**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      40-F**




o
            Registration
                statement pursuant to Section 12 of the Securities Exchange Act of
                1934orþ
            Annual
                report pursuant to Section 13(a) or 15(d) of the Securities Exchange
                Act of 1934




**For
                the Fiscal year ended:**
            August
                31, 2006**Commission
                File number:**
            001-14992





**CORUS
      ENTERTAINMENT INC.**





(Exact
      name of registrant as specified in its charter)




**Canada**
            **4832,
                4833**
            **Not
                Applicable**(Province
                or other jurisdiction of incorporation or organization)
            (Primary
                standard industrial classification code number, if
                applicable)
            (I.R.S.
                employer identification number, if
                applicable)





**BCE
      Place**


**181
      Bay Street, Suite 1630**


**P.O.
      Box 767**


**Toronto,
      Ontario**


**M5J
      2T3 Canada**


**(416)
      642-3770**





(Address
      and telephone number of registrant's principal executive office)




**CT
      Corporation System**


**111
      8** **th** **Avenue, 13** **th** **Floor**


**New
      York, New York 10011**


**(212)
      894-8700**





(Name,
      address and telephone number of agent for service in the United
      States)




Securities
      registered pursuant to Section 12(b) of the Act:




Title of each class
            Name
                of each exchange on which registered:**Class B Non-Voting
              Shares**
            **New
                York Stock Exchange**




Securities
      registered or to be registered pursuant to Section 12(g) of the Act: **None**


Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act: **None**




For
      annual reports, indicate by check mark the information filed with this
      form:




þAnnual Information Form
            þAudited Annual Financial Statements




Indicate
      the number of outstanding shares of each of the issuer’s classes of capital or
      common stock as of the close of the period covered by the annual
      report:




**Class
                A Voting Shares**
            **1,723,929
                As of August 31, 2006****Class
                B Non-Voting Shares**
            **40,281,529
                As of August 31, 2006**




Indicate
      by check mark whether the registrant by filing the information contained in
      this
      form is also thereby


furnishing
      the information to the Commission pursuant to Rule12g3-2(b) under the Securities
      Exchange


Act
      of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the file number
      assigned to the


registrant
      in connection with such rule.




Yeso
            Noþ




Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13(d) or 15(d)


of
      the Exchange Act during the proceeding  12 months (or for such shorter
      period that the registrant has been


required
      to file such reports); and (2) has been subject to such filing requirements
      in
      the past 90 days.




Yesþ
            Noo
















































**RENEWAL
      ANNUAL INFORMATION FORM**





**Fiscal
      year ended August 31, 2006**











**Corus
      Entertainment Inc.**


























**October
      31, 2006**














**RENEWAL
      ANNUAL INFORMATION FORM - CORUS ENTERTAINMENT INC.**




**Table
                of Contents****FORWARD-LOOKING
                STATEMENTS**
            **3****INCORPORATION
                OF CORUS**
            **3**Organization
                and Name
            3Subsidiaries
                and Affiliates
            4**GENERAL
                DEVELOPMENT OF THE BUSINESS**
            **5**Historical
                Background
            5Significant
                Acquisitions and Divestitures
            5**DESCRIPTION
                OF THE BUSINESS**
            **6**Radio
            6Description
                of the Industry
            6Business
                Overview
            7Operating
                Strategy
            9Competition
                Conditions
            9Television
            10Description
                of the Industry
            10Business
                Overview
            12Operating
                Strategy
            13Competition
                Conditions
            15Content
            16Description
                of the Industry
            16Business
                Overview
            16Operating
                Strategy
            18Competition
            18**ADDITIONAL
                INFORMATION CONCERNING CORUS’ BUSINESSES**
            **19**Intangible
                Properties
            19Seasonality
                and Cycles
            19Economic
                Dependence
            20Environmental
            20Employees
            20Foreign
                Operations
            20Lending
            20Bankruptcy
            21Reorganizations
            21Social
                or Environmental Policies
            21Risk
                Factors
            21**CANADIAN
                COMMUNICATIONS INDUSTRY - REGULATORY ENVIRONMENT**
            21Canadian
                Radio-television and Telecommunications Commission
            21Industry
                Canada
            22Restrictions
                on Non-Canadian Ownership
            22Broadcasting
                Services
            22Radio
                Undertakings
            23Specialty
                and Premium Television Undertakings
            24Local
                Television Undertakings
            24Pay
                Audio Services
            25Cable
                Advertising Services
            25Canadian
                Content Requirement for Broadcasters
            25Film
                and Television Tax Credits and Grants
            25International
                Treaty Co-Productions
            25Competition
                Act Requirements
            26Investment
                Canada Act
            26Copyright
                Act Requirements
            26**CAPITAL
                STRUCTURE**
            **27**Description
                of Capital Structure
            27Share
                Constraints
            31Ratings
            31





**2**








**MARKET
                FOR SECURITIES**
            **31**Marketplaces
            31Trading
                Price and Volume
            32**DIVIDEND
                POLICY**
            **33****DIRECTORS
                AND OFFICERS**
            **34****AUDIT
                COMMITTEE**
            **35**Charter
            35Composition
                of the Audit Committee
            36Principal
                Accounting Fees and Services - Independent Auditors
            36**LEGAL
                AND REGULATORY**
            **37****INTERESTS
                OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS**
            **38****TRANSFER
                AGENTS**
            **38****MATERIAL
                CONTRACTS**
            **38**Senior
                Secured Credit Facility
            38Trust
                Indenture for 83⁄4% Senior Subordinated Notes due 2012
            39Cross
                Currency Interest Rate Swaps
            39**ADDITIONAL
                INFORMATION**
            **40****CORPORATE
                GOVERNANCE PRACTICES**
            **41****SCHEDULE
                A - AUDIT COMMITTEE CHARTER**




**FORWARD-LOOKING
        STATEMENTS**
 
 *To
        the extent any statements made in this report contain information that is
        not
        historical; these statements are forward-looking statements within the meaning
        of applicable securities laws. These forward-looking statements related to,
        among other things, our objectives, goals, strategies, intentions, plans,
        estimates and outlook and can generally be identified by the use of the words
        such as "believe", "anticipate", "expect", "intend", "plan", "will", "may"
        and
        other similar expressions. In addition, any statements that refer to
        expectations, projections or other characterizations of future events or
        circumstances are forward-looking statements. Although Corus believes that
        the
        expectations reflected in such forward-looking statements are reasonable,
        such
        statements involve risks and uncertainties and undue reliance should not
        be
        placed on such statements. Certain material factors or assumptions are applied
        in making forward-looking statements and actual results may differ materially
        from those expressed or implied in such statements. Important factors that
        could
        cause actual results to differ materially from these expectations include,
        among
        other things: our ability to attract and retain advertising revenues; audience
        acceptance of our television programs and cable networks; our ability to
        recoup
        production costs, the availability of tax credits and the existence of
        co-production treaties; our ability to compete in any of the industries in
        which
        we do business; the opportunities (or lack thereof) that may be presented
        to and
        pursued by us; conditions in the entertainment, information and communications
        industries and technological developments therein; changes in laws or
        regulations or the interpretation or application of those laws and regulations;
        our ability to integrate and realize anticipated benefits from our acquisitions
        and to effectively manage our growth; our ability to successfully defend
        ourselves against litigation matters arising out of the ordinary course of
        business; and changes in accounting standards. Additional information about
        these factors and about the material assumptions underlying such forward-looking
        statements may be found in this Annual Information Form. Corus cautions that
        the
        foregoing list of important factors that may affect future results is not
        exhaustive. When relying on our forward-looking statements to make decisions
        with respect to Corus, investors and others should carefully consider the
        foregoing factors and other uncertainties and potential events. Unless otherwise
        required by applicable securities laws, we disclaim any intention or obligation
        to publicly update or revise any forward-looking statements whether as a
        result
        of new information, events or circumstances that arises after the date thereof
        or otherwise.*
 
 **INCORPORATION
        OF CORUS**
 
 **Organization
        and Name**
 
 Corus
        Entertainment Inc. (“Corus” or the “Company”) is a Canadian based media and
        entertainment company with interests in radio broadcasting, television
        broadcasting, and the production and distribution of children’s media content.
        The Company was originally incorporated under the *Canada
        Business Corporations Act* as 3470652 Canada Inc. on March 3, 1998. Corus amended its articles to change
        its name to Corus Entertainment Inc. on May 28, 1999 and subsequently amended
        its articles on August 26, 1999 to create additional classes of shares.
  Corus
        commenced operations on September 1, 1999. On that date, pursuant to a statutory
        plan of arrangement (the “Arrangement”), Corus was separated from Shaw
        Communications Inc. (“Shaw”) as an independently operated, publicly traded
        company, and assumed ownership of Shaw’s radio broadcasting, specialty
        television programming, digital audio services and cable advertising services
        businesses, as well as certain investments held by Shaw.
 
  **3**
  Corus
        commenced trading on the Toronto Stock Exchange (CJR.B) on September 3, 1999
        and
        on the New York Stock Exchange (CJR) on May 10, 2000.
 
 Corus’
        registered office and an executive office is located at 501, 630 - 3 rd Avenue S.W., Calgary, Alberta, T2P 4L4. A second executive office is located
        at
        BCE Place, Bay-Wellington Tower, Suite 1630, 181 Bay Street, P.O. Box 767,
        Toronto, Ontario, M5J 2T3.
 
 **Subsidiaries
        and Affiliates**
 
 The
        following table describes the significant operating subsidiaries and affiliates
        of Corus as at August 31, 2006, their jurisdiction of incorporation or
        organization, the percentage of voting and non-voting securities owned by
        Corus
        directly or indirectly and the nature of the business in which each subsidiary
        or affiliate is engaged.
 **NAME**
              
              **JURISDICTION
                  -**
                **INCORPORATION/**
                **ORGANIZATION**
              
              **%**
                **OWNED**
                **VOTING**
              
              **%**
                **OWNED**
                **NON-**
                **VOTING**
              
              **NATURE
                  OF BUSINESS****Radio**
                Corus
                  Radio Company
                Metromedia
                  CMR Broadcasting Inc.
                Corus
                  Premium Television Ltd.
                591989
                  B.C. Ltd.
                591991
                  B.C. Ltd.
                CKIK-FM
                  Limited
                United
                  Broadcast Sales Limited
              
              Nova
                  Scotia
                Canada
                Canada
                British
                  Columbia
                British
                  Columbia
                Alberta
                Ontario
              
              100%
                100%
                100%
                100%
                100%
                100%
                100%
              
              100%
                N/A
                100%
                100%
                100%
                N/A
                N/A
              
              Radio
                  Broadcasting
                Radio
                  Broadcasting
                Radio
                  Broadcasting
                Radio
                  Broadcasting
                Radio
                  Broadcasting
                Radio
                  Broadcasting
                50%
                  Interest in Canadian Broadcast Sales Partnership (a Radio Airtime
                  Sales
                  Partnership)**Television**
                YTV
                  Canada, Inc.
                YTV
                  Productions Inc.
                W
                  Network Inc.
                Country
                  Music Television Ltd.
                591987
                  B.C. Ltd.
                Movie
                  Central Ltd.
                Encore
                  Avenue Ltd.
                Corus
                  Audio & AdvertisingServices
                  Ltd.
                Max
                  Trax Music Ltd.
                
                Telelatino
                  Network Inc.
                TELETOON
                  Canada Inc.
              
              Canada
                Ontario
                Canada
                British
                  Columbia
                British
                  Columbia
                Alberta
                Alberta
                Alberta
                British
                  Columbia
                
                Ontario
                Canada
              
              100%
                100%
                100%
                90%
                100%
                100%
                100%
                100%
                100%
                
                50.5%
                40%
              
              100%
                N/A
                100%
                68.5%
                100%
                N/A
                N/A
                N/A
                N/A
                
                N/A
                N/A
              
              CRTC
                  License Holder (YTV and Treehouse TV)
                Television
                  Production
                CRTC
                  License Holder (W Network)
                CRTC
                  License Holder (CMT)
                CRTC
                  License Holder (Ontario Television)
                CRTC
                  License Holder (Premium Television)
                CRTC
                  License Holder (Premium Television)
                Advertising
                  Services (Corus Custom Networks)
                CRTC
                  License Holder - Residential Pay Audio Services (Max Trax)
                
                CRTC
                  License Holder (TLN Television)
                CRTC
                  License Holder (TELETOON)**Content**Nelvana
                  Limited
                Nelvana
                  Marketing Inc.
                Nelvana
                  Enterprises Inc.
                Nelvana
                  Communications, Inc.
                Nelvana
                  International Limited
                Nelvana
                  Enterprises (U.K.) Limited
                Kids
                  Can Press Limited
              
              Ontario
                Ontario
                Ontario
                United
                  States
                Ireland
                United
                  Kingdom
                Ontario
              
              100%
                100%
                100%
                100%
                100%
                100%
                100%
              
              100%
                N/A
                N/A
                N/A
                N/A
                N/A
                N/A
              
              Animated
                  Television Program Production
                Merchandising
                  and Consumer Products
                Sales
                  and Distribution of Television Programs
                Sales
                  and Development of Television Programs
                Sales
                  and Distribution of Television Programs
                Sales
                  and Distribution of Television Programs
                Children’s
                  Book Publishing
 N/A
        - subsidiary has no non-voting shares outstanding
  **4**
  
 **GENERAL
        DEVELOPMENT OF THE BUSINESS**
 
 Corus
        is an integrated Canadian media and entertainment company with an established
        global distribution network for the programming the Company produces. Corus
        has
        strong established brands in each of its businesses: Radio, Television, and
        Content. The principal assets consist of 51 radio stations; a variety of
        specialty television networks focused on children and adult genres; western
        Canada’s premium television services; Nelvana Limited, an international producer
        and distributor of children’s programming and merchandise products; Kids Can
        Press, the largest Canadian-owned English language publisher of children’s
        books; three broadcast television stations; a cable advertising service (Corus
        Custom Networks); and Max Trax, a digital audio service.
 
 **Historical
        Background**
 
 Certain
        of the businesses of Corus were operated by Shaw prior to September 1, 1999.
        On
        that date, the shareholders of Shaw approved the Arrangement which had the
        effect of creating Corus as an independently operated, publicly traded company.
        Under the Arrangement, the assets of Shaw were separated into two distinct,
        publicly traded corporations: one continued under the name Shaw Communications
        Inc. and the other one became Corus Entertainment Inc. Shaw continues to
        carry
        on Shaw’s cable television, Internet access, telecommunications and satellite
        businesses. Corus now owns and operates the media businesses which had
        previously been carried on by Shaw.
 
 Pursuant
        to the Arrangement, Class A shareholders of Shaw received one Class A
        participating share (“Shaw Class A Share”) of Shaw and one-third of a Class A
        participating share of Corus (“Corus Class A Voting Share”) for each Shaw Class
        A Share previously held by them. Class B non-voting shareholders of Shaw
        received one Class B non-voting participating share of Shaw (“Shaw Class B
        Share”) and one-third of one Class B non-voting participating share of Corus
        (“Corus Class B Non-Voting Share”) for each Shaw Class B Share previously held
        by them.
 
 Pursuant
        to the Arrangement, 1,907,665 Corus Class A Voting Shares and 28,492,618
        Corus
        Class B Non-Voting Shares were issued. On September 3, 1999, the Corus Class
        B
        Non-Voting Shares were listed and posted for trading on the Toronto Stock
        Exchange (CJR.B) and commenced trading at $18.90 per share. On May 10, 2000,
        Corus Class B Non-Voting Shares were listed for trading on the New York Stock
        Exchange (CJR) and commenced trading at US $26.125 per share.
 
 **Significant
        Acquisitions and Divestitures**
 
 Since
        September 1, 1999, Corus has become one of Canada’s leading media and
        entertainment companies and one of the largest radio broadcasters and specialty
        and premium television operators in Canada. Corus’ radio and television
        divisions have expanded through a number of acquisitions. As well, Corus
        expanded its business to include production and distribution of television
        programs, merchandise licensing and publishing. The most significant
        acquisitions and divestitures in the past three fiscal years include the
        following:
  ***Sale
        of Locomotion***
 
 On
        January 18, 2005, the Company sold its 50% share in the assets of the Locomotion
        Channel to a wholly-owned subsidiary of Sony Pictures Inc. for an aggregate
        $6,200,000 purchase price.
 
 ***Astral/Corus
        Radio Asset Exchange***
  On
        May 26, 2004 the Company and Astral Media Inc. (“Astral”) entered into an
        agreement to swap certain assets, being radio stations located in the Province
        of Quebec. The transaction was reviewed and approved by the Canadian
        Radio-television and Telecommunications Commission (“CRTC”) on January 21, 2005.
        See *Broadcasting
        Decision CRTC 2005-15* .
        A labour union associated with one of the swapped stations appealed the decision
        to the federal Cabinet pursuant to the appeal provisions in the *Broadcasting
        Act* .
        Cabinet released its decision on April 21, 2005, finding that the CRTC’s
        decision was sound and met the objectives of the *Broadcasting
        Act* .
        As a result the transaction closed on May 29, 2005.
   **5**
  ***Red
        Deer Radio Sale***
  The
        Company entered into an agreement in January 2005 with Newfoundland Capital
        Corporation (“NewCap”) to sell two radio stations located in Red Deer, Alberta.
        On August 10, 2005 the CRTC approved the application to transfer the Red
        Deer
        assets (CIZZ-FM and CKGY-FM) to NewCap. *See
        Broadcasting Decision CRTC 2005-390.* The
        transaction was closed on September 25, 2005.
 
 ***TELETOON
        Acquisition***
  On
        July 13, 2006, Corus and Astral announced that they had reached an agreement
        to
        purchase the remaining 20% of TELETOON network from Cookie Jar Entertainment.
        The deal, which received CRTC approval on August 28, 2006, will give both
        Corus
        and Astral Media a 50% ownership in the network. The purchase price for Cookie
        Jar Entertainment’s 20% stake is approximately $96,000. The transaction was
        completed subsequent to the end of fiscal 2006.
 
 **DESCRIPTION
        OF THE BUSINESS**
 
 Corus’
        principal business activities are conducted through three operating groups:
        Radio, Television and Content, as described below.
 
 **RADIO**
 
 **Description
        of the Industry**
 The
        Canadian radio industry has historically been fragmented, with most stations
        being owned locally and oriented towards local advertisers and markets. In
        April
        1998, the CRTC adopted a new radio multiple ownership policy. In any market
        where there are at least eight commercial radio stations in English or French,
        a
        single owner can own as many as two AM and two FM stations in that language.
        Since then, there has been a significant amount of consolidation of ownership
        within the radio industry.
 
 According
        to the CRTC, as of August 31, 2005, there were 554 commercial radio stations
        in
        Canada of which approximately 68%  were
        FM stations and 32% were AM stations.
 
 The
        industry is dependent upon advertising revenues for economic performance
        and
        growth. According to the CRTC, the industry generated over $1.33 billion
        in
        revenues in 2005. Radio stations compete for advertising dollars with other
        radio stations and many other forms of media. According to industry sources,
        the
        radio industry captures approximately 14% of an estimated $9 billion spent
        on
        advertising in Canada, compared to the newspaper and television industries,
        which capture approximately 38%  and
        31% of the total, respectively. According to the CRTC, in 2005, local
        advertising and national advertising represented 76% and 24%, respectively,
        of
        total radio advertising revenues.
 
 Radio
        is an efficient, cost-effective medium for advertisers to reach specific
        demographic groups. Stations are typically classified by their on-air format,
        such as classic rock, country, adult contemporary, oldies and news/talk.
        A
        station’s format and style of presentation enables it to target certain
        demographics. By capturing a specific share of a market’s radio listening
        audience, with particular concentration in a targeted demographic market,
        a
        station is able to market its broadcasting time to advertisers seeking to
        reach
        that specific audience demographic. Advertisers and stations utilize data
        published by audience measuring services, such as Bureau of Broadcast
        Measurement (“BBM”), to estimate how many people within particular geographical
        and demographic markets listen to specific stations. The number of
        advertisements that can be broadcast without jeopardizing listening levels,
        and
        the resulting ratings, is determined primarily by the format of a particular
        station and the local competitive environment. The number of advertisements
        that
        can be broadcast is not regulated.
 
 Radio
        broadcasters are continuing to see the importance of new media outlets to
        work
        in tandem with the traditional radio stations. There is a growing need to
        ensure
        that strong local websites exist for each station to offer advertisers an
        opportunity to complement on-air campaigns with an interactive element not
        previously possible through radio streaming alone. A successful combination
        of
        on-air and on-line streaming will lead to increased brand awareness for the
        radio broadcaster and the advertiser and should translate to a rise in ratings
        and advertising revenues.
 
  **6**
  The
        industry experienced new methods of distribution this past year. Three licenses
        were approved by the CRTC in 2004 to distribute digital radio signals across
        Canada. Two of these licenses were launched in 2005 and now distribute digital
        signals via satellite. The licensees charge a monthly subscriber fee varying
        from 12.95 to $15.95 per month. Early results indicate some minor penetration
        in
        the market.
 
 In
        fiscal 2005 the industry experienced significant charges to the royalties
        which
        commercial radio stations are required to pay. On October 14, 2005, the
        Copyright Board of Canada issued a decision settling these new amounts. The
        decision provided for increases of approximately 30% in the amount of royalties
        payable to the Society of Composers, Authors and Music Publishers of Canada
        (“SOCAN”) and the Neighbouring Rights Collective of Canada (“NRCC”) under Tariff
        1A. These increases were retroactive to January 1, 2003.
 
 **Business
        Overview**
 Corus’
        radio group (“Corus Radio”) comprises 51 radio stations situated primarily in
        nine of the 10 largest Canadian markets by population and in the densely
        populated area of southern Ontario.
 
 Corus
        Radio is the largest radio operator in Canada in terms of audience reach
        and
        tune-in. According to BBM’s Survey 1 2006 (“S1 ’06”), Corus led the industry
        with a market share of 29.7% in terms of audience reach, compared to its
        closest
        competitors, Standard Radio and Rogers Media, which had market shares of
        22.2%
        and 18.6%, respectively, in terms of reach, during that same period. Corus
        Radio
        reaches one in three Canadians. In terms of audience tuning, Corus Radio’s share
        was 46% larger than its next competitor.
 
 Corus
        Radio operates stations primarily in urban centres in Canada, including
        Montreal, Quebec City, Toronto, Hamilton/Burlington, Winnipeg, Edmonton,
        Calgary
        and Vancouver, and in the densely populated area of southern Ontario. Corus
        Radio operates news/talk stations in nine **** out
        of Canada’s 10 largest markets by population (Vancouver, Calgary, Edmonton,
        Winnipeg, Hamilton, London, Toronto, Quebec City and Montreal). Corus is
        well
        positioned in the Toronto market through its three stations that focus on
        adults
        18 to 49: Q107, 102.1 The Edge and AM 640. According to BBM’s Survey 2 2006 (“S2
’06”), Q107 was the #1 station for M25-54 and the #2 station for A25-54. 102.1
        The Edge was the #1 station with A18-34. As well, according to the S1 ’06 and S2
’06, Corus’ news/talk stations were the most listened to AM stations in Calgary,
        Edmonton, Vancouver and Winnipeg, measured by audience tuning.
 
 Corus
        Radio’s primary method of distribution is over-the-air, analog radio
        transmission. Each radio station’s content is available to audiences through
        traditional analog radio receivers at the particular station’s licensed
        frequency on the AM or FM band. The following table sets out particulars
        of
        Corus’ radio stations as at October 31, 2006:
 **Location**
              **Call
                  letter**
              **Frequency**
              **Format**
              **Targeted**
                **demographic**
              **Rank
                  within**
                **demographic**
              **Audience**
                **share
                  within**
                **total
                  market****(1)****B.C.**Vancouver
              CKNW
                  (CKNW 980)
              AM
              News/Talk
              A35+
              1
              13.7CFOX
                  (The Fox)
              FM
              Active
                  Rock
              M18-34
              1
              19.6CFMI
                  (Rock 101)
              FM
              Classic
                  Rock
              M25-54
              1
              15.1CHMJ
                  (AM 730)
              AM
              Traffic
              M25-49
              12
              1.6**Alberta**Calgary
              CKRY
                  (Country 105)
              FM
              Country
              A35-54
              2
              13.5CHQR
                  (QR77)
              AM
              News/Talk
              A35+
              2
              12.9CFGQ
                  (Q107)
              FM
              Classic
                  Rock
              M25-49
              3
              12.3Edmonton
              CHED
                  (630 CHED)
              AM
              News/Talk
              A25+
              1
              14.6CKNG
                  (JOE)
              FM
              80’s
                  90’s
              A25-49
              1
              13.5CISN
                  (CISN Country)
              FM
              New
                  Country
              F35-54
              1
              15.6CHQT
                  (Cool 880)
              AM
              Oldies
              A35-54
              9
              4.5**Manitoba**Winnipeg
              CJOB
                  (CJOB 680)
              AM
              News/Talk/Sports
              A35+
              1
              21.8CJKR
                  (Power 97)
              FM
              Rock
              M18-34
              1
              22.3
 
  **7**
  
 **Location**
              **Call
                  letter**
              **Frequency**
              **Format**
              **Targeted**
                **demographic**
              **Rank
                  within**
                **demographic**
              **Audience**
                **share
                  within**
                **total
                  market****(1)****Ontario**Barrie
              CIQB
                  (B101)
              FM
              Hot
                  Adult Contemporary
              A25-54
              4
              8.3CHAY
                  (The New CHAY)
              FM
              Adult
                  Contemporary
              A25-54
              3
              9.1Burlington
              CING
                  (Country 95.3)
              FM
              Country
              A25-49
              3
              5.5Cambridge
              CJDV
                  (DAVE)
              FM
              80’s/90’s
              A25-49
              3
              10.6Collingwood
              CKCB
                  (The Peak)
              FM
              Adult
                  Contemporary
              A25-54
              NA
              NACornwall
              CFLG
                  (Variety 104.5)
              FM
              Adult
                  Contemporary
              A25-49
              1
              27.5CJSS
                  (Rock 101.9)
              FM
              Rock
              M25-54
              2
              15.2CJUL
                  (Jewel 1220)
              AM
              Oldies
              A50+
              2
              17.4Guelph
              CJOY
                  (1460 CJOY)
              AM
              Oldies
              A35+
              2
              11.5CIMJ
                  (Magic 106.1)
              FM
              Adult
                  Contemporary
              A25-49
              1
              21.7Hamilton
              CJXY
                  (Y 108)
              FM
              Rock
                  Hits
              M25-49
              1
              13.9CHML
                  (AM 900)
              AM
              News/Talk
              A35+
              2
              10.0Kingston
              CFMK
                  (JOE)
              FM
              80’s
                  90’s
              A25-49
              3
              14.7CFFX
                  (Oldies 960)
              AM
              Oldies
              A35+
              6
              4.2London
              CFPL
                  (FM 96)
              FM
              Rock
              M18-49
              1
              25.5CFPL
                  (AM 980)
              AM
              News/Talk
              A35+
              8
              4.1St.
                  Thomas
              CFHK
                  (Fresh FM)
              FM
              Contemporary
                  Hit Radio
              A18-34
              2
              15.8Peterborough
              CKWF
                  (The Wolf)
              FM
              Rock
              A25-49
              1
              37.2CKRU
                  (980 Kruz)
              AM
              Oldies/Sports
              A35+
              3
              12.2Toronto
              CFNY
                  (102.1 The Edge)
              FM
              New
                  Rock
              M18-34
              1
              16.7CILQ
                  (Q107)
              FM
              Classic
                  Rock
              M25-49
              1
              14.4CFMJ
                  (AM 640)
              AM
              News/Talk
              M25-49
              12
              3.0Woodstock
              CKDK
                  (The Hawk)
              FM
              Classic
                  Rock
              M25-49
              1
              22.5**Quebec**Gatineau
              CJRC
              AM
              News/Talk
              A35+
              3
              13.3Montmagny
              CFEL
              FM
              Soft
                  Rock
              A25-54
              NA
              NAMontreal
              CFQR
              FM
              Adult
                  Contemporary
              F25-54
              1
              29.3CKOI
              FM
              Contemporary
                  Hit Radio
              A25-54
              3
              10.2CKAC
              AM
              News/Talk/Sports
              A35+
              5
              6.6CINW
                  (940 News)
              AM
              News/Talk
              A35+
              5
              3.3CHMP
              FM
              News/Talk
              A25-54
              5
              8.3CINF
                  (Info 690)
              AM
              News
              A35+
              9
              1.2Quebec
                  City
              CHRC
              AM
              News/Talk
              A35+
              3
              9.7CFOM
              FM
              Adult
                  Contemporary
              A25-54
              5
              8.6Saguenay
              CKRS
              AM
              News/Talk
              A35+
              2
              21.7St.
                  Jerome
              CIME
              FM
              Adult
                  Contemporary
              A25-54
              1
              14.0Sherbrooke
              CHLT
              AM
              News/Talk
              A35+
              2
              15.4CKTS
              AM
              News/Talk
              A35+
              NA
              NATrois
                  Rivieres
              CHLN
              AM
              News/Talk
              A35+
              3
              18.4
 
 (1)
                  Sources:
              S2’06
                  - Vancouver, Calgary, Edmonton, Winnipeg, Hamilton, Toronto, Gatineau,
                  Montreal, Quebec City, S4’05 - Cornwall, Guelph, Peterborough, Woodstock;
                  St. Jerome, S1’06 - All other
                  markets
 
 Corus
        Radio derives the majority of its revenues from advertising sales. Revenues
        for
        fiscal 2006 and 2005 were $268 million and $253 million, respectively.
 
 Revenues
        from Corus Radio are derived mainly from two types of advertising: (a)
        advertising by local advertisers who are generally local merchants and who
        operate in the trading area encompassed by the station’s signal; and (b)
        advertising by national businesses such as automotive manufacturers, breweries,
        banks, fast food chains and similar operations which develop national
        advertising campaigns. The extent to which Corus’ advertising revenues are from
        local or national advertising depends on the given market. In 2006,
        approximately 69% of Corus Radio’s revenues were derived from local
        advertising.
 
 In
        addition to advertising revenues, Corus Radio derives a smaller portion of
        its
        revenues through non-traditional revenue sources (non-airtime). Websites
        have
        proven to be extremely popular with audiences and advertisers and are a growing
        source of revenue. Corus Radio has very loyal listeners that continue to
        be
        connected to the station for the music, the hosts, the events and
        information-entertainment that is present on Corus websites. With more than
        1,000,000 people registered to Corus Radio’s stations’ web-clubs and
        permission-based e-mail, the stations are able to develop one-to-one
        relationships and connect audiences with advertisers in areas that meet their
        needs. Other sources of non-traditional revenue include sponsorships, concerts
        and other events that allow Corus Radio to diversify its revenue streams
        and
        reach more potential listeners.
 
  **8**
  **Operating
        Strategy**
 Corus
        Radio has a focused strategy for the coming fiscal year. It will continue
        to
        emphasize growth in the listener and advertising base in the top 10 markets
        in
        Canada. It will strengthen core competencies of both sales management and
        programming. Corus will seek to dominate its target demographics. The Company
        will leverage new media to connect audiences with advertisers.
 
 During
        fiscal 2006, Corus concluded the sale of its two FM stations (CKGY and CIZZ)
        in
        Red Deer, AB to Newfoundland Capital Corporation. The transaction closed
        on
        September 30, 2005. In addition, Corus Radio announced on October 2, 2006
        that
        it had reached an agreement to buy two radio stations from CanWest Media
        Works.
        The transaction is subject to approval by the CRTC.
 
 Corus
        Radio is committed to providing the best quality in programming for the
        listener. Corus Radio stations boast key proprietary personalities that are
        both
        highly recognized in their communities and dedicated to Corus programming
        standards. The Company is committed to reformatting stations when research
        shows
        that there is a need. In fiscal 2006, Corus’ recently reformatted stations
        continued to gain traction with their targeted demographics.
 
 Corus
        Radio aims to be rated by audience measuring services, such as BBM, as number
        one or two in the targeted demographic for their relevant markets, by continuing
        to provide attractive programming. Corus Radio has a clustering strategy
        pairing
        AM and FM radio stations to the limits allowed by the CRTC for the given
        market.
        Such clustering improves operating performance by expanding demographic coverage
        of the market, thereby providing local and national advertisers with an
        attractive and efficient medium with which to allocate their advertising
        dollars. Clustering also provides opportunities to share costs between radio
        stations, thereby improving operating margins.
 
 Corus
        Radio is also committed to having the best radio sales force in the industry.
        In
        2002, Corus launched Corus Radio Sales University, an internal training course
        designed to provide the sales team with the tools to succeed. Stage one is
        an
        80-hour on-line training session that is an orientation to customer-focused
        selling. Stage two involves on-site training and customer calls with the
        trainer
        who visits every major market cluster at least twice a year. To date, all
        of the
        Corus radio sellers and managers in the major markets have completed both
        stage
        one and two of the training. All new sales representatives and managers hired
        by
        Corus must participate in the training.
 
 Corus
        owns a 50% stake in Canadian Broadcast Sales (“CBS”), in partnership with Rogers
        Media. CBS is Canada’s leading national sales representation firm.
 
 Corus
        Radio will continue to leverage new media to expand its audience and give
        new
        opportunities to advertisers through a series of strong local websites to
        complement Corus’ radio stations. On-line audio streaming through websites
        affords the broadcaster and advertiser a more personal connection with the
        listener not available through traditional radio.
 
 **Competitive
        Conditions**
 Radio
        stations compete for advertising dollars with other radio stations in their
        respective market areas as well as with other forms of media such as
        conventional television, specialty television networks, daily, weekly, and
        free-distribution newspapers, outdoor billboard advertising, magazines, other
        print media, direct mail marketing, and the Internet. In each market, Corus’
radio stations face competition from other stations with substantial financial
        resources, including stations targeting the same demographic groups. In markets
        near the U.S. border, such as Kingston, Corus also competes with U.S. radio
        stations. On a national level, Corus competes generally with Standard Radio,
        Rogers Media, CHUM Radio and Astral, each of which owns and operates stations
        across Canada.
 
 Factors
        that are material to competitive position include the station’s rank in its
        demographic, market share of audience, authorized power, assigned frequency,
        audience characteristics, local program acceptance and the number and
        characteristics of stations in the market area.
 
  **9**
  **TELEVISION**
 
 Corus’
        television group (“Corus Television”) comprises specialty television networks,
        premium pay television services, three local television stations, and other
        media services.
 
 **Description
        of the Industry**
 According
        to Statistics Canada, as of August 2005, there were approximately 10.1 million
        subscribers to television programming services. There were approximately
        7.6
        million cable subscribers and 2.5 million direct-to-home satellite subscribers.
        Total digital subscribers were approximately 4,8 million, up from 4.1 million
        a
        year earlier.
 
 *Specialty
        and Premium Pay Television Networks*
  Specialty
        and premium pay television networks generated $2.2 billion of combined
        advertising and subscriber revenues in 2005. Specialty and premium television
        networks are available to those Canadians who subscribe to the service package
        of a particular broadcasting distribution undertaking (“BDU”) (i.e. cable
        television, direct-to-home satellite and multipoint distribution systems).
        Specialty television networks provide special interest, news, sports, arts
        and
        entertainment programming, while premium television networks provide
        commercial-free movies, series and special event programming.
 
 Specialty
        and premium pay television networks each obtain revenues by charging a monthly
        subscriber fee to cable and direct-to-home satellite operators. Subscriber
        fees
        are the sole source of revenues for licensed premium television services,
        while
        specialty services can also generate advertising revenue. The CRTC regulates
        the
        maximum subscriber fee if the network is included as part of the basic cable
        service of a large cable operator, but not if the network is carried on a
        discretionary tier. Regardless, the amount of the subscriber fee is specified
        in
        the network’s agreement with the BDU. Digital specialty services are carried on
        a new discretionary tier of digital-only theme packages, as a stand-alone
        digital offering, or as part of individual premium services provided to digital
        subscribers. Specialty and premium television networks benefit from these
        subscriber fees, which are supported by the high level of cable and satellite
        penetration in Canada. Subscribers to discretionary tiers pay monthly fees
        to
        their BDU that reflect an amount for the basic service, plus an additional
        amount for specialty and premium television networks for which they subscribe
        on
        discretionary tiers.
 
 Because
        all subscribers receive at least basic service, specialty television networks
        that are carried on a basic tier typically have a much higher number of
        subscribers. The number of subscribers for a cable network in a discretionary
        tier depends primarily upon pricing and subscriber preference. A specialty
        television network’s subscriber penetration will also benefit to the extent it
        is packaged or tiered with other popular specialty television networks. As
        a
        consequence, discretionary specialty television networks that are popular
        (or
        are otherwise packaged with popular specialty television networks) can generally
        be priced at rates above those for specialty television networks on basic
        service.
 
 Unlike
        premium television networks, which are prevented by CRTC regulations from
        obtaining advertising revenues, specialty television networks may obtain
        both
        subscriber and national advertising revenues. Specialty television networks
        appeal to advertisers seeking highly targeted markets. The CRTC limits national
        advertising to 12 minutes an hour but does not regulate advertising rates,
        and
        specialty television networks are not required to share a portion of their
        advertising revenues with the cable and direct-to-home (“DTH”) satellite
        operators. According to the CRTC, television advertising in 2005 totaled
        approximately $2.6 billion in Canada. Specialty television networks received
        a
        29% share of total television advertising revenues, or approximately $768
        million, up from $708 million or a 28 % share of total television advertising
        revenues in 2004.
  Canadian
        specialty and premium television networks have experienced subscriber growth
        over the past decade due to the advances in cable-based delivery systems
        and the
        growth of DTH satellite services. In November 2000, a number of new digital
        specialty television network licenses were awarded by the CRTC for launch
        commencing September 2001. Of these licenses, 21 were Category 1 and 262
        were
        Category 2. Since the initial awarding of 262 Category 2 licenses, additional
        Category 2 licenses have been granted. However, as of August 2005, approximately
        74 Category 1 and 2 digital networks are in operation. It remains unclear
        how
        many of the remaining Category 2 networks will be launched in the future.
 
  **10**
  *Local
        Television*
 
 Local
        television stations are licensed by the CRTC and provide over-the-air broadcast
        television signals to viewers within a local geographical market or on a
        network
        basis. The CRTC has licensed three English-language television networks,
        two
        private commercial networks and one public network. The private commercial
        networks are operated by CTV Television Network Inc. (“CTV”) and Global
        Television Network (“Global”) with the Canadian Broadcasting Corporation (“CBC”)
        operating the public broadcasting network. In addition to receiving conventional
        television signals off-air, the majority of Canadian viewers have access,
        either
        directly or through a BDU, to the television signals of U.S. border stations
        which are generally affiliated with one of the four U.S. commercial networks
        (ABC, NBC, CBS and Fox) and a Public Broadcasting Service station. Canadian
        conventional television stations generate revenue from advertising and receive
        no subscription revenues. The number of commercial messages that a station
        may
        broadcast is restricted to 12 minutes an hour and in some instances, as in
        the
        case of Corus’ Oshawa television station, is dependent on the production of
        local programming. The success of conventional television is dependent on
        the
        quality of programming which results in audience ratings that in turn attract
        advertisers to a station or network. In the case of stations affiliated with
        the
        CBC, the local, private affiliated station receives a fee from the CBC to
        air or
        broadcast CBC national programming at certain designated times, in addition
        to
        being able to generate advertising revenues.
 
 *Other
        Media Businesses*
 
 Digital
        audio services distribute music in a digital mode to homes served by BDUs.
        A
        digital stream is delivered via cable or satellite to a “set top” box and
        converted to a signal that a residential customer’s television or audio system
        can understand. A variety of music formats are available, including channels
        devoted exclusively to classical, rock, jazz, country and many other music
        genres. Residential digital audio services are subject to licensing requirements
        by the CRTC.
 
 Cable
        advertising services provide commercial customers with wide coverage,
        high-frequency advertising at rates that are competitive with other forms
        of
        media. The business is exempt from licensing or regulatory requirements.
        An
        access fee is paid to the cable provider.
 
 *New
        Products*
 
 The
        trend in the television sector is in innovative new products and services
        in the
        digital environment. The emphasis on instant gratification for consumers
        is
        dominating the industry. New product offerings will fuel growth in the digital
        sector, reduce churn and contribute to incremental revenue growth.
        Video-on-demand (“VoD”); Subscription video-on-demand (“SVoD”); High Definition
        Television (“HDTV”); and Personal Video Recorders (“PVR”) all provide greater
        choice in delivery to the consumer and increase the amount of digital
        subscriptions for the provider. A description of these new digital products
        is
        as follows:
  r
              VoD
                  provides an alternate method for the supply of video and related
                  content
                  material over cable and telecommunications networks. For broadcasters
                  it
                  represents a fundamental shift from a linear program service to
                  the
                  consumer having complete control over the programming segment.
  r
              SVoD
                  is a video-on-demand service offered at a flat subscription price
                  that
                  provides viewers with unlimited access to select programs from
                  the
                  libraries of featured cable networks.
  r
              HDTV
                  is a high-resolution digital television service combined with Dolby
                  Digital surround sound. This combination creates an unparalleled
                  combination of sound and image. HDTV requires new production and
                  transmission equipment at the HDTV stations, as well as new equipment
                  for
                  reception by the consumer. The higher resolution picture is the
                  main
                  selling point for HDTV.
  r
              A
                  PVR is a Personal Video Recorder or an interactive television recording
                  device. Like the VCR, a PVR records and plays back television programs,
                  but unlike the VCR, it stores the programs in digital as opposed
                  to analog
                  form, allowing the user the ability to watch what they want when
                  they
                  want.
  **11**
  
 **Business
        Overview**
 Corus
        had the following interests in specialty and premium television networks
        in
        Canada as at October 31, 2006:
 **NETWORK**
              **DESCRIPTION
                  OF PROGRAMMING**
              **INTEREST**YTV
                Treehouse
                  TV
                W
                  Network
                Country
                  Music Television
                Telelatino
                TELETOON
                The
                  Food Network Canada
                Movie
                  Central
                Encore
                  Avenue
                Discovery
                  Kids (Digital Service)
                SCREAM
                  TV (Digital Service)
                The
                  Documentary Channel (Digital Service)
              Children/Family
                Preschool
                  Children/Parents
                Lifestyle
                  and Entertainment geared to women
                Country
                  Music/Country Lifestyle
                Canadian-Italian
                  and Spanish
                Children/Family/Adult
                  Animation
                Food
                  Related
                Premium
                  Television - Premium Movies and Series
                Premium
                  Television - Classic Movies
                Children/Family
                Horror
                  Movies and Series
                Documentaries
              100%
                100%
                100%
                80%
                50.5%
                50%
                20%
                100%
                100%
                53.6%
                51%
                53%
 
 *Specialty
        Television Networks* ****
 
 Corus
        Television’s group of specialty television networks appeal particularly to kids,
        teens and women, much-coveted target groups among Canadian marketers. Corus
        Television’s specialty networks have a 47% higher cumulative average minute
        audience (2-54 demographic) than its nearest competitor, based on Nielsen
        Media
        Research 05/06 broadcast year surveys. Each of the analog specialty television
        networks is ranked among the top three analog television networks that compete
        within its genre, based on targeted demographics.
 
 YTV
        is a specialty television network dedicated to programming for children and
        youth aged two to 17. YTV broadcast 12 of the top 20 children’s shows in Canada
        in the Kids 2-11 genre, based on the Nielsen 05/06 broadcast year survey.
        This
        network reaches children beyond the television with interactive events and
        initiatives including *ytv.com,* a
        top Canadian kids’ website. YTV is generally carried on the basic
        tier.
 
 Treehouse
        TV is the only specialty service in Canada dedicated to preschoolers (aged
        two
        to five). Treehouse TV operates on a 24-hour basis offering a commercial-free
        television environment in its preschool programming that reflects the interests
        and developmental levels of young children.
 
 W
        Network is a specialty television service dedicated to serving the needs
        and
        interests of women. On April 15, 2002, the service, which was previously
        known
        as WTN, was rebranded, reformatted and relaunched as W Network. Since the
        relaunch, W Network has achieved a 111% growth in its core demographic of
        women
        25-54. Recent Nielsen statistics indicate that W Network has the highest
        average
        minute audience of all Canadian specialty networks for W25-54 and is watched
        by
        over 10.7 million Canadians in an average month.
 
 Country
        Music Television (“CMT”) is a specialty service dedicated to exhibiting country
        music videos, music programming and daily entertainment news. CMT also offers
        a
        prime-time lineup of comedy and drama series, movies and specials. In 2000,
        the
        network established the Video Advantage Program to support the development
        and
        production of original Canadian music videos for emerging artists. Corus
        has a
        90% voting interest and an 80% equity interest in CMT *.* The remaining 10% voting interest and 20% equity interest is held by Country
        Music Television Inc., the operator of a similar service in the United States.
        According to recent Nielsen statistics, CMT has seen a 113% increase in the
        adult 25-54 demographic over the past four years and the network has more
        than
        doubled its prime time audience in the same time period.
 
 Telelatino,
        in which Corus acquired a controlling interest in November 2001, is an ethnic
        specialty service that offers general interest domestic and international
        programming in the Italian, Spanish and English languages.
 
 Currently,
        Corus offers three digital specialty television networks: The Documentary
        Channel, featuring documentaries from Canada and around the world; Discovery
        Kids *,* which offers children informative and entertaining programming with an emphasis
        on action, adventure and the environment; and SCREAM TV *,* which offers a horror theme through a movie-rich schedule of classic and
        modern
        thrillers, cult favorites and popular series. These services were launched
        in
        September 2001. Corus also holds interests in the following specialty television
        networks:
  **12**
   • A
        50% interest in TELETOON *,* which is a Canadian specialty service featuring a wide range of animation
        programming in all forms. TELETOON is available in both an English language
        version and a French language version. For fiscal 2006, Corus had a 40% interest
        in TELETOON, however, in fiscal 2007 this interest increased to 50%.
  • A
        20% equity interest in The Food Network Canada *,* a
        specialty service which provides information and entertainment programming
        related to food and nutrition.
 
 Revenues
        from Corus’ specialty television networks are derived primarily from subscriber
        fees and advertising. In fiscal 2006, subscriber fees accounted for 58% and
        advertising accounted for 39% of total revenues from the specialty television
        networks.
 
 *Premium
        Television Networks*
 
 Movie
        Central and Encore Avenue are the exclusive providers of premium television
        services in western Canada, featuring blockbuster movies, series and specials
        from diverse genres on six channels. Each channel broadcasts commercial-free
        24
        hours a day, seven days a week. *The
        Movie Central* brand consists of four channels and the *Encore* brand
        consists of two channels.
 
 Revenues
        from premium television networks have experienced significant growth over
        the
        past two years as a result of increased direct-to-home satellite and digital
        cable subscribers. As at August 31, 2006, Corus’ Movie Central service had
        822,000 subscribers, a 10% increase in year-over-year subscribers, representing
        penetration of approximately 50% of digital cable and direct-to-home satellite
        subscribers in western Canada.
 
 *Local
        Television*
 
 Corus
        owns three local television stations - one in each of Kingston, Peterborough
        and
        Oshawa, Ontario. Each is an affiliate of the CBC. These were acquired in
        April
        2000 as part of the Power Broadcasting acquisition.
 
 Revenues
        are almost exclusively derived from advertising. In fiscal 2006, national
        agency
        directed clients and local advertisers accounted for a combined 84% of revenues.
        CBC network affiliate payments amounted to 12% of revenues, with the remaining
        4% originating from a variety of other sources.
 
 *Other
        Media Services*
 
 Corus
        Custom Networks primarily operates TV listings channels, providing viewers
        with
        current and easily accessible listings for the local cable television program
        lineup. Revenues for Corus Custom Networks are derived through advertising.
 
 Max
        Trax is a residential digital audio service launched in the spring of 1997.
        Max
        Trax is a partner in a joint marketing agreement with CBC to offer a 40 channel
        service package. Max Trax is carried by cable operators and direct-to-home
        satellite operators. Revenues from Max Trax are earned through subscriber
        fees.
 
 **Operating
        Strategy**
 Corus
        has reorganized its television division to focus on two strategic portfolios.
        The Lifestyle, Drama and Movies potfolio includes the operations of W Network,
        CMT, Telelatino, Movie Central, Encore Avenue, The Documentary Channel, SCREAM
        TV *,* the
        local television stations, Corus Custom Networks and Max Trax. Management
        is
        responsible for generating program buying synergies, developing strategies
        for
        integrating operations where possible, as well as consolidating cross-promotion
        and marketing opportunities and joint sales initiatives. The kids’ portfolio
        includes YTV, Treehouse TV, TELETOON, Discovery Kids and the Nelvana Studio.
        The
        consolidation of the kids assets will allow for shared programming, a
        streamlined development process, the ability to create and maintain
        multi-platform rights in Canada and ensure stable output with cost certainty
        for
        the studio.
 
  **13**
  Corus
        Television’s operating strategy remains focused on four key areas: (i)
        increasing its position in the kids’ and women’s genres, (ii) leveraging the
        competitive position of Corus Premium Television, (iii) building key
        relationships with BDUs and (iv) maximizing operational synergies across
        all of
        Corus brands.
 
 Corus
        will continue to focus on managing and growing its core business. The Company
        will continue to explore new platform opportunities and make investments
        to test
        where appropriate.
 
 *Kids*
 
 Corus
        Television continues to lead the kids’ entertainment marketplace in Canada
        through programming on YTV, Treehouse TV, TELETOON and Discovery Kids. Corus
        Television intends to drive revenue growth in the kids sector by building
        program ratings, building the kids market by attracting new advertisers and
        building new revenue sources. Corus Television will also focus on programming
        and operational synergies across its properties.
 
 The
        integration of Nelvana Studios will maximize new platform efforts, an
        increasingly important segment of the kids market. The consolidation of the
        development streams will ensure Corus continues to create brands which will
        drive ratings. The studio will continue to provide content to Teletoon to
        meet
        that networks unique needs.
 
 The
        kids’ market and new media provide growth opportunities. Corus Television will
        capitalize on the growth in the home entertainment industry by constructing
        and
        investing in the new media platforms such as VoD, SVoD and interactive games,
        including massive multiplayer on-line games (MMOG) to create new revenue
        streams. Sales of branded DVDs, CDs and other merchandise will also fuel
        revenue
        growth in the kids’ area.
 
 *Lifestyle,
        Drama and Movies*
 
 Corus
        Television has achieved a leadership position in the women’s genre with its W
        Network targeting women aged 25-54. The viewing audience in this demographic
        has
        increased 111% since the 2001-2002 season, making W Network the #1 ranked
        specialty service for women. In fiscal 2006, W Network held the highest average
        minute audience of all Canadian specialty networks for women 25-54. W Network
        intends to invest in its programming to maximize audience growth and revenue
        potential. W Network is building an outstanding programming schedule anchored
        on
        movie blocks and design shows. The Company will focus on new media opportunities
        and platforms to deliver the programming that the target audience wants,
        in the
        format they want it in, through the wnetwork.com website and other merchandise
        offerings.
 
 Corus
        Premium Television services, previously operating in western Canada, will
        be
        integrated into the Toronto facility. The service will continue to operate
        under
        two separate licenses (Movie Central and Encore Avenue), and will continue
        to
        focus marketing effort on customer acquisition and retention. Having established
        a track record of successful direct marketing campaigns, undertaken with
        the
        cooperation of key cable and satellite providers, Corus will continue to
        capitalize on the growth in the number of digital households in western Canada
        as well as up-selling current digital households. Demand for movies and new
        original dramatic series continue to fuel strong interest in the service’s
        programming. To this end, Movie Central has secured output agreements with
        major
        Hollywood studios for exclusive programming, such as first windows on
        blockbuster feature films and new HBO and Showtime products. These agreements
        allow Movie Central to premiere HBO series on Movie Central at the same time
        as
        they debut in the United States.
 
 Corus
        Premium Television is also leading with innovative new digital product offerings
        which will fuel digital growth, reduce churn and contribute incremental
        revenues.  In this regard, Corus Premium Television established the first
        SVoD product in Canada, Movie Central Express.  Movie Central Express
        showcases programming from five major Hollywood studios with up to 90 hours
        of
        unique programming each week. In conjunction with Shaw’s VoD service, this
        service is offered to current subscribers for a separate monthly subscription.
 
 Movie
        Central has a dedicated high definition channel offering an unparalleled
        lineup
        of new releases, original series and re-mastered library features all in
        true
        high definition format.
 
  **14**
  In
        addition to the growth of digital products, opportunities are developing
        on two
        mainstream platforms, broadband and mobile, that are creating new revenue
        opportunities for Corus Premium Television. Although the products are still
        quite nascent, Corus believes the potential is substantial and is actively
        exploring and developing these opportunities with the BDUs now.
 
 *Other
        Media Services*
 
 The
        CBC-affiliated local television stations improved operating efficiencies
        by
        consolidating with Corus’ local market radio stations. Revenue growth is being
        achieved through an improved program schedule, expansion of news service
        and
        joint selling of radio and television. Each of the stations represents the
        only
        local television broadcaster in their respective communities.
 
 Corus
        believes cable advertising services such as Corus Custom Networks are a
        cost-effective advertising vehicle for national accounts and local merchants,
        particularly in areas where there are no local television stations. Corus’
operating strategy involves optimizing existing products and services through
        product quality enhancements. Corus Custom Networks is also investigating
        new
        types of advertising-related businesses that are complementary to its core
        competencies. Corus Custom Networks has streamlined operations by creating
        regional hubs to service advertisers.
 
 **Competitive
        Conditions**
 The
        television broadcast environment is highly competitive. The principal methods
        of
        competition in broadcast television are the development and acquisition of
        popular programming and the development of audience interest through programming
        and promotion, in order to sell advertising at profitable rates. Broadcast
        specialty networks like YTV, W, CMT, the local stations and digital channels
        compete for audience, advertising revenues, and programming with other broadcast
        networks such as CBC, CTV, Global, specialty networks owned by Alliance Atlantis
        Communications Inc. (“AAC”) and other digital channels, independent television
        stations, basic cable program services as well as other media, including
        DTH
        television services, videocassettes, DVDs, print and the Internet.
 
 Television
        stations compete for programming, audiences and advertising revenues with
        other
        stations and cable networks in their respective coverage areas and, in some
        cases, with respect to programming, with other station groups, and in the
        case
        of advertising revenues, with other local and national media.
 
 Because
        conversion to digital television broadcasting has begun, current and future
        technological and regulatory developments may affect competition within the
        television marketplace.
 
 Corus
        Television’s specialty and premium television networks compete for subscriber
        fees with other specialty and premium television network operators, including
        Bell GlobeMedia, AAC, CHUM Limited and Astral. According to the CRTC, in
        2005,
        the Canadian specialty television and premium television network industries
        generated $2.2 billion of combined advertising and subscriber revenues. Corus’
specialty services also compete directly for advertising revenues with the
        operators of cable networks listed above and with broadcast networks, including
        Global, CBC and CTV, and with other advertising media. Corus’ conventional
        television stations compete principally for viewers and advertisers with
        other
        television stations that broadcast in central and eastern Ontario.
 
 In
        June 2006, the CRTC licensed a national pay television service which will
        compete directly with Corus’ premium television networks. It is not known when
        this service will launch.
 
  **15**
  
 **CONTENT**
 
 **Description
        of the Industry**
 In
        recent years the launch of numerous segmented networks in the North American
        television broadcasting industry has provided viewers with greater channel
        selection. There are now numerous television networks around the world that
        program dedicated children’s blocks and other programming exclusively for
        children. Nelvana’s content is seen in more than 190 countries on over-the-air,
        analog and digital platforms.
 
 However,
        over the past few years, the children’s television market has fundamentally
        changed. Demand for production has slowed due to consolidation and vertical
        integration of U.S. production studios and television networks.
 
 Despite
        the current environment, the long-term outlook for the worldwide animation
        business and the children’s entertainment sector is favourable. Future growth in
        the sector is being fueled by:
 
 • the
        growth of the 3D animation market;
 • the
        shift of audiences from traditional broadcast networks to cable
        networks;
 • the
        growth of digital television services, providing a new platform for additional
        cable and satellite services and thereby new programming
        opportunities;
 • the
        continued international expansion by all types of programming services,
        including major U.S. broadcasters and domestic children’s services;
 • the
        growth in demand for content featuring recognizable characters on the Internet;
        and
 • the
        emerging platforms for content distribution (i.e. VoD, SVoD, broadband, cell
        phones and video games).
 
 According
        to industry sources, total spending on filmed entertainment, which includes
        feature films, video, television shows, animation and other programming
        worldwide is expected to grow from an estimated US$80.5 billion in 2005 to
        US$104.1 billion in 2010. In part due to the proliferation of cable and
        satellite services, channels targeting children have increased substantially
        in
        recent years. ****
 
 Merchandising
        has grown from the popularity of toys that are associated with movies, books
        and
        television characters. According to industry sources, in 2005 licensed retail
        sales in the United States and Canada were approximately US$71 billion. All
        of
        Nelvana’s character brands fall into the entertainment/character property type
        category, which, according to industry sources, accounted for US$13 billion
        of
        retail sales in the United States and Canada in 2005. The
        entertainment/character property type category is the second largest category
        of
        licensed retail products, accounting for 18% of total sales in the United
        States
        and Canada in 2005.
 
 The
        home entertainment market is a huge market and continues to grow. In 2005,
        the
        estimated worldwide market for home entertainment is expected to be approaching
        $63.2 billion marketwide. There has been a purchasing shift from VHS to DVD
        as
        the advancement of DVD technology has made it more user-friendly and more
        affordable. Unit growth for DVD was up 15% in 2005, with a corresponding
        unit
        decline of 53% for VHS. In the United States, the market for children’s
        non-theatrical DVDs is growing substantially faster than the overall DVD
        market.
 
 **Business
        Overview**
 The
        Content group consists of the operations of Corus’ wholly-owned subsidiary,
        Nelvana, an integrated children’s production and distribution company that
        develops, produces, markets and distributes quality animated branded media
        content and related products for children worldwide. Its brand portfolio
        includes internationally recognized animated characters such as *Babar,
        Franklin, The Backyardigans, Miss Spider’s Sunny Patch Friends,* and *The
        Berenstain Bears* .
        Kids Can Press, a Canadian publisher of children’s books, is a wholly-owned
        subsidiary of Nelvana. Nelvana’s operations consist of the production and
        distribution of film and television programs, and the sale and licensing
        of
        related products.
 
 
 
  **16**
  
 *Production
        and Distribution*
  Nelvana
        is an animation production and distribution company specializing in children’s
        and youth programming for television. Nelvana distributes programming to
        broadcasters in over 190 countries, including some of the world’s leading
        networks, such as Nickelodeon, the Disney Channel, HBO, ITV in the United
        Kingdom and France 3. Nelvana has 80 television programs licensed in Canada,
        and
        40 in the United States. Nelvana’s production facility in Toronto houses
        state-of-the-art 2D and 3D digital animation technology as well as traditional
        animation capabilities. Programming is distributed internationally through
        five
        sales and distribution offices.
 
 In
        2002, in response to a leaner marketplace, Nelvana committed to reducing
        cash
        flow requirements with the goal of achieving operating cash flow neutrality
        within one year while continuing to grow its library. This was successfully
        achieved. In the last three years, Nelvana’s production slate has ranged between
        90 to 150 new episodes, well below the 252 episodes peak reached in fiscal
        2002.
        This amount of production maintained Nelvana’s leadership position in the
        industry while reducing cash flow requirements to produce the year’s slate.
        Following are some highlights from the production and distribution business
        in
        fiscal 2006:
 
 r
              Produced
                  7 episodes of*The
                  Backyardigans*,
                  a series which airs on Nickelodeon in the United States and on
                  Treehouse
                  TV in Canada, bringing the total to 27
                  episodes
 r
              Produced
                  25 episodes of*Jane
                  & the Dragon,*which airs on YTV, bringing the total to 26
                  episodes
 r
              Produced
                  24 episodes of*6Teen,*which air on TELETOON in Canada, bringing the total to 52
                  episodes
  At
        August 31, 2006, Nelvana’s program library totaled over 2,870 half-hour
        equivalent episodes, comprising 70 animated television series, 18 specials,
        17
        animated feature length films and 12 live action series. Children’s animated
        programs generally have longer life spans than those of live action programs
        because they can typically be resold continually to new generations of audiences
        around the world. The United States is the biggest market, accounting for
        43.3%
        of production and distribution revenues in fiscal 2006, compared to 30.3%
        from
        the Canadian market and 26.4% from other countries.
 
 *Merchandising*
 
 Nelvana’s
        merchandising business contains some of Nelvana’s most popular characters,
        including *Franklin,
        Babar, Miss Spider’s Sunny Patch Friends* and *Backyardigans* ,
        which have achieved recognition and popularity worldwide and have become
        valuable long-term merchandising brands. Nelvana’s merchandising efforts focus
        on marketing its most popular brands and co-ordinating with retailers to
        promote
        its character merchandise in North America and around the world. Nelvana
        acquires brands from which it produces media content and becomes either the
        licensor or agent, on behalf of the owner of the property, for most product
        categories, including toys, plush, apparel, gifts, book publishing and
        interactive products. Highlights in fiscal 2006 include the fact that *Franklin* merchandise sold well in France.
 
 *Publishing*
 
 Nelvana’s
        publishing business is conducted through its subsidiary Kids Can Press, acquired
        in 1998. Kids Can Press is the largest Canadian-owned English language publisher
        of children’s books with a broad and growing backlist of titles. Highlights of
        the Kids Can Press catalogue include:
  • *Franklin* -
        more than 61 million books sold worldwide. In the fall of 2006, we celebrate
        the
        20 th anniversary of the very first *Franklin* book, *Franklin
        in the Dark* ,
        with a commemorative-boxed set, a special edition of the book going to 500,000
        school children in Canada thanks to the Canadian Children’s Book Centre and a
        series of public events with Paulette Bourgeois and Brenda Clark;
  • *Scaredy
        Squirrel -* a
        new character has arrived. This book, which tells of a squirrel too afraid
        to
        leave his nut tree in which he lives the same existence day in and day out,
        has
        gathered steam since publication in February 2006. The charming worrywart
        who
        finally breaks out of his fears to see that he too can soar will make a second
        appearance in Spring 2007 with *Scaredy
        Squirrel Makes a Friend.*
  **17**
  
 **Operating
        Strategy**
 The
        operating strategy for Nelvana is based on the diversification of revenue
        streams. In a marketplace where dependence on worldwide broadcast license
        fees
        is no longer viable, Nelvana is seeking to maximize revenue from all streams
        including:
 
 r  Broadcasting
        (traditional and new platforms);
 r  Merchandise
        licensing;
 r  Publishing;
 r  Home
        entertainment;
 r  Interactive;
        and
 r  Music
 
 To
        capitalize on the dominance that Nelvana enjoys in the kids broadcast market
        in
        Canada, Nelvana is putting a “Made in Canada” strategy into effect. This
        strategy will see Nelvana covering the hard costs of production in Canada.
        Nelvana will optimize brand success by aligning all of Corus’ resources, both
        broadcasting and merchandising, to establish great ratings which will drive
        strong consumer product performance. The success in Canada can then be used
        to
        roll the brand out worldwide.
 
 Nelvana
        will focus on the strong near-term revenue growth potential of the home
        entertainment market. With the worldwide DVD business expected to double
        by
        2008, Nelvana is in a perfect position to exploit this market with a strong
        catalogue of existing titles and titles in production. As well, home
        entertainment products will drive significant merchandise sales in North
        America’s major retailers.
 
 Many
        existing outlets are expanding and new markets are emerging for branded
        children’s content. As the marketplace changes with new distribution platforms,
        Nelvana is investigating how this new technology can benefit the Corus stable
        of
        shows. Many of these distribution platforms - VoD, SVoD, cell phones and
        broadband - are in the early stages and are not expected to generate significant
        revenue for at least five years. Nelvana is in dialogue with all of the major
        strategic players in the On-Demand space including Comcast, Microsoft, Yahoo
        and
        Sony in order to determine the best fit for Corus’ properties.
 
 This
        ever growing number of outlets for the distribution of children’s content
        creates a need for Nelvana to be focused on rights management. We need to
        ensure
        that the best deals are being made for Corus to protect Nelvana and allow
        us to
        explore and exploit all of the new emerging distribution platforms that are
        arising.
  **Competition**
 The
        business of producing and distributing children’s television programs is highly
        competitive. We compete with a variety of international companies, including
        HIT
        Entertainment, DIC, 4KIDS, and several U.S. studios such as the Walt Disney
        Company, Warner Bros., and Nickelodeon (a division of Viacom International
        Inc.). These U.S. studios are substantially larger, and have greater financial
        resources. Many have their own television networks on which their in-house
        productions are aired. In Canada, Corus also competes with several domestic
        producers and distributors such as Cookie Jar Corp. and Decode Entertainment
        Inc.
 
 
  **18**
  **ADDITIONAL
        INFORMATION CONCERING CORUS’ BUSINESSES**
 
 *a)*  *Intangible
        Properties*
 
 Corus
        uses a number of trademarks, service marks and official marks for its products
        and services. Many of these brands and marks are owned and registered by
        Corus,
        and those trademarks that are not registered are protected by common law.
        Corus
        also licenses certain marks from third parties. Corus has taken affirmative
        legal steps to protect its owned and licensed trade marks, and Corus believes
        its trademark position is adequately protected. The exclusive rights to
        trademarks depend upon the Company’s efforts to use and protect these and Corus
        does so vigorously.
 
 Distribution
        rights to television programming and motion pictures as well as ancillary
        rights
        are granted legal protection under the copyright laws and other laws of Canada,
        the United States and most foreign countries. These laws impose substantial
        civil and criminal sanctions for the unauthorized duplication and exhibition
        of
        television programming. Corus believes that it takes, and plans to continue
        taking, all appropriate and reasonable measures to secure, protect and maintain
        or obtain agreements from licensees to secure, protect and maintain copyright
        and other legal protections for all of the television programming produced
        and
        distributed by Corus under the laws of all applicable
        jurisdictions.
  Corus
        can give no assurance that its actions to establish and protect Corus trademarks
        and other proprietary rights will be adequate to prevent imitation or copying
        of
        its filmed and animated entertainment by others or to prevent third parties
        from
        seeking to block sales of its filmed and animated entertainment as a violation
        of their trademarks and proprietary rights.
 
 Moreover,
        Corus can give no assurance that others will not assert rights in, or ownership
        of, its trademarks and other proprietary rights, or that Corus will be able
        to
        successfully resolve these conflicts. In addition, the laws of certain foreign
        countries may not protect proprietary rights to the same extent as do the
        laws
        of the United States and Canada.
 
 Corus
        also licenses copyright materials either by way of direct contracting or
        through
        blanket licensing regimes. The tariffs for blanket licenses are established
        by
        the Copyright Board in Canada. Although the amount of a blanket license is
        set
        by this third party regulator, the system provides certainty as to cost and
        also
        a modicum of immunity from claim for innocent infringements due to the
        presumptions of right to use works that flow with the imposition of these
        tariffs.
 
 The
        Company operates a comprehensive clearance and rights management system to
        both
        protect its rights and to ensure that works that Corus uses have the requisite
        clearances or licenses from the owners. A key element of contracts for copyright
        works is the term or time period of the license granted which in the
        broadcasting sector can vary but usually is or for a time period such as
        one to
        three years. In some circumstances the time period is combined with a right
        to
        only a certain number of “plays” or broadcasts.
 
 *b)
        Seasonality and Cycles*
 
 Corus’
        operating results are subject to seasonal fluctuations that can significantly
        impact quarter-to-quarter operating results. Accordingly, one-quarter’s
        operating results are not necessarily indicative of what a subsequent quarter’s
        operating results will be. Corus’ broadcasting businesses (Radio and Television)
        and the Content business each has unique seasonal aspects.
 
 For
        the Company’s broadcasting businesses, operating results are dependent on
        general advertising and retail cycles associated with consumer spending
        activity. Accordingly, operating results for the first quarter tend to be
        the
        strongest, reflecting pre-Christmas advertising activity, and the second
        quarter
        tends to be the weakest, consistent with lower consumer spending in winter
        months.
 
 For
        Corus’ Content business, operating results are dependent on the timing and
        number of television programs made available for delivery in the period,
        as well
        as timing of merchandising royalties received, none of which can be predicted
        with certainty. Consequently, Content’s operating results may fluctuate
        significantly from quarter to quarter. Cash flows may also fluctuate and
        are not
        necessarily closely related to revenue recognition.
  **19**
  
 *c)
        Economic Dependence*
 
 Corus’
        operating results for the Company’s broadcasting businesses are not dependent
        upon any single customer or upon a few customers with respect to revenues
        from
        advertisers.
 
 Corus’
        broadcasting businesses are dependent upon on-air talent to provide quality,
        consistent programming to attract advertisers. All on-air talent is under
        contractual obligation to the Company.
 
 Corus
        Television’s premium pay television services are solely dependent on subscriber
        fees. The major BDUs are Rogers, Shaw, Cogeco, BEV, Videotron and Star
        Choice.
 
 The
        Company’s regulated properties operate in a competitive environment with both
        regulated and unregulated competitors. Although entry by new competitors
        into
        the Company’s markets is slowed by the regulatory process, new competition
        always poses a risk to the Company’s revenue streams. The regulatory environment
        is more fully explained below.
 
 *d)
        Environmental*
 
 Corus’
        operations do not have any significant impact on the environment. Corus has
        not
        made, and does not anticipate making, any significant capital expenditures
        to
        comply with environmental regulations.
 
 *e)
        Employees*
 
 As
        at August 31, 2006, Corus had approximately 2,093 full-time employees.  The
        Company operates in a non-union environment except for: 177 employees in
        specialty and conventional television and radio and 59 employees in its premium
        television operations who are members of the Communications, Energy and
        Paperworkers Union of Canada; 45 employees in Quebec radio operations who
        are
        members of the Syndicat Général de la Radio; 11 employees in Quebec radio
        operations who are members of the Centrale Syndicat Nationale; eight employees
        in Quebec radio operations who are members of the Independent Syndicat; and
        33
        employees in Quebec operations who are members of the Syndicat Canadien de
        la
        Fonction Publique.
 
 There
        are 115 Corporate employees, 1,107 Radio employees of which 166 are unionized,
        547 TV employees of which 167 are unionized and 324 Content
        employees.
 
 *f)
        Foreign Operations*
 
 A
        significant portion of the revenues in the Content division are in currencies
        other than Canadian dollars and therefore subject to fluctuation in exchange
        rates. Approximately 7% of Corus’ consolidated revenues for the year ended
        August 31, 2006 were derived from foreign operations.
 
 *g)
        Lending*
 
 Corus
        does not have any lending operations as a distinct or significant business.
        Corus does, however, provide financing through loans to its digital channels,
        loans to privately owned Canadian media companies and has outstanding loans
        to
        executive officers. Corus may make loan investments in companies involved
        in the
        media sector of up to $5 million with the approval of the chief executive
        officer (“CEO”) or the chief financial officer (“CFO”) and more than $5 million
        with the approval of the Executive Committee of the Board of Directors.
        Outstanding loans to executive officers were granted prior to July 31,
        2002.
  **20**
  
 *h)
        Bankruptcy*
 
 There
        have been no bankruptcies, receiverships or similar proceedings against Corus
        or
        any of its subsidiaries within the past three years.
 
 *i)
        Reorganizations*
 
 There
        have been no material reorganizations at Corus or any of its subsidiaries
        within
        the past three years.
 
 *j)
        Social or Environmental Policies*
 
 **Code
        of Ethics**
 Corus
        is committed to fair dealing, honesty and integrity in all aspects of its
        business conduct. The Company takes its responsibility to its employees,
        shareholders and other stakeholders very seriously. The Company’s Code of
        Business Conduct (the “Code”) aims to demonstrate to its stakeholders and the
        public the Company’s commitment to conduct itself ethically.
 
 The
        Code applies to all employees and members of the Board of Directors of Corus
        and
        its subsidiary companies. For purposes of rules promulgated under Section
        406 of
        the *Sarbanes
        Oxley Act of 2002* ,
        portions of this Code shall comprise the Company’s “code of ethics” for senior
        executives and financial officers. The Code is available on the Corus
        Entertainment website at www.corusent.com under “Investor
        Information.”
 
 *k)
        Risk Factors*
 
 A
        discussion of risk affecting the Company and its business is set forth under
        the
        heading “Risks and Uncertainties” in the Management’s Discussion and Analysis
        for the year ended August 31, 2006, as contained in the Company’s 2006 Annual
        Report, which discussion is incorporated by reference herein. In addition,
        the
        Company is subject to the risks and uncertainties set forth below.
 
 This
        description of risks does not include all possible risks, and there may be
        other
        risks of which the Company is currently not aware.
 
 *l)
        Control of Corus by the Shaw family*
 
 JR
        Shaw and members of his family and the corporations owned and controlled
        by JR
        Shaw and members of his family (the “JR Shaw Group”) currently own 84.3% of the
        outstanding Class A participating shares in the capital of Corus. The Class
        A
        participating shares are the only shares entitled to vote in all circumstances.
        All of the Class A participating shares held by the JR Shaw Group are subject
        to
        a Voting Trust Agreement entered into by such persons. The voting rights
        with
        respect to such Class A participating shares are exercised by the representative
        of a committee of five trustees. Accordingly, the JR Shaw Group is, and as
        long
        as it owns a majority of the Class A participating shares will continue to
        be,
        able to elect a majority of the Board of Directors of Corus and to control
        the
        vote on matters submitted to a vote of Corus’ Class A participating
        shareholders.
 
 **CANADIAN
        COMMUNICATIONS INDUSTRY**
 **REGULATORY
        ENVIRONMENT**
 
 **Canadian
        Radio-television and Telecommunications Commission**
 
 Under
        the *Broadcasting
        Act* (Canada), the CRTC is responsible for regulating and supervising all aspects
        of
        the Canadian broadcasting system with a view to implementing broadcasting
        policy
        objectives set forth in the *Broadcasting
        Act* .
 
 Changes
        in the regulation of Corus’ business activities, including decisions by
        regulators affecting the Company’s operations (such as the granting or renewal
        of licenses; decisions as to the rights to programming licenses to competitors
        in the Company’s markets) or changes in interpretations of existing regulations
        by courts or regulators, could adversely affect the Company’s results of
        operations. The Company’s CRTC licenses must be renewed from time to time and
        cannot be transferred without regulatory approval.
  **21**
  
 Since
        1996, the CRTC has been implementing a competitive policy framework and has
        focused its attention on strengthening the creation of Canadian content and
        programming.
 
 The
        current objectives of the CRTC, as articulated in its 1997 Vision Statement
        and
        revised in May 1998, are to:
 
 • promote
        an environment in which existing and new communications services are available
        to Canadians;
 • ensure
        a strong Canadian presence in content that fosters creative talent and reflects
        Canadian society, including its linguistic duality and cultural
        diversity;
 • promote
        choice and diversity of high-quality communications services; and
 • to
        foster strong competitive and socially responsive communications
        industries.
 
 On
        April 1, 2004, the CRTC issued its so-called “CRTC 3-Year Work Plan” which
        included four objectives for the broadcasting sector which expand upon the
        aforementioned Vision Statement:
 
 1.
              Increased
                  availability of Canadian content and programming that reflects
                  Canadian
                  creative talent and Canada’s linguistic duality, cultural diversity and
                  social values, as well as its national, regional and community
                  characteristics.
 2.
              Increased
                  access to a variety of innovative, high-quality communications
                  services,
                  at reasonable prices, that meet consumers’ needs and reflect their
                  values.
 3.
              A
                  sustainable competitive Canadian communications
                  industry.
 4.
              Commission
                  processes that are fair, transparent and
                  effective.
 
 **Industry
        Canada**
 
 The
        technical aspects of the operation of radio and television stations in Canada
        are also subject to the licensing requirements and oversight of Industry
        Canada,
        a Ministry of the Government of Canada.
 
 **Restrictions
        on Non-Canadian Ownership**
 
 The
        legal requirements relating to Canadian ownership and control of broadcasting
        undertakings are embodied in a statutory order (the “Order”) from the Governor
        in Council (i.e. Cabinet of the Canadian federal government) to the CRTC.
        The
        Order is issued pursuant to authority contained in the *Broadcasting
        Act* .
        Under the Order, non-Canadians are permitted to own and control, directly
        or
        indirectly, up to 33 1/3% of the voting shares and 33 1/3% of the votes of
        a
        holding company which has a subsidiary operating company licensed under the *Broadcasting
        Act* .
        In addition, up to 20% of the voting shares and 20% of the votes of the
        operating licensee company may be owned and controlled, directly or indirectly,
        by non-Canadians. The Order also provides that the Chief Executive Officer
        and
        80% of the members of the board of directors of the operating company must
        be
        Canadian. In addition, where the holding company is less than 80%
        Canadian-owned, the holding company and its directors are prohibited from
        exercising any control or influence over the programming decisions of a
        subsidiary operating company. There are no restrictions on the number of
        non-voting shares that may be held by the non-Canadians at either the holding
        company or licensee operating company level. The CRTC, however, retains the
        discretion under the Order to determine as a question of fact whether a given
        licensee is controlled by non-Canadians.
 
 The
        Company’s articles currently give its Board of Directors the authority to
        restrict the issue, transfer and voting of its Class A participating shares
        and
        the transfer of its Class B non-voting participating shares for the purpose
        of
        ensuring that Corus remains qualified to hold or obtain licenses to carry
        on any
        broadcasting or programming business.
 
 **Broadcasting
        Services**
 
 Corus’
        radio stations and local television undertakings, specialty and premium
        television networks and pay audio services are subject to licensing and
        regulation by the CRTC. The *Broadcasting
        Act* gives the CRTC the power to issue and renew broadcasting licenses for a maximum
        term of seven years. Historically, all licenses issued by the CRTC have been
        consistently renewed except where there have been serious breaches of license
        conditions or regulations, in which case the licenses have been renewed for
        less
        than seven years, or, in a very limited number of instances, not at all.
        In
        order to conduct its business, Corus maintains its licenses in good standing
        and
        is in material compliance with conditions of license and regulatory
        requirements. The CRTC has never declined to renew a license held by any
        broadcasting undertaking in which Corus holds an ownership
        interest.
  **22**
  
 Licenses
        issued by the CRTC generally sets out the terms and conditions of the
        broadcaster’s program offering, including Canadian content expenditures,
        Canadian exhibition requirements and signal delivery terms for Corus’ specialty,
        premium television and pay audio services. The CRTC also imposes restrictions
        on
        the transfer of ownership and effective control of all licensed broadcasting
        undertakings. Transferees of ownership or control of a licensed undertaking
        must
        demonstrate to the CRTC that the transfer is in the public interest, and
        the
        purchaser is required, in most instances, to provide a specific package of
        tangible benefits designed to benefit the Canadian broadcasting system. For
        transfer of ownership applications involving profitable radio stations, tangible
        benefits are required to represent a financial contribution equal to 6% of
        the
        purchase price and for acquisitions of television, or specialty or premium
        television network services, a financial contribution of 10% of the value
        of the
        transaction is expected.
 
 The
        CRTC’s regulations that apply to radio, conventional television and specialty
        and premium television services require these broadcasting undertakings to
        obtain the prior approval of the CRTC in respect of any act, agreement or
        transaction that, directly or indirectly, would result in (i) a change in
        the
        effective control of a broadcasting undertaking; or (ii) a person together
        with
        any associate acquiring control of 30% or more of the issued voting securities,
        or 50% or more of the common shares, of a broadcasting undertaking or (iii)
        of a
        person that has, directly or indirectly, effective control of that broadcasting
        undertaking.
 
 **Radio
        Undertakings**
 
 The
        CRTC no longer regulates the formats of commercial FM radio stations except
        in
        the case of “specialty” radio licenses which, by definition, requires that (i)
        the language of broadcast is neither French nor English; (ii) more than 50%
        of
        the programming is spoken word; or (iii) less than 70% of the musical selections
        broadcast are not pop, rock, dance, country or country-orientated selections.
        For non-specialty format FM stations, the CRTC continues to require that
        less
        than 50% of the musical selections broadcast each week be “hits” which are
        defined in English markets as any selection which, prior to December 31,
        1980,
        achieved a Top 40 position in any of the charts recognized by the CRTC. Each
        commercial station is required to make a contribution to Canadian talent
        development initiatives ranging from an annual payment of $27,000 for major
        market stations to $400 for small market stations.
 
 On
        April 30, 1998, the CRTC announced certain changes to its commercial radio
        policy. By regulation, the CRTC increased Canadian popular music content
        levels
        broadcast to 35%. For French-language radio stations, at least 65% of popular,
        vocal music selections must be in the French language. The CRTC also changed
        ownership restrictions on the number of stations that could be owned within
        a
        particular market. The ownership changes allow a single owner to operate
        up to
        three stations provided only two are in the same band, in a given language
        in
        smaller markets and, in markets with eight or more commercial stations in
        a
        given language, one owner may hold up to two AM stations and two FM stations.
        In
        assessing transactions involving a change in control or ownership, the CRTC
        has
        stated it will examine the impact on diversity of news voices, the level
        of
        competition and, if the applicant has equity holdings in other local radio
        stations or media, cross-media ownership levels in a given market. Under
        its new
        policy, the CRTC also stated that it would no longer apply market entry criteria
        in assessing applications for new radio services in a particular market.
        Radio
        broadcasters derive substantially all of their revenues from advertising
        revenues. There is no regulatory limit on the number of commercials that
        can be
        broadcast. In markets with more than one commercial FM station, FM licensees
        are
        required to broadcast at least 42 hours per week of local programming in
        order
        to access local advertising. The CRTC will be conducting a review of its
        1998
        commercial radio policy in 2006, after it licensed new subscription radio
        undertakings in 2005.  A new policy framework is expected to be released in
        late 2006 or early 2007.  The key issues are Canadian Content levels,
        Canadian Talent Development payments and digital broadcasting.
  **23**
  **Specialty
        and Premium Television Networks Undertakings**
 
 Specialty
        and premium television networks each have varying Canadian programming and
        expenditure requirements set by a condition of license. These requirements
        depend on a number of factors, including the nature of the service and the
        types
        and availability of programming offered. The Canadian content conditions
        of
        license are reviewed by the CRTC at the time that the networks renew their
        licenses. Licensees are also required to make financial contributions to
        the
        creation of Canadian programming which is imposed by condition of
        license.
 
 Specialty
        television networks derive substantially all of their revenues from subscription
        and advertising revenues. Premium television networks derive their revenues
        from
        subscriptions and by regulation are required to be commercial free. The CRTC
        generally requires cable and DTH satellite distributors to carry all licensed
        specialty and premium television networks appropriate to the markets in which
        they are distributed with the exception of Category 2 digital services as
        described below. The maximum wholesale subscriber fee that can be charged
        to
        subscribers for the carriage of the service is regulated if it is carried
        as
        part of the basic service, but is not regulated if it is carried on an extended
        or discretionary tier. Subscriber fees payable to premium television network
        licensees are not regulated by the CRTC.
 
 On
        November 24, 2000, the CRTC announced that it would license 16 new
        English-language and five French-language digital programming services for
        mandatory distribution on a digital basis known as Category 1 services. The
        CRTC
        stated that all Category 1 services must commence operation on or before
        November 24, 2001, but subsequently extended this date until September 30,
        2002
        for certain of the French-language Category 1 services. An additional 262
        Category 2 digital services were also approved by the CRTC for distribution
        on a
        digital basis and continue to be licensed by the CRTC. Category 2 services
        may
        be competitive with one another but may not be directly competitive with
        an
        existing licensed analog specialty or premium television network or a Category
        1
        digital service. Category 2 services have no guaranteed distribution rights
        except that, if a cable or DTH satellite operator carries a Category 2 service
        in which it or an affiliate owns more than 10% of the issued equity, it must
        distribute at least five non-related Category 2 services for each related
        service carried. The Category 2 services licensed in the fall of 2000 were
        required to implement service no later than November 24, 2004, unless the
        CRTC
        approved an extension before that date. Since then, the Commission has licensed
        many new Category 2 services while at the same time allowing for carriage
        of new foreign services, especially those in third languages.
  In
        the fall of 2006, the Commission started a policy review for over-the-air
        broadcasting stations.  Key issues include the imposition of a fee for
        carriage of broadcast stations, the introduction of high definition television
        technology, transfer of ownership benefits payments, and closed captioning
        regulations.  It is expected that this will be followed by a review of
        policies regarding pay and specialty services and broadcasting distribution
        undertakings.
 
 New
        applications for Category 2 services are considered on an ongoing
        basis.
 
 **Local
        Television Undertakings**
 
 The
        CRTC reviewed its policies and regulations pertaining to Canadian television,
        primarily as they affect local broadcasters, and, on June 11, 1999, issued
        a new
        policy entitled “Building on Success - A Policy Framework for Canadian
        Television”. This policy introduced changes to the regulatory environment in an
        attempt to provide more flexibility and diversity for broadcasters while
        still
        providing a predominant amount of Canadian programming content.
 
 Under
        this new policy, Canadian content levels for conventional private television
        broadcasters will remain at 60% overall and 50% in prime time. As part of
        its
        new policy, the CRTC also announced that it would not require licensees to
        make
        quantitative commitments to local news programming but would require licensees
        to demonstrate how they intend to respond to the demands of local viewers
        as
        part of a license renewal application. The CRTC retained its policy of requiring
        the provision of local programming in order to access local advertising.
        The
        CRTC also retained the existing 150% dramatic programming credit for stations
        not part of a large multi-stations group applicable to Canadian programming
        in
        the calculation of Canadian content requirements. As of September 1, 2000,
        the
        CRTC eliminated the Canadian programming expenditure requirements and the
        expectations that had been imposed on stations. As well, in a departure from
        past practice, the renewal of all conventional television licenses held by
        an
        ownership group is considered at the same hearing.
  **24**
  
 **Pay
        Audio Services**
 
 Pay
        audio musical programming services provided to residential Canadian subscribers
        by broadcast distribution undertakings are licensed and regulated by the
        CRTC.
        The CRTC has established an open licensing framework and has imposed identical
        requirements on each licensee regarding Canadian content and French-language
        selection requirements. Canadian-originated pay audio channels may be linked
        on
        a 1:1 basis with foreign-originated channels.
 
 The
        CRTC has also imposed access requirements in the *Broadcasting
        Distribution Regulations* for third party pay audio services. If a Class 1 cable licensee distributes
        a
        pay audio service in which it or an affiliate controls 30% or more of the
        issued
        shares of the pay audio licensee, the Class 1 cable licensee is required
        to
        distribute at least one other third party pay audio service.
 
 **Cable
        Advertising Services**
 
 Still
        image and teleshopping advertising services are exempted from having to hold
        a
        CRTC license. If the CRTC is satisfied that the licensing of an undertaking
        will
        not contribute in a material manner to the implementation of the broadcasting
        policy outlined in the *Broadcasting
        Act* ,
        it shall exempt such undertaking from licensing requirements. The CRTC has
        issued a number of exemption orders which allow an undertaking to be operated
        without a license, provided it satisfies any terms and conditions contained
        in
        the particular order. Still image and teleshopping cable advertising services
        operate under the terms of exemption orders.
 
 **Canadian
        Content Requirement for Broadcasters**
 
 As
        mentioned previously, Canadian conventional television services, specialty
        television networks and premium television networks are required to devote
        a
        certain amount of their programming schedules to Canadian productions. These
        requirements provide support to the market for Canadian programs (such as
        the
        ones produced through Nelvana) as long as they qualify as Canadian programs
        for
        purposes of the Canadian Audio Visual Certification Office (“CAVCO”) as an
        officially recognized co-production or the CRTC.
 
 CAVCO
        and the CRTC determine the criteria for qualification of a program as
“Canadian”. Generally, a program will qualify if it is produced by an individual
        Canadian producer with the involvement of individual Canadians in principal
        functions, and where a substantial portion of the budget is spent on Canadian
        elements. In addition, the Canadian producer must have full creative and
        financial control of the project.
 
 **Film
        and Television Tax Credits and Grants**
 
 Nelvana
        generally receives various federal and provincial tax credits on its television
        series and feature films, which typically provide benefits of between 10%
        and
        25% of the Canadian production budget. These tax credits are calculated on
        the
        basis of each individual production.
 
 Nelvana
        is also eligible to receive additional funding for its productions from various
        Canadian industry funding sources including the Canadian Television Fund
        and
        Telefilm Canada in respect of feature films. However, given the limited
        resources of these programs, Nelvana has no assurance that it will obtain
        these
        funds for future productions.
 
 **International
        Treaty Co-Productions**
 
 Canada
        is a party to co-production treaties with many countries throughout the world,
        excluding the United States. These international co-production treaties allow
        for the reduction of the risks of production by permitting the pooling of
        creative, technical and financial resources of Canadian producers with
        non-Canadian producers under prescribed conditions. Canadian co-production
        treaty partners include China, France, Great Britain, Germany, New Zealand
        and
        Australia. A production that qualifies as a co-production for treaty purposes
        is
        considered to be a domestic product in each of the participating countries
        and,
        as such, is entitled to many aspects of national treatment in each country.
        More
        specifically, the co-production usually qualifies for domestic treatment
        under
        applicable broadcasting legislation and certain government subsidies. The
        co-producers jointly hold the copyright in the production. Sharing of foreign
        revenues is based on the respective contribution of each co-producer, subject
        to
        negotiation between the co-producers and approval by the appropriate government
        authorities. Many of Nelvana’s productions are produced through international
        treaty co-productions.
  **25**
  
 **Competition
        Act Requirements**
 
 The
        Commissioner of Competition has the authority pursuant to the *Competition
        Act* (Canada) to inquire into mergers and apply to the Competition Tribunal for
        remedial orders, including an order blocking a merger, where the Commissioner
        determines the merger is or will likely prevent or lessen competition
        substantially in a market. To facilitate the Commissioner’s review of mergers,
        parties to a merger transaction are required to pre-notify the Commissioner
        of
        Competition prior to completing the transaction when specified party and
        transaction-size thresholds are satisfied. For example, in the case of an
        asset
        purchase, a transaction is notifiable if the parties to the transaction,
        together with their affiliates, have assets in Canada or annual gross revenues
        from sales in, from or into Canada that exceed $400 million and if the aggregate
        value of the Canadian assets to be acquired or annual gross revenues from
        sales
        in or from Canada generated from those assets exceed $50 million.
 
 Ownership
        transfers of licensed broadcasting undertakings exceeding these financial
        thresholds thus require the approval of both the CRTC and the Commissioner
        of
        Competition according to their respective statutory mandates. The two
        authorities could come to different conclusions on a given transaction. For
        example, the CRTC could approve a broadcasting company’s acquisition of radio
        stations as being in accordance with its commercial radio policy whereas
        the
        Commissioner of Competition might conclude that the acquisition would
        substantially lessen competition in the market or markets under consideration.
 
 **Investment
        Canada Act**
 
 Under
        the *Investment
        Canada Act* (“ICA”), certain transactions which involve the acquisition of control of a
        Canadian business by a non-Canadian require the approval of the Canadian
        government. The Ministry of Industry (Canada) is responsible for reviewing
        proposed acquisitions of control of Canadian businesses by non-Canadians.
        However, where the Canadian business is a “cultural business”, the proposed
        acquisition would also be subject to review by the Minister of Canadian
        Heritage. Cultural businesses include those involved in the publication,
        distribution or sale of books, magazines, periodicals and newspapers, as
        well as
        businesses involved in the production and distribution of film and video
        recordings, audio and video music recordings. Radio, television and cable
        television broadcasting undertakings are also considered “cultural businesses”
under the ICA, but they are also the subject of other, more stringent, Canadian
        ownership and control regulations under the *Broadcasting
        Act,* as discussed above.
 
 Before
        an acquisition of a “cultural business” by a non-Canadian can be completed, the
        non-Canadian must be able to demonstrate that the proposed acquisition is
        likely
        to be of “net benefit to Canada”. In determining whether this test has been met,
        the Minister of Canadian Heritage is required to take into account a number
        of
        factors outlined in the ICA, including compatibility with Canada’s cultural
        policy objectives, as well as any applicable government policies and any
        written
        undertakings that may have been given by the non-Canadian investor.
 
 **Copyright
        Act Requirements**
 
 Corus’
        radio, conventional television, specialty television, premium television
        and pay
        audio service undertakings rely upon licenses under the *Copyright
        Act* (Canada) in order to make use of the music component of the programming and
        other uses of works used or distributed by these undertakings. Under these
        licenses, Corus is required to pay a range of royalties established by the
        Copyright Board pursuant to the requirements of the *Copyright
        Act* to
        collecting societies (which represent the copyright owners) and individual
        copyright owners. These royalties are paid by these undertakings in the normal
        course of their business.
 
 The
        levels of the royalties payable by Corus are subject to change upon application
        by the collecting societies and approval by the Copyright Board. The Government
        of Canada may, from time to time, make amendments to the *Copyright
        Act* to implement Canada’s international treaty obligations and for other purposes.
        Any such amendments could result in Corus’ broadcasting undertakings being
        required to pay additional royalties for these licenses. **
  **26**
  
 **CAPITAL
        STRUCTURE**
 
 **Description
        of Capital Structure**
 
 *(a) General*
 
 The
        authorized share capital of Corus consists of an unlimited number of Class
        A
        participating shares (“Class A Voting Shares”); an unlimited number of Class B
        non-voting participating shares (“Class B Non-Voting Shares”) (and, together
        with the Class A Voting Shares, the “Corus Shares”); an unlimited number of
        Class 1 preferred shares (the “Class 1 Preferred Shares”), issuable in series;
        an unlimited number of Class 2 preferred shares (the “Class 2 Preferred
        Shares”), issuable in series; and an unlimited number of Class A preferred
        shares (the “Class A Preferred Shares”). As at August 31, 2006, there were
        1,723,929 Class A Voting Shares, 40,281,529 Class B Non-Voting Shares and
        no
        preferred shares outstanding.
 
 *(b) Class
        A
        Voting Shares and Class B Non-Voting Shares*
 
 *(i)*
              *Authorized
                  Number of Shares*
 
 The
        authorized number of Class A Voting Shares and Class B Non-Voting Shares
        is
        unlimited. No Class A Voting Shares, however, shall be issued unless the
        prior
        written consent of holders of no fewer than two-thirds of the then outstanding
        Class A Voting Shares is obtained.
 
 *(ii)*
              *Voting
                  Rights*
 
 The
        holders of Class A Voting Shares are entitled to one vote per share at all
        meetings of shareholders. The holders of Class B Non-Voting Shares are entitled
        to receive notice of, to attend, and to speak at all meetings of shareholders
        but are not entitled to vote thereat except as required by law and except
        upon
        any resolution to authorize the liquidation, dissolution or winding up of
        Corus
        or the distribution of assets among its shareholders for the purpose of winding
        up its affairs, in which event each holder of Class B Non-Voting Shares will
        be
        entitled to one vote per share.
 
 *(iii)*
              *Dividends*
 
 In
        general, subject to the rights of any preferred shares outstanding from time
        to
        time, holders of Class A Voting Shares and Class B Non-Voting Shares are
        entitled to receive such dividends as the Board of Directors of Corus determines
        to declare on a share-for-share basis, as and when any such dividends are
        declared or paid, except that, during each Dividend Period (as defined below),
        the dividends (other than stock dividends) declared and paid on the Class
        A
        Voting Shares will always be $0.01 per share per annum less than the dividends
        declared and paid in such Dividend Period to holders of the Class B Non-Voting
        Shares, subject to proportionate adjustment in the event of any future
        consolidations or subdivisions of Corus Shares and in the event of any issue
        of
        Corus Shares by way of stock dividends. A “Dividend Period” is defined as the
        fiscal year of Corus or such other period not exceeding one year in respect
        of
        which the directors of Corus have an announced current policy to declare
        and pay
        or set aside for payment of regular dividends.
 
 *(iv)*
              *Rights
                  on Liquidation*
 
 In
        the event of the liquidation, dissolution or winding up of Corus or other
        distribution of assets of Corus for the purpose of winding up its affairs,
        all
        property and assets of Corus available for distribution to the holders of
        Corus
        Shares will be paid or distributed equally, share for share, between the
        holders
        of Corus Shares without preference or distinction.
 
 *(v)*
              *Conversion
                  Privilege*
 
 Any
        holder of Class A Voting Shares may, at any time or from time to time, convert
        any or all Class A Voting Shares held by such holder into Class B Non-Voting
        Shares on the basis of one Class B Non-Voting Share for each Class A Voting
        Share so converted.
  **27**
  
 Subject
        to certain exceptions described below, if an Exclusionary Offer is made,
        any
        holder of Class B Non-Voting Shares may, at any time or from time to time
        during
        a Conversion Period, convert any or all of the Class B Non-Voting Shares
        held by
        such holder into Class A Voting Shares on the basis of one Class A Voting
        Share
        for each Class B Non-Voting Share so converted. For the purpose of this
        paragraph, the following terms have the following meanings:
 
 “Conversion
        Period” means the period of time commencing on the eighth day after the Offer
        Date and terminating on the Expiry Date;
 
 “Exclusionary
        Offer” means an offer to purchase Class A Voting Shares that:
 
 (A)
              must,
                  by reason of applicable securities legislation or the requirements
                  of a
                  stock exchange on which the Class A Voting Shares are listed, be
                  made to
                  all or substantially all holders of Class A Voting Shares who are
                  residents of a province of Canada to which the requirement applies;
                  and
 
 (B)
              is
                  not made concurrently with an offer to purchase Class B Non-Voting
                  Shares
                  that is identical to the offer to purchase Class A Voting Shares
                  in terms
                  of price per share and percentage of outstanding shares to be taken
                  up
                  exclusive of shares owned immediately prior to the offer by the
                  Offeror,
                  and in all other material respects (except with respect to the
                  conditions
                  that may be attached to the offer for Class A Voting Shares), and
                  that has
                  no condition attached other than the right not to take up and pay
                  for
                  shares tendered if no shares are purchased pursuant to the offer
                  for Class
                  A Voting Shares,
 
 and
        for the purposes of this definition if an offer to purchase Class A Voting
        Shares is not an Exclusionary Offer as defined above but would be an
        Exclusionary Offer if it were not for sub-clause (B), the varying of any
        term of
        such offer shall be deemed to constitute the making of a new offer unless
        an
        identical variation concurrently is made to the corresponding offer to purchase
        Class B Non-Voting Shares;
 
 “Expiry
        Date” means the last date upon which holders of Class A Voting Shares may accept
        an Exclusionary Offer;
 
 “Offer
        Date” means the date on which an Exclusionary Offer is made;
 
 “Transfer
        Agent” means the transfer agent for the time being of the Class A Voting Shares;
        and
 
 “Offeror”
        means a person or company that makes an offer to purchase Class A Voting
        Shares
        (the “bidder”), and includes any associate or affiliate of the bidder or any
        person or company that is disclosed in the offering document to be acting
        jointly or in concert with the bidder.
 
 Subject
        to certain exceptions, the foregoing conversion right shall not come into
        effect
        if:
 
 (A)
              prior
                  to the time at which the offer is made there is delivered to the
                  Transfer
                  Agent and to the Secretary of Corus a certificate or certificates
                  signed
                  by or on behalf of one or more shareholders of Corus owning in
                  the
                  aggregate, as at the time the Exclusionary Offer is made, more
                  than 50% of
                  the then outstanding Class A Voting Shares, exclusive of shares
                  owned
                  immediately prior to the Exclusionary Offer by the Offeror, which
                  certificate or certificates shall confirm, in the case of each
                  such
                  shareholder, that such shareholder shall
                  not:
 
 a.
              tender
                  any shares in acceptance of any Exclusionary Offer without giving
                  the
                  Transfer Agent and the Secretary of Corus written notice of such
                  acceptance or intended acceptance at least seven days prior to
                  the Expiry
                  Date;
 
 b.
              make
                  any Exclusionary Offer;
 
 c.
              act
                  jointly or in concert with any person or company that makes any
                  Exclusionary Offer; or
  **28**
  
 
 d.
              transfer
                  any Class A Voting Shares, directly or indirectly, during the time
                  at
                  which any Exclusionary Offer is outstanding without giving the
                  Transfer
                  Agent and the Secretary of Corus written notice of such transfer
                  or
                  intended transfer at least seven days prior to the Expiry Date,
                  which
                  notice shall state, if known to the transferor, the names of the
                  transferees and the number of Class A Voting Shares transferred
                  or to be
                  transferred to each transferee; or
 
 (B)
              as
                  of the end of the seventh day after the Offer Date there has been
                  delivered to the Transfer Agent and to the Secretary of Corus a
                  certificate or certificates signed by or on behalf of one or more
                  shareholders of Corus owning in the aggregate more than 50% of
                  the then
                  outstanding Class A Voting Shares, exclusive of shares owned immediately
                  prior to the Exclusionary Offer by the Offeror, which certificate
                  or
                  certificates shall confirm, in the case of each such
                  shareholder:
 
 a.
              the
                  number of Class A Voting Shares owned by the
                  shareholder;
 
 b.
              that
                  such shareholder is not making the offer and is not an associate
                  or
                  affiliate of, or acting jointly or in concert with, the person
                  or company
                  making the offer;
 
 c.
              that
                  such shareholder shall not tender any shares in acceptance of the
                  offer,
                  including any varied form of the offer, without giving the Transfer
                  Agent
                  and the Secretary of Corus written notice of such acceptance or
                  intended
                  acceptance at least seven days prior to the Expiry Date;
                  and
 
 d.
              that
                  such shareholder shall not transfer any Class A Voting Shares,
                  directly or
                  indirectly, prior to the Expiry Date without giving the Transfer
                  Agent and
                  the Secretary of Corus written notice of such transfer or intended
                  transfer at least seven days prior to the Expiry Date, which notice
                  shall
                  state, if known to the transferor, the names of the transferees
                  and the
                  number of Class A Voting Shares transferred or to be transferred
                  to each
                  transferee; or
 
 (C)
              as
                  of the end of the seventh day after the Offer Date, a combination
                  of
                  certificates that comply with either clause (A) or (B) from shareholders
                  of Corus owning in the aggregate more than 50% of the then outstanding
                  Class A Voting Shares, exclusive of shares owned immediately prior
                  to the
                  Exclusionary Offer by the Offeror, has been delivered to the Transfer
                  Agent and to the Secretary of
                  Corus.
 
 *(vi)*
              *Modification*
 
 Neither
        class of Corus Shares may be subdivided, consolidated, reclassified or otherwise
        changed unless contemporaneously therewith the other class of Corus Shares
        is
        subdivided, consolidated, reclassified or otherwise changed in the same
        proportion and in the same manner.
 
 *(vii)*
              *Offer
                  to Purchase*
 
 Corus
        may not make an offer to purchase any outstanding Class A Voting Shares unless
        at the same time it makes an offer to purchase at the same price and on the
        same
        terms as to payment an equivalent proportion of the outstanding Class B
        Non-Voting Shares.
 
 *(viii)*
              *Redemption*
 
 The
        Corus Shares are not redeemable at the option of either Corus or the holder
        of
        any such Corus Shares.
 
 *(c) Class
        1
        Preferred Shares*
 
 The
        Class 1 Preferred Shares are issuable in one or more series. The Board of
        Directors may fix from time to time before such issue the number of shares
        which
        is to comprise each series then to be issued and the designation, rights,
        conditions, restrictions and limitations attaching thereto, including, without
        limiting the generality of the foregoing, the rate of preferential dividends
        and
        whether or not such dividends shall be cumulative, the dates of payment thereof,
        the redemption price and terms and conditions of redemption, including the
        rights, if any, of the holders of Class 1 Preferred Shares of such series
        to
        require the redemption thereof, conversion rights, if any, and any redemption
        fund, purchase fund or other provisions to be attached to the Class 1 Preferred
        Shares of such series.
  **29**
  
 The
        holders of Class 1 Preferred Shares of any series shall not be entitled to
        receive notice of, to attend or vote at any meeting of shareholders of Corus,
        other than a meeting of holders of Class 1 Preferred Shares, as provided
        by
        applicable law.
 
 The
        shares of each successive series of Class 1 Preferred Shares shall have
        preference over the Class A Voting Shares and Class B Non-Voting Shares as
        to
        dividends of not less than 1/100th of a cent per share, and shall not confer
        upon the shares of one series a priority over the shares of any other series
        of
        the Class 1 Preferred Shares in respect of voting, dividends or return of
        capital. If any amount of cumulative dividends or any amount payable on return
        of capital in respect of shares of a series of Class 1 Preferred Shares is
        not
        paid in full, the shares of such series shall participate rateably with the
        shares of all other series of Class 1 Preferred Shares in respect of accumulated
        dividends and return of capital. The Class 1 Preferred Shares and each series
        thereof shall rank junior to and be subject to in all respects to the
        preferences, rights, conditions, restrictions, limitations and prohibitions
        attached to the Class A Preferred Shares.
 
 *(d) Class
        2
        Preferred Shares*
 
 The
        Class 2 Preferred Shares are issuable in one or more series. From time to
        time
        before any such issue, the directors may fix the number of shares which is
        to
        comprise each series then to be issued and the designation, rights, conditions,
        restrictions or limitations attaching thereto, including, without limiting
        the
        generality of the foregoing, the rate of preferential dividends and whether
        or
        not such dividends shall be cumulative, the dates of payment thereof, the
        redemption price and terms and conditions of redemption, including the rights,
        if any, of the holders of Class 2 Preferred Shares of such series to require
        the
        redemption thereof, conversion rights, if any, and any redemption fund, purchase
        fund or other provisions to be attached to the Class 2 Preferred Shares of
        such
        series.
 
 The
        holders of Class 2 Preferred Shares of any series shall not be entitled to
        receive notice of, to attend or vote at any meeting of shareholders of Corus,
        other than a meeting of holders of Class 2 Preferred Shares, as provided
        by
        applicable law.
 
 The
        shares of each successive series of Class 2 Preferred Shares shall have
        preference over the Class A Voting Shares and Class B Non-Voting Shares as
        to
        dividends in right of payment and shall not confer upon the shares of one
        series
        a priority over the shares of any other series of Class 2 Preferred Shares
        in
        respect of voting, dividends or return of capital. If any amount of cumulative
        dividends or any amount payable on return of capital in respect of shares
        of a
        series of Class 2 Preferred Shares is not paid in full, the shares of such
        series shall participate rateably with the shares of all other series of
        the
        Class 2 Preferred Shares in respect of accumulated dividends and return of
        capital. The Class 2 Preferred Shares and each series thereof shall rank
        junior
        to and be subject to in all respects to the preferences, rights, conditions,
        restrictions, limitations and prohibitions attached to the Class A Preferred
        Shares and the Class 1 Preferred Shares.
 
 *(e) Class
        A
        Preferred Shares*
 
 In
        accordance with the provisions of subsection 26(3) of the *Canada
        Business Corporations Act* (the “CBCA”), the directors of Corus may add to the stated capital account
        maintained for Class A Preferred Shares the whole or any part of the amount
        of
        consideration received by Corus in an exchange for property, or shares of
        another class, or pursuant to an amalgamation referred to in section 182
        of the
        CBCA or an arrangement referred to in subsection 192(1)(b) or (c) of the
        CBCA.
        The Class A Preferred Shares shall be redeemed (the “Class A Redemption Amount”)
        at the amount of consideration received therefore as determined by the directors
        of Corus at the time of issuance. No Class A Preferred Shares shall be issued
        by
        Corus at any particular time if, at that time, there are Class A Preferred
        Shares issued and outstanding
 
 The
        holders of the Class A Preferred Shares shall not be entitled to receive
        notice
        of, to attend or vote at any meeting of shareholders of Corus, subject to
        the
        CBCA.
 
  **30**
  When
        and if declared by the directors of Corus, the holders of Class A Preferred
        Shares shall be entitled to receive out of the net profits or surplus of
        Corus
        properly applicable to the payment of dividends, a non-cumulative dividend
        at
        such rate as the directors may from time to time determine. Upon the
        liquidation, dissolution or winding up of Corus, or other distribution of
        the
        assets of Corus or repayment of capital to its shareholders for the purpose
        of
        winding up its affairs, the holders of Class A Preferred Shares shall be
        entitled to receive for each such share, in priority of the holders of Class
        A
        Voting Shares and Class B Non-Voting Shares, the Class A Redemption Amount
        per
        share together with all declared but unpaid dividends thereon (the “Class A
        Redemption Price”). After such payment the holders of the Class A Preferred
        Shares shall have no right or claim to any of the remaining assets of Corus.
        Class 1 Preferred Shares, Class 2 Preferred Shares, Class A Voting Shares
        and
        Class B Non-Voting Shares shall rank junior to and shall be subject in all
        respect to the preferences, rights, conditions, restrictions, limitations
        and
        prohibitions attached to the Class A Preferred Shares. The Class A Preferred
        Shares are redeemable at the demand of Corus and are retractable at the demand
        of a holder of Class A Preferred Shares at the Class A Redemption
        Price.
 
 **Share
        constraints**
 
 The
        statutes which govern the provision of broadcasting services by Corus and
        its
        regulated subsidiaries impose restrictions on the ownership of shares of
        Corus
        and its regulated subsidiaries by persons that are not Canadian. (See
        information under the heading “Canadian Communications Industry Regulatory
        Environment - Restrictions on Non-Canadian Ownership”). In order to ensure that
        Corus and its regulated subsidiaries remain eligible or qualified to provide
        broadcasting services in Canada, the Articles of Incorporation of Corus require
        the directors of Corus to refuse to issue or register the transfer of any
        “Voting Shares” (defined as the Class A Voting Shares and any other shares of
        Corus carrying voting rights under all circumstances or by reason of an event
        that has occurred and is continuing, and includes a security that is convertible
        into such a share and a currently exercisable option or right to acquire
        such a
        share or such a convertible security) to a person that is not a Canadian
        if such
        issue or transfer would result in the total number of such shares held by
        non-Canadians exceeding the maximum number permitted by applicable law. In
        addition, the directors of Corus are required to refuse to issue or register
        the
        transfer of any Voting Shares to a person in circumstances where such issue
        or
        transfer would affect the ability of Corus and its regulated subsidiaries
        to
        obtain, maintain, amend or renew a license to carry on any business. The
        Articles of Incorporation of Corus further provide that if, for whatever
        reason,
        the number of Voting Shares held by non-Canadians or other such persons exceeds
        the maximum number permitted by applicable law or would affect the ability
        to
        carry on any licensed business, Corus may, to the extent permitted by corporate
        or communications statutes, sell the Voting Shares held by such non-Canadians
        or
        other persons as if it were the owner of such shares. The Articles of
        Incorporation of Corus also give the directors of Corus the right to refuse
        to
        issue or register the transfer of shares of any class in the capital of Corus
        if
        (i) the issue or the transfer requires the prior approval of a regulatory
        authority unless and until such approval has been obtained; or (ii) the person
        to whom the shares are to be issued or transferred has not provided Corus
        with
        such information as the directors may request for the purposes of administering
        these share constraints.
 
 **Ratings**
 
 As
        a result of the successful tender offer and consent solicitation for Corus’
Senior Subordinated Debt, completed in January 2006, the ratings previously
        assigned by Standard & Poor’s (“S&P”) and Moody’s Investors Service,
        Inc. (“Moody’s”) for Corus were withdrawn.
  **MARKET
        FOR SECURITIES**
 
 **Marketplaces**
 The
        securities of the Company are listed and posted for trading on the exchanges
        set
        forth below.
 
 **Security**
              **Exchange**
              **Symbol**Class
                  B Non-Voting Shares
              Toronto
                  Stock Exchange (“TSX”)
              CJR.BClass
                  B Non-Voting Shares
              New
                  York Stock Exchange (“NYSE”)
              CJR
 
  **31**
  **Trading
        Price and Volume**
 The
        following table sets forth the monthly price range and volume traded for
        each of
        the Company’s publicly traded securities for each month during the fiscal year
        ended August 31, 2006.
 **TSX
                  - CJR.B**
              
              **NYSE
                  - CJR****September
                  2005**
              
              
              High
              
              
              35.30
              
              
              29.65Low
              
              
              31.68
              
              
              26.70September
                  30
              
              
              Close
              
              
              33.64
              
              
              29.31Average
                  Daily Volume
              
              
              177,276
              
              
              1,820**October
                  2005**
              
              
              High
              
              
              35.00
              
              
              29.88Low
              
              
              30.19
              
              
              26.41October
                  31
              
              
              Close
              
              
              31.15
              
              
              26.41Average
                  Daily Volume
              
              
              128,360
              
              
              2,014**November
                  2005**
              
              
              High
              
              
              31.35
              
              
              26.47Low
              
              
              28.75
              
              
              24.50November
                  30
              
              
              Close
              
              
              29.00
              
              
              24.96Average
                  Daily Volume
              
              
              147,805
              
              
              2,038**December
                  2005**
              
              
              High
              
              
              31.49
              
              
              27.00Low
              
              
              29.12
              
              
              25.00December
                  30
              
              
              Close
              
              
              31.20
              
              
              26.78Average
                  Daily Volume
              
              
              146,315
              
              
              2,376**January
                  2006**
              
              
              High
              
              
              35.84
              
              
              31.23Low
              
              
              30.96
              
              
              26.75January
                  31
              
              
              Close
              
              
              35.28
              
              
              31.07Average
                  Daily Volume
              
              
              124,390
              
              
              6,640**February
                  2006**
              
              
              High
              
              
              36.20
              
              
              31.67Low
              
              
              34.20
              
              
              29.85February
                  28
              
              
              Close
              
              
              36.20
              
              
              31.53Average
                  Daily Volume
              
              
              118,425
              
              
              2,974**March
                  2006**
              
              
              High
              
              
              37.61
              
              
              33.30Low
              
              
              33.76
              
              
              29.17March
                  31
              
              
              Close
              
              
              35.80
              
              
              30.65Average
                  Daily Volume
              
              
              139,452
              
              
              9,491**April
                  2006**
              
              
              High
              
              
              39.86
              
              
              34.80Low
              
              
              35.38
              
              
              30.25April
                  28
              
              
              Close
              
              
              37.13
              
              
              33.53Average
                  Daily Volume
              
              
              237,811
              
              
              8,495**May
                  2006**
              
              
              High
              
              
              39.09
              
              
              35.22Low
              
              
              35.56
              
              
              32.30May
                  31
              
              
              Close
              
              
              36.00
              
              
              32.70Average
                  Daily Volume
              
              
              103,805
              
              
              8,705**June
                  2006**
              
              
              High
              
              
              37.76
              
              
              33.86Low
              
              
              32.76
              
              
              29.25June
                  30
              
              
              Close
              
              
              36.25
              
              
              32.30Average
                  Daily Volume
              
              
              84,100
              
              
              9,886**July
                  2006**
              
              
              High
              
              
              40.75
              
              
              36.00Low
              
              
              35.00
              
              
              31.20July
                  31
              
              
              Close
              
              
              39.02
              
              
              34.60Average
                  Daily Volume
              
              
              87,937
              
              
              7,645**August
                  2006**
              
              
              High
              
              
              40.54
              
              
              37.50Low
              
              
              38.16
              
              
              34.49August
                  31
              
              
              Close
              
              
              38.63
              
              
              35.33Average
                  Daily Volume
              
              
              60,076
              
              
              3,609
 
 All
        price and volume information is from independent third-party
        sources.
 
  **32**
  **DIVIDEND
        POLICY**
 
 *(a) Dividend
        Policy*
 
 The
        Company’s dividend policy is reviewed regularly by the Board of Directors of
        Corus. In general, subject to the rights of any preferred shares outstanding
        from time to time, holders of Class A Voting Shares 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, if, as and when any such
        dividends are declared and paid. In accordance with the terms and conditions
        of
        such shares, the dividends (other than stock dividends) declared and paid
        on the
        Class A Voting Shares shall be $0.01 per share per annum less than the dividends
        declared and paid to holders of the Class B Non-Voting Shares. See the
        information under the heading “Capital Structure - Description of Capital
        Structure - Class Voting A Shares and Class B Non-Voting Shares”.
 
 *(b) Restrictions
        on Payment of Dividends*
 
 Covenants
        under Corus’ credit agreement with a syndicate of lenders, as amended and
        restated on January 23, 2006, may restrict Corus’ ability to pay dividends
        should Corus fail to achieve certain financial ratios and/or financial
        performance or if an event of default has occurred and is continuing or would
        result from the payment of the dividend.
 
 *(c) Distribution
        Rates and Payment Dates*
 
 The
        annual distribution rates on securities of the Company and payment dates
        for the
        fiscal year ended August 31, 2006, as well as the annual dividend payments
        for
        the past three fiscal years, are set forth in the tables below.
 
 ***Fiscal
        2006 Distribution Rates and Payment Dates***
 
 **Security**
              **Distribution
                  Rate**
              **Payment
                  Date**Class
                  A Voting Shares
              $0.0975
                  per share
              June
                  30, 2006$0.0975
                  per share
              March
                  31, 2006$0.0450
                  per share
              December
                  31, 2005Class
                  B Non-Voting Shares
              $0.100
                  per share
              June
                  30, 2006$0.100
                  per share
              March
                  31, 2006$0.050
                  per share
              December
                  31, 2005
  ***Annual
        Dividend Payments (Fiscal 2004 - Fiscal 2006)***
 
 **Security**
              **Fiscal
                  2006**
              **Fiscal
                  2005**
              **Fiscal
                  2004**Class
                  A Voting Shares
              $0.240
              $0.065
              $0.040Class
                  B Non-Voting Shares
              $0.250
              $0.075
              $0.050
 
 **NORMAL
        COURSE ISSUER BID**
 
 On
        December 15, 2005 Corus announced its intention to make a Normal Course Issuer
        Bid for its Class B Non-Voting Shares. The TSX subsequently accepted the
        notice
        filed by Corus. Under the bid Corus can purchase for cancellation up to a
        total
        of 3,000,000 Class B Non-Voting Shares during the 12 month period commencing
        January 1, 2006 and ending December 31, 2006. To August 31, 2006 Corus
        repurchased 1,034,700 shares at an average price of $35.56 per
        share.
  **33**
  
 **DIRECTORS
        AND OFFICERS**
 
 The
        following are the names and municipalities of residence of the directors
        and
        executive officers of the Company as of October 31, 2006 or as otherwise
        noted,
        their positions within the Company and their principal occupations during
        the
        last five years. The term of office for each director will be until the next
        annual meeting or until his or her successor is elected or
        appointed.
 **Name
                      and Municipality of**
                    **Residence**
                  **Director/Officer**
                  **Position
                      with Corus/Principal Occupation**Pierre
                      Béland(3)
                  Director
                  President,
                      Métromédia PlusMontreal,
                      QuebecJohn
                      M. Cassaday(2)
                  Director
                      and Officer
                  President
                      and Chief Executive Officer,Toronto,
                      Ontario
                  
                  Corus
                      Entertainment Inc.Dennis
                      Erker(2)(4)(6)
                  Director
                  Partner,
                      Fairley Erker Advisory Group (a financialEdmonton,
                      Alberta
                  
                  and
                      estate planning company)Carolyn
                      Hursh(4)
                  Director
                  Chairman,
                      James Richardson & Sons Limited (a familyCalgary,
                      Alberta
                  
                  owned
                      and managed conglomerate)Wendy
                      A. Leaney(1)(8)
                  Director
                  President,
                      Wyoming Associates Ltd. (a privateToronto,
                      Ontario
                  
                  investment
                      and consulting firm)Ronald
                      D. Rogers(1)(3)(7)
                  Director
                  Corporate
                      Director/TrusteeCalgary,
                      AlbertaCatherine
                      Roozen(1)(4)
                  Director
                  Director
                      and Corporate Secretary,Edmonton,
                      Alberta
                  
                  Cathton
                      Holdings Ltd.Terrance
                      Royer(2)(3)(5)
                  Director
                  Chairman,
                      Royco Hotels Ltd. (aCalgary,
                      Alberta
                  
                  hotel
                      management company)Heather
                      A. Shaw(2)
                  Director
                      and Officer
                  Executive
                      Chair, Corus Entertainment Inc.Calgary,
                      AlbertaJulie
                      M. Shaw
                  Director
                  Vice
                      President, Facilities, Design and Management, ShawCalgary,
                      Alberta
                  
                  Communications
                      Inc; and Secretary, Shaw FoundationThomas
                      C. Peddie FCA
                  Officer
                  Senior
                      Vice President and Chief FinancialToronto,
                      Ontario
                  
                  Officer,
                      Corus Entertainment Inc.Paul
                      W. Robertson
                  Officer
                  President,
                      Television, Corus Entertainment Inc.Toronto,
                      OntarioJohn
                      P. Hayes
                  Officer
                  President,
                      Radio, Corus Entertainment Inc.Toronto,
                      OntarioDoug
                      Murphy
                  Officer
                  President,
                      Nelvana Enterprises, CorusToronto,
                      Ontario
                  
                  Entertainment
                      Inc.Scott
                      Dyer
                  Officer
                  Executive
                      Vice President, General Manager,Toronto,
                      Ontario
                  
                  Corus
                      Kids, Corus Entertainment Inc.Gary
                      Maavara
                  Officer
                  Vice
                      President and General Counsel,Toronto,
                      Ontario
                  
                  Corus
                      Entertainment Inc.David
                      Spence CA
                  Officer
                  Vice
                      President, Controller, CorusMarkham,
                      Ontario
                  
                  Entertainment
                      Inc.Hal
                      Blackadar
                  Officer
                  Vice
                      President, Human Resources,Oakville,
                      Ontario
                  
                  Corus
                      Entertainment Inc.Pierre
                      Arcand
                  Officer
                  President,
                      Quebec Radio, CorusMontreal,
                      Quebec
                  
                  Entertainment
                      Inc.John
                      R. (Jack) Perraton
                  Secretary
                  Senior
                      Partner, Perraton LawCalgary,
                      Alberta
  **34**
  Notes:
 (1)
              Member
                  of the Audit Committee in fiscal
                  2006
 (2)
              Member
                  of the Executive Committee in fiscal
                  2006
 (3)
              Member
                  of the Human Resources Committee in fiscal
                  2006
 (4)
              Member
                  of the Corporate Governance Committee in fiscal
                  2006
 (5)
              Member
                  of Audit Committee effective October 11,
                  2006
 (6)
              Member
                  of Human Resources Committee effective October 11,
                  2006
 (7)
              Mr.
                  Rogers, a chartered accountant, was independent to October 11,
                  2006, when
                  he ceased to be a member of the Audit Committee and the Human Resources
                  Committee. He is considered to be a financial expert for United
                  States
                  reporting purposes.
 (8)
              Ms.
                  Leaney, Chair of the Audit Committee effective October 11, 2006,
                  is
                  independent and is considered to be a financial expert for United
                  States
                  reporting purposes.
 
 Each
        director named above was appointed a director on December 15, 2005 and will
        hold
        office until the next scheduled annual meeting of shareholders. Thereafter,
        each
        director will be elected at the annual meeting of shareholders to serve until
        the next annual meeting or until a successor is elected or
        appointed.
 
 Effective
        October 11, 2006, the Board, after discussions initiated by Ronald Rogers,
        considers him, on an interim basis, to be a related director. As such, he
        was
        replaced by Terrance Royer on the Audit Committee and by Dennis Erker on
        the
        Human Resources Committee. Effective October 11, 2006, Wendy Leaney was
        appointed Chair of the Audit Committee.
 
 Each
        officer or director of Corus has been engaged for more than five years in
        his or
        her principal or prior occupation, as the case may be, except as follows:
        Pierre
        Béland was the President of Corus Radio Quebec prior to July 25, 2002; prior
        to
        July 2004, Ronald Rogers was Senior Vice President and Chief Financial Officer
        of Shaw Communications Inc.; prior to September, 2006, Doug Murphy was Executive
        Vice President, Business Development, Nelvana, and prior to December, 2002
        he
        was Principal, Doug Murphy and Company; prior to September, 2006, Scott Dyer
        was
        Executive Vice President, Production and Development, Nelvana; Gary Maavara
        was
        Vice President, Public Relations for CanWest Global Communications Corp.
        from
        July 2003 to September 2004, and from 2001 to 2003 Senior Vice President,
        Global
        Television Inc. and concurrently Senior Vice President and Chief Operating
        Officer, CanWest Interactive Inc.; Hal Blackadar was the General Manager
        of
        Corus Radio Ontario prior to June 2002; prior to July 2002, Pierre Arcand
        was
        Executive Vice President of Metromedia CMR; and prior to February 2005, David
        Spence was Corporate Controller, Corus Entertainment Inc.
 
 As
        of October 31, 2006, the directors and executive officers of the Company
        beneficially owned, directly or indirectly, or exercised control or direction
        over 897,974 Class A Voting Shares and 1,183,296 Class B Non-Voting Shares,
        representing 52.1% and 2.9% of the issued and outstanding Class A Voting
        Shares
        and Class B Non-Voting Shares, respectively.
 
 
 **AUDIT
        COMMITTEE**
 
 **Charter**
 
 The
        text of the Audit Committee’s Charter is attached as Schedule A.
  **35**
  **Composition
        of the Audit Committee**
 
 The
        Company’s Audit Committee is composed of Ronald D. Rogers (to October 11, 2006),
        Wendy A. Leaney, Catherine Roozen and Terrance Royer (as of October 11, 2006),
        each of whom is a financially literate, independent director of the Company.
        The
        relevant education and experience of each Audit Committee member is outlined
        below:
 
 *Ronald
        D. Rogers (Chair to October 11, 2006)*
 
 Mr.
        Rogers holds a Bachelor of Commerce degree and is a chartered accountant.
        Mr.
        Rogers retired as Senior Vice President and Chief Financial Officer of Shaw
        Communications Inc. in August of 2004. Mr. Rogers serves as a trustee for
        The
        Brick Group Income Fund, Transforce Income Fund, Pizza Pizza Royalty Income
        Fund
        and Parkland Income Fund.
 
 *Wendy
        A. Leaney (Chair as of October 11, 2006)*
 
 Ms.
        Leaney holds a Bachelor of Arts (Hon) degree. Ms. Leaney is President of
        Wyoming
        Associates Ltd., a private investment and consulting firm based in Toronto.
        Prior to that, Ms. Leaney was Managing Director and Co-Head Global
        Communications Finance for TD Securities Inc. Ms. Leaney serves on the Board
        of
        Canadian Western Bank. From 2001 to 2005, Ms. Leaney also served on the Board
        of
        Call-Net Enterprises.
 
 *Catherine
        Roozen*
 
 Ms.
        Roozen is Director and Corporate Secretary of Cathton Holdings Ltd. and the
        Allard Foundation, positions she has held since 1981. Ms. Roozen serves on
        the
        Alberta Cancer Board as well as on a number of charitable boards.
 
 *Terrance
        Royer (Audit Committee member as of October 11, 2006)*
 
 Mr.
        Royer is Chairman of Royco Hotels Ltd., a hotel management company. Mr. Royer
        retired as Executive Vice-Chairman of the Calgary-based Royal Host REIT in
        December of 2005. He is also retired President, CEO and founder of Royal
        Host
        Corp., a hotel and resort ownership, franchising and management company.
        Mr.
        Royer served on the Board of Royal Host REIT from January, 1998 to June,
        2006.
        Mr. Royer is Chairman Emeritus of the University of Lethbridge (Chairman
        from
        January 2001 - July 2006), Chairman of the Alberta “Access to the Future Fund”
for post-secondary institutions in Alberta and is a Trustee for the Alberta
        Ingenuity Fund.
 
 **Principal
        Accounting Fees and Services - Independent Auditors**
 
 Fees
        payable to the Registrant’s independent auditor, Ernst and Young LLP, for the
        years ended August 31, 2006 and 2005 totaled $2,228,680 and $1,294,100,
        respectively, as detailed in the following table. All funds are in Canadian
        dollars:
 Year
                  Ended August 31, 2006
              Year
                  Ended August 31, 2005Audit
                  Fees
              1,553,000
              999,300Audit-Related
                  Fees
              280,500
              237,500Tax
                  Fees
              229,800
              57,300All
                  Other Fees
              165,380
              -Total
              2,228,680
              1,294,100
 
 The
        nature of the services provided by Ernst and Young LLP under each of the
        categories indicated in the table is described below:
 
  **36**
  *Audit
        Fees*
 
 Audit
        fees were for professional services rendered by Ernst and Young LLP for the
        audit of the Registrant’s annual financial statements and services provided in
        connection with statutory and regulatory filings or engagements.
 
 *Audit-Related
        Fees*
 
 Audit-related
        fees were for assurance and related services reasonably related to the
        performance of the audit or review of the annual financial statements and
        are
        not reported under “Audit Fees” above. These services consisted of employee
        benefit plan audits, assistance with the Company’s plans to comply with Section
        404 of the *Sarbanes-Oxley
        Act of 2002* ,
        and translation services in respect of the financial statements and other
        regulatory filings.
 
 *Tax
        Fees*
 
 Tax
        fees were for tax compliance, tax advice and tax-planning professional services.
        These services consisted of tax planning and advisory services relating to
        common forms of domestic and international taxation (i.e. income tax, capital
        tax, Goods and Services Tax, and value added tax) as well as assistance with
        various tax audit matters.
 
 *All
        Other Fees*
 
 Fees
        disclosed in the table above under the item “all other fees” represent products
        and services other than the audit fees, audit-related fees and tax fees
        described above. No such fees were paid in 2006 and 2005.
 
 The
        Company’s Audit Committee has implemented a policy restricting the services that
        may be provided by the auditors and the fees paid to the auditors. Prior
        to the
        engagement of the auditors, the Audit Committee pre-approves the provision
        of
        the service. In making their determination regarding non-audit services,
        the
        Audit Committee considers the compliance with the policy and the provision
        of
        non-audit services in the context of avoiding impact on auditor independence.
        Each quarter, the CFO makes a presentation to the Audit Committee detailing
        the
        non-audit services performed by the auditors on a year-to-date basis, and
        details of any proposed assignments for consideration by the Audit Committee
        and
        pre-approval if appropriate.
 
 As
        required by the *Sarbanes-Oxley
        Act of 2002* ,
        all audit, audit-related and non-audit services rendered by Ernst and Young
        LLP
        pursuant to engagements entered into since May 6, 2003 were pre-approved
        by the
        Audit Committee pursuant to the Company’s policy and pre-approval procedures. In
        fiscal 2006, no audit-related or non-audit services rendered by the auditors
        were required to be approved by the Audit Committee pursuant to the DE MINIMIS
        exception set out in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
  **LEGAL
        AND REGULATORY**
 
 Corus
        is involved from time to time in various claims and lawsuits incidental to
        the
        ordinary course of business, including intellectual property actions and
        acts
        for defamation. Adverse determinations in litigation could result in the
        loss of
        proprietary rights, subject the Company to significant liabilities, or require
        Corus to seek licenses from third parties, any one of which could have an
        adverse effect on the business and results of operations. Actions which are
        incidental to the business are typically covered by insurance and management
        has
        estimated the potential liability and expensed the amount on its financial
        statements. Corus does not anticipate that the damages which may be awarded
        in
        any material action of which the Company is currently aware will exceed its
        insurance coverage in a material way. While no assurance can be given that
        these
        proceedings will be favourably resolved, Corus does not believe that the
        outcome
        of these legal proceedings will have a material adverse impact on its financial
        position or results of operations.
 
 
 
  **37**
  
 
 **INTERESTS
        OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS**
 
 To
        the knowledge of the Company, no director or executive officer of the Company,
        or a shareholder holding a sufficient number of securities of the Company
        to
        affect materially the control of the Company, is or has been, since the
        incorporation of the Company, a director or executive officer of any company
        that, while that person was acting in that capacity, (a) was the subject
        of a
        cease trade order or similar order or an order that denied the company access
        to
        any exemptions under Canadian securities legislation for a period of more
        than
        30 consecutive days; (b) was subject to an event that resulted, after that
        person ceased to be a director or executive officer, in the company being
        the
        subject of a cease trade or similar order or an order that denied the company
        access to any exemption under Canadian securities legislation for a period
        of
        more than 30 consecutive days; or (c) has, since the incorporation of the
        Company, become bankrupt, made a proposal under any legislation relating
        to
        bankruptcy or insolvency or become subject to or instituted any proceedings,
        arrangement or compromise with creditors or had a receiver, receiver manager
        or
        trustee appointed to hold the assets of the director, executive officer or
        shareholder.
 
 **TRANSFER
        AGENTS**
 
 I n
        Canada, CIBC Mellon Trust Company acts as Corus’ transfer agent. In the United
        States, Mellon Shareholder Services acts as Corus’ transfer agent.
 
 **MATERIAL
        CONTRACTS**
 
 **Senior
        Secured Credit Facility**
 
 A
        syndicate of lenders has provided Corus with a senior secured revolving term
        credit facility (the “Revolving Facility”) and a senior secured non-revolving
        term credit facility (the “Term Facility”) under the Amended and Restated Credit
        Agreement dated as of January 23, 2006 (the “Credit Agreement”).
 
 The
        Revolving Facility consists of a committed credit of $300 million that matures
        January 24, 2011. As a revolving facility, amounts borrowed may be repaid
        and
        re-borrowed as required through the term of the Revolving Facility. The
        commitment expires at the maturity date and there are no mandatory reductions
        to
        the committed amount, subject to certain covenants, during the term of the
        facility. As at August 31, 2006, $100 million was drawn against the Revolving
        Facility.
 
 The
        Term Facility amounts to $500 million and matures January 24, 2011. Any amounts
        repaid before the maturity date may not be re-borrowed. The commitment expires
        at the maturity date and there are no mandatory reductions to the committed
        amount, subject to certain covenants, during the term of the facility. As
        at
        August 31, 2006 $500 million was drawn against the Term Facility.
 
 Advances
        under the Credit Agreement are available in either Canadian or U.S. dollars
        at
        the option of Corus. Interest rates applicable to Canadian dollar advances,
        at
        Corus’ option, are equal to (i) the Canadian prime rate, or (ii) Bankers
        Acceptance rates for terms up to six months, plus, in each case, an applicable
        margin. Interest rates applicable to U.S. dollar advances, at Corus’ option, are
        equal to (i) the U.S. base rate, or (ii) the U.S. London inter-bank offered
        rate
        (“LIBOR”) for terms up to six months, plus, in each case, an applicable margin.
        Margins will vary based on the type of advance and debt to cash flow ratios
        achieved.
 
 The
        Credit Agreement requires that Corus comply on a quarterly basis with certain
        financial covenants, including maximum debt to cash flow ratio tests and
        a
        minimum interest coverage ratio test. The Credit Agreement also includes
        negative covenants that, subject to certain exceptions, may restrict or limit
        the ability of Corus (and its significant operating subsidiaries) to, among
        other things, incur, assume or permit to exist additional indebtedness or
        encumbrances, engage in mergers, consolidations, amalgamations or other
        reorganizations, sell or otherwise dispose of significant assets, make
        investments, declare dividends or repurchase equity securities, engage in
        activities that adversely affect the ranking or validity of the lenders’
security, or make optional prepayments on subordinated debt (excepting residual
        senior subordinated notes outstanding subsequent to the January 2006 completion
        of the tender offer and consent solicitation (see information under the heading
        “Trust Indenture for 83⁄4% Senior Subordinated Notes due 2012”
below)).
  **38**
  
 The
        Credit Agreement contains certain customary representations and warranties,
        positive covenants and events of default, including payment defaults, covenant
        defaults, cross-defaults to other material indebtedness or other material
        agreements, insolvency or bankruptcy defaults, material judgments, material
        breach of representations and warranties and failure to maintain security.
        If an
        event of default occurs and continues, the lenders are entitled to take all
        actions permitted to a secured creditor including the acceleration of amounts
        due.
 
 The
        lenders under the Credit Agreement have a first ranking charge on the present
        and future property of Corus, including the present and future property of
        its
        significant operating subsidiaries. Those subsidiaries have provided guarantees
        to the lenders and securities pledge agreements have been entered into relative
        to the ownership interest in most of the significant operating
        subsidiaries.
 
 **Trust
        Indenture for 83⁄4% Senior Subordinated Notes due 2012**
 
 On
        March 7, 2002 Corus issued US$375 million in Senior Subordinated Notes bearing
        interest at 8.75% per annum and maturing on March 1, 2012 (the “Notes”). The
        Notes are governed under an Indenture with J.P. Morgan Trust Company, National
        Association, as Trustee dated March 7, 2002 (the “Indenture”). Terms of the
        Notes include those stated in the Indenture.
 
 On
        December 15, 2005 Corus announced that it had commenced a cash tender offer
        and
        consent solicitation for its Notes. On January 23, 2006 Corus completed the
        tender offer for the Notes resulting in the acquisition and cancellation
        of
        US$373.6 million of the Notes. As at August 31, 2006, US$0.5 million of the
        Notes remain outstanding.
 
 The
        Notes are unsecured and are subordinated to Corus’ senior indebtedness. Interest
        is due for payment semi-annually in arrears each March 1 and September 1
        that
        the Notes are outstanding and otherwise accrues from the last payment date
        on a
        360-day year (consisting of 12 30-day months) basis. The Notes are redeemable
        at
        the option of Corus, in whole or in part, at any time on or after March 1,
        2007
        at specified redemption prices, plus accrued and unpaid interest
        thereon.
 
 As
        a result of the consent solicitation completed with the tender offer, the
        Indenture governing the Notes contains no covenants that significantly restrict
        Corus’ ability to engage in transactions with affiliates, incur additional
        indebtedness, sell or otherwise dispose of significant assets, declare dividends
        or repurchase equity securities, make investments, engage in mergers,
        consolidations, amalgamations or other reorganizations, create restrictions
        on
        the ability of restricted subsidiaries to pay dividends, make loans or transfer
        assets between restricted subsidiaries and/or Corus, create unrestricted
        subsidiaries, incur or suffer to exist liens, or, in the case of restricted
        subsidiaries, guarantee indebtedness and issue or sell preferred
        shares.
 
 **Interest
        Rate Swaps**
 
 Corus
        has entered into Canadian interest rate swap agreements with certain Canadian
        banks (that are also lenders under the Credit Agreement) to fix the interest
        rate at 4.13% plus a margin on $400 million of the Term Facility for the
        full
        term of the facility. These swap agreements are considered senior debt and
        are
        subject to the same covenants and security as available to the lenders under
        the
        Credit Agreement.
 
 **ADDITIONAL
        INFORMATION**
 
 Corus
        Entertainment Inc. shall provide to any person, upon request to the Secretary
        of
        the Company:
 
 a)
              when
                  the securities of the Company are in the course of a distribution
                  pursuant
                  to a short form prospectus or a preliminary short form prospectus
                  has been
                  filed in respect of a distribution of its
                  securities:
 1)
              one
                  copy of the Annual Information Form of the Company, together with
                  one copy
                  of any document, or the pertinent pages of any document, incorporated
                  by
                  reference in the Annual Information
                  Form;
  **39**
  
 2)
              one
                  copy of the comparative financial statements of the Company for
                  its most
                  recently completed financial year together with the accompanying
                  auditors’
                  report and one copy of any subsequent interim financial statements
                  of the
                  Company;
 3)
              one
                  copy of the information circular of the Company in respect of its
                  most
                  recent annual meeting of shareholders that involved the election
                  of
                  directors or one copy of any annual filing prepared in lieu of
                  that
                  information circular, as appropriate;
                  and
 4)
              one
                  copy of any other documents that are incorporated by reference
                  into the
                  short form prospectus or preliminary short form prospectus that
                  are not
                  mentioned in (1), (2) or (3) above.
 b)
              at
                  any other time, one copy of any documents referred to in (a)(1),
                  (2) and
                  (3) above, provided the Company may require the payment of a reasonable
                  charge if the request is made by a person who is not a security
                  holder of
                  the Company.
 
 Additional
        information including directors’ and officers’ remunerations and indebtedness,
        principal holders of the Company’s securities, options to purchase securities
        and interests of insiders in material transactions, where applicable, is
        contained in the Company’s Management Information Circular dated December 8,
        2006. Additional financial information is provided in the Company’s consolidated
        financial statements for its most recently completed financial year. A copy
        of
        such documents may be obtained upon request from the Company.
 
 The
        Secretary of the Company can be contacted at:
 
 Corus
        Entertainment Inc.
 501,
        630 - 3 rd Avenue S.W.
 Calgary,
        Alberta
 T2P
        4L4
 Phone:
        (403) 444-4244
 
 **CORPORATE
        GOVERNANCE PRACTICES**
 
 The
        Board of Directors of the Company endorses the principles that sound corporate
        governance practices (“Corporate Governance Practices”) are important to the
        proper functioning of the Company and the enhancement of the interests of
        the
        shareholders.
 
 The
        Company’s Statement of Corporate Governance Practices as they compare to the TSX
        Guidelines on Corporate Governance, a statement of the significant ways that
        the
        Company’s Corporate Governance Practices differ from the NYSE Corporate
        Governance Rules, charters of the Board of Directors and its committees,
        and the
        Code of Business Conduct may be found in the Company’s most recently filed
        Management Information Circular, as well as on the Company’s website at
        www.corusent.com.
 
  **40**
  
 **Schedule
        A**
 
 **AUDIT
        COMMITTEE CHARTER**
 **1.** **Mandate**
 
 The
        mandate of the Audit Committee (the “Committee”) shall be to: provide assistance
        to the Board of Directors (the “Board”) of Corus Entertainment Inc. (“Corus” or
        the “Company”) in fulfilling their oversight responsibilities relating to: (i)
        the integrity of the Company’s financial statements; (ii) the Company’s
        compliance with legal and regulatory requirements; (iii) the external auditor’s
        qualifications and independence; and, (iv) the performance of the Company’s
        internal audit function and external auditors.
 
 In
        fulfilling its purpose, it is the responsibility of the Committee to maintain
        free and open communication between the Committee, external auditors, the
        internal auditors, and management of the Company, and to determine that all
        parties are aware of their responsibilities.
 
 **2.** **Composition
        and Operations**
 
 2.1
              The
                  Committee shall be composed of three or more unrelated and independent
                  directors, as determined and appointed by the Board on an annual
                  basis.
                  “Unrelated and independent director” means a director who is independent
                  of management of the Company and is free from any interest and
                  any
                  business or other relationship which could, or could reasonably
                  be
                  perceived to, materially interfere with the director’s ability to act with
                  a view to the best interests of the Company. In this regard, to
                  maintain
                  their independence, members of the Committee may not accept any
                  consulting, advisory or other compensatory fee (other than regular
                  Board
                  and Committee fees) from the Company or any of its affiliates.
                  Members
                  also may not receive any indirect payments from the Company or
                  any of its
                  affiliates, including payments (whether or not material) made to
                  spouses
                  or family members, or payments for services to law firms, accounting
                  firms, consulting firms and investment banks for which the Committee
                  member serves as a partner, member, managing director or executive.
                  The
                  members of the committee and the Chair will be appointed annually
                  by the
                  Board and each member shall serve until the next Annual General
                  Meeting of
                  the shareholders of the Company or until his or her earlier resignation
                  or
                  removal by the Board.
 
 2.2
              Every
                  Committee member must be considered financially literate and at
                  least one
                  Committee member must be considered a financial expert. The definition
                  of
                  “financial literacy” and “financial expertise”, and the determination of
                  whether any given member of the Committee meets such definition,
                  will be
                  made by the Board, in consultation with the Corporate Governance
                  Committee, in accordance with applicable laws, policies and guidelines
                  of
                  securities regulatory authorities.
 
 2.3
              The
                  Committee should meet at least quarterly. Special meetings should
                  be
                  authorized at the request of any member of the Committee or at
                  the request
                  of the external auditor, internal auditor (if any) or senior members
                  of
                  management. The external auditors should have the right to attend
                  all
                  meetings of the Committee.
 
 2.4
              The
                  Committee has access to Corus senior management and documents as
                  required
                  to fulfill its responsibilities and is provided with the resources
                  necessary to carry out its
                  responsibilities.
 
 2.5
              The
                  Board should be kept informed of the Committee’s activities by a report
                  following each Committee meeting. The person designated to act
                  as
                  secretary should prepare minutes of all meetings, to be filed in
                  the
                  corporate records.
 
 2.6
              The
                  Committee may at its discretion retain the services of independent
                  outside
                  advisors or counsel in consultation with the Executive
                  Chair.
 
 2.7
              The
                  secretary to the Committee shall be either the Corporate Secretary
                  or a
                  person delegated by the Chair and that person will be responsible
                  to keep
                  minutes of all meetings.
  **41**
  
 2.8
              Notice
                  of each meeting of the Committee shall be given to each member
                  of the
                  Committee as far in advance of the time for the meeting as possible,
                  but
                  in any event, not later than 24 hours preceding the time stipulated
                  for
                  the meeting (unless otherwise waived by all members of the Committee).
                  Each notice of meeting shall state the nature of the business to
                  be
                  transacted at the meeting in reasonable detail and to the extent
                  practicable, be accompanied by copies of documentation to be considered
                  at
                  the meeting.
 
 2.9
              A
                  quorum for the transaction of business at a meeting shall consist
                  of not
                  less than a majority of the members of the Committee, which majority
                  must
                  include the Committee’s designated financial expert. Members of the
                  Committee may participate in any meeting by means of such telephonic,
                  electronic or other communication facilities as permit all persons
                  participating in the meeting to communicate adequately with each
                  other,
                  and a member participating by any such means shall be deemed to
                  be present
                  at that meeting. Senior management of the Company and other parties
                  may
                  attend meetings of the Committee, as may be deemed appropriate
                  by the
                  Committee.
 
 **3.** **Duties
        and Responsibilities**
 
 The
        Committee has the responsibilities and powers set forth in this
        Charter:
 
 ***General***
 
 3.1
              The
                  Committee shall review and reassess the charter at least annually
                  and
                  obtain the approval of the Board.
 
 3.2
              The
                  Committee shall perform an evaluation of its performance at least
                  annually
                  to determine whether it is functioning
                  effectively.
 
 3.3
              The
                  Committee shall review, at least on an annual basis, and approve
                  the
                  Company’s policies for hiring existing and former employees and partners
                  of the external auditors.
 
 3.4
              The
                  Committee shall meet separately, periodically, as it deems appropriate,
                  with management, with internal auditors (or personnel responsible
                  for the
                  internal audit function) and with external
                  auditors.
 
 ***Financial
        and other reports***
 
 3.5
              The
                  Committee shall review the Company’s quarterly and annual financial
                  statements, including Management’s Discussion and Analysis, Annual
                  Information Form, Management Information Circular and annual and
                  interim
                  earnings press releases that require approval by the Board prior
                  to their
                  release and make recommendations to the Board for their approval.
                  In
                  addition, the Committee will review any report of management that
                  accompanies published financial
                  statements.
 
 3.6
              The
                  Committee’s review of the annual audited financial statements shall
                  include: (i) major issues regarding accounting principles and financial
                  statement presentations, including any significant changes in the
                  Company’s selection or application of accounting principles; (ii) major
                  issues as to the adequacy of the Company’s internal controls and any
                  specific remedial actions adopted in light of material control
                  deficiencies; (iii) discussions with management and the external
                  auditors
                  regarding significant financial reporting issues and judgments
                  made in
                  connection with the preparation of the financial statements and
                  the
                  reasonableness of those judgments; (iv) consideration of the effect
                  of
                  regulatory accounting initiatives, as well as off-balance sheet
                  structures
                  on the financial statements; (v) consideration of the judgment
                  of both
                  management and the external auditors about the quality and disclosure,
                  not
                  just the acceptability, of accounting principles; (vi) the clarity
                  of the
                  disclosures in the financial statements; and (vii) discussions
                  with
                  management and the external auditors regarding accounting adjustments
                  that
                  were noted or proposed by the external auditors but were “passed” (as
                  immaterial or otherwise).
 
 3.7
              The
                  Committee shall review with the external auditors any audit problems
                  or
                  difficulties encountered during the course of the audit work, including
                  any restrictions on the scope of the external auditors’ activities or
                  access to requested information, and management’s
                  response.
  **42**
  
 3.8
              The
                  Committee shall review and discuss financial information and earnings
                  guidance provided to analysts and rating agencies prior to their
                  release.
 
 3.9
              The
                  Committee shall, on an annual basis, review and assess the adequacy
                  of the
                  Company’s procedures in place for the review of the Company’s public
                  disclosure of financial information, other than the information
                  referred
                  to in subsection 3.8.
 
 ***Risk
        Management, Internal Controls and Information Systems***
 
 3.10
              The
                  Committee shall discuss with management, the internal auditors
                  (if
                  applicable), and the external auditors the adequacy and effectiveness
                  of
                  internal control over financial reporting, including any significant
                  deficiencies or material weaknesses identified by management of
                  the
                  Company in connection with its required quarterly certifications
                  with
                  securities regulatory authorities.
 
 3.11
              Commencing
                  August 31, 2006, the Committee shall review management’s assessment of the
                  effectiveness of internal control over financial reporting as of
                  the end
                  of the most recent fiscal year and the external auditor’s report on
                  management’s assessment.
 
 3.12
              The
                  Committee shall review with management, the external auditor and
                  if
                  necessary with legal counsel, any litigation, claim or other contingency,
                  including tax assessments that could have a material effect upon
                  the
                  financial position or operating results of the Company, and the
                  manner in
                  which these matters have been disclosed in the financial
                  statements.
 
 3.13
              The
                  Committee shall monitor compliance with statutory and regulatory
                  observations.
 
 3.14
              The
                  Committee is responsible for establishing appropriate processes
                  and
                  procedures surrounding the receipt, retention, and treatment of
                  accounting, internal controls or auditing matter complaints received
                  by
                  the company. In addition the Committee shall ensure that the company
                  has a
                  mechanism to allow employees to communicate concerns regarding
                  questionable accounting or auditing matters on a confidential,
                  anonymous
                  basis without fear of reprisal.
 
 3.15
              The
                  Committee shall discuss the Company’s policies with respect to risk
                  assessment and risk management, including the risk of fraud. The
                  Committee
                  also shall discuss the Company’s major financial risk exposures and the
                  steps management has taken to monitor and control such
                  exposures.
 
 3.16
              The
                  Committee shall review the process for identifying related party
                  transactions.
 
 ***External
        Audit Services***
 
 3.17 The
        external auditors will report directly to the Committee.
 
 3.18 The
        Committee will recommend to the Board of Directors:
 (a)
              the
                  external auditor to be nominated for the purpose of preparing or
                  issuing
                  an auditor’s report or performing other audit, review or attest services
                  of the Company; and
 (b)
              the
                  compensation of the external
                  auditor.
 
 3.19
              The
                  Committee will oversee the work of the external auditor engaged
                  for the
                  purpose of preparing or issuing an auditor’s report or performing other
                  audit, review or attest services for the Company, including but
                  not
                  limited to the following:
 (a)  objectives
        and scope of audit, review or attest services
 (b)
              reviewing
                  the results of the external audit and any changes in accounting
                  practices
                  or policies and the financial statement impact
                  thereof
 (c)
              reviewing
                  any accruals, provisions or estimates that have a significant effect
                  upon
                  the financial statements
 (d)
              resolution
                  of any disagreement between management and the external auditor
                  regarding
                  financial reporting.
  **43**
  
 3.20
              The
                  Committee will pre-approve all audit and non-audit services provided
                  to
                  the Company or its subsidiaries by the external auditors and shall
                  not
                  engage the external auditors to perform non-audit services proscribed
                  by
                  law or regulation.
 
 3.21
              The
                  Committee may delegate to one or more members of the Committee
                  the
                  authority to pre-approve any audit and non-audit services up to
                  a
                  pre-determined cap in satisfaction of the requirement under subsection
                  3.20.
 
 3.22
              The
                  pre-approval of audit and non-audit services pursuant to subsection
                  3.21
                  must be presented to the Committee at its first scheduled meeting
                  following such pre-approval.
 
 3.23
              The
                  Committee shall determine that the external audit firm has a process
                  in
                  place to address the rotation of the lead audit partner and other
                  audit
                  partners serving the account in accordance with applicable laws,
                  policies
                  and guidelines of securities regulatory
                  authorities.
 
 3.24
              Annually,
                  the Committee shall obtain and review a report by the external
                  auditors
                  describing : (i) the audit firm’s internal quality control procedures;
                  (ii) any material issues raised by the most recent internal quality
                  control review, or peer review, of the audit firm, or by any inquiry
                  or
                  investigation by governmental or professional authorities, within
                  the
                  preceding five years, respecting one or more independent audits
                  carried
                  out by the audit firm, and any steps taken to deal with any such
                  issues;
                  and (iii) all relationships between the external auditors and the
                  Company
                  (to assess the auditor’
independence).
 
 **4.**
              **Committee
                  Timetable**
 
 The
        Committee shall fulfill its oversight responsibilities primarily by carrying
        out
        the activities set forth in a detailed quarterly schedule, as well as all
        such
        other actions which may be incidental thereto or which may be necessary for
        the
        Committee to comply with the spirit and intent of this Charter. The items
        enumerated in the schedule are not intended to be exhaustive of the duties
        of
        the Committee. The schedule is reviewed annually by the Board and may be
        supplemented and revised from time to time as may be appropriate.
 
 **5.** **Committee
        Chair - Job Description**
 
 At
        the time of the annual appointment of the members of the Audit committee,
        the
        Board of Directors shall appoint a Chair of the Audit Committee. The Chair
        shall: be a member of the Audit Committee, preside over all Audit Committee
        meetings, coordinate the Audit Committee’s compliance with this charter, work
        with management to develop the Audit Committee’s annual work-plan and provide
        reports of the Audit Committee to the Board. The Chair may vote on any matter
        requiring a vote and shall provide a second vote in the case of a tie
        vote.
 
  
 **44**
 
 **UNDERTAKING
          AND CONSENT TO SERVICE OF PROCESS**
  **A.**  **Undertaking**
  Corus
          Entertainment Inc. (the “Registrant”) undertakes to make available, in person or
          by telephone, representatives to respond to inquiries made by the staff
          of the
          Securities and Exchange Commission (the “SEC”), and to furnish promptly, when
          requested to do so by the SEC staff, information relating to the securities
          in
          relation to which the obligation to file an annual report on Form 40-F
          arises or
          transactions in said securities.
  **B.**  **Consent
          to Service of Process**
  The
          Registrant has previously filed with the SEC a written irrevocable consent
          and
          power of attorney on Form F-X in connection with the Class B Non-Voting
          Shares.
  
 
  
 **SIGNATURES**
  Pursuant
          to the requirements of the Exchange Act, the Registrant certifies that
          it meets
          all of the requirements for filing on Form 40-F and has duly caused this
          annual
          report to be signed on its behalf by the undersigned, thereto duly
          authorized.
  **CORUS
                  ENTERTAINMENT INC.**Date:November
                    29, 2006
                By:
                /s/  THOMAS
                    C. PEDDIEName:
                Thomas
                    C. PeddieTitle:
                Senior
                    Vice President andChief
                    Financial Officer
 
   
 
 **EXHIBIT
          INDEX**
  99.1
                Comparative
                    consolidated financial statements for the year ended August 31,
                    2006,
                    together with the auditors’ reports thereon99.2
                Management’s
                    Discussion and Analysis of Operating Results and Financial
                    Position99.3
                Consent
                    of auditors - Ernst & Young LLP dated November 29,
                    2006.99.4
                Officers’
                    certifications required by Rule 13a-14(a) or Rule 15d-14(a).99.5
                Officers’
                    certifications required by Rule 13a-14(b) or Rule 15d-14(b) and
                    Section
                    1350 of Chapter 63 of Title 18 of the United States Code.99.6
                Business
                    Code of
                    Conduct