      capital increased by $1.9 million primarily as a result of the exercising of
      employee stock options. Contributed surplus increased by $2.3 million as a
      result of expensing stock options for the year. Cumulative translation
      adjustment decreased by $3.0 million primarily due to the effect of exchange
      rate fluctuation on the translation of the net assets of self-sustaining foreign
      operations.




2005
        Annual Report / **37**











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**LIQUIDITY
      AND CAPITAL RESOURCES**


**Cash
      flows**


Overall,
      the Company’s cash and cash equivalents position increased by $42.9 million in
      the year ended August 31, 2005. Cash provided by operating activities for the
      year was $102.4 million, compared to $84.9 million in the prior year. An
      increase in net income adjusted for non-cash items of $5.8 million and reduced
      non-cash working capital use of $20.6 million were offset by an increase of
      $7.1
      million in program rights expenditures. Cash used in investing activities for
      the year was $22.5 million, compared to $32.4 million in the prior year, as
      there were reduced requirements for cash for investments, as well as proceeds
      from the sale of non-core assets. Cash used in financing activities for the
      year
      was $37.1 million, compared to $1.1 million in the prior year, as the Company
      paid down its U.S. dollar denominated bank loan balance of $34.0 million in
      the
      first quarter of fiscal 2005. The Company paid $3.2 million in dividends to
      shareholders in fiscal 2005.




**Liquidity**


In
      fiscal 2002, Corus issued U.S.$375.0 million aggregate principal amount of
      8.75%
      Notes due in 2012 at a price of 99.186% of their aggregate principal amount.
      Cross-currency interest rate agreements have fixed the effective interest rates
      on the Notes at 9.33% and the exchange rate applicable to the principal portion
      of the debt has been fixed at Cdn.$1.6107, translating to Cdn.$604.0 million.




In
      addition, the Company has available a $25.0 million one-year operating loan
      facility and a revolving term credit facility in the amount of $215.0 million
      that matures on January 31, 2009. As at August 31, 2005, neither the operating
      loan nor the term credit facility was being utilized. Interest rates on these
      facilities fluctuate with Canadian bankers’ acceptances and LIBOR and averaged
      2.7% for fiscal 2005 and 2.4% for fiscal 2004.




These
      borrowings, combined with cash generated from operations, have been the primary
      funding sources for operations over the last several years. The nature of the
      Company’s business is such that significant expenditures are required to acquire
      program rights for the Television business and to produce and acquire film
      assets for the Content business. For the past three years, these expenditures
      have been financed from cash generated from operations. The Company has no
      significant commitments related to the acquisition of property, plant and
      equipment. Over the past three fiscal years, the Company has reduced its
      investment in non-cash working capital.




As
      at August 31, 2005, the Company had a cash balance of $138.1 million, and a
      working capital balance of $175.0 million. Management believes that cash flow
      from operations and existing credit facilities will provide the Company with
      sufficient financial resources to fund its operations for fiscal 2006.




**Net
      debt and adjusted net debt**


As
      at August 31, 2005, net debt was $307.1 million, down from $433.9 million at
      August 31, 2004. Adjusted net debt as at August 31, 2005 was $465.9 million,
      down from $545.5 million at August 31, 2004.


38
        / Corus
        Entertainment











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**Off-balance
      sheet arrangements and derivative financial instruments**


The
      Company has guarantees and general indemnification commitments to
      counterparties. Historically, the Company has not made any significant payments
      with respect to these guarantees and indemnification provisions, and management
      believes that the risk of loss is low.




The
      Company uses derivative financial instruments to manage risks from fluctuations
      in exchange and interest rates. These instruments include cross-currency and
      interest rate swap agreements. All such instruments are only used for risk
      management purposes. The net receipts or payments arising from financial
      instruments relating to the management of interest rate risks are recognized
      in
      interest expense over the term of the instrument. Foreign exchange gains or
      losses arising on cross-currency agreements used to hedge U.S. dollar
      denominated debt are offset against the corresponding exchange gains or losses
      on the hedged item. The carrying value of derivative financial instruments
      that
      do not qualify for hedge accounting is adjusted to reflect their current market
      value.




As
      at August 31, 2005, the consolidated balance sheet included a liability of
      $158.8 million [2004 - $111.6 million] related to a cross-currency agreement.
      The fair value of this liability was $242.0 million [2004 - $142.9 million].




As
      at August 31, 2004, the consolidated balance sheet included a fair value
      liability of $3.3 million related to an interest rate swap agreement. Corus
      terminated this agreement in the third quarter of fiscal 2005. Net derivative
      transaction gains of $4.4 million [2004 - $1.0 million] are included in other
      income, net in the consolidated statements of income (loss) and retained
      earnings (deficit) for the year ended August 31, 2005.




**Contractual
      commitments**


Corus
      has the following contractual obligations:




Less
                than
            
            One
                to
            
            Four
                to
            
            After[thousands
                of Canadian dollars]
            
            Total
            
            one
                year
            
            three
                years
            
            five
                years
            
            five
                yearsLong-term
                debt
            
            
            604,000
            
            
            -
            
            
            -
            
            
            -
            
            
            604,000Operating
                leases
            
            
            97,012
            
            
            22,139
            
            
            34,045
            
            
            13,902
            
            
            26,926Film
                and program rights purchase commitments
            
            
            151,455
            
            
            81,144
            
            
            62,782
            
            
            7,529
            
            
            -Other
                long-term obligations
            
            
            21,186
            
            
            2,862
            
            
            5,225
            
            
            4,925
            
            
            8,174





2005
        Annual Report / **39**














MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**TRANSACTIONS
      WITH RELATED PARTIES**


The
      Company has transacted business in the normal course with entities that are
      subject to common voting control and with entities over which the Company
      exercises significant influence. These transactions are measured at the exchange
      amount, which is the amount of consideration established and agreed to by the
      related parties and having normal trade terms.




During
      the year, the Company received cable service subscriber, programming and
      advertising fees of $94.6 million [2004 - $92.3 million; 2003 - $89.3 million],
      production and distribution revenue of $2.5 million [2004 - $3.1 million; 2003
      -
      $2.1 million] and administrative and other fees of $6.6 million [2004 - $5.5
      million] from related parties. In addition, the Company paid cable and satellite
      system distribution access fees of $4.8 million [2004 - $4.5 million; 2003
      -
      $3.6 million] and administrative and other fees of $2.0 million [2004 - $1.5
      million; 2003 - $1.1 million] to related parties. As at August 31, 2005, the
      Company had $20.0 million [2004 - $9.9 million] receivable from related parties.




The
      Company provided related parties with radio and television spots in return
      for
      television advertising. No monetary consideration was exchanged for these
      transactions and no amounts were recorded in the accounts.




In
      the first quarter of fiscal 2005, Corus acquired a cable advertising business
      for $0.9 million in cash from Shaw, a company subject to common voting control.




Certain
      officers of the Company are currently indebted to the Company in connection
      with
      the purchase of Class B Non-Voting Shares, Corus Senior Subordinated Notes
      and
      relocation housing loans. The loans granted by the Company do not bear interest.
      The aggregate amount of such indebtedness as at August 31, 2005 was $6.4
      million.




**IMPACT
      OF NEW ACCOUNTING PRONOUNCEMENTS ADOPTED IN 2005**


**Variable
      interest entities**


Effective
      December 1, 2004, the Company adopted the recommendations of the Canadian
      Institute of Chartered Accountants [“CICA”] Accounting Guideline-15,
“Consolidation of Variable Interest Entities,” which provides guidance on the
      consolidation and disclosure of variable interest entities. This standard is
      substantially harmonized with U.S. GAAP. The adoption of this standard did
      not
      have a material impact on the Company’s consolidated financial position or
      results of operations.




**Asset
      retirement obligations**


Effective
      September 1, 2004, the Company adopted the recommendations of CICA Handbook
      Section 3110, “Asset Retirement Obligations,” which establishes standards for
      the recognition, measurement and disclosure of liabilities for asset retirement
      obligations and the associated asset retirement costs. The section requires
      that
      an entity recognize the fair value of a liability for an asset retirement
      obligation in the period in which it is incurred when a reasonable estimate
      of
      fair value can be made. This standard is substantially harmonized with U.S.
      GAAP. The adoption of this standard did not have a material impact on the
      Company’s consolidated financial position or results of operations.




40
        / Corus
        Entertainment











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**RECENT
      ACCOUNTING PRONOUNCEMENTS**


**Financial
      instruments, comprehensive income and hedges**


In
      April 2005, the CICA issued Handbook Section 1530, “Comprehensive Income,”
Handbook Section 3855, “Financial Instruments - Recognition and Measurement,”
and Handbook Section 3865, “Hedges.” Section 3855 expands on CICA Handbook
      Section 3860, “Financial Instruments - Disclosure and Presentation,” by
      prescribing when a financial instrument is to be recognized on the balance
      sheet
      and at what amount. It also specifies how instrument gains and losses are to
      be
      presented. Section 3865 is optional. It provides alternative treatments to
      Section 3855 for entities that choose to designate qualifying transactions
      as
      hedges for accounting purposes and specifies how hedge accounting is applied
      and
      what disclosures are necessary when it is applied. Section 1530 introduced
      a new
      requirement to present temporarily certain gains and losses outside net income
      in a new component of shareholders’ equity entitled Comprehensive Income. These
      standards are substantially harmonized with U.S. GAAP and are effective for
      the
      Company beginning September 1, 2007. The Company is currently evaluating the
      impact of these standards on its consolidated financial position and results
      of
      operations.




**CRITICAL
      ACCOUNTING ESTIMATES**


The
      Company’s significant accounting policies are described in note 2 to the
      consolidated financial statements. The preparation of consolidated financial
      statements in conformity with Canadian GAAP requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the consolidated financial statements and the reported amounts of revenues
      and
      expenses during the reporting periods. The most significant assumptions made
      by
      management in the preparation of the Company’s consolidated financial statements
      include future revenue projections for investments in film and television
      programs, provisions for doubtful accounts to reflect credit exposures,
      valuation allowances and impairment assessments for various assets including
      investment in film and television programs; property, plant and equipment;
      long-term investments; current and future income taxes; broadcast licenses
      and
      goodwill. Actual results could differ from those estimates. The policies
      described below are considered to be critical accounting estimates, as they
      require significant estimation or judgment.




**Film
      investments**


The
      Company accounts for its production and distribution of film and television
      programs in accordance with the American Institute of Certified Public
      Accountants Statement of Position 00-2, “Accounting by Producers or Distributors
      of Films” [“SOP 00-2”]. SOP 00-2 requires that film and television costs of
      production and acquisition are amortized using the
      individual-film-forecast-computation method. Under this method, capitalized
      costs for an individual film or television program are amortized in the
      proportion that current period actual revenues bear to management’s estimates of
      the total revenues expected to be received from such film or television program
      over a period not to exceed ten years from the date of delivery. As a result,
      if
      revenue estimates change with respect to a film or television program, the
      Company may be required to write down all or a portion of the unamortized costs
      of such film or television program, therefore impacting direct cost of sales,
      general and administrative expenses, and profitability.




The
      fiscal 2004 results include a writedown of $85.0 million resulting from lower
      estimates of future revenue projections. No assurance can be given that
      unfavourable changes to revenue estimates will not continue to occur, which
      may
      again result in significant writedowns affecting our results of operations
      and
      financial conditions.





2005
        Annual Report / 4**1**








MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**Broadcast
      licenses and goodwill**


The
      cost of acquiring media broadcasting, production/distribution and publishing
      businesses is allocated to the fair value of related net identifiable tangible
      and intangible assets acquired. Net identifiable intangible assets acquired
      consist primarily of broadcast licenses. The excess of the cost of acquiring
      these businesses over the fair value of related net identifiable tangible and
      intangible assets acquired is allocated to goodwill.




Broadcast
      licenses are considered to have an indefinite life based on management’s intent
      and ability to renew the licenses without substantial cost and without material
      modification of the existing terms and conditions of the license. No assurance
      can be given that the Company will be able to renew its licenses, or that
      substantial cost or material modification of the existing terms and conditions
      will not be incurred.




Broadcast
      licenses and goodwill are tested for impairment annually or more frequently
      if
      events or changes in circumstances indicate that they are impaired. The Company
      has selected August 31 as the date it performs its annual impairment test.
      The
      key assumptions used in the test include forecasted segment profit and industry
      multiples. The fair value of the Company’s intangible assets is exposed to
      future adverse changes if the Company experiences declines in operating results,
      significant negative industry or economic trends, or if future performance
      is
      below historical trends.




**Income
      taxes**


The
      liability method of tax allocation is used in accounting for income taxes.
      Under
      this method, future tax assets and liabilities are determined based on
      differences between the financial reporting and tax bases of assets and
      liabilities, and measured using the substantively enacted tax rates and laws
      that are expected to be in effect when the differences are expected to reverse.
      Certain assumptions are required in order to determine the provision for income
      taxes, including filing positions on certain items and the realization of future
      tax assets.




The
      Company is audited regularly by federal and provincial authorities in the areas
      of income taxes and the remittance of sales taxes. These audits consider the
      timing and amount of deductions and compliance with federal and provincial
      laws.
      To the extent that the Company’s filing positions are challenged, the Company’s
      effective tax rate in a given financial statement period could be materially
      affected.




The
      recognition of future tax assets depends on management’s assumption that future
      earnings will be sufficient to realize the future benefit. No assurance can
      be
      given that future earnings will be sufficient to realize the future benefit.




**Investments**


The
      Company’s consolidated balance sheets contain balances related to investments
      carried at historical cost. In certain cases, quoted market value has been
      lower
      than cost for several years. In each case management believes that persuasive
      evidence exists to indicate that the financial condition and near-term prospects
      of the issuer are not impaired and that the Company has the intent and ability
      to retain its investment in the issuer until anticipated recovery in market
      value occurs. Therefore, management believes that the declines in market value
      are not other-than-temporary, and no writedown is required. No assurance can
      be
      given that a recovery will occur, and the prospect of a writedown sometime
      in
      the future remains present. At October 31, 2005, the carrying amount of
      investments held at cost exceeded their market value by $2.7 million [2004
      -
      $3.9 million].




42
        / Corus
        Entertainment











MANAGEMENT’S
      DISCUSSION AND ANALYSIS





**Production
      tax credits**


The
      Company’s consolidated balance sheets contain balances related to production tax
      credits received or receivable from federal and provincial government agencies.
      Tax credits are claimed based on the expectation of meeting eligibility
      requirements and amounts may be subject to estimation and interpretation. Claims
      are subject to audit by federal and provincial authorities, and no assurances
      can be given that amounts received or receivable will not be disallowed. Such
      a
      disallowance may have an impact on the net unamortized cost of completed film,
      and result in higher film amortization expense.




**CONTROLS
      AND PROCEDURES**


As
      required by Multilateral Instrument 52-109 issued by the Canadian Securities
      Administrators, Corus’ Chief Executive Officer and Chief Financial Officer will
      be making certifications related to the information in Corus’ annual filings [as
      defined in Multilateral Instrument 52-109] with the provincial securities
      legislation. As part of such certification, the Chief Executive Officer and
      Chief Financial Officer must certify that they are responsible for establishing
      and maintaining disclosure controls and procedures and have designed such
      disclosure controls and procedures [or caused such disclosure controls and
      procedures to be designed under their supervision] to ensure that material
      information with respect to Corus, including its consolidated subsidiaries,
      is
      made known to them and that they have evaluated the effectiveness of Corus’
disclosure controls and procedures as of the end of the period covered by these
      annual filings. Disclosure controls and procedures ensure that information
      required to be disclosed by Corus in the reports that it files or submits to
      the
      provincial securities legislation is recorded, processed, summarized and
      reported, within the time periods required. Corus has adopted or formalized
      such
      controls and procedures as it believes are necessary and consistent with its
      business and internal management and supervisory practices.




As
      Corus is a foreign private issuer listed on the New York Stock Exchange, similar
      certifications by Corus’ Chief Executive Officer and Chief Financial Officer are
      required by Section 302[a] of the *Sarbanes-Oxley
      Act of 2002* related
      to information in Corus’ Annual Report on Form 40-F.




**Evaluation
      of disclosure controls and procedures**


The
      Company’s Chief Executive Officer and Chief Financial Officer, after evaluating
      the effectiveness of the Company’s disclosure controls and procedures [as
      defined in Multilateral Instrument 52-109 and in *Securities
      Exchange Act of 1934* Rules
      13a-15[e] and 15d-15[e]] as at August 31, 2005, have concluded that, as at
      August 31, 2005, the Company’s disclosure controls and procedures were
      effective.




**Changes
      in internal control over financial reporting**


During
      fiscal 2005, there were no significant changes in the Company’s internal control
      over financial reporting that occurred during the year that have materially
      affected or are reasonably likely to materially affect the Company’s internal
      control over financial reporting. However, the Company is continually improving
      its infrastructure and controls.




**OUTSTANDING
      SHARE DATA**


As
      at October 31, 2005, 1,724,929 Class A Voting Shares and 41,084,867 Class B
      Non-Voting Shares were issued and outstanding. Class A Voting Shares are
      convertible at any time into an equivalent number of Class B Non-Voting Shares.
      The Class B Non-Voting Shares are convertible into an equivalent number of
      Class
      A Voting Shares in limited circumstances.




Additional
      information relating to the Company, including the Annual Information Form,
      can
      be found on SEDAR at www.sedar.com.


2005
        Annual Report / **43**