##### 



Consolidated Financial Statements

Corus Entertainment Inc.
August 31, 2002, 2001 and 2000





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##### 



AUDITORS REPORT

To the Shareholders of

Corus Entertainment Inc.

We have audited the consolidated balance sheets of Corus Entertainment Inc.as
at August 31, 2002 and 2001 and the consolidated statements of income (loss),
retained earnings (deficit) and cash flows for each of the years in the
three-year period ended August 31, 2002. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at August 31, 2002
and 2001 and the results of its operations and its cash flows for each of the
years in the three-year period ended August 31, 2002 in accordance with
Canadian generally accepted accounting principles.

As discussed in note 2[b] to the consolidated financial statements, in 2002 the
Company changed its method of accounting for film investments, earnings per
share and goodwill and other intangible assets.

|                                   |  |                                              
|---------------------------------- |  | ---------------------------------------------
|Toronto, Canada,
October 17, 2002. |  | (ERNST & YOUNG LLP SIG)
Chartered Accountants





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##### 



Corus Entertainment Inc.

CONSOLIDATED BALANCE SHEETS

As at August 31

|                                                           |  |      |           |      |  |            |           | 
|---------------------------------------------------------- |  | ---- | --------- | ---- |  | ---------- | --------- | 
|                                                           |  | 2002 |           | 2001
|[thousands of Canadian dollars]                            |  | $    |           | $   
|                                                           |  |      |           |     
|                                                           |  |      |           |      |  | [restated-
|                                                           |  |      |           |      |  | note 2[b]]
|ASSETS[note 15]                                            |  |      |           |      |  |            |           | 
|Current                                                    |  |      |           |      |  |            |           | 
|Cash and cash equivalents                                  |  |      | 20,467    |      |  |            |          | 
|Accounts receivable [notes 6 and 28]                       |  |      | 166,650   |      |  |            | 175,009   | 
|Prepaid expenses and other                                 |  |      | 9,850     |      |  |            | 13,995    | 
|Inventories [note 7]                                       |  |      | 4,230     |      |  |            | 24,731    | 
|Program and film rights                                    |  |      | 50,332    |      |  |            | 48,753    | 
|                                                           |  |      |           |      |  |            |           | 
|Total current assets                                       |  |      | 251,529   |      |  |            | 262,488   | 
|                                                           |  |      |           |      |  |            |           | 
|Tax credits receivable                                     |  |      | 30,332    |      |  |            | 30,995    | 
|Investments and other assets [notes 4 and 8]               |  |      | 84,755    |      |  |            | 319,754   | 
|Capital assets [note 9]                                    |  |      | 100,841   |      |  |            | 104,944   | 
|Program and film rights                                    |  |      | 15,645    |      |  |            | 14,329    | 
|Film investments [note 10]                                 |  |      | 140,601   |      |  |            | 146,583   | 
|Deferred charges [note 11]                                 |  |      | 37,486    |      |  |            | 36,947    | 
|Broadcast licenses and other intangibles [note 12]         |  |      | 482,594   |      |  |            | 421,139   | 
|Goodwill [note 12]                                         |  |      | 781,373   |      |  |            | 932,632   | 
|                                                           |  |      |           |      |  |            |           | 
|                                                           |  |      | 1,925,156 |      |  |            | 2,269,811 | 
|                                                           |  |      |           |      |  |            |           | 
|LIABILITIES AND SHAREHOLDERS EQUITY                       |  |      |           |      |  |            |           | 
|Current                                                    |  |      |           |      |  |            |           | 
|Bank overdraft                                             |  |      |          |      |  |            | 6,536     | 
|Accounts payable and accrued liabilities [notes 13 and 28] |  |      | 178,277   |      |  |            | 140,302   | 
|Income taxes payable                                       |  |      | 5,748     |      |  |            | 25,736    | 
|Future tax liability [note 18]                             |  |      | 2,248     |      |  |            | 10,687    | 
|Securitized borrowing [note 14]                            |  |      |          |      |  |            | 89,500    | 
|Current portion of long-term debt [note 15]                |  |      | 2,391     |      |  |            | 6,382     | 
|                                                           |  |      |           |      |  |            |           | 
|Total current liabilities                                  |  |      | 188,664   |      |  |            | 279,143   | 
|                                                           |  |      |           |      |  |            |           | 
|Long-term debt [note 15]                                   |  |      | 646,614   |      |  |            | 614,419   | 
|Deferred credits [note 16]                                 |  |      | 76,631    |      |  |            | 56,244    | 
|Future tax liability [note 18]                             |  |      | 150,177   |      |  |            | 150,942   | 
|Other long term liabilities                                |  |      | 6,610     |      |  |            |          | 
|Minority interest                                          |  |      | 5,445     |      |  |            | 1,456     | 
|                                                           |  |      |           |      |  |            |           | 
|Total liabilities                                          |  |      | 1,074,141 |      |  |            | 1,102,204 | 
|                                                           |  |      |           |      |  |            |           | 
|Shareholders equity                                       |  |      |           |      |  |            |           | 
|Share capital [note 17]                                    |  |      | 881,415   |      |  |            | 882,516   | 
|Retained earnings (deficit)                                |  |      | (31,886   | )    |  |            | 284,151   | 
|Cumulative translation adjustment                          |  |      | 1,486     |      |  |            | 940       | 
|                                                           |  |      |           |      |  |            |           | 
|Total shareholders equity                                 |  |      | 851,015   |      |  |            | 1,167,607 | 
|                                                           |  |      |           |      |  |            |           | 
|                                                           |  |      | 1,925,156 |      |  |            | 2,269,811 | 
|                                                           |  |      |           |      |  |            |           | 

Commitments [notes 15, 17 and 27]

See accompanying notes

On behalf of the Board:

|                                              |  |                                          
|--------------------------------------------- |  | -----------------------------------------
|(J.M. CASSADAY SIG)
John M. Cassaday
Director |  | (H. A. SHAW SIG)
Heather A. Shaw
Director





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##### 



Corus Entertainment Inc.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)

Years ended August 31

|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  
|------------------------------------------------------------------------- |  | ---------------------- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                                          |  | 2002                   |          | 2001 |  | 2000
|[thousands of Canadian dollars except per share amounts]                  |  | $                      |          | $    |  | $   
|                                                                          |  |                        |          |      |  |     
|                                                                          |  | [restated - note 2[b]]
|Revenues[notes 26 and 28]                                                 |  |                        | 652,784  |      |  |      | 556,825  |   |  |   | 229,230  |  
|Operating, general and administrative
expenses [notes 27 and 28]          |  |                        | 536,288  |      |  |      | 432,909  |   |  |   | 163,694  |  
|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  
|Operating income before the following                                     |  |                        | 116,496  |      |  |      | 123,916  |   |  |   | 65,536   |  
|Depreciation [note 9]                                                     |  |                        | 25,858   |      |  |      | 19,960   |   |  |   | 8,995    |  
|Amortization [notes 11 and 12]                                            |  |                        | 8,006    |      |  |      | 45,958   |   |  |   | 13,383   |  
|Interest on long-term debt [note 15]                                      |  |                        | 57,731   |      |  |      | 47,328   |   |  |   | 30,445   |  
|Gain on sale of investments [note 4]                                      |  |                        | (18,172  | )    |  |      | (103,125 | ) |  |   | (197,679 | )
|Other income                                                              |  |                        | (68      | )    |  |      | (10,546  | ) |  |   | (9,454   | )
|Restructuring charges [note 20]                                           |  |                        | 22,089   |      |  |      |         |   |  |   |         |  
|Hedge transaction loss [note 15[b]]                                       |  |                        | 17,636   |      |  |      |         |   |  |   |         |  
|Asset write-downs [note 21]                                               |  |                        | 15,240   |      |  |      | 1,530    |   |  |   |         |  
|Goodwill and intangible impairment loss [note 12]                         |  |                        | 162,772  |      |  |      |         |   |  |   |         |  
|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  
|Income (loss) before income taxes                                         |  |                        | (174,596 | )    |  |      | 122,811  |   |  |   | 219,846  |  
|Income tax expense (recovery) [note 18]                                   |  |                        | (5,146   | )    |  |      | (3,093   | ) |  |   | 65,770   |  
|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  
|Income (loss) before equity earnings from
investees and minority interest |  |                        | (169,450 | )    |  |      | 125,904  |   |  |   | 154,076  |  
|Equity earnings from investees                                            |  |                        | 5,063    |      |  |      | 2,585    |   |  |   | 2,108    |  
|Minority interest                                                         |  |                        | (1,650   | )    |  |      | (322     | ) |  |   | (200     | )
|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  
|Net income (loss) for the year                                            |  |                        | (166,037 | )    |  |      | 128,167  |   |  |   | 155,984  |  
|Retained earnings, beginning of year [note 2[b]]                          |  |                        | 284,151  |      |  |      | 155,984  |   |  |   |         |  
|Adjustment for change in accounting
policy [note 2[b][iii]]               |  |                        | (150,000 | )    |  |      |         |   |  |   |         |  
|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  
|Retained earnings (deficit), end of year                                  |  |                        | (31,886  | )    |  |      | 284,151  |   |  |   | 155,984  |  
|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  
|Earnings (loss) per share                                                 |  |                        |          |      |  |      |          |   |  |   |          |  
|Basic                                                                     |  | $                      | (3.90    | )    |  | $    | 3.09     |   |  | $ | 4.67     |  
|Diluted  restated [note 2[b][iii]]                                       |  | $                      | (3.90    | )    |  | $    | 3.06     |   |  | $ | 4.61     |  
|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  
|Weighted average number of shares outstanding
[in thousands]              |  |                        |          |      |  |      |          |   |  |   |          |  
|Basic                                                                     |  |                        | 42,621   |      |  |      | 41,539   |   |  |   | 33,379   |  
|Diluted  restated [note 2[b]]                                            |  |                        | 42,621   |      |  |      | 41,819   |   |  |   | 33,870   |  
|                                                                          |  |                        |          |      |  |      |          |   |  |   |          |  

See accompanying notes





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##### 



Corus Entertainment Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended August 31

|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |          |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------ | - | ---------------------- | ------- | ---- | - | -------- | -------- | - | - | -------- | -------- | -
|                                                                                |                                                              |   | 2002                   |         | 2001 |   | 2000    
|[thousands of Canadian dollars except per share amounts]                        |                                                              | $ |                        | $       |      | $
|                                                                                |                                                              |   |                        |         |      |  
|                                                                                |                                                              |   | [restated - note 2[b]]
|OPERATING ACTIVITIES                                                            |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Net income (loss) for the year                                                  |                                                              |   | (166,037               | )       |      |   | 128,167  |          |   |   | 155,984  |         
|Add
(deduct) non-cash items                                                     |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|                                                                                | Depreciation                                                 |   |                        | 25,858  |      |   |          | 19,960   |   |   |          | 8,995    |  
|                                                                                | Amortization of broadcast licenses and goodwill [note 12]    |   |                        |        |      |   |          | 42,429   |   |   |          | 11,431   |  
|                                                                                | Amortization of program and film rights and film investments |   |                        | 222,564 |      |   |          | 122,803  |   |   |          | 21,141   |  
|                                                                                | Other amortization                                           |   |                        | 8,006   |      |   |          | 3,529    |   |   |          | 1,952    |  
|                                                                                | Future income taxes                                          |   |                        | (34,949 | )    |   |          | (54,341  | ) |   |          | 54,171   |  
|                                                                                | Gain on sale of investments                                  |   |                        | (18,172 | )    |   |          | (103,125 | ) |   |          | (197,679 | )
|                                                                                | Equity earnings from investees                               |   |                        | (5,063  | )    |   |          | (2,585   | ) |   |          | (2,108   | )
|                                                                                | Hedge transaction loss                                       |   |                        | 17,636  |      |   |          |         |   |   |          |         |  
|                                                                                | Asset write-downs                                            |   |                        | 15,240  |      |   |          | 1,530    |   |   |          |         |  
|                                                                                | Goodwill and intangible impairment loss                      |   |                        | 162,772 |      |   |          |         |   |   |          |         |  
|                                                                                | Minority interest                                            |   |                        | 1,650   |      |   |          | 322      |   |   |          | 200      |  
|                                                                                | Other                                                        |   |                        | 298     |      |   |          | 467      |   |   |          | 217      |  
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Cash flow derived from operations                                               |                                                              |   | 229,803                |         |      |   | 159,156  |          |   |   | 54,304   |         
|Net change in non-cash working capital
balances related to operations [note 24] |                                                              |   | 21,843                 |         |      |   | (13,828  | )        |   |   | 19,747   |         
|Other                                                                           |                                                              |   | 2,020                  |         |      |   | 4,876    |          |   |   |         |         
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Cash provided by operating activities                                           |                                                              |   | 253,666                |         |      |   | 150,204  |          |   |   | 74,051   |         
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|INVESTING ACTIVITIES                                                            |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Additions to capital assets [note 24[iii]]                                      |                                                              |   | (27,927                | )       |      |   | (37,045  | )        |   |   | (9,975   | )       
|Net proceeds from sale of investments                                           |                                                              |   | 134,827                |         |      |   | 2,273    |          |   |   | 654,094  |         
|Net proceeds from business divestitures [note 4]                                |                                                              |   | 95,067                 |         |      |   | 135,684  |          |   |   |         |         
|Business acquisitions, net of cash acquired [note 3]                            |                                                              |   | (77,720                | )       |      |   | (462,696 | )        |   |   | (239,361 | )       
|Additions of investments                                                        |                                                              |   | (40,747                | )       |      |   | (283,382 | )        |   |   | (63,654  | )       
|Payment of program and film rights                                              |                                                              |   | (96,734                | )       |      |   | (63,937  | )        |   |   | (32,241  | )       
|Additions to film investments                                                   |                                                              |   | (132,512               | )       |      |   | (95,628  | )        |   |   |         |         
|Additions to deferred charges                                                   |                                                              |   | (26,278                | )       |      |   | (13,022  | )        |   |   | (8,907   | )       
|Other                                                                           |                                                              |   | (7,065                 | )       |      |   | 3,288    |          |   |   | 697      |         
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Cash provided by (used in) investing activities                                 |                                                              |   | (179,089               | )       |      |   | (814,465 | )        |   |   | 300,653  |         
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|FINANCING ACTIVITIES                                                            |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Increase (decrease) in bank overdraft                                           |                                                              |   | (6,536                 | )       |      |   | 6,536    |          |   |   |         |         
|Increase (decrease) in revolving loans                                          |                                                              |   | (247,551               | )       |      |   | 308,829  |          |   |   |         |         
|Decrease in reducing term loans                                                 |                                                              |   | (310,097               | )       |      |   | (3,000   | )        |   |   | (2,617   | )       
|Increase in senior subordinated notes [note 15[b]]                              |                                                              |   | 604,000                |         |      |   |         |          |   |   |         |         
|Increase (decrease) in securitized borrowing [note 14]                          |                                                              |   | (89,500                | )       |      |   | 89,500   |          |   |   |         |         
|Decrease in other long-term debt                                                |                                                              |   | (3,325                 | )       |      |   | (110,752 | )        |   |   |         |         
|Issuance of shares                                                              |                                                              |   | 944                    |         |      |   | 800      |          |   |   |         |         
|Other                                                                           |                                                              |   | (2,045                 | )       |      |   |         |          |   |   |         |         
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Cash provided by (used in) financing activities                                 |                                                              |   | (54,110                | )       |      |   | 291,913  |          |   |   | (2,617   | )       
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Net increase (decrease) in cash and cash equivalents during the year            |                                                              |   | 20,467                 |         |      |   | (372,348 | )        |   |   | 372,087  |         
|Cash and cash equivalents, beginning of year                                    |                                                              |   |                       |         |      |   | 372,348  |          |   |   | 261      |         
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Cash and cash equivalents, end of year                                          |                                                              |   | 20,467                 |         |      |   |         |          |   |   | 372,348  |         
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Cash flow from operations per share[note 2[a]]                                  |                                                              |   |                        |         |      |   |          |          |   |   |          |         
|Basic                                                                           |                                                              | $ | 5.39                   |         |      | $ | 3.83     |          |   | $ | 1.63     |         
|Diluted  restated [note 2[b]]                                                  |                                                              | $ | 5.39                   |         |      | $ | 3.81     |          |   | $ | 1.60     |         
|                                                                                |                                                              |   |                        |         |      |   |          |          |   |   |          |         

Supplemental cash flow disclosures[note 24]
See accompanying notes





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##### 



1. BASIS OF PRESENTATION

Corus Entertainment Inc.
[Corus or the Company] is a diversified Canadian
communications and entertainment company. The Company is incorporated under
the Canada Business Corporations Act and its shares are listed on the Toronto
and New York Stock Exchanges.

2[a]. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared by management on the
historical cost basis in accordance with Canadian generally accepted accounting
principles [Canadian GAAP]. The effects of differences between the
application of Canadian and U.S. GAAP on the consolidated financial statements
of the Company are described in note 25.

Basis of consolidation

The consolidated financial statements include the accounts of Corus and all of
its subsidiaries, all of which are wholly-owned except for Country Music
Television Ltd. [80% interest] and Telelatino Network Inc. [50.5% interest].
Intercompany transactions and balances have been eliminated on consolidation.
The results of operations of subsidiaries acquired during the year are included
from their respective dates of acquisition.

Use of estimates

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.
Actual results could differ from those estimates.

Revenue recognition

Radio, specialty television and other media advertising revenues are recognized
in the period in which the advertising is aired under broadcast contracts.

Affiliate subscriber fee revenues are recognized to the extent that the service
has been made available under distribution contracts.

Revenue from distribution and the licensing of proprietary exploitation rights
for network television, syndicated television, pay cable television feature
films and home video is recognized when all of the following conditions are
met: [i] persuasive evidence of a sale or licensing arrangement with a
customer exists; [ii] the film is complete and is available for immediate and
unconditional delivery; [iii] the license period of the arrangement has begun;
[iv] the arrangement fee is fixed or determinable; and [v] collection of the
arrangement fee is reasonably assured.

Revenue from merchandise licensing contracts, publishing and other royalties,
which may provide for non-refundable advances, is recognized when the license
period has commenced and collection is reasonably assured.

Revenue from the sale of books is recognized at the time of shipment, net of an
estimated provision for returns. Revenue from the sale of subsidiary book
rights, when determinable, is recorded on an accrual basis. When amounts are
not determinable, amounts are recorded on receipt of funds. Grants for
specific projects are recognized as revenue when awarded.

Cash and cash equivalents

Cash and cash equivalents include cash and short-term deposits with maturities
of less than three months when purchased.

Inventories

Inventories consist of books and are valued at the lower of cost and net
realizable value, with cost being determined on a first-in, first-out basis.
Cost includes the cost of materials, labour and applicable overhead.

1



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##### 



Investments

Investments in entities over which the Company exercises significant influence
are accounted for using the equity method. Investments in joint ventures and
partnerships which the Company jointly controls are accounted for using the
proportionate consolidation method of accounting. Other investments are
recorded at cost and written down only when there is evidence that a decline in
value that is other than temporary has occurred.

Acquisitions subject to the Canadian Radio-television and Telecommunications
Commission [CRTC] approval are recorded at cost until approval is received
and then accounted for according to the nature of the investment made.

Capital assets

Capital assets are recorded at cost less accumulated depreciation.
Depreciation is recorded on a straight-line basis over the estimated useful
lives of the assets as follows:

|                                |  |                      
|------------------------------- |  | ---------------------
|Asset                           |  | Estimated useful life
|                                |  |                      
|Broadcasting head-end equipment |  | 10 years             
|Production equipment            |  | 5 years              
|Leasehold improvements          |  | lease term           
|Buildings                       |  | 20-40 years          
|Computer equipment              |  | 3 years              
|Furniture and fixtures          |  | 7 years              
|Other                           |  | 4-10 years           

Program and film rights

Program and film rights represent contract rights acquired from third parties
to broadcast television programs and feature films. The assets and liabilities
related to these rights are recorded when the cost of the rights is known or
reasonably determinable, the program material is accepted by the Company in
accordance with the license agreement and the material is available to the
Company for airing. These costs are amortized over the contracted exhibition
period as the programs or feature films are aired. Program and film rights are
carried at the lower of cost less accumulated amortization and net recoverable
amount.

Amortization of program and film rights is included in operating, general and
administrative expenses and has been disclosed separately in the consolidated
statements of cash flows.

Film investments

Film investments represent the costs of projects in development, projects in
process and the unamortized costs of proprietary films and television programs
which have been produced by the Company or for which the Company has acquired
distribution rights. Such costs include development and production
expenditures, attributable studio and other costs which are expected to benefit
future periods.

As more fully described in note 2[b], the Company has retroactively changed its
policy in respect of accounting for film investments with the adoption of
Statement of Position 00-2, Accounting by Producers or Distributors of Films
[SOP 00-2].

The individual-film-forecast-computation method is used to determine
amortization. The capitalized costs and the estimated total costs of
participations and residuals, net of anticipated federal and provincial program
contributions, production tax credits and co-producers shares of production
costs, are charged to amortization expense on a series or program basis in the
ratio that current period revenue bears to managements estimate of total gross
revenue [ultimate revenue] to be realized from the series or program.
Ultimate revenue is projected for periods not exceeding ten years from the date
of delivery or acquisition. For episodic television series, the adoption of
SOP 00-2 requires that ultimate revenue includes estimates of revenue over a
period not to exceed ten years from the date of delivery of the first episode
or, if still in production, five years from the date of delivery of the most
recent episode, if later. Estimates of gross revenue can change significantly
due to the level of market acceptance of film and television products.
Accordingly, revenue estimates are reviewed periodically and amortization is
adjusted. Such adjustments could have a material effect on the results of
operations in future periods.

2



---



##### 



Film and television program costs are stated at the lower of unamortized cost
or estimated net realizable value as determined on a series or program basis.
Revenue and cost forecasts for each production are evaluated quarterly in
connection with a comprehensive review of the Companys inventory of
audio-visual products. Estimated losses, if any, are then provided for.

The Company reviews the status of projects in development quarterly. If, in
the opinion of management, any such projects will not progress toward
production, the accumulated costs are charged to operating expenses. Projects
are written off at the earlier of the date determined not to be recoverable or
when projects under development are abandoned, and three years from the date of
the initial investment.

Amortization of film investments is included in operating, general and
administrative expenses.

Deferred charges

Financing costs and credit facility arrangements are amortized to income on a
straight-line basis over the term of the debt facility.

Start-up costs for the preparation of new applications to the CRTC are deferred
prior to approval by the CRTC. The costs associated with unsuccessful
applications are expensed. Start-up costs for licenses of successful
applications which are awarded by the CRTC are capitalized from the date they
are awarded to the date revenue is generated for the service. Start-up costs
are amortized over a period which reflects their expected future benefit, not
exceeding the term of the licenses.

Advertising and promotion costs incurred for reformatting of radio, specialty
and pay television stations are deferred and amortized on a straight-line basis
over a period which reflects their expected future benefit, not exceeding three
years. Costs assessed as having no future benefit are written off.

Broadcast licenses, other intangible assets 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.
Prior to September 1, 2001, amounts allocated to broadcast licenses and
goodwill were amortized on a straight-line basis over twenty to forty years.

Effective September 1, 2001, the Company adopted the non-amortization
impairment approach in accounting for goodwill and other indefinite life
intangible assets [note 2[b]].The Company reviews the valuation and
amortization period of goodwill whenever events or changes in circumstances
warrant such a review.

Government financing and assistance

The Company has access to several government programs that are designed to
assist film and television production in Canada. Funding from certain programs
provides a supplement to a series Canadian license fees and is recorded as
revenue when cash has been received. Government assistance with respect to
federal and provincial production tax credits is recorded as a reduction of
film investments when eligible expenditures are made and there is reasonable
assurance of realization. Assistance in connection with equity investments is
recorded as a reduction in film investments.

Government grants for specific publishing projects are recorded as revenue when
awarded.

Deferred credits

Deferred credits include: [i] a provision for contributions to Canadian
broadcasting initiatives that must be made by a purchaser of specialty
television, pay television, and radio undertakings in accordance with CRTC
policies [CRTC benefits] associated with acquiring radio and television
businesses that will be drawn down when the Company makes eligible payments
towards meeting the conditions of license; [ii] foreign exchange gains on
translating long-term debt; and [iii] unearned revenue from the distribution
and licensing of rights for feature films and television programs.

3



---



##### 



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
which are expected to be in effect when the differences are expected to
reverse.

Foreign currency translation

The assets and liabilities of the Companys self-sustaining operations having a
functional currency in U.S. dollars are translated into Canadian dollars using
the exchange rate in effect at the consolidated balance sheet date and revenues
and expenses are translated at the average rate during the year. Exchange
gains or losses on translation of the Companys net equity investment in these
operations are deferred as a separate component of shareholders equity.

For integrated foreign operations monetary items are translated into Canadian
dollars at exchange rates in effect at the consolidated balance sheet date and
non-monetary items are translated at rates of exchange in effect when the
assets were acquired or obligations incurred. Revenues and expenses are
translated at rates in effect at the time of the transaction. Foreign exchange
gains and losses are included in income.

Long-term debt denominated in U.S. dollars is translated into Canadian dollars
at the year-end rate of exchange. Exchange gains or losses on translating
long-term debt are deferred and, except for hedged debt, are amortized on a
straight-line basis over the remaining term of the debt.

Other exchange gains and losses are included in net income for the year.

Financial instruments

The Company uses derivative financial instruments to manage risks from
fluctuations in exchange and interest rates. These instruments include
interest rate and cross-currency exchange agreements. All such instruments are
only used for risk management purposes. The Company accounts for these
financial instruments as hedges and, as a result, the carrying values of the
financial instruments are not adjusted to reflect their current market value.
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
deferred until maturity of the agreement at which time they are offset by the
foreign currency hedge.

Stock-based compensation

No compensation expense is recognized for stock options granted under the
Companys Stock Option Plan. Consideration paid by employees and senior
officers on the exercise of stock options is credited to share capital.
Consideration paid by the Company under the Companys Employee Share Purchase
Plan is included in operating, general and administrative expenses.

Earnings per share

Basic earnings per share are calculated using the weighted average number of
common shares outstanding during the year. The computation of diluted earnings
per share assumes the basic weighted average number of common shares
outstanding during the year is increased to include the number of additional
common shares that would have been outstanding if the dilutive potential common
shares had been issued. The dilutive effect of warrants and stock options is
determined using the treasury stock method.

Basic and diluted cash flow from operations per share have been calculated
using the cash flow derived from operations before the net change in non-cash
working capital balances related to operations.

4



---



##### 



2[b]. ACCOUNTING CHANGES

|                                                         |  |      |         |  
|-------------------------------------------------------- |  | ---- | ------- | -
|                                                         |  | 2001
|[thousands of Canadian dollars except per share amounts] |  | $   
|                                                         |  |     
|Operating, general and administrative expenses           |  |      |         |  
|As previously reported                                   |  |      | 427,688 |  
|Adjustment [i]                                           |  |      | 5,221   |  
|                                                         |  |      |         |  
|As restated                                              |  |      | 432,909 |  
|                                                         |  |      |         |  
|Amortization                                             |  |      |         |  
|As previously reported                                   |  |      | 45,761  |  
|Adjustment [i]                                           |  |      | 197     |  
|                                                         |  |      |         |  
|As restated                                              |  |      | 45,958  |  
|                                                         |  |      |         |  
|Income tax recovery                                      |  |      |         |  
|As previously reported                                   |  |      | (2,283  | )
|Adjustment [i]                                           |  |      | (810    | )
|                                                         |  |      |         |  
|As restated                                              |  |      | (3,093  | )
|                                                         |  |      |         |  
|Net income                                               |  |      |         |  
|As previously reported                                   |  |      | 132,775 |  
|As restated[i]                                           |  |      | 128,167 |  
|                                                         |  |      |         |  
|Retained earnings                                        |  |      |         |  
|As previously reported                                   |  |      | 288,759 |  
|Adjustment [i]                                           |  |      | (4,608  | )
|                                                         |  |      |         |  
|As restated                                              |  |      | 284,151 |  
|                                                         |  |      |         |  
|Basic earnings per share                                 |  |      |         |  
|As previously reported                                   |  | $    | 3.20    |  
|As restated[i] [ii]                                      |  | $    | 3.09    |  
|                                                         |  |      |         |  
|Diluted
earnings per share                               |  |      |         |  
|As
previously reported                                   |  | $    | 3.14    |  
|As restated[i] [ii]                                      |  | $    | 3.06    |  
|                                                         |  |      |         |  

None of the accounting changes had any effect on amounts previously reported
for fiscal 2000, except for the adoption of a new standard related to earnings
per share [ii], which had an immaterial impact on diluted earnings per share.

5



---



##### 





|[i] |  | SOP 00-2                                                                                                                                                                 
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company retroactively adopted SOP 00-2, which provides guidance on U.S.
GAAP to all producers or distributors that own or hold rights to distribute
or exploit films.
|   
|    |  | The impact of the adoption of SOP 00-2 includes the following:                                                                                                           



| | [a] |  | For episodic television series, the adoption of SOP 00-2 requires
that ultimate revenue includes estimates of revenue over a period not to
exceed ten years from the date of delivery of the first episode or, if
still in production, five years from the date of delivery of the most
recent episode, if later. The impact of SOP 00-2 was to amortize the
cost of film investments over a shorter number of years than was
previously realized.                                                                                                                                                                                                                                                      
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | [b] |  | Projects in development include costs of acquiring film rights to
books, stage plays or original screenplays and costs to adapt such
projects. Such costs are capitalized and, upon commencement of
production, are transferred to production costs. Projects are written
off at the earlier of the date determined not to be recoverable or when
projects under development are abandoned, and three years from the date
of the initial investment. Prior to the adoption of SOP 00-2,
development costs were charged to operations when in the opinion of
management, such projects would not progress towards production which
might give rise to a deferral of these costs in excess of three years.



|      |  | Adoption of SOP 00-2 resulted in a retroactive adjustment to the allocation
of the purchase price of the Nelvana Limited assets, which were acquired on
November 14, 2000, of $8,252,000, representing a reduction of the film
investments acquired. Consequently, future tax liability has been decreased
by $3,301,000 and goodwill has been increased by $4,951,000. The
consolidated balance sheet at August 31, 2001 has been restated to reflect
these allocations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|[ii]  |  | Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     
|      |  | Effective September 1, 2001 the Company adopted the new recommendations of
the Canadian Institute of Chartered Accountants [CICA] Handbook Section
3500, Earnings per share. Accordingly, earnings per share are calculated
based on net income attributable to common shareholders. Basic earnings per
share are calculated using the weighted average number of common shares
outstanding during the year. The computation of diluted earnings per share
assumes the basic weighted average number of common shares outstanding during
the year is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been
issued. The dilutive effect of warrants and stock options is determined
using the treasury stock method. The dilutive effect of convertible
securities is determined using the if-converted method. The new
recommendations have been applied retroactively to restate all diluted
earnings per share amounts in these consolidated financial statements.
|     
|[iii] |  | Business combinations, goodwill and other intangible assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     
|      |  | Effective September 1, 2001, the Company adopted retroactively the CICAs
standards on Business Combinations [CICA Section 1581], and Goodwill and
Other Intangible Assets [CICA Section 3062]. CICA Section 1581 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. CICA Section 3062 changes the accounting for
goodwill from an amortization method to an impairment-only approach; thus,
amortization of goodwill, including goodwill recorded in past business
combinations, has ceased upon adoption of these standards. Goodwill and
other intangibles will be tested for impairment annually or more frequently
if events or changes in circumstances indicate that they might be impaired.                                                                                                                                                                                                                                                                                              
|     
|      |  | The Company evaluated its intangible assets acquired on prior purchase
business combinations to ensure the allocation of amounts to broadcast
licenses, having indefinite lives, and to goodwill as at September 1, 2001
was appropriate under the new recommendations. In the first quarter,
management tested the amounts allocated to broadcast licenses and concluded
that no provisions for impairment were required. In the second quarter,
management tested the amounts allocated to goodwill and, as a result, the
Company recorded a non-cash charge for goodwill impairment in the Content
division of approximately $150,000,000 of which a portion related to the
recently disposed Klutz business. Such charge is non-operational in nature
and is reflected as an adjustment to retained earnings as at September 1,
2001. See also note 12.                                                                                                                                                                                                        

6



---



##### 





|     |  | Adjusted earnings per share before amortization of broadcast licenses and
goodwill for the year ended August 31, 2001 were $3.98 basic [$3.95 diluted].                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|[iv] |  | Goodwill and broadcast license reclassification                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|     |  | During fiscal 2002, as part of the Companys analysis in the application of
the new non-amortization impairment approach for broadcast licenses and
goodwill adopted September 1, 2001, a retroactive reclassification was made
from broadcast licenses to goodwill resulting in a net reclassification of
$18,995 as at August 31, 2001. This reclassification was made to ensure a
consistent approach was taken in the allocation of fair value to net
identifiable intangible assets acquired. This reclassification has no impact
on future income taxes and no impact on previously reported net income.

3.     BUSINESS COMBINATIONS

In fiscal 2002 and 2001, the Company completed a number of acquisitions which
are summarized below:

Transactions completed in fiscal 2002:

|                                                            |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |         | 
|----------------------------------------------------------- | ------------- | --------- | ---------- | --------- | --- | ------- | ------- | ------- |  |  | ------ | ------ |  |  | ------- | ------- | 
|                                                            |               |           | Telelatino |           | WTN |         | Other   |         |  |  |       
|[thousands of Canadian dollars                              |               | [a]       |            | [b]       |     | [c],[d] |         | Total  
|except for percentages]                                     |               | $         |            | $         |     | $       |         | $      
|                                                            |               |           |            |           |     |         |         |        
|Effective date acquired                                     |               | Nov. 2001 |            | Nov. 2001 |     |         |         |         |  |  |        |       
|Percentage acquired                                         |               |           | 50.5       | %         |     |         | 100     | %       |  |  | 100    | %      |  |  |         |        
|Cash, including transaction costs,
net of cash acquired     |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |        
|                                                            | - Fiscal 2002 |           |            | 7,480     |     |         |         | 55,009  |  |  |        | 15,231 |  |  |         | 77,720  | 
|                                                            | - Prior years |           |            | 738       |     |         |         | 150,079 |  |  |        |       |  |  |         | 150,817 | 
|                                                            |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |         | 
|                                                            |               |           | 8,218      |           |     |         | 205,088 |         |  |  | 15,231 |        |  |  | 228,537 |        
|Non-cash consideration                                      |               |           |           |           |     |         |        |         |  |  | 8,000  |        |  |  | 8,000   |        
|Integration and transaction costs,
net of taxes             |               |           | 30         |           |     |         | 35      |         |  |  | 100    |        |  |  | 165     |        
|                                                            |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |         | 
|Total consideration after integration
and transaction costs |               |           | 8,248      |           |     |         | 205,123 |         |  |  | 23,331 |        |  |  | 236,702 |        
|                                                            |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |         | 
|Assigned value of assets and
liabilities acquired           |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |        
|Capital assets                                              |               |           | 1,301      |           |     |         | 3,834   |         |  |  | 129    |        |  |  | 5,264   |        
|Program and film rights                                     |               |           | 412        |           |     |         | 4,990   |         |  |  |       |        |  |  | 5,402   |        
|Broadcast licenses                                          |               |           | 7,424      |           |     |         | 68,23   |         |  |  | 82,196 |        |  |  | 77,858  |        
|Goodwill                                                    |               |           | 6,803      |           |     |         | 167,959 |         |  |  | 21,834 |        |  |  | 196,596 |        
|Non-cash working capital                                    |               |           | (439       | )         |     |         | 1,721   |         |  |  | 83     |        |  |  | 1,365   |        
|Long-term debt                                              |               |           | (146       | )         |     |         |        |         |  |  |       |        |  |  | (146    | )      
|Deferred credits                                            |               |           | (1,106     | )         |     |         | (20,500 | )       |  |  | (242   | )      |  |  | (21,848 | )      
|Minority interest                                           |               |           | (2,339     | )         |     |         |        |         |  |  |       |        |  |  | (2,339  | )      
|Future tax liability                                        |               |           | (2,277     | )         |     |         | (21,119 | )       |  |  | (669   | )      |  |  | (24,065 | )      
|                                                            |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |         | 
|                                                            |               |           | 9,633      |           |     |         | 205,123 |         |  |  | 23,331 |        |  |  | 238,087 |        
|                                                            |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |         | 
|Equity earnings of investee recorded in prior years         |               |           | (1,385     | )         |     |         |        |         |  |  |       |        |  |  | (1,385  | )      
|                                                            |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |         | 
|                                                            |               |           | 8,248      |           |     |         | 205,123 |         |  |  | 23,331 |        |  |  | 236,702 |        
|                                                            |               |           |            |           |     |         |         |         |  |  |        |        |  |  |         |         | 

7



---



##### 





|[a] |  | Telelatino Network Inc. [Telelatino"]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Effective November 16, 2001, Corus acquired shares that increased its total
interest in Telelatino to 50.5% from 20% for cash consideration of
$11,056,250. Telelatino operates TLN Television, a specialty ethnic channel
that provides programming in Italian, Spanish and English. The results of
operations are included in the Companys consolidated financial statements
from the date of acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|[b] |  | Womens Television Network [WTN]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | Effective November 19, 2001, Corus acquired all of the outstanding shares of
Lifestyle Television (1994) Limited, which operates WTN, a special television
network [relaunched April 15, 2002 as W Network"] focused on womens
programming, from Moffat Communications Ltd. [Moffat"] for cash
consideration of $205,000,000. During fiscal 2001, $150,000,000 was advanced
to Moffat against the purchase price. The balance was paid upon completion
of the transaction. The results of operations are included in the Companys
consolidated financial statements from the date of acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|[c] |  | Tri-Co Broadcasting Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | Effective January 4, 2002, Corus acquired all of the outstanding shares of
Tri-Co Broadcasting Limited, a company that owns and operates three radio
stations in Cornwall, Ontario for cash consideration of $4,250,000. The
results of operations are included in the Companys consolidated financial
statements from the date of acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|[d] |  | DMX Music Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | For accounting purposes, Corus recorded, effective March 1, 2002, the
exchange of ownership interests in digital music subscription services to
residential and commercial customers in Canada with DMX Music Inc. The
transaction resulted in Corus acquiring the remaining 20% ownership of the
existing Canadian residential subscription business in exchange for DMX Music
Inc. gaining 100% ownership of the Canadian commercial business. Corus
acquired assets with an assigned fair value of approximately $19,000,000 for
which cash of approximately $11,000,000 was paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|[e] |  | Pro forma information  unaudited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | If the acquisitions and divestitures [note 4]completed during the year ended
August 31, 2002 had occurred on September 1, 2001, the Companys unaudited
pro forma consolidated revenues, net loss and basic loss per share would have
been $609,803,000, $170,844,000 and $4.10, respectively for the year ended
August 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|[f] |  | WIC Western International Communications Ltd. [WIC]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | Included in integration costs related to the acquisition of WIC in fiscal
2000 is a provision of $26,489,000 for direct acquisition costs, workforce
reductions and costs to exit certain activities identified at the time of
acquisition. These costs are a result of the Companys plans to consolidate
facilities, restructure certain functions and integrate operating systems.
The liabilities included $14,629,000 for direct acquisition costs, $7,760,000
for workforce reductions of management and certain sales, marketing,
operations, programming and administrative staff, and $4,100,000 for lease
terminations and office closures. The provision was included in tangible net
liabilities of WIC. During the year ended August 31, 2002, the Company
charged $6,117,000 [2001  $5,627,000] against the liability. Consequently,
at August 31, 2002, a balance of $954,000 remains in the acquisition accrual
relating primarily to work reductions and lease termination costs which are
expected to be substantially drawn down by the fourth quarter of fiscal 2003.

8



---



##### 



Transactions completed in fiscal 2001:

|                                                            |                                                   |               |         |           |         |            |         |         |         |  |       |        |       |  |         |           |         | 
|----------------------------------------------------------- | ------------------------------------------------- | ------------- | ------- | --------- | ------- | ---------- | ------- | ------- | ------- |  | ----- | ------ | ----- |  | ------- | --------- | ------- | 
|                                                            |                                                   |               |         | Nelvana   |         |            |         |         |         |  |       |        |       |  |         |          
|                                                            |                                                   |               |         | Limited   |         | Metromedia |         | Other   |         |  |       |       
|[thousands of Canadian dollars                              |                                                   | [a]           |         | [b]       |         | [c]        |         | Total  
|except for share amounts and percentages]                   |                                                   | $             |         | $         |         | $          |         | $      
|                                                            |                                                   |               |         |           |         |            |         |        
|Effective date acquired                                     |                                                   | Nov. 2000     |         | Feb. 2001 |         |            |         |         |         |  |       |       
|Percentage acquired                                         |                                                   |               | 100     | %         |         |            | 100     | %       |         |  |       |        |       |  |         |          
|Cash, including transaction costs,
net of cash acquired     |                                                   |               |         |           |         |            |         |         |         |  |       |        |       |  |         |          
|                                                            |                                                   | - Fiscal 2001 |         |           | 332,138 |            |         |         | 129,223 |  |       |        | 1,335 |  |         |           | 462,696 | 
|                                                            |                                                   | - Prior years |         |           | 15,525  |            |         |         | 39,473  |  |       |        | 3,500 |  |         |           | 58,498  | 
|Class B Non-Voting Shares of the
Company                    |                                                   |               | 211,022 |           |         |            |        |         |         |  |      |        |       |  | 211,022 |          
|                                                            |                                                   |               |         |           |         |            |         |         |         |  |       |        |       |  |         |           |         | 
|                                                            |                                                   |               | 558,685 |           |         |            | 168,696 |         |         |  | 4,835 |        |       |  | 732,216 |          
|Integration and transaction costs, net of taxes             |                                                   |               | 1,827   |           |         |            | 1,194   |         |         |  | 99    |        |       |  | 3,120   |          
|                                                            |                                                   |               |         |           |         |            |         |         |         |  |       |        |       |  |         |           |         | 
|Total consideration after
integration and transaction costs |                                                   |               | 560,512 |           |         |            | 169,890 |         |         |  | 4,934 |        |       |  | 735,336 |          
|                                                            |                                                   |               |         |           |         |            |         |         |         |  |       |        |       |  |         |           |         | 
|                                                            | Assigned value of assets and
liabilities acquired |               |         |           |         |            |         |         |         |  |       |        |       |  |         |           |        
|                                                            | Capital assets                                    |               |         | 14,880    |         |            |         | 3,806   |         |  |       | 690    |       |  |         | 19,376    |        
|                                                            | Tax credits receivable                            |               |         | 27,003    |         |            |         |        |         |  |       |       |       |  |         | 27,003    |        
|                                                            | Program and film rights                           |               |         |          |         |            |         |        |         |  |       | 3,795  |       |  |         | 3,795     |        
|                                                            | Film investments                                  |               |         | 112,077   |         |            |         |        |         |  |       |       |       |  |         | 112,077   |        
|                                                            | Investments                                       |               |         | 30,203    |         |            |         |        |         |  |       |       |       |  |         | 30,203    |        
|                                                            | Goodwill                                          |               |         | 449,200   |         |            |         | 162,673 |         |  |       | 809    |       |  |         | 612,682   |        
|                                                            | Broadcast licenses                                |               |         |          |         |            |         | 38,854  |         |  |       |       |       |  |         | 38,854    |        
|                                                            | Non-cash working capital                          |               |         | 59,154    |         |            |         | 5,397   |         |  |       | 869    |       |  |         | 65,420    |        
|                                                            | Long-term debt                                    |               |         | (93,957   | )       |            |         | (21,582 | )       |  |       | (1,229 | )     |  |         | (116,768  | )      
|                                                            | Deferred credits                                  |               |         | (3,350    | )       |            |         | (9,900  | )       |  |       |       |       |  |         | (13,250   | )      
|                                                            | Future tax liability                              |               |         | (34,698   | )       |            |         | (9,358  | )       |  |       |       |       |  |         | (44,056   | )      
|                                                            |                                                   |               |         |           |         |            |         |         |         |  |       |        |       |  |         |           |         | 
|                                                            |                                                   |               | 560,512 |           |         |            | 169,890 |         |         |  | 4,934 |        |       |  | 735,336 |          
|                                                            |                                                   |               |         |           |         |            |         |         |         |  |       |        |       |  |         |           |         | 
|                                                            | Number of Class B Non-Voting
Shares issued        |               |         | 5,047,532 |         |            |         |        |         |  |       |       |       |  |         | 5,047,532 |        
|                                                            |                                                   |               |         |           |         |            |         |         |         |  |       |        |       |  |         |           |         | 



|[a] |  | Nelvana Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Nelvana Limited
[Nelvana] is an international producer and distributor of
childrens programming and products. At August 31, 2000, the Company owned
an approximate 6.7% interest in Nelvana.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | On November 14, 2000, Corus completed the take-up of the outstanding
subordinate voting shares of Nelvana tendered to the offer for all Nelvana
subordinate voting shares made by Corus and 1421711 Ontario Inc. on October
20, 2000. Upon completion of the offer, Corus and 1421711 Ontario Inc. owned
97.7% of Nelvanas outstanding subordinate voting shares. Effective January
2, 2001, Corus completed the compulsory acquisition of the remaining 2.3%
outstanding interest in Nelvana, resulting in Nelvana becoming a wholly-owned
subsidiary of Corus. The acquisition was accounted for by the purchase
method and the results of operations have been included in the Companys
consolidated financial statements commencing November 15, 2000.
|   
|    |  | On August 24, 2001, the CRTC granted Corus the right to acquire Nelvanas 20%
ownership in TELETOON Canada Inc. Accordingly, this investment has been
accounted for at cost until CRTC approval on August 24, 2001 and has been
accounted for on the equity basis thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | Included in integration costs related to the acquisition of Nelvana is a
provision of $2,978,000 for direct acquisition costs and workforce reductions
identified at the time of acquisition. The workforce reductions are a result
of the Companys plans to consolidate head office related functions as
Nelvana ceased to operate as a stand-alone public company. The liabilities
included $237,000 for direct acquisition costs, $1,141,000 for penalties on
debt                                                                                                                                                                                                                                                                                      

9



---



##### 





|    |  | extinguishments, and $1,600,000 for workforce reductions of management.
During the year ended August 31, 2002, the Company charged $1,124,000 against
the liability. Consequently, at August 31, 2002, a balance of $546,000 [2001
- $1,670,000] remains in the acquisition accrual relating primarily to work
reductions which is expected to be substantially drawn down by the fourth
quarter of fiscal 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|[b] |  | Metromedia CMR Broadcasting
Inc. [Metromedia]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | Metromedia operates six radio stations in Quebec. At August 31, 2000, the
Company owned a 29.9% interest in Belcand Mount Royal Holdings Inc.
[Belcand"], the parent company of Metromedia.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | Effective February 28, 2001, Corus acquired the remaining 70.1% of Belcand.
Upon completion of the transaction, Belcand became a wholly-owned subsidiary
of Corus. The acquisition was accounted for by the purchase method and the
results of operations have been included in the Companys consolidated
financial statements from the date of acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | Included in integration costs related to the acquisition of Metromedia is a
provision of $1,609,000 for direct acquisition costs and workforce reductions
identified at the time of acquisition. The workforce reductions are a result
of the Companys plans to consolidate facilities, restructure certain
functions and integrate operating systems. The liabilities included $459,000
for direct acquisition costs and $1,150,000 for workforce reductions of
management and certain sales, marketing, operations, programming and
administrative staff. During the year ended August 31, 2002, the Company
charged $1,008,000 [2001  $370,000] against the liability. Consequently, at
August 31, 2002, a balance of $231,000 remains in the acquisition accrual
which is expected to be substantially drawn down by the fourth quarter of
fiscal 2003.                                                                                                                                                                                                                                
|   
|[c] |  | Balmur Corus Music Inc. [BCM]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | BCM is a music and television production business. At August 31, 2000, the
Company owned a 50% interest in BCM.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | Effective March 31, 2001, Corus acquired the remaining 50% of BCM for
$3,725,000. Upon completion of the transaction, BCM became a wholly-owned
subsidiary of Corus. The acquisition was accounted for by the purchase
method and the results of operations have been included in the Companys
consolidated financial statements from the date of acquisition [note 21].                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|[d] |  | WIC Western International Communications Ltd. [WIC]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | Included in integration costs related to the acquisition of WIC in fiscal
2000 is a provision of $26,489,000 for direct acquisition costs, workforce
reductions and costs to exit certain activities identified at the time of
acquisition. These costs are a result of the Companys plans to consolidate
facilities, restructure certain functions and integrate operating systems.
The liabilities included $14,629,000 for direct acquisition costs, $7,760,000
for workforce reductions of management and certain sales, marketing,
operations, programming and administrative staff, and $4,100,000 for lease
terminations and office closures. The provision was included in tangible net
liabilities of WIC. During the year ended August 31, 2001, the Company
charged $5,627,000 [2000  $13,791,000] against the liability. Consequently,
at August 31, 2001, a balance of $7,071,000 remains in the acquisition
accrual relating primarily to work reductions and lease termination costs
which are expected to be substantially drawn down by the fourth quarter of
fiscal 2003.

10



---



##### 



4. DIVESTITURES



|[a] |  | Klutz                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On April 8, 2002, Corus sold Klutz, its U.S. publishing business to
Scholastic Inc. for approximately $68,000,000 [U.S.$43,000,000] in cash plus
a three-year earn-out based on revenue resulting in a pre-tax gain of
approximately $900,000. Additional consideration, once determinable, will be
recorded as a gain on sale once earned.                                                                                                                                                                                                        
|   
|[b] |  | Corus VC Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | Effective May 31, 2002, Corus sold all of its outstanding shares in Corus VC
Ltd., which operates the Viewers Choice Pay-Per-View Service, to Shaw
Communications Inc. [Shaw"] for consideration of $33,000,000. The
transaction resulted in a pre-tax gain of approximately $3,000,000.                                                                                                                                                                                                                                                         
|   
|[c] |  | The Comedy Network Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | On October 11, 2001, Corus acquired an additional 14.95% interest in The
Comedy Network Inc., increasing its total ownership interest to 29.9%. The
specialty channel provides programming such as Canadian and foreign comedy
series, comedy sketches, variety and human interest programs. On December
18, 2001, Corus disposed of its 29.9% interest to CTV Inc. for cash
consideration of $36,000,000, resulting in a pre-tax gain of approximately
$17,967,000. This investment was accounted for using the cost method
throughout the period.
|   
|[d] |  | CHAU-TV                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | Effective February 28, 2001, Corus sold its Quebec conventional television
station CHAU-TV for the base price of $7,000,000 plus other consideration and
a working capital adjustment of approximately $1,800,000, resulting in a
pre-tax gain of approximately $900,000.                                                                                                                                                                                                                                                                          
|   
|[e] |  | The Family Channel Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | Effective May 30, 2001, Corus sold its 50% interest in The Family Channel
Inc., held by a wholly-owned subsidiary, to Astral Media Inc., for
$126,900,000, resulting in a pre-tax gain of approximately $102,000,000.                                                                                                                                                                                                                                                                                                                              

5. JOINT VENTURES

The following amounts, included in these consolidated financial statements,
represent the Companys proportionate share in joint ventures:

|                                  |  |      |        |      |  |  |        |  
|--------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                                  |  | 2002 |        | 2001
|[thousands of Canadian dollars]   |  | $    |        | $   
|                                  |  |      |        |     
|Balance sheets                    |  |      |        |      |  |  |        |  
|Assets                            |  |      | 9,243  |      |  |  | 3,092  |  
|Liabilities                       |  |      | 11,818 |      |  |  | 2,072  |  
|Shareholders equity (deficiency) |  |      | (2,575 | )    |  |  | 1,020  |  
|                                  |  |      |        |      |  |  |        |  
|Statements of income              |  |      |        |      |  |  |        |  
|Revenues                          |  |      | 2,385  |      |  |  |       |  
|Expenses                          |  |      | 8,137  |      |  |  |       |  
|Net loss                          |  |      | (5,752 | )    |  |  |       |  
|                                  |  |      |        |      |  |  |        |  
|Cash flows                        |  |      |        |      |  |  |        |  
|Operating activities              |  |      | (4,279 | )    |  |  |       |  
|Investing activities              |  |      | (8,558 | )    |  |  | (1,954 | )
|Financing activities              |  |      | 12,837 |      |  |  | 1,954  |  
|                                  |  |      |        |      |  |  |        |  

11



---



##### 



6.     ACCOUNTS RECEIVABLE

|                                     |  |      |         |      |  |  |         | 
|------------------------------------ |  | ---- | ------- | ---- |  |  | ------- | 
|                                     |  | 2002 |         | 2001
|[thousands of Canadian dollars]      |  | $    |         | $   
|                                     |  |      |         |     
|Trade                                |  |      | 163,558 |      |  |  | 168,481 | 
|Receivable from co-venturers         |  |      |        |      |  |  | 2,442   | 
|Dividends receivable                 |  |      |        |      |  |  | 1,632   | 
|GST receivable                       |  |      | 337     |      |  |  | 1,602   | 
|Other                                |  |      | 5,603   |      |  |  | 5,663   | 
|                                     |  |      |         |      |  |  |         | 
|                                     |  |      | 169,498 |      |  |  | 179,820 | 
|Less allowance for doubtful accounts |  |      | 2,848   |      |  |  | 4,811   | 
|                                     |  |      |         |      |  |  |         | 
|                                     |  |      | 166,650 |      |  |  | 175,009 | 
|                                     |  |      |         |      |  |  |         | 

7.   INVENTORIES

|                                |  |      |       |      |  |  |        | 
|------------------------------- |  | ---- | ----- | ---- |  |  | ------ | 
|                                |  | 2002 |       | 2001
|[thousands of Canadian dollars] |  | $    |       | $   
|                                |  |      |       |     
|Raw materials                   |  |      |      |      |  |  | 5,419  | 
|Finished goods                  |  |      | 4,230 |      |  |  | 19,312 | 
|                                |  |      |       |      |  |  |        | 
|                                |  |      | 4,230 |      |  |  | 24,731 | 
|                                |  |      |       |      |  |  |        | 

8.   INVESTMENTS AND OTHER ASSETS

|                                                                                             |  |      |        |      |  |  |         | 
|-------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------- | 
|                                                                                             |  | 2002 |        | 2001
|[thousands of Canadian dollars]                                                              |  | $    |        | $   
|                                                                                             |  |      |        |     
|Investments, at equity                                                                       |  |      |        |      |  |  |         | 
|Telelatino
Network Inc. [20% interest until November 16, 2001 and
50.5%
thereafter] [note 3] |  |      |       |      |  |  | 2,027   | 
|TELETOON Canada Inc. [20% interest until August 24, 2001 and 40%
thereafter] [note 3]        |  |      | 37,733 |      |  |  | 33,273  | 
|The Locomotion Channel/Locomotion Channel B.V. [i]                                           |  |      | 13,368 |      |  |  |        | 
|Investments, at cost                                                                         |  |      |        |      |  |  |         | 
|Womens Television Network [note 3]                                                          |  |      |       |      |  |  | 150,079 | 
|Astral Media Inc. [market value - 2002 - $7,654; 2001 - $99,027]
[ii]                        |  |      | 13,861 |      |  |  | 114,576 | 
|Other [note 28]                                                                              |  |      | 19,793 |      |  |  | 19,799  | 
|                                                                                             |  |      |        |      |  |  |         | 
|                                                                                             |  |      | 84,755 |      |  |  | 319,754 | 
|                                                                                             |  |      |        |      |  |  |         | 

[i] The Locomotion Channel/Locomotion Channel B.V.

On May 17, 2002, the Company acquired a 50% interest in The Locomotion Channel,
an action-oriented animation pay television service for a maximum consideration
of approximately $16,250,000 [U.S.$10,500,000] less a holdback in the event of
certain economic changes that may impact revenue projections. Cash
consideration of approximately $13,000,000 [U.S.$8,400,000] was paid during the
third quarter of fiscal 2002. The investment was accounted for using the
equity method from the date of acquisition.

12



---



##### 



[ii] Astral Media Inc.

During fiscal 2001, the Company, through a wholly-owned subsidiary, purchased
2,029,000 Class A non-voting shares and 145,600 Class B subordinate voting
shares of Astral Media Inc. from Shaw for approximately $110,000,000. These
shares have been pledged against the securitized borrowing as described in note
14.

On October 31, 2001, the Company, through a wholly-owned subsidiary, disposed
of 1,000,000 Class A non-voting shares of Astral Media Inc. for $43,000,000,
resulting in a pre-tax loss of approximately $4,700,000. These shares were
pledged against a securitized borrowing that matured as described in note 14.

On April 2, 2002, the remaining 1,000,000 Class A non-voting shares pledged
against the securitized borrowing were disposed of for $50,500,000, resulting
in a pre-tax gain of approximately $2,250,000. The securitized borrowing was
repaid in full upon sale of the shares. See also note 14.

9.     CAPITAL ASSETS

|                                |  |      |         |              |         |             |         |              |  |  |         |             |         |  |         | 
|------------------------------- |  | ---- | ------- | ------------ | ------- | ----------- | ------- | ------------ |  |  | ------- | ----------- | ------- |  | ------- | 
|                                |  | 2002 |         | 2001        
|                                |  |      |         |             
|                                |  |      |         |              |         | Accumulated |         |              |  |  |         | Accumulated
|                                |  | Cost |         | depreciation |         | Cost        |         | depreciation
|[thousands of Canadian dollars] |  | $    |         | $            |         | $           |         | $           
|                                |  |      |         |              |         |             |         |             
|Broadcasting head-end equipment |  |      | 28,565  |              |         |             | 19,096  |              |  |  | 43,865  |             |         |  | 24,941  | 
|Production equipment            |  |      | 81,266  |              |         |             | 53,835  |              |  |  | 59,144  |             |         |  | 37,082  | 
|Leasehold improvements          |  |      | 29,418  |              |         |             | 11,648  |              |  |  | 23,229  |             |         |  | 9,743   | 
|Buildings                       |  |      | 21,624  |              |         |             | 6,124   |              |  |  | 19,351  |             |         |  | 5,279   | 
|Computer equipment              |  |      | 33,792  |              |         |             | 20,785  |              |  |  | 19,092  |             |         |  | 11,434  | 
|Furniture and fixtures          |  |      | 23,972  |              |         |             | 14,994  |              |  |  | 27,834  |             |         |  | 16,313  | 
|Other                           |  |      | 2,533   |              |         |             | 1,873   |              |  |  | 11,899  |             |         |  | 2,933   | 
|                                |  |      |         |              |         |             |         |              |  |  |         |             |         |  |         | 
|                                |  |      | 221,170 |              |         |             | 128,355 |              |  |  | 204,414 |             |         |  | 107,725 | 
|Land                            |  |      | 8,026   |              |         |             |        |              |  |  | 8,255   |             |         |  |        | 
|                                |  |      |         |              |         |             |         |              |  |  |         |             |         |  |         | 
|                                |  |      | 229,196 |              |         |             | 128,355 |              |  |  | 212,669 |             |         |  | 107,725 | 
|                                |  |      |         |              |         |             |         |              |  |  |         |             |         |  |         | 
|Net book value                  |  |      |         |              | 100,841 |             |         |              |  |  |         |             | 104,944 |  |         | 
|                                |  |      |         |              |         |             |         |              |  |  |         |             |         |  |        

Depreciation provided in the accounts on capital assets amounted to $25,858,000
[2001  $19,960,000; 2000  $8,995,000].

10. FILM INVESTMENTS

|                                           |  |      |         |      |  |            |         | 
|------------------------------------------ |  | ---- | ------- | ---- |  | ---------- | ------- | 
|                                           |  | 2002 |         | 2001
|[thousands of Canadian dollars]            |  | $    |         | $   
|                                           |  |      |         |     
|                                           |  |      |         |      |  | [restated-
|                                           |  |      |         |      |  | note 2[b]]
|Projects in development, net of advances   |  |      | 4,140   |      |  |            | 7,287   | 
|Projects in process                        |  |      | 26,825  |      |  |            | 30,745  | 
|Completed projects and distribution rights |  |      | 109,636 |      |  |            | 108,551 | 
|                                           |  |      |         |      |  |            |         | 
|                                           |  |      | 140,601 |      |  |            | 146,583 | 
|                                           |  |      |         |      |  |            |         | 

13



---



##### 



During fiscal 2002, the Company reduced its investment in film and television
programs by anticipated Federal and Ontario production tax credits amounting to
$15,392,000 [2001  $11,600,000].

The Company estimates that 60% of unamortized film costs, excluding acquired
film libraries, will be amortized within three years from August 31, 2002. It
is estimated that at least 80% will be amortized within five years.

The Company also generates revenue from productions which have been fully
amortized in prior years and are not valued in the accounts.

11. DEFERRED CHARGES

|                                                                                              |  |      |        |              |  |             |        |              |  |        |        |             |  |  |       | 
|--------------------------------------------------------------------------------------------- |  | ---- | ------ | ------------ |  | ----------- | ------ | ------------ |  | ------ | ------ | ----------- |  |  | ----- | 
|                                                                                              |  | 2002 |        | 2001        
|                                                                                              |  |      |        |             
|                                                                                              |  |      |        |              |  | Accumulated |        |              |  |        |        | Accumulated
|                                                                                              |  | Cost |        | amortization |  | Cost        |        | amortization
|[thousands of Canadian dollars]                                                               |  | $    |        | $            |  | $           |        | $           
|                                                                                              |  |      |        |              |  |             |        |             
|Financing costs and credit facility arrangement fees                                          |  |      | 27,925 |              |  |             | 4,786  |              |  |        | 9,932  |             |  |  | 2,392 | 
|Foreign exchange gains on translating long-term debt                                          |  |      |       |              |  |             |       |              |  |        | 16,288 |             |  |  |      | 
|Start-up costs of new specialty programming networks                                          |  |      | 12,796 |              |  |             | 6,858  |              |  |        | 9,133  |             |  |  | 2,550 | 
|Advertising and promotion costs for reformatting radio, specialty
and pay television stations |  |      | 11,366 |              |  |             | 3,140  |              |  |        | 6,481  |             |  |  | 151   | 
|Other                                                                                         |  |      | 1,318  |              |  |             | 1,135  |              |  |        | 1,261  |             |  |  | 1,055 | 
|                                                                                              |  |      |        |              |  |             |        |              |  |        |        |             |  |  |       | 
|                                                                                              |  |      | 53,405 |              |  |             | 15,919 |              |  |        | 43,095 |             |  |  | 6,148 | 
|                                                                                              |  |      |        |              |  |             |        |              |  |        |        |             |  |  |       | 
|                                                                                              |  |      |        | 37,486       |  |             |        |              |  | 36,947 |        |            
|                                                                                              |  |      |        |              |  |             |        |              |  |       

Amortization provided in the accounts on deferred charges amounted to
$7,709,000 [2001  $3,529,000; 2000  $1,952,000].

12. BROADCAST LICENSES, OTHER INTANGIBLES AND GOODWILL

|                                         |  |      |           |              |  |             |        |              |  |                        |           |             |  |  |        | 
|---------------------------------------- |  | ---- | --------- | ------------ |  | ----------- | ------ | ------------ |  | ---------------------- | --------- | ----------- |  |  | ------ | 
|                                         |  | 2002 |           | 2001        
|                                         |  |      |           |             
|                                         |  |      |           |              |  | Accumulated |        |              |  |                        |           | Accumulated
|                                         |  | Cost |           | amortization |  | Cost        |        | amortization
|[thousands of Canadian dollars]          |  | $    |           | $            |  | $           |        | $           
|                                         |  |      |           |              |  |             |        |             
|                                         |  |      |           |              |  |             |        |              |  | [restated - note 2[b]]
|Broadcast licenses and other intangibles |  |      | 531,155   |              |  |             | 48,561 |              |  |                        | 469,896   |             |  |  | 48,757 | 
|Goodwill                                 |  |      | 815,053   |              |  |             | 33,680 |              |  |                        | 966,579   |             |  |  | 33,947 | 
|                                         |  |      |           |              |  |             |        |              |  |                        |           |             |  |  |        | 
|                                         |  |      | 1,346,208 |              |  |             | 82,241 |              |  |                        | 1,436,475 |             |  |  | 82,704 | 
|                                         |  |      |           |              |  |             |        |              |  |                        |           |             |  |  |        | 

The changes in the carrying amounts of broadcast licenses, other intangibles
and goodwill since August 31, 2001 are summarized as follows:

|                                         |                               |   |             |         |           |   |           |         |        |   |         |         |      |  |            |          |               |  |      |      |   |  |         |         | 
|---------------------------------------- | ----------------------------- | - | ----------- | ------- | --------- | - | --------- | ------- | ------ | - | ------- | ------- | ---- |  | ---------- | -------- | ------------- |  | ---- | ---- | - |  | ------- | ------- | 
|                                         |                               |   |             |         |           |   |           |         |        |   |         |         |      |  | Impairment |          | Amortization/ |  |      |      |  
|                                         |                               |   | 2001        |         | Additions |   | Disposals |         | losses |   | other   |         | 2002
|[thousands of Canadian dollars]          |                               | $ |             | $       |           | $ |           | $       |        | $ |         | $      
|                                         |                               |   |             |         |           |   |           |         |        |   |         |        
|                                         |                               |   | [restated - |         |           |   |           |         |        |   |         |         |      |  |            |          |               |  |      |      |   |  |        
|                                         |                               |   | note 2[b]]  |         |           |   |           |         |        |   |         |         |      |  |            |          |               |  |      |      |   |  |        
|Broadcast licenses and other
intangibles |                               |   | 421,139     |         |           |   | 87,687    |         |        |   | (16,403 | )       |      |  | (9,532     | )        |               |  | (297 | )    |   |  | 482,594 |        
|                                         |                               |   |             |         |           |   |           |         |        |   |         |         |      |  |            |          |               |  |      |      |   |  |         |         | 
|Goodwill                                
|                                         | Television                    |   |             | 137,437 |           |   |           | 193,635 |        |   |         | (8,722  | )    |  |            | (3,240   | )             |  |      | (55  | ) |  |         | 319,055 | 
|                                         | Radio                         |   |             | 412,931 |           |   |           | 2,312   |        |   |         |        |      |  |            |         |               |  |      | (263 | ) |  |         | 414,980 | 
|                                         | Content                       |   |             |         |           |   |           |         |        |   |         |         |      |  |            |          |               |  |      |      |   |  |         |         | 
|                                         | - Production and distribution |   |             | 241,093 |           |   |           |        |        |   |         |        |      |  |            | (216,000 | )             |  |      | (140 | ) |  |         | 24,953  | 
|                                         | - Branded consumer products   |   |             | 141,171 |           |   |           | 649     |        |   |         | (35,435 | )    |  |            | (84,000  | )             |  |      |     |   |  |         | 22,385  | 
|                                         |                               |   |             |         |           |   |           |         |        |   |         |         |      |  |            |          |               |  |      |      |   |  |         |         | 
|                                         |                               |   |             | 932,632 |           |   |           | 196,596 |        |   |         | (44,157 | )    |  |            | (303,240 | )             |  |      | (458 | ) |  |         | 781,373 | 
|                                         |                               |   |             |         |           |   |           |         |        |   |         |         |      |  |            |          |               |  |      |      |   |  |         |         | 

14



---



##### 



In February 2002, total goodwill impairment loss of $150,000,000 was recognized
upon adoption of CICA Section 3062 and reflected as an adjustment to retained
earnings as at September 1, 2001. The total goodwill impairment loss was
comprised of $66,000,000 related to the production and distribution business
and $84,000,000 related to the branded consumer products business.

The Company has selected August 31 as the date it will perform its annual
impairment test and has determined that there was a further impairment of
goodwill during fiscal 2002 of $153,240,000 of which $150,000,000 related to
the production and distribution business in the Content division and $3,240,000
related to the Television division. To determine the amount of the impairment,
management used a fair value methodology based on market transaction multiples
for comparable businesses applied to forecasted operating income used to
evaluate the reporting units performance.

Amortization provided in the accounts on broadcast licenses, other intangibles
and goodwill amounted to $297,000 [2001  $42,429,000; 2000  $11,431,000].
During 2002, amortization was provided on finite life intangibles.

13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

|                                   |  |      |         |      |  |  |         | 
|---------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                   |  | 2002 |         | 2001
|[thousands of Canadian dollars]    |  | $    |         | $   
|                                   |  |      |         |     
|Trade                              |  |      | 96,408  |      |  |  | 77,237  | 
|Program rights payable             |  |      | 34,943  |      |  |  | 34,141  | 
|Accrued interest                   |  |      | 27,836  |      |  |  | 172     | 
|Restructuring                      |  |      | 11,342  |      |  |  |        | 
|Acquisition and integration costs  |  |      | 1,883   |      |  |  | 10,182  | 
|Third party participation payments |  |      | 3,922   |      |  |  | 5,632   | 
|GST payable                        |  |      | 896     |      |  |  | 1,057   | 
|Other                              |  |      | 1,047   |      |  |  | 11,881  | 
|                                   |  |      |         |      |  |  |         | 
|                                   |  |      | 178,277 |      |  |  | 140,302 | 
|                                   |  |      |         |      |  |  |         | 

14. SECURITIZED BORROWING

During the third quarter of fiscal 2001, Corus entered into a borrowing
arrangement with a financial institution for $89,500,000 which was
collateralized by 2,000,000 Astral Media Inc. shares
[Astral shares]. The
borrowing was repaid in full on October 31, 2001 and a new borrowing
arrangement was entered into for $44,750,000 which was collateralized by
1,000,000 Astral shares. The borrowing was repaid in full on April 30, 2002
[note 8].

15. LONG-TERM DEBT

|                                |  |      |         |      |  |  |         | 
|------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                |  | 2002 |         | 2001
|[thousands of Canadian dollars] |  | $    |         | $   
|                                |  |      |         |     
|Bank loans [a]                  |  |      | 61,558  |      |  |  | 614,518 | 
|Senior subordinated notes [b]   |  |      | 584,550 |      |  |  |        | 
|Other                           |  |      | 2,897   |      |  |  | 6,283   | 
|                                |  |      |         |      |  |  |         | 
|                                |  |      | 649,005 |      |  |  | 620,801 | 
|Less current portion            |  |      | 2,391   |      |  |  | 6,382   | 
|                                |  |      |         |      |  |  |         | 
|                                |  |      | 646,614 |      |  |  | 614,419 | 
|                                |  |      |         |      |  |  |         | 

15



---



##### 





|[a] |  | Bank loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company has a $25,000,000 revolving operating loan facility with interest
rates and borrowing options, which are the same as those contained in the
credit facilities described below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | A syndicate of banks has provided the Company with various credit facilities
[the facility], which at August 31, 2002 amounted to $427,500,000,
$277,500,000 of which is revolving on a reducing basis until repayment on
August 31, 2006. As at August 31, 2002, $215,942,000 of the $277,500,000
facility was not utilized. The balance of the facility, $150,000,000, is a
revolving credit facility expiring on April 29, 2003, but is extendible at
the Companys option for a further period of 364 days. As at August 31,
2002, the facility was undrawn. Funds are available to the Company in both
Canadian and U.S. dollars. At August 31, 2002, the U.S. portion of the bank
loans was $35,000,000 [Cdn.$54,558,000] [2001  U.S.$147,000,000;
Cdn.$228,000,000].
|   
|    |  | Interest rates on the balance of the bank loans fluctuate with the Canadian
bankers acceptances and LIBOR and averaged 6.7% for the year ended August
31, 2002 [2001  6.8%].                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | At August 31, 2001, the Company had a non-revolving term loan outstanding of
U.S.$147,000,000 [Cdn.$228,000,000 translated at the exchange rate at August
31, 2001] as well as a cross-currency interest rate agreement on the U.S.
denominated debt to fix the interest at 11.4% and liability for interest and
principal payments at Cdn.$212,000,000. During the year, the non-revolving
term loan was repaid in full and the cross-currency interest rate agreement
was unwound.                                                                                                                                                                                                                                                                                          
|   
|    |  | The banks hold as collateral a first ranking charge on all assets and
undertakings of Corus and certain of Corus subsidiaries as designated under
the credit agreements. As well, unlimited guarantees are provided by certain
subsidiaries. Under the credit facilities, the Company has undertaken to
maintain certain financial covenants. The Company was in compliance with the
covenants provided under the bank loans at August 31, 2002.                                                                                                                                                                                                                                                                                                                             
|   
|[b] |  | Senior subordinated notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | On March 7, 2002, Corus issued U.S.$375,000,000 aggregate principal amount of
8 3/4% Senior Subordinated Notes [the Notes] due 2012 at a price of
99.186% of their aggregate principal amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | The Company has entered into cross-currency interest rate agreements to fix
the liability for interest and principal payments on the Notes. The
agreements have resulted in an effective interest rate of 9.33% on the
Canadian dollar equivalent of the U.S. debt. The exchange rate applicable to
the principal portion of the debt has been fixed at Cdn.$1.6107 or
approximately Cdn.$604,000,000.                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | The net proceeds from this offering were used to repay existing indebtedness
including the permanent repayment in full of the Companys reducing term
loans of Cdn.$294,000,000 due on August 31, 2007. Consequently, the Company
unwound U.S.$147,000,000 of cross-currency interest rate swaps relating to
the reducing term loan that had fixed the interest rate at 11.4% and
liability for interest and principal payments at Cdn.$212,000,000, resulting
in a non-cash hedge transaction loss of approximately $17,636,000.                                                                                                                                                                                                                                             
|   
|    |  | Principal repayments on long-term debt in each of the next five years and
thereafter are approximately as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                |  |   |         | 
|------------------------------- |  | - | ------- | 
|[thousands of Canadian dollars] |  | $
|                                |  |  
|2003                            |  |   | 2,391   | 
|2004                            |  |   | 367     | 
|2005                            |  |   |        | 
|2006                            |  |   | 61,558  | 
|2007                            |  |   |        | 
|Thereafter                      |  |   | 584,689 | 
|                                |  |   |         | 
|                                |  |   | 649,005 | 
|                                |  |   |         | 

16



---



##### 



16. DEFERRED CREDITS

|                                                                |  |      |        |      |  |  |        | 
|--------------------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | 
|                                                                |  | 2002 |        | 2001
|[thousands of Canadian dollars]                                 |  | $    |        | $   
|                                                                |  |      |        |     
|CRTC benefits                                                   |  |      | 54,756 |      |  |  | 39,855 | 
|Foreign exchange gains on translating long-term debt            |  |      | 19,450 |      |  |  | 3,262  | 
|Unearned revenue from distribution and licensing of film rights |  |      | 1,511  |      |  |  | 11,413 | 
|Other                                                           |  |      | 914    |      |  |  | 1,714  | 
|                                                                |  |      |        |      |  |  |        | 
|                                                                |  |      | 76,631 |      |  |  | 56,244 | 
|                                                                |  |      |        |      |  |  |        | 

17.     SHARE CAPITAL

Authorized

The Company is authorized to issue an unlimited number of Class A participating
shares [Class A Voting Shares], Class B non-voting participating shares
[Class B Non-Voting Shares], Class A Preferred Shares, and Class 1 and Class
2 preferred shares.

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.

The Class A Preferred Shares are redeemable at any time at the demand of Corus
and retractable at any time at the demand of a holder of a Class A Preferred
Share for an amount equal to the consideration received by Corus at the time of
issuance of such Class A Preferred Shares. Holders of Class A Preferred Shares
are entitled to receive a non-cumulative dividend at such rate as Corus Board
of Directors may determine on the redemption amount of the Class A Preferred
Shares. Each of the Class 1 preferred shares, the Class 2 preferred shares,
the Class A Voting Shares and the Class B Non-Voting Shares rank junior to and
are subject in all respects to the preferences, rights, conditions,
restrictions, limitations and prohibitions attaching to the Class A Preferred
Shares in connection with the payment of dividends.

The Class 1 and 2 preferred shares are issuable in one or more series with
attributes designated by the Board of Directors. The Class 1 preferred shares
rank senior to the Class 2 preferred shares.

In the event of liquidation, dissolution or winding up of Corus or other
distribution of assets of Corus for the purpose of winding up its affairs, the
holders of Class A Preferred Shares are entitled to a payment in priority to
all other classes of shares of Corus to the extent of the redemption amount of
the Class A Preferred Shares, but will not be entitled to any surplus in excess
of that amount. The remaining property and assets will be available for
distribution to the holders of the Class A Voting Shares and Class B Non-Voting
Shares which shall be paid or distributed equally, share for share, between the
holders of the Class A Voting Shares and the Class B Non-Voting Shares,
respectively without preference or distinction.

17



---



##### 



Issued and outstanding

The changes in the Class A Voting and Class B Non-Voting Shares since August
31, 2000 are summarized as follows:

|                                                          |  |         |           |   |  |   |        |            |  |   |            |  |  |       |         |   |  |  |         |  
|--------------------------------------------------------- |  | ------- | --------- | - |  | - | ------ | ---------- |  | - | ---------- |  |  | ----- | ------- | - |  |  | ------- | -
|                                                          |  | Class A |           |   |  |   |        | Class B    |  |   |            |  |  |       |         |  
|                                                          |  | Voting  |           |   |  |   |        | Non-Voting |  |   |            |  |  |       |         |  
|[thousands of Canadian dollars                            |  | Shares  |           |   |  |   |        | Shares     |  |   |            |  |  | Total
|except number of shares]                                  |  | #       |           | $ |  | # |        | $          |  | $
|                                                          |  |         |           |   |  |   |        |            |  |  
|Balance, August 31, 2000                                  |  |         | 1,851,709 |   |  |   | 28,679 |            |  |   | 35,673,574 |  |  |       | 642,015 |   |  |  | 670,694 |  
|Conversion of Class A Voting
to Class B Non-Voting Shares |  |         | (9,032    | ) |  |   | (140   | )          |  |   | 9,032      |  |  |       | 140     |   |  |  |        |  
|Issuance of shares under
Stock Option Plan                |  |         |          |   |  |   |       |            |  |   | 31,060     |  |  |       | 800     |   |  |  | 800     |  
|Issued on business
acquisitions [note 3]                  |  |         |          |   |  |   |       |            |  |   | 5,047,532  |  |  |       | 211,022 |   |  |  | 211,022 |  
|                                                          |  |         |           |   |  |   |        |            |  |   |            |  |  |       |         |   |  |  |         |  
|Balance, August 31, 2001                                  |  |         | 1,842,677 |   |  |   | 28,539 |            |  |   | 40,761,198 |  |  |       | 853,977 |   |  |  | 882,516 |  
|Conversion of Class A Voting
to Class B Non-Voting Shares |  |         | (3,965    | ) |  |   | (61    | )          |  |   | 3,965      |  |  |       | 61      |   |  |  |        |  
|Issuance of shares under
Stock Option Plan                |  |         |          |   |  |   |       |            |  |   | 37,425     |  |  |       | 944     |   |  |  | 944     |  
|Executive stock purchase loans                            |  |         |          |   |  |   |       |            |  |   |           |  |  |       | (2,045  | ) |  |  | (2,045  | )
|                                                          |  |         |           |   |  |   |        |            |  |   |            |  |  |       |         |   |  |  |         |  
|Balance, August 31, 2002                                  |  |         | 1,838,712 |   |  |   | 28,478 |            |  |   | 40,802,588 |  |  |       | 852,937 |   |  |  | 881,415 |  
|                                                          |  |         |           |   |  |   |        |            |  |   |            |  |  |       |         |   |  |  |         |  

Stock Option Plan

Under the Companys Stock Option
Plan [the Plan], the Company may grant
options to purchase Class B Non-Voting Shares to eligible officers, directors,
and employees of or consultants to the Company. The maximum number of shares
that can be reserved for issuance under the Plan is 2,852,670. All options
granted are for terms not to exceed ten years from the grant date. The
exercise price of each option equals the market price of the Companys stock on
the date of the grant. Options vest 25% on each of the first, second, third
and fourth anniversary dates of the date of grant.

A summary of the options outstanding at August 31, 2002 and the changes since
August 31, 2000 is presented as follows:

|                             |  |           |           |                |  |          |       | 
|---------------------------- |  | --------- | --------- | -------------- |  | -------- | ----- | 
|                             |  |           |           |                |  | Weighted
|                             |  | Number of |           | average       
|                             |  | options   |           | exercise price
|                             |  | #         |           | $             
|                             |  |           |           |               
|Outstanding, August 31, 2000 |  |           | 927,250   |                |  |          | 25.48 | 
|Granted                      |  |           | 970,443   |                |  |          | 39.94 | 
|Exercised                    |  |           | (31,060   | )              |  |          | 25.73 | 
|Cancelled                    |  |           | (8,700    | )              |  |          | 35.61 | 
|                             |  |           |           |                |  |          |       | 
|Outstanding, August 31, 2001 |  |           | 1,857,933 |                |  |          | 32.98 | 
|Granted                      |  |           | 927,742   |                |  |          | 30.14 | 
|Exercised                    |  |           | (37,425   | )              |  |          | 25.25 | 
|Cancelled                    |  |           | (129,212  | )              |  |          | 32.44 | 
|                             |  |           |           |                |  |          |       | 
|Outstanding, August 31, 2002 |  |           | 2,619,038 |                |  |          | 32.11 | 
|                             |  |           |           |                |  |          |       | 

18



---



##### 



At August 31, 2002, the outstanding options consist of the following:

|            |  |   |           |   |  |                     |               |                     |  |   |       |  |  |                |         |  |  |  |       | 
|----------- |  | - | --------- | - |  | ------------------- | ------------- | ------------------- |  | - | ----- |  |  | -------------- | ------- |  |  |  | ----- | 
|            |  |   |           |   |  | Options outstanding |               | Options exercisable
|            |  |   |           |   |  |                     |               |                    
|            |  |   |           |   |  | Range of            |               | Weighted            |  |   |       |  |  | Weighted      
|            |  |   |           |   |  | exercise            |               | average             |  |   |       |  |  | average       
|            |  |   |           |   |  | prices              |               | exercise price      |  |   |       |  |  | exercise price
|Expiry date |  | # |           | $ |  | $                   |               | #                   |  | $
|            |  |   |           |   |  |                     |               |                     |  |  
|2005        |  |   | 833,575   |   |  |                     | 25.25 - 37.00 |                     |  |   | 25.78 |  |  |                | 527,503 |  |  |  | 25.84 | 
|2006        |  |   | 891,663   |   |  |                     | 34.50 - 44.00 |                     |  |   | 40.02 |  |  |                | 183,496 |  |  |  | 40.10 | 
|2007        |  |   | 893,800   |   |  |                     | 23.80 - 34.99 |                     |  |   | 27.06 |  |  |                |        |  |  |  |      | 
|            |  |   |           |   |  |                     |               |                     |  |   |       |  |  |                |         |  |  |  |       | 
|            |  |   | 2,619,038 |   |  |                     | 23.80 - 44.00 |                     |  |   | 32.11 |  |  |                | 710,999 |  |  |  | 29.52 | 
|            |  |   |           |   |  |                     |               |                     |  |   |       |  |  |                |         |  |  |  |       | 

On September 1, 2002, the Company granted a further 535,000 options for Class B
Non-Voting Shares to eligible officers, directors, and employees of or
consultants to the Company subject to approval by the shareholders to the
amendment of the Plan. These options are exercisable at $20.25 per share.

Dividends

The holders of Class A Voting and Class B Non-Voting Shares are entitled to
receive such dividends as the Board of Directors determines to declare on a
share-for-share basis, as and when any such dividends are declared or paid.
The holders of Class B Non-Voting Shares are entitled to receive during each
dividend period, in priority to the payment of dividends on the Class A Voting
Shares, an additional dividend at a rate of $0.01 per share per annum. This
additional dividend is subject to proportionate adjustment in the event of
future consolidations or subdivisions of shares and in the event of any issue
of shares by way of stock dividend. After payment or setting aside for payment
of the additional non-cumulative dividends on the Class B Non-Voting Shares,
holders of Class A Voting and Class B Non-Voting Shares participate equally, on
a share-for-share basis, on all subsequent dividends declared.

Executive stock purchase loans

In October 2001, the Board of Directors of the Company authorized the granting
of loans to certain of its executive officers in order to finance the
acquisition of Class B Non-Voting Shares of the Company on the open market.
During the year ended August 31, 2002, the Company made loans in an aggregate
amount of $2,045,000 to certain qualifying executive officers. These loans are
non-interest bearing and are secured by a promissory note and the relevant
Class B Non-Voting Shares. Each loan has a ten-year term from December 1, 2001
with annual instalments of the greater of 10% of the original principal or 10%
of the employees pre-tax bonus for the most recently completed financial year
of the Company. At August 31, 2002, the market value of the shares held as
collateral for the loans was $928,462.

19



---



##### 





|18. |  | INCOME TAXES                                                                                                                                                                                                                                                                                                                
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|[a] |  | Future income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Companys future tax liabilities and assets
as at August 31 are as follows:

|                                                                               |  |      |         |      |  |             |         | 
|------------------------------------------------------------------------------ |  | ---- | ------- | ---- |  | ----------- | ------- | 
|                                                                               |  | 2002 |         | 2001
|[thousands of Canadian dollars]                                                |  | $    |         | $   
|                                                                               |  |      |         |     
|                                                                               |  |      |         |      |  | [restated -
|                                                                               |  |      |         |      |  | note 2[b]] 
|Future tax liability                                                           |  |      |         |      |  |             |         | 
|Deferred charges deducted for tax purposes capitalized
for accounting purposes |  |      | 7,424   |      |  |             | 6,765   | 
|Capital cost allowance in excess of
book depreciation                          |  |      | 919     |      |  |             | 747     | 
|Deferred partnership income                                                    |  |      | 3,468   |      |  |             | 5,642   | 
|Differences in tax and accounting cost bases for investments                   |  |      | 46,384  |      |  |             | 45,968  | 
|Broadcast licenses and other intangibles                                       |  |      | 116,491 |      |  |             | 96,342  | 
|Purchase price equation differences                                            |  |      | 25,000  |      |  |             | 27,539  | 
|Other, net                                                                     |  |      | 10,136  |      |  |             | 3,216   | 
|                                                                               |  |      |         |      |  |             |         | 
|Total future tax liability                                                     |  |      | 209,822 |      |  |             | 186,219 | 
|                                                                               |  |      |         |      |  |             |         | 
|Future tax asset                                                               |  |      |         |      |  |             |         | 
|Book depreciation in excess of
capital cost allowance                          |  |      | 20,733  |      |  |             | 5,768   | 
|Employment obligations recognized on
purchase equation                         |  |      | 338     |      |  |             | 343     | 
|Loss carryforwards, net of valuation allowances                                |  |      | 22,483  |      |  |             | 8,821   | 
|Deferred charges deducted for accounting purposes
in excess of tax purposes    |  |      | 2,989   |      |  |             | 473     | 
|Differences in tax and accounting cost bases for investments                   |  |      | 1,619   |      |  |             |        | 
|Revenue recognition differences between tax and
accounting purposes            |  |      | 6,627   |      |  |             | 4,303   | 
|Purchase price equation differences                                            |  |      | 756     |      |  |             | 4,565   | 
|Other, net                                                                     |  |      | 1,852   |      |  |             | 317     | 
|                                                                               |  |      |         |      |  |             |         | 
|Total future tax asset                                                         |  |      | 57,397  |      |  |             | 24,590  | 
|                                                                               |  |      |         |      |  |             |         | 
|Net future tax liability                                                       |  |      | 152,425 |      |  |             | 161,629 | 
|                                                                               |  |      |         |      |  |             |         | 

20



---



##### 





|[b] |  | Significant components of the income tax expense (recovery) attributable
to operations are as follows:
|--- |  | ------------------------------------------------------------------------------------------------------

|                                                                                                   |  |      |         |      |  |      |         |   |  |  |        |  
|-------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------ | -
|                                                                                                   |  | 2002 |         | 2001 |  | 2000
|[thousands of Canadian dollars]                                                                    |  | $    |         | $    |  | $   
|                                                                                                   |  |      |         |      |  |     
|Current tax expense                                                                                |  |      | 29,790  |      |  |      | 51,248  |   |  |  | 11,599 |  
|Future income tax expense (recovery) relating to
origination and reversal of temporary differences |  |      | (8,522  | )    |  |      | (15,474 | ) |  |  | 63,508 |  
|Future income tax recovery resulting from
recognition of losses incurred in the year               |  |      | (17,541 | )    |  |      | (4,986  | ) |  |  | (8,007 | )
|Future income tax recovery resulting from tax
rate changes                                         |  |      | (160    | )    |  |      | (42,258 | ) |  |  | (2,032 | )
|Other                                                                                              |  |      | (8,713  | )    |  |      | 8,377   |   |  |  | 702    |  
|                                                                                                   |  |      |         |      |  |      |         |   |  |  |        |  
|Income tax expense (recovery)                                                                      |  |      | (5,146  | )    |  |      | (3,093  | ) |  |  | 65,770 |  
|                                                                                                   |  |      |         |      |  |      |         |   |  |  |        |  



|[c] |  | The reconciliation of income taxes attributable to operations computed at
the statutory tax rates to income tax expense (recovery) is as follows:
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|                                              |                                                                                                   |        |         |         |   |      |      |        |   |   |        |         |   |        |      |       |   |  |        |         |   |  |      |       |  
|--------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------ | ------- | ------- | - | ---- | ---- | ------ | - | - | ------ | ------- | - | ------ | ---- | ----- | - |  | ------ | ------- | - |  | ---- | ----- | -
|                                              |                                                                                                   | 2002   |         | 2001    |   | 2000
|                                              |                                                                                                   |        |         |         |   |     
|                                              |                                                                                                   | Amount |         |         |   |      |      | Amount |   |   |        |         |   | Amount |      |       |   | 
|[thousands of Canadian dollars]               |                                                                                                   | $      |         | %       |   | $    |      | %      |   | $ |        | %      
|                                              |                                                                                                   |        |         |         |   |      |      |        |   |   |        |        
|Tax at combined federal and
provincial rates  |                                                                                                   |        | (68,185 | )       |   |      | 39.8 |        |   |   | 53,457 |         |   |        | 42.7 |       |   |  | 95,658 |         |   |  | 43.5 |      
|Differences from statutory rates
relating to: |                                                                                                   |        |         |         |   |      |      |        |   |   |        |         |   |        |      |       |   |  |        |         |   |  |      |      
|                                              | Amortization of goodwill                                                                          |        |         | 63,640  |   |      |      | (37.2  | ) |   |        | 14,462  |   |        |      | 11.6  |   |  |        | 1,362   |   |  |      | 0.6   |  
|                                              | Non-taxable portion of net capital
gains on sale of investments                                   |        |         | (16,345 | ) |      |      | 9.5    |   |   |        | (40,329 | ) |        |      | (32.2 | ) |  |        | (30,263 | ) |  |      | (13.8 | )
|                                              | Reduction in future income taxes
resulting from statutory rate reduction                          |        |         | (160    | ) |      |      | 0.1    |   |   |        | (42,258 | ) |        |      | (33.8 | ) |  |        | (2,032  | ) |  |      | (0.9  | )
|                                              | Reversal in current period of temporary
differences originally recorded using
long-term tax rates |        |         | 8,451   |   |      |      | (4.9   | ) |   |        | 2,658   |   |        |      | 2.1   |   |  |        |        |   |  |      |      |  
|                                              | Other                                                                                             |        |         | 7,453   |   |      |      | (4.3   | ) |   |        | 8,917   |   |        |      | 7.1   |   |  |        | 1,045   |   |  |      | 0.5   |  
|                                              |                                                                                                   |        |         |         |   |      |      |        |   |   |        |         |   |        |      |       |   |  |        |         |   |  |      |       |  
|                                              |                                                                                                   |        |         | (5,146  | ) |      |      | 3.0    |   |   |        | (3,093  | ) |        |      | (2.5  | ) |  |        | 65,770  |   |  |      | 29.9  |  
|                                              |                                                                                                   |        |         |         |   |      |      |        |   |   |        |         |   |        |      |       |   |  |        |         |   |  |      |       |  



|[d] |  | The Company recognizes as a future tax asset the benefit of investment
tax credits and capital loss carryforwards to the extent it is more likely
than not that the benefit will be realized. At August 31, 2002, the
Company has available loss carryforwards of approximately $76,500,000
which expire between 2003 and 2009. A future tax asset of $22,400,000
[2001  $8,800,000] has been recognized in respect of these carryforwards,
net of a valuation allowance of $5,000,000 [2001  $2,000,000].
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The available loss carryforwards will expire as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                                |  |   |            | 
|------------------------------- |  | - | ---------- | 
|[thousands of Canadian dollars] |  | $
|                                |  |  
|2003                            |  |   | 1,100,000  | 
|2004                            |  |   | 1,700,000  | 
|2005                            |  |   | 1,400,000  | 
|2006                            |  |   | 4,400,000  | 
|2007                            |  |   | 700,000    | 
|2008                            |  |   | 4,100,000  | 
|2009                            |  |   | 48,500,000 | 
|2021                            |  |   | 4,500,000  | 
|2022                            |  |   | 300,000    | 
|No expiration  capital losses  |  |   | 9,800,000  | 
|                                |  |   |            | 
|                                |  |   | 76,500,000 | 
|                                |  |   |            | 

21



---



##### 



19. BUSINESS SEGMENT INFORMATION

The Companys business activities are conducted through three reportable
operating segments:



|[a] |  | Radio Broadcasting
[Radio]                                                                                                                                                                                                                                                                                                                                              
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Radio segment is comprised of 50 radio stations, subject to CRTC approval
of the divestiture of two Oshawa radio stations [2001  49 radio stations],
situated primarily in high growth urban centres in Canada. Revenues are
derived from advertising aired over these stations.                                                                                     
|   
|[b] |  | Television                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | The Television segment includes interests in several specialty television
networks, pay television and pay-per-view services, several conventional
television stations, digital audio services and cable advertising services.
Revenues are generated from affiliate subscriber fees and advertising.                                                                     
|   
|[c] |  | Content                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | The Content segment includes the production and distribution of film and
television programs and the branded consumer products business [formerly
merchandise licensing and publishing businesses] of Nelvana which was
acquired in fiscal 2001. Revenues are generated from licensing of
proprietary films and television programs, merchandise licensing and
publishing.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Management evaluates the business
segments performance based on revenues less operating, general and
administrative expenses.



|[a] |  | Operating revenues and margin
|--- |  | -----------------------------

|                                      |  |      |         |      |  |      |         |   |  |  |         |  
|------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                                      |  | 2002 |         | 2001 |  | 2000
|[thousands of Canadian dollars]       |  | $    |         | $    |  | $   
|                                      |  |      |         |      |  |     
|Revenues                              |  |      |         |      |  |      |         |   |  |  |         |  
|Radio                                 |  |      | 211,416 |      |  |      | 191,773 |   |  |  | 86,241  |  
|Television                            |  |      | 284,684 |      |  |      | 228,693 |   |  |  | 142,989 |  
|Content  production and distribution |  |      | 99,357  |      |  |      | 81,287  |   |  |  |        |  
|Content
 branded consumer products   |  |      | 60,558  |      |  |      | 56,119  |   |  |  |        |  
|Eliminations                          |  |      | (3,231  | )    |  |      | (1,047  | ) |  |  |        |  
|                                      |  |      |         |      |  |      |         |   |  |  |         |  
|                                      |  |      | 652,784 |      |  |      | 556,825 |   |  |  | 229,230 |  
|                                      |  |      |         |      |  |      |         |   |  |  |         |  
|Segment profit                        |  |      |         |      |  |      |         |   |  |  |         |  
|Radio                                 |  |      | 52,853  |      |  |      | 48,063  |   |  |  | 26,700  |  
|Television                            |  |      | 90,051  |      |  |      | 73,728  |   |  |  | 42,846  |  
|Content  production and distribution |  |      | (28,797 | )    |  |      | 8,509   |   |  |  |        |  
|Content
branded consumer products    |  |      | 7,843   |      |  |      | 3,616   |   |  |  |        |  
|Corporate                             |  |      | (4,871  | )    |  |      | (9,461  | ) |  |  | (4,010  | )
|Eliminations                          |  |      | (583    | )    |  |      | (539    | ) |  |  |        |  
|                                      |  |      |         |      |  |      |         |   |  |  |         |  
|                                      |  |      | 116,496 |      |  |      | 123,916 |   |  |  | 65,536  |  
|                                      |  |      |         |      |  |      |         |   |  |  |         |  

For the year ended August 31, 2002, expenditures for the Corporate segment of
$4,871,000 [2001  $9,461,000; 2000  $4,010,000] represent the incremental
cost of corporate overhead that is not allocated to the operating segment.

During fiscal 2002, two customers accounted for approximately 25% and 8% of
production and distribution revenues, respectively for the Content segment.

22



---



##### 



Gross revenues are derived from the following geographical sources by
location of customer as follows:

|              |  |      |         |      |  |      |         |  |  |  |         | 
|------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|              |  | 2002 |         | 2001 |  | 2000
|              |  | $    |         | $    |  | $   
|              |  |      |         |      |  |     
|Canada        |  |      | 520,328 |      |  |      | 442,743 |  |  |  | 229,230 | 
|United States |  |      | 87,166  |      |  |      | 75,277  |  |  |  |        | 
|International |  |      | 45,290  |      |  |      | 38,805  |  |  |  |        | 
|              |  |      |         |      |  |      |         |  |  |  |         | 
|              |  |      | 652,784 |      |  |      | 556,825 |  |  |  | 229,230 | 
|              |  |      |         |      |  |      |         |  |  |  |         | 



|[b] |  | Segment assets
|--- |  | --------------

|                                      |  |      |           |      |  |  |           |  
|------------------------------------- |  | ---- | --------- | ---- |  |  | --------- | -
|                                      |  | 2002 |           | 2001
|[thousands of Canadian dollars]       |  | $    |           | $   
|                                      |  |      |           |     
|Radio                                 |  |      | 334,209   |      |  |  | 344,170   |  
|Television                            |  |      | 472,507   |      |  |  | 470,644   |  
|Content  production and distribution |  |      | 271,252   |      |  |  | 292,566   |  
|Content branded consumer products    |  |      | 14,519    |      |  |  | 45,734    |  
|Corporate                             |  |      | 833,791   |      |  |  | 1,117,236 |  
|Eliminations                          |  |      | (1,122    | )    |  |  | (539      | )
|                                      |  |      |           |      |  |  |           |  
|                                      |  |      | 1,925,156 |      |  |  | 2,269,811 |  
|                                      |  |      |           |      |  |  |           |  



|[c] |  | Capital expenditures by segment
|--- |  | -------------------------------

|                                      |  |      |        |      |  |      |        |  |  |  |       | 
|------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ----- | 
|                                      |  | 2002 |        | 2001 |  | 2000
|[thousands of Canadian dollars]       |  | $    |        | $    |  | $   
|                                      |  |      |        |      |  |     
|Radio                                 |  |      | 12,740 |      |  |      | 10,326 |  |  |  | 1,534 | 
|Television                            |  |      | 5,213  |      |  |      | 20,040 |  |  |  | 6,396 | 
|Content  production and distribution |  |      | 3,422  |      |  |      | 2,951  |  |  |  |      | 
|Content branded consumer products    |  |      | 217    |      |  |      | 403    |  |  |  |      | 
|Corporate                             |  |      | 6,335  |      |  |      | 7,379  |  |  |  | 2,045 | 
|                                      |  |      |        |      |  |      |        |  |  |  |       | 
|                                      |  |      | 27,927 |      |  |      | 41,099 |  |  |  | 9,975 | 
|                                      |  |      |        |      |  |      |        |  |  |  |       | 

Capital assets and goodwill are located primarily within Canada.

23



---



##### 



20.     RESTRUCTURING CHARGES

Restructuring charges consist of the following:

|                                         |  |       |        |               |  |            |        |                 |  |               |     |  |  |           |        | 
|---------------------------------------- |  | ----- | ------ | ------------- |  | ---------- | ------ | --------------- |  | ------------- | --- |  |  | --------- | ------ | 
|                                         |  |       |        |               |  |            |        |                 |  |               |     |  |  | Provision
|                                         |  |       |        |               |  | Cumulative |        | Non-cash        |  | balance as at
|                                         |  | Total |        | cash payments |  | charges    |        | August 31, 2002
|[thousands of Canadian dollars]          |  | $     |        | $             |  | $          |        | $              
|                                         |  |       |        |               |  |            |        |                
|Workforce reduction [i]                  |  |       | 15,986 |               |  |            | 8,692  |                 |  |               |    |  |  |           | 7,294  | 
|Contract settlement and
lease costs [ii] |  |       | 5,396  |               |  |            | 1,609  |                 |  |               |    |  |  |           | 3,787  | 
|Other [iii]                              |  |       | 707    |               |  |            | 237    |                 |  |               | 209 |  |  |           | 261    | 
|                                         |  |       |        |               |  |            |        |                 |  |               |     |  |  |           |        | 
|                                         |  |       | 22,089 |               |  |            | 10,538 |                 |  |               | 209 |  |  |           | 11,342 | 
|                                         |  |       |        |               |  |            |        |                 |  |               |     |  |  |           |        | 

In light of the current economic climate, the Company has taken steps to reduce
debt and improve operating margins by streamlining operations and exiting
activities not aligned with its core assets.

During 2002, the Company recorded restructuring charges of $22,089,000, which
included the following:



| |  | [i] Workforce reduction charges of $15,986,000 relating to the cost of
severance and benefits associated with approximately 410 job
positions. Of the 410 positions, approximately 130, 150 and 130
were from the Radio, Television and Content divisions, respectively
and included management, sales, marketing, operations, programming
and administrative staff. As at August 31, 2002, the workforce
reduction provision balance has been drawn down by cash payments
totalling $8,692,000, resulting in an ending provision balance of
$7,294,000. The remaining provision is expected to be substantially
drawn down by the end of fiscal 2003.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | [ii] Contract settlement costs of $5,396,000 relating to provisions for
negotiated settlements to cancel programming contracts at the Radio
division and future contractual obligations under operating leases
for facilities that will no longer be required. As at August 31,
2002, the provision for contract settlement and lease costs has been
drawn down by cash payments totalling $1,609,000, resulting in an
ending provision balance of $3,787,000.                                                                                                                                                                                        
|
| |  | [iii] Other costs of $707,000 have been drawn down by cash payments
totalling $237,000. The provision balance as at August 31, 2002 was
$261,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

24



---



##### 



21. ASSET WRITE-DOWNS

As part of the Companys restructuring plan announced in the first quarter of
2002, management focused on exiting activities not aligned with its core
assets. As a result, the following investments were either discontinued or
disposed of subsequent to the year end. The carrying values of these
investments were written down at August 31, 2002 as follows:

|                                |  |   |        | 
|------------------------------- |  | - | ------ | 
|[thousands of Canadian dollars] |  | $
|                                |  |  
|Local Media Internet Venture    |  |   | 6,869  | 
|Balmur Corus Music Inc.         |  |   | 4,000  | 
|Liberty Digital Inc.            |  |   | 2,171  | 
|Other                           |  |   | 2,200  | 
|                                |  |   |        | 
|                                |  |   | 15,240 | 
|                                |  |   |        | 

22. FINANCIAL INSTRUMENTS

Fair values

The fair values of financial instruments have been determined as follows:



|[i]  |  | Current assets and current liabilities                                                                                                                       
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | The fair values of financial instruments included in current assets and
current liabilities approximate their carrying values due to their short-term
nature.
|    
|[ii] |  | Investments and other assets                                                                                                                                 



| | [a] |  | The fair value of publicly traded shares included in this category is
determined by the closing market values for those investments.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------
|
| | [b] |  | The fair value of other investments in this category is not determinable.                                                           



|[iii] |  | Long-term debt                                                                                                                                                                                                                                         
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|      |  | The carrying value of the Companys bank loans approximates their fair value
because interest charges under the terms of the bank loans are based upon
current Canadian bank prime and bankers acceptance rates and on U.S. bank
base and LIBOR rates.

25



---



##### 





|[iv] |  | Derivative financial instruments                                                                                                                   
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | The fair value of cross-currency interest rate and securitized borrowing
agreements is based on quotations by the counterparties to the agreements.

The estimated fair values of derivative financial instruments are as follows:

|                                        |  |          |   |            |  |          |         |            |  |  |         |   |  |  |         |  
|--------------------------------------- |  | -------- | - | ---------- |  | -------- | ------- | ---------- |  |  | ------- | - |  |  | ------- | -
|                                        |  | 2002     |   | 2001      
|                                        |  |          |   |           
|                                        |  | Carrying |   | Estimated  |  | Carrying |         | Estimated 
|                                        |  | value    |   | fair value |  | value    |         | fair value
|[thousands of Canadian dollars]         |  | $        |   | $          |  | $        |         | $         
|                                        |  |          |   |            |  |          |         |           
|Cross-currency interest rate agreements |  |          |  |            |  |          | (11,318 | )          |  |  |        |   |  |  | (5,067  | )
|Securitized borrowing agreements        |  |          |  |            |  |          |        |            |  |  | (89,500 | ) |  |  | (90,000 | )
|                                        |  |          |   |            |  |          |         |            |  |  |         |   |  |  |         |  
|                                        |  |          |  |            |  |          | (11,318 | )          |  |  | (89,500 | ) |  |  | (95,067 | )
|                                        |  |          |   |            |  |          |         |            |  |  |         |   |  |  |         |  

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

Credit risks and concentration

Credit risks associated with interest rate and cross-currency exchange
agreements arise from the ability of counterparties to meet the terms of the
contracts. In the event of non-performance by the counterparties, the
Companys accounting loss would be limited to the net amount that it would be
entitled to receive under the contracts and agreements. These risks are
mitigated by dealing with major creditworthy financial institutions.

Accounts receivable resulting from advertising and affiliate subscriber fee
revenues are not subject to any concentration of credit risk.

Accounts receivable from distribution and licensing of proprietary exploitation
rights of feature films and television programs are subject to credit risk.
The risk is mitigated because the Company enters into license and distribution
contracts with many major international broadcasters and distributors.

Accounts receivable from Canadian federal government and other government
agencies in connection with production on financing represents 15% of the total
accounts receivable balance at August 31, 2002 and 2001. The Company believes
that there is minimal risk associated with the collection of these amounts.

23. EARNINGS PER SHARE

The following is a reconciliation of the numerators and denominators used for
the computation of the basic and diluted earnings per share amounts:

|                                                            |                                                       |   |          |        |      |   |         |        |  |  |         |        | 
|----------------------------------------------------------- | ----------------------------------------------------- | - | -------- | ------ | ---- | - | ------- | ------ |  |  | ------- | ------ | 
|                                                            |                                                       |   | 2002     |        | 2001 |   | 2000   
|[thousands of Canadian dollars except share amounts]        |                                                       | $ |          | $      |      | $
|                                                            |                                                       |   |          |        |      |  
|Net income (loss) for the year [numerator]                  |                                                       |   | (166,037 | )      |      |   | 128,167 |        |  |  | 155,984 |       
|                                                            |                                                       |   |          |        |      |   |         |        |  |  |         |       
|Weighted average number of
shares outstanding [denominator]
|                                                            | Weighted average number of shares
outstanding  basic |   |          | 42,621 |      |   |         | 41,539 |  |  |         | 33,379 | 
|                                                            | Effect of dilutive securities                         |   |          |       |      |   |         | 280    |  |  |         | 491    | 
|                                                            |                                                       |   |          |        |      |   |         |        |  |  |         |       
|Weighted average number of shares
outstanding  diluted     |                                                       |   | 42,621   |        |      |   | 41,819  |        |  |  | 33,870  |       
|                                                            |                                                       |   |          |        |      |   |         |        |  |  |         |       

26



---



##### 



24. CONSOLIDATED STATEMENTS OF CASH FLOWS

Additional disclosures with respect to the consolidated statements of cash
flows are as follows:



|[i] |  | Net change in non-cash working capital balances related to operations
consists of the following:
|--- |  | ------------------------------------------------------------------------------------------------

|                                         |  |      |         |      |  |      |         |   |  |  |        |  
|---------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------ | -
|                                         |  | 2002 |         | 2001 |  | 2000
|[thousands of Canadian dollars]          |  | $    |         | $    |  | $   
|                                         |  |      |         |      |  |     
|Accounts receivable                      |  |      | 12,748  |      |  |      | (17,032 | ) |  |  | (6,742 | )
|Prepaid expenses and other               |  |      | 3,913   |      |  |      | 1,024   |   |  |  | 1,896  |  
|Inventories                              |  |      | 2,665   |      |  |      | (7,690  | ) |  |  |       |  
|Accounts payable and accrued liabilities |  |      | 21,536  |      |  |      | (3,029  | ) |  |  | 18,851 |  
|Income taxes payable                     |  |      | (19,019 | )    |  |      | 12,899  |   |  |  | 5,742  |  
|                                         |  |      |         |      |  |      |         |   |  |  |        |  
|                                         |  |      | 21,843  |      |  |      | (13,828 | ) |  |  | 19,747 |  
|                                         |  |      |         |      |  |      |         |   |  |  |        |  



|[ii] |  | Interest paid, interest received, dividends received and income taxes
paid and classified as operating activities are as follows:
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------

|                                |  |      |        |      |  |      |        |  |  |  |        | 
|------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                |  | 2002 |        | 2001 |  | 2000
|[thousands of Canadian dollars] |  | $    |        | $    |  | $   
|                                |  |      |        |      |  |     
|Interest paid                   |  |      | 32,349 |      |  |      | 47,238 |  |  |  | 36,102 | 
|Interest received               |  |      | 2,573  |      |  |      | 8,313  |  |  |  | 9,728  | 
|Dividends received              |  |      | 1,597  |      |  |      | 826    |  |  |  | 1,190  | 
|Income taxes paid               |  |      | 49,791 |      |  |      | 35,400 |  |  |  | 3,357  | 
|                                |  |      |        |      |  |      |        |  |  |  |        | 



|[iii] |  | Non-cash transactions                                                                 
|----- |  | --------------------------------------------------------------------------------------
|     
|      |  | The consolidated statements of cash flows exclude the following non-cash
transactions:

|                                                                    |  |      |   |      |  |      |         |  |  |  |         | 
|------------------------------------------------------------------- |  | ---- | - | ---- |  | ---- | ------- |  |  |  | ------- | 
|                                                                    |  | 2002 |   | 2001 |  | 2000
|                                                                    |  | $    |   | $    |  | $   
|                                                                    |  |      |   |      |  |     
|Common shares issued on acquisitions [note 3]                       |  |      |  |      |  |      | 211,022 |  |  |  | 199,855 | 
|Accounts payable and accrued liabilities
relating to capital assets |  |      |  |      |  |      | 4,054   |  |  |  |        | 
|                                                                    |  |      |   |      |  |      |         |  |  |  |         | 

27



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##### 



25.     RECONCILIATION OF CANADIAN GAAP TO U.S. GAAP

The consolidated financial statements of the Company are prepared in Canadian
dollars in accordance with Canadian GAAP. The following adjustments and
disclosures would be required in order to present these consolidated financial
statements in accordance with United States generally accepted accounting
principles [U.S. GAAP].



|[a] |  | Reconciliation to U.S. GAAP
|--- |  | ---------------------------

|                                                                                          |                                                                            |   |          |          |      |   |         |         |   |  |         |        |  
|----------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | - | -------- | -------- | ---- | - | ------- | ------- | - |  | ------- | ------ | -
|                                                                                          |                                                                            |   | 2002     |          | 2001 |   | 2000   
|[thousands of Canadian dollars]                                                           |                                                                            | $ |          | $        |      | $
|                                                                                          |                                                                            |   |          |          |      |  
|Net income (loss) using Canadian GAAP                                                     |                                                                            |   | (166,037 | )        |      |   | 128,167 |         |   |  | 155,984 |       
|Add
(deduct) adjustments for                                                             
|                                                                                          | Deferred charges [1]                                                       |   |          | (1,294   | )    |   |         | (10,134 | ) |  |         | 431    |  
|                                                                                          | Foreign exchange gains (losses) [2]                                        |   |          | (3,262   | )    |   |         | (804    | ) |  |         | 4,066  |  
|                                                                                          | Equity in earnings of investees [3]                                        |   |          |         |      |   |         | 1,283   |   |  |         | 7,692  |  
|                                                                                          | Dividend income [3]                                                        |   |          |         |      |   |         | (690    | ) |  |         |       |  
|                                                                                          | Transaction gain (loss) [5]                                                |   |          | (1,385   | )    |   |         | 4,617   |   |  |         |       |  
|                                                                                          | Reversal of net derivative loss
deferred in other comprehensive income [5] |   |          |         |      |   |         | (1,996  | ) |  |         |       |  
|                                                                                          | Adoption of SOP 00-2 [6]                                                   |   |          | (13,473  | )    |   |         | 5,418   |   |  |         |       |  
|                                                                                          | Adoption of FAS 142 [7]                                                    |   |          | (150,000 | )    |   |         |        |   |  |         |       |  
|                                                                                          | Income tax effect of adjustments                                           |   |          | 5,112    |      |   |         | 4,525   |   |  |         | (6,828 | )
|                                                                                          |                                                                            |   |          |          |      |   |         |         |   |  |         |       
|Net income (loss) using U.S. GAAP                                                         |                                                                            |   | (330,339 | )        |      |   | 130,386 |         |   |  | 161,345 |       
|Unrealized gains (losses) on investments
classified as available for sale, net of tax [4] |                                                                            |   | (647     | )        |      |   | (13,369 | )       |   |  | 4,040   |       
|Realized gains (losses) on investments classified
as available for sale, net of tax       |                                                                            |   | 5,605    |          |      |   |        |         |   |  | (19,781 | )     
|Unrealized gain (loss) on derivative contracts [5]                                        |                                                                            |   | 23,573   |          |      |   | (16,661 | )       |   |  |        |       
|Unrealized foreign exchange gain on translation
of self-sustaining foreign operations     |                                                                            |   | 546      |          |      |   | 940     |         |   |  |        |       
|                                                                                          |                                                                            |   |          |          |      |   |         |         |   |  |         |       
|Comprehensive income (loss) using U.S. GAAP                                               |                                                                            |   | (301,262 | )        |      |   | 101,296 |         |   |  | 145,604 |       
|                                                                                          |                                                                            |   |          |          |      |   |         |         |   |  |         |       

|                                                                           |  |      |       |      |  |      |      |  |  |  |      | 
|-------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ---- |  |  |  | ---- | 
|                                                                           |  | 2002 |       | 2001 |  | 2000
|                                                                           |  | $    |       | $    |  | $   
|                                                                           |  |      |       |      |  |     
|Net income (loss) per share prior to cumulative
catch-up using U.S. GAAP   |  |      |       |      |  |      |      |  |  |  |      | 
|Basic                                                                      |  |      | (4.01 | )    |  |      | 3.03 |  |  |  |     | 
|Diluted                                                                    |  |      | (4.01 | )    |  |      | 3.01 |  |  |  |     | 
|Net income (loss) per share related to cumulative
catch-up using U.S. GAAP |  |      |       |      |  |      |      |  |  |  |      | 
|Basic                                                                      |  |      | (3.74 | )    |  |      | 0.11 |  |  |  |     | 
|Diluted                                                                    |  |      | (3.74 | )    |  |      | 0.11 |  |  |  |     | 
|Net income (loss) per share using U.S. GAAP                                |  |      |       |      |  |      |      |  |  |  |      | 
|Basic                                                                      |  |      | (7.75 | )    |  |      | 3.14 |  |  |  | 4.83 | 
|Diluted                                                                    |  |      | (7.75 | )    |  |      | 3.12 |  |  |  | 4.76 | 
|Comprehensive income (loss) per share using
U.S. GAAP                      |  |      |       |      |  |      |      |  |  |  |      | 
|Basic                                                                      |  |      | (7.07 | )    |  |      | 2.44 |  |  |  | 4.36 | 
|Diluted                                                                    |  |      | (7.07 | )    |  |      | 2.42 |  |  |  | 4.30 | 
|                                                                           |  |      |       |      |  |      |      |  |  |  |      | 

28



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##### 



Balance sheet items using U.S. GAAP

|                                                       |  |          |           |      |  |          |           |      |  |  |           |  |  |  |           | 
|------------------------------------------------------ |  | -------- | --------- | ---- |  | -------- | --------- | ---- |  |  | --------- |  |  |  | --------- | 
|                                                       |  | 2002     |           | 2001
|                                                       |  |          |           |     
|                                                       |  | Canadian |           | U.S. |  | Canadian |           | U.S.
|                                                       |  | GAAP     |           | GAAP |  | GAAP     |           | GAAP
|[thousands of Canadian dollars]                        |  | $        |           | $    |  | $        |           | $   
|                                                       |  |          |           |      |  |          |           |     
|Investments and other assets [3]                       |  |          | 84,755    |      |  |          | 87,576    |      |  |  | 319,754   |  |  |  | 312,490   | 
|Film investments [6]                                   |  |          | 140,601   |      |  |          | 140,601   |      |  |  | 146,583   |  |  |  | 160,056   | 
|Deferred charges [1]                                   |  |          | 37,486    |      |  |          | 23,140    |      |  |  | 36,947    |  |  |  | 14,822    | 
|Broadcast licenses, other intangibles
and goodwill [6] |  |          | 1,263,967 |      |  |          | 1,259,213 |      |  |  | 1,353,771 |  |  |  | 1,349,017 | 
|Deferred credits [2]                                   |  |          | 76,631    |      |  |          | 57,181    |      |  |  | 56,244    |  |  |  | 52,982    | 
|Securitized borrowing [5]                              |  |          |          |      |  |          |          |      |  |  | 89,500    |  |  |  | 90,000    | 
|Interest rate swap liability [5]                       |  |          |          |      |  |          | 11,318    |      |  |  |          |  |  |  | 5,067     | 
|Future tax liability                                   |  |          | 150,177   |      |  |          | 148,092   |      |  |  | 150,942   |  |  |  | 148,258   | 
|Shareholders equity                                   |  |          | 851,015   |      |  |          | 844,952   |      |  |  | 1,167,607 |  |  |  | 1,147,315 | 
|                                                       |  |          |           |      |  |          |           |      |  |  |           |  |  |  |           | 

The cumulative effect of these adjustments on shareholders equity is as
follows:

|                                                     |                                                                                       |   |        |        |      |  |         |         |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------- | - | ------ | ------ | ---- |  | ------- | ------- | -
|                                                     |                                                                                       |   | 2002   |        | 2001
|[thousands of Canadian dollars]                      |                                                                                       | $ |        | $     
|                                                     |                                                                                       |   |        |       
|Deferred charges [1] and [5]                         |                                                                                       |   | (8,608 | )      |      |  | (7,570  | )      
|Foreign exchange gains [2]                           |                                                                                       |   |       |        |      |  | 2,517   |        
|Equity in earnings of investees [3]                  |                                                                                       |   | 4,758  |        |      |  | 4,758   |        
|Adoption of SOP 00-2 [6]                             |                                                                                       |   | (4,754 | )      |      |  | 4,608   |        
|Accumulated other comprehensive income:              |                                                                                       |   |        |        |      |  |         |        
|                                                     | Unrealized losses on investments [4]                                                  |   |        | (4,371 | )    |  |         | (9,329  | )
|                                                     | Unrealized gain (loss) on derivative contracts [5]                                    |   |        | 6,912  |      |  |         | (15,276 | )
|                                                     | Unrealized foreign exchange gain on translation
of self-sustaining foreign operations |   |        | 1,486  |      |  |         | 940     |  
|                                                     |                                                                                       |   |        |        |      |  |         |        
|Total cumulative adjustments on shareholders equity |                                                                                       |   | (4,577 | )      |      |  | (19,352 | )      
|                                                     |                                                                                       |   |        |        |      |  |         |        

Areas of material difference between Canadian GAAP and U.S. GAAP and their
impact on the consolidated financial statements are as follows:



| | [1] |  | Deferred charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Start-up costs of new specialty programming networks and costs associated
with reformatting radio stations are deferred and amortized under Canadian
GAAP. Under U.S. GAAP, these costs are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | [2] |  | Foreign exchange gains (losses)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |     |  | Foreign exchange gains (losses) on translation of long-term debt are
deferred and not amortized as a result of there being an effective hedge
in place under Canadian GAAP. Under U.S. GAAP, gains (losses) are to be
included in income when incurred.                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | [3] |  | Equity in earnings of investees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |     |  | The earnings of investees determined under Canadian GAAP have been
adjusted to reflect U.S. GAAP. Under Canadian GAAP, the investment in
Nelvanas 20% interest in TELETOON Canada Inc. in fiscal 2001 and WIC in
fiscal 2000 were accounted for using the cost method of accounting until
CRTC approval was received for the transactions. When the Company
received CRTC approval, the amount in the accounts under the cost method
became the basis for the purchase price allocation and equity accounting
commenced. Under U.S. GAAP, equity accounting for the investments was
done retroactively to the date the Company first acquired shares in
Nelvana and WIC.

29



---



##### 





| | [4] |  | Unrealized gains (losses) on investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Under U.S. GAAP, equity securities having a readily determinable fair
value and not classified as trading securities are classified as
available-for-sale securities and reported at fair value, with
unrealized gains and losses included in comprehensive income and reported
as a separate component of shareholders equity net of related deferred
income taxes. Under Canadian GAAP, these investments are carried at cost
and written down only when there is evidence that a decline in value that
is other than temporary has occurred.                                                                                                         
|
| | [5] |  | Derivative instruments and hedging activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | Under U.S. GAAP, all derivative instruments are to be recorded on the
balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the
hedged assets, liabilities, or firm commitments through income or deferred
in other comprehensive income until the hedged item is recognized in
income.                                                                                                                                       
|
| | [6] |  | Adoption of SOP 00-2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | Under Canadian GAAP, adoption of a new accounting standard is applied
retroactively including a revision to the purchase price equation for the
Nelvana acquisition. Under U.S. GAAP, the adoption of SOP 00-2 is
reflected in the statement of income of the adoption year. As such, under
U.S. GAAP the effect of the adoption of SOP 00-2 is reflected as a
cumulative catch-up adjustment in income of fiscal 2002. The increased
amortization from adopting these accounting policies retroactively under
Canadian GAAP has therefore been added back in the determination of pro
forma net income under U.S. GAAP for the year ended August 31, 2001.
|
| |     |  | Accounting for SOP 00-2 also gives rise to a balance sheet difference.
Under Canadian GAAP the adjustment to broadcast licenses, other
intangibles and goodwill is recorded retroactively, with an adjustment to
opening consolidated retained earnings which therefore impacts the 2001
consolidated balance sheet. Under U.S. GAAP, the adjustment is applied as
a cumulative adjustment to the current years consolidated income which
therefore impacts the broadcast licenses, other intangibles and goodwill
balance in 2002.                                                                                                                       
|
| | [7] |  | Adoption of FAS 142                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |     |  | Under Canadian GAAP, adoption of a new accounting standard is applied
retroactively as an adjustment to retained earnings. Under U.S. GAAP, the
adoption of FAS 142 is reflected in the statement of income of the
adoption year. As such, under U.S. GAAP, the effect of the adoption of
FAS 142 is reflected as a cumulative catch-up adjustment in income of
fiscal 2002.                                                                                                                                                                                                                                                                               



|[b] |  | Consolidated statements of cash flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Under U.S. GAAP, cash flow from operations per share cannot be reported in
the consolidated statements of cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|[c] |  | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | The Company applies Accounting Principles Board Opinion No. 25 in accounting
for common share options granted to employees and officers for U.S. GAAP
purposes. Had compensation expense been determined on the basis of the
estimated fair values of the options granted in accordance with Financial
Accounting Standards Board Statement No. 123, Accounting for Stock-Based
Compensation, the net loss for the year ended August 31, 2002 would have
increased by $7,243,000 to $173,280,000, or a loss of $4.07 per share [2001 -
would have decreased by $5,305,000 to $125,081,000, or earnings of $2.99 per
share].

30



---



##### 





| |  | The fair value of stock options granted in fiscal 2002 was $11,831,000 [2001
- $26,570,000] and is estimated as at the grant date using the Black-Scholes
option pricing model, using the following assumptions:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |         |      |  
|----------------------- |  | ------- | ---- | -
|Dividend yield          |  |         | 0.0  | %
|Risk-free interest rate |  |         | 4.88 | %
|Expected life           |  | 5 years
|Expected volatility     |  |         | 42   | %
|                        |  |         |      |  

[d] Recent accounting pronouncements



| | [i]  |  | Impairment of long-lived assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |      |  | In August 2001, the Financial Accounting Standards Board [FASB] approved
Statement No. 144 [FAS 144], Impairment of Long-Lived Assets. FAS 144
requires that in cases where undiscounted expected cash flows associated
with long-lived assets are less than their carrying value, an impairment
provision is recognized in an amount by which the carrying value exceeds
the estimated fair value of such assets. FAS 144 will be applicable for
fiscal years beginning after December 15, 2001. The Company has not yet
determined the impact that the adoption of this pronouncement will have on
its consolidated financial statements.                  
|
| | [ii] |  | Accounting for costs associated with exit or disposal activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |      |  | In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, Accounting for Costs Associated with Exit or Disposal
Activities [SFAS 146], which addresses financial accounting and
reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force [EITF] Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity [including Certain Costs Incurred in a Restructuring].                                                                                                                                                        
|
| |      |  | SFAS 146 requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. Under
EITF 94-3, a liability for an exit cost as generally defined in EITF 94-3
was recognized at the date of an entitys commitment to an exit plan. A
fundamental conclusion reached by the FASB in SFAS 146 is that an entitys
commitment to a plan, by itself, does not create an obligation that meets
the definition of a liability in FASB Statement No. 6. The provisions of
SFAS 146 are effective for exit or disposal activities that are initiated
after December 31, 2002 with early application encouraged.
|
| |      |  | The Company has not estimated the impact that this pronouncement will have
on its consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

26. GOVERNMENT FINANCING AND ASSISTANCE

Revenues include $1,893,000 [2001
- $1,800,000] of production financing
obtained from government programs. This financing provides a supplement to a
production series Canadian license fees and is not repayable. As well,
revenues include $1,224,000 [2001 - $791,000] of government grants relating to
the marketing of books in both Canada and international markets. The majority
of the grants is repayable if the average profit margin for the three-year
period following receipt of the funds equals or is greater than 10%.

31



---



##### 



27. COMMITMENTS

The Company has various long-term operating lease agreements for the use of
transmission facilities and premises in each of the next five years and
thereafter as follows:

|                                |  |   |         | 
|------------------------------- |  | - | ------- | 
|[thousands of Canadian dollars] |  | $
|                                |  |  
|2003                            |  |   | 17,657  | 
|2004                            |  |   | 16,654  | 
|2005                            |  |   | 13,334  | 
|2006                            |  |   | 12,286  | 
|2007                            |  |   | 11,897  | 
|Thereafter                      |  |   | 39,772  | 
|                                |  |   |         | 
|                                |  |   | 111,600 | 
|                                |  |   |         | 

Acquisition commitments are outlined in note 3 to these consolidated financial
statements. Rental expenses recognized in operating, general and
administrative expenses totalled approximately $10,460,000 [2001  $10,433,000;
2000  $3,556,000].

28. RELATED PARTY TRANSACTIONS

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

|                                                          |                                                     |   |        |        |      |  |        |       |  
|--------------------------------------------------------- | --------------------------------------------------- | - | ------ | ------ | ---- |  | ------ | ----- | -
|                                                          |                                                     |   | 2002   |        | 2001
|[thousands of Canadian dollars]                           |                                                     | $ |        | $     
|                                                          |                                                     |   |        |       
|Revenues
Cable service subscriber fees and advertising    |                                                     |   | 96,511 |        |      |  | 68,140 |      
|                                                          | Sales representation fees                           |   |        | 1,923  |      |  |        | 1,430 |  
|                                                          | Production and distribution                         |   |        | 5,352  |      |  |        | 4,462 |  
|                                                          | Other                                               |   |        | 600    |      |  |        | 629   |  
|Expenses                                                  |                                                     |   |        |        |      |  |        |      
|                                                          | Digital music subscriber fees                       |   |        | 1,933  |      |  |        | 3,264 |  
|                                                          | Cable and satellite system distribution access fees |   |        | 5,153  |      |  |        | 6,902 |  
|                                                          | Administrative service fees                         |   |        | 1,824  |      |  |        | 2,049 |  
|                                                          |                                                     |   |        |        |      |  |        |      
|Amounts due from (to) affiliated companies are as follows |                                                     |   |        |        |      |  |        |      
|                                                          | Cable service subscriber fees and advertising       |   |        | 15,962 |      |  |        | 9,431 |  
|                                                          | Sales representation fees                           |   |        | 959    |      |  |        | 713   |  
|                                                          | Production and distribution                         |   |        | 4,588  |      |  |        | 3,738 |  
|                                                          | Other                                               |   |        | 184    |      |  |        | 88    |  
|                                                          | Digital music subscriber fees                       |   |        |       |      |  |        | (503  | )
|                                                          | Cable and satellite system distribution access fees |   |        | (447   | )    |  |        | (654  | )
|                                                          | Program rights payable                              |   |        |       |      |  |        | (907  | )
|                                                          | Administrative service fees                         |   |        | (49    | )    |  |        | (206  | )
|                                                          |                                                     |   |        |        |      |  |        |      

Included in other investments [note 8]are loans of $2,678,000 made to certain
executive officers of the Company for housing or investment purposes. The
loans are secured by charges on the officers personal residence and/or by
related investment. The loans are non-interest bearing and are due between
April 2, 2007 and October 31, 2012.

32



---



##### 



29. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

The comparative consolidated financial statements have been reclassified from
statements previously presented to conform to the presentation of the 2002
consolidated financial statements.

33