##### 



Exhibit 2

MANAGEMENT
DISCUSSION AND ANALYSIS 
          OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Certain statements in this report may constitute forward-looking statements.
Such forward-looking statements involve risks, uncertainties and other factors
which may cause actual results, performance or achievements of the Company to
be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. OVERVIEW The Company is an international media company formed under the laws of Canada.
In Canada, the Company owns and operates 16 broadcast television stations and
several specialty cable channels  including Prime TV and 6 digital specialty
channels, 16 metropolitan newspapers, the National Post a daily Canadian
national newspaper, and more than 50 non-daily publications. The Company also
owns and operates New Zealands TV3, TV4 and CanWest Radio NZ and has a 57.5%
economic interest in Australias Network TEN, which includes a wholly owned
out-of-home advertising company, Eye Corp. The Company also has a 45% interest
in the Republic of Irelands TV3, and a 29.9% equity interest in Northern
Irelands UTV. In addition, the Company owns and operates Fireworks
Entertainment Inc., an international film and television production and
distribution company.
 In August 2002, the Companys Australian operating unit, Network TEN, purchased
the remaining 40% of Eye Corp, Australias leading out-of-home advertising
company, for
aggregate cash consideration of approximately A$10 million. In August 2002, CanWest sold 10 small-to-medium market daily newspapers  as
well as certain community papers in Atlantic Canada and Saskatchewan  to
G.T.C. Transcontinental Group Ltd. for aggregate cash consideration of
approximately $257
million. In March 2002, the Company completed the purchase of the 50% of the National
Post it did not already own for nominal consideration in the form of cash and
agreements


and undertakings. In October 2001, the Company sold its interest in CKVU
(Vancouver) and received cash proceeds of approximately $133 million. In
September 2001, the Company sold its 70% interest in CFCF (Montreal) for cash
proceeds of $87 million. In August 2001, the Company sold its 50% interest in
ROBTv for cash proceeds of $30 million. In May 2001, the Company concluded the private placement of approximately $720
million in 10-year senior subordinated notes bearing a coupon of 10 5/8%,
replacing interim financing arrangements. In May 2001, through an amalgamation of subsidiaries, the Company acquired the
29.34% minority interest in CanWest Broadcasting Ltd. (CBL) which owned
Global Television Network stations in British Columbia (CKVU), Manitoba (CKND)
and Saskatchewan (CFRE and CFSK) in exchange for Series 2 preference shares of
CanWest. CanWest has the option  exercisable for twelve months following the
completion of the determination of
value of the net sale proceeds of CKVU  to redeem the Series 2 preference
shares for cash, or to convert the Series 2 preference shares into subordinate
voting shares. The Company expects the redemption or conversion to occur within
the next fiscal year. The redemption or conversion price, as the case may be,
will be determined in accordance with a formula based on after-tax proceeds
from the sale of CKVU, the value of the Manitoba and Saskatchewan television
stations, and certain other factors, and has not yet been finally determined,
but it is estimated by the Company to be $54.7 million. The former minority
shareholders of CBL have commenced a lawsuit against CanWest and certain of its
subsidiaries. See Notes 10 and 17 to the consolidated financial statements. In March 2001, the Company completed a series of transactions through which
Granada Media acquired a 45% interest in TV3 (Ireland). While the Company
retains a 45% interest in TV3, control of its board of directors is shared with
Granada Media.


















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In November 2000, the Company acquired CanWest Publications for
an aggregate purchase price of approximately $3.1 billion, including certain
costs associated with the transaction, and subject to adjustment for working
capital. In May 2000, the Company acquired a 72% equity interest in New
Zealands RadioWorks through a series of purchases on the New Zealand Stock
Exchange and, in January 2001, acquired its remaining shares. The aggregate
acquisition cost of RadioWorks was $74 million. In 1997 and 1998, the Company acquired approximately 44% of WIC Western
International Communications Inc. (WIC). On March 31, 2000, the Company
completed a series of transactions with the other shareholders of WIC, which
resulted
in the division of WICs broadcasting, distribution and other businesses among
certain of that companys shareholders. Through these transactions, the Company
acquired all of WICs shares and retained all of WICs broadcast television
stations, as well as a 50% interest in ROBTv and certain other assets. The
aggregate acquisition cost for the WIC assets acquired was approximately $861
million. TRENDS The Company historically derives more than 80% of its
revenues from advertising in Canada. For that reason, the Companys results
typically reflect overall activity in the economy. Although advertising markets
in North America and throughout the world were affected by the slowing
economy, results for the fourth quarter confirm that the Canadian economy
continues to improve with a more rapid resumption of economic growth than in
other major economies. The rebound in
advertising revenues in Canada has been stronger than in the United States or
Europe, where spending on advertising continues to grow more slowly.
 Feedback from both television and newspaper advertising markets suggest that
the improvement in operating results evident in the latter half of fiscal 2002
should continue


through the next fiscal year. Bookings for the first quarter of
2003 and into the rest of the fiscal year indicate a sustained strengthening of
television and print advertising. CanWests Canadian television stations and metropolitan newspapers are
generally the highest rated in prime time and most read papers in their
respective markets. In managements opinion, these attributes enable the
Company to sustain its levels of revenue more successfully than its competitors. APPLICATION OF ACCOUNTING PRINCIPLES The Company prepares its consolidated financial statements in Canadian dollars
and in accordance with Canadian GAAP. The consolidated financial statements
include the Companys accounts and the accounts of its subsidiary companies.
 The preparation of financial statements in accordance with Canadian GAAP
requires the use of estimates and assumptions that affect reported amounts of
assets, liabilities, revenue and expenses, and disclosure of contingencies.
Future events could alter such estimates. The Company operates in highly competitive markets. The Company has estimated
the useful lives of intangible assets and the value of goodwill, based on
historical customer patterns, industry trends and existing competitive factors.
Significant long-term changes in these factors could result in a material
impairment of the value and life of intangible assets and goodwill. In addition, management estimates ultimate revenue from film and television
program to determine amortization and fair values of investments in film and
television programs. Actual revenues may differ from these estimates. In September 2001, the Company, consistent with CICA guidelines, adopted new
accounting policies related to accounting for goodwill and intangibles.
Goodwill and indefinite life intangibles are no longer amortized and are
subject to an annual value


















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##### 



MANAGEMENT DISCUSSION
          AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS



impairment test. As a result, the Company recorded a
write down of $76 million related to Network TENs investment in Eye Corp., $45
million of which was charged to retained earnings at September 1, 2001. In
September 2001, the Company adopted recommendations of the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
related to Accounting by Producers and Distributors of Films (SOP 00-2). As a
result of this change, an adjustment of $125 million was charged to opening
retained earnings at September 1, 2001. During 2001, the Company adopted new recommendations of the Canadian Institute
of Chartered Accountants (CICA) relating to accounting for income taxes. A
description of the impact of these changes in accounting policies, and a
discussion of new accounting standards of the CICA which impact the Company, is
provided in Note 1 to the Consolidated Financial Statements for the years ended
August 31, 2002 and 2001. The Company accounts for its economic interest in Network TEN using the equity
method of accounting. Under this method, the Companys interest in the net
earnings (before interest on subordinated debentures) of Network TEN is
included in the Companys consolidated earnings, and an adjustment is made to
the carrying value at which the investment is recorded on the consolidated
balance sheet. The carrying value of this investment is reduced by any interest
on subordinated debentures and dividends received by the Company. In fiscal 2001, the Company accounted for its 50% interest in the National Post
using the equity method. In September 2001, the Company assumed control of the
National Postand, thereafter, the Company has consolidated its interest in the
National Post. As a result of the restructuring effective March 31, 2001, the Company changed
the accounting for its 45% interest in TV3 Ireland to proportionate
consolidation.


THE COMPANY Fiscal 2002 Compared to Fiscal 2001
 The Companys results were significantly impacted by
acquisitions and divestitures in 2002 and 2001. Accordingly,
the following discussion includes references to pro forma results. Pro forma
results reflect the following transactions
as if they had occurred at the beginning of 2001:
  
 
 the acquisition of CanWest Publications including online operations in November 2000;
 
 the reorganization of the Companys interest in TV3 Ireland in March 2001;
 
 the acquisition of the remaining 50% interest in the National Posteffective March 2002; and,
 
 the sale of CKVU effective August 2001. The following is a reconciliation of actual revenue and EBITDA to pro forma
revenue and EBITDA for the year ended August 31, 2001: Revenue
        
        
        EBITDA1$000
        
        
        $000As reported
        
        
        1,944,775
        
        
        
        441,071CanWest Publications
        
        
        269,717
        
        
        
        87,256Online operations
        
        
        1,804
        
        
        
        (3,214
        )National Post
        
        
        152,350
        
        
        
        (64,869
        )TV3 Ireland
        
        
        (10,735
        )
        
        
        (1,014
        )CKVU
        
        
        (68,170
        )
        
        
        (21,245
        )Pro forma
        
        
        2,289,741
        
        
        
        437,984
 1
        
        EBITDA is not a recognized measure under Canadian GAAP. Management
believes that in addition to net income (loss), EBITDA is a useful
supple-mental measure as it provides investors with an indication of cash
available for distribution prior to debt service, capital expenditures and
income taxes. Investors should be cautioned, however, that EBITDA should
not be construed as an alternative to net income (loss) determined in
accordance with GAAP as an indicator of the Companys performance. The
Companys method of calculating EBITDA may differ from other companies
and, accordingly, EBITDA may not be comparable to measures used by other
companies. The Company reported consolidated revenues of $2,273 million for the year ended
August 31, 2002, an increase of $328 million from the actual revenues reported
for the
previous year, but a decline of $17 million from pro forma revenues of $2,290
million.






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##### 





The increase in actual revenue was primarily attributable to the inclusion of
twelve months of Publications results in 2002 compared to only nine and a half
months in 2001. Pro forma revenues reflect solid increases in Canadian
television revenues offset by decreased revenues in Publications and Fireworks
Entertainment. Consolidated operating expenses (including selling, general, and administrative
expenses) before amortization increased $299 million to $1,802 million as a
result of the inclusion
of a full year of the Publications results. On a pro forma basis, operating
expenses (including selling, general, and administrative expenses) decreased
$49 million, 3% from $1,852 million in the previous year, reflecting expense
reductions in Publications offset by increased expenses in Canadian television
operations. Consolidated operating profits (EBITDA) increased by 7% to $470 million, from
$441 million last year. The increase in actual operating profit is the result
of the inclusion of twelve months of Publications results partially offset by a
reduction due to the sale of CKVU. On a pro forma basis, operating profit
increased by 7% over $438 million last year, primarily due to reductions in
losses of the National Post. Actual revenues from Canadian television were down slightly to $688 million
from $701 million recorded in the previous year. This was due entirely to the
sale of CKVU (Vancouver) effective August 31, 2001. On a pro forma (same
station) basis, Canadian television revenues increased by 9% compared to $633
million in fiscal 2001. BCTV was a substantial contributor to the growth in
revenue in fiscal 2002, as a result of an additional 40 hours per week of
airtime inventory being available for sale following its disaffiliation with
the CTV network. Operating expenses at Canadian television increased by 5% to
$493 million dollars, compared to $472 million in fiscal 2001. On a pro forma
basis, which excluded operating expenses associated with CKVU in the previous
year, the increase in operating expenses was 16% compared to fiscal


2001. The
year-over-year increase reflected higher programming costs arising from the
affiliation of BCTV in Vancouver with the Global Television Network, as well as
substantial additional investment in programs designed to enhance future
ratings performance. Examples include securing a new season of the top-ranked
Survivor series, PGA golf and big event programming for the Companys CH
stations. In addition, as part of the CRTC approval, CanWest made substantial investments
in local programming at the CH stations in Victoria and Hamilton, which
included enhanced news programming and daytime programming. The additional
investments resulted in a 6% decline in EBITDA for Canadian television
operations to $195 million, from $208 million on a pro forma basis the year
before. The Companys conventional television operations in Canada continued to be the
market leaders in prime time ratings. Outside of high profile sports events,
Global Television ranked number one in the countrys largest English speaking
markets, with 8 of the top 10 shows in Toronto and 17 of the top 20 shows in
Vancouver. Revenues increased by 27% at Prime, the Companys top-rated specialty cable
channel, to $25 million from $19 million in fiscal 2001. The increase was
attributable to a 44.9% increase in advertising sales revenue over the previous
year, and an increase in the subscriber base of 6.6% over the previous year. The Company launched six specialty digital channels in September 2001. Five of
the new channels ranked in the top ten of the 47 new digital channels that went
on air at
that time. At the close of the fiscal year, the Companys portfolio of Canadian
digital channels had approximately 2,000,000 subscribers. Revenue from the
specialty digital
channels for the eight months following the end of the free preview period was
$4 million, with expenses of $8 million, resulting in an operating loss of $4
million.






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##### 



MANAGEMENT DISCUSSION
          AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS



Global Television launched a new national news service during fiscal 2001 and
attracts a substantial number of Canadian television viewers. According to the
Broadcast Bureau of Measurement, an average of 773,000 adult Canadians, 18
years or older, tuned into Global National with Kevin Newmanin the fall of
2001. By the spring of 2002, Global National with Kevin Newmanhad increased
its adult audience to 802,000, overtaking the late evening CBC National
newscast with Peter Mansbridge in numbers of viewers. Publications group revenues for fiscal 2002, including the National Post, were
$1,264 million, a decline of 6% from the pro forma revenues of $1,340 million
for the previous year. Newspaper revenues were negatively affected by the
impact of the September 11th tragedy on advertising expenditures and the
lingering effects of a slowdown in overall advertising markets that began in
April 2001. However, the decrease in advertising linage slowed and reversed
through fiscal 2002. During the last four months of fiscal 2002, revenues were
ahead of the corresponding months of the previous year. Consistent with the
prior year, approximately 78% of newspaper revenues are derived from
advertising, while circulation represents about 17% of the total. Compared to last year, on a pro forma basis, operating expenses (including
selling, general and administrative expenses) of the Companys newspaper
operations declined by 11% to $972 million as a result of restructuring at the
National Postand reduced manning at other newspapers, and an overall drop
of 14% in average newsprint costs during the year. Operating costs include the
start-up costs associated with the launch of the Reach Canada customer contact
centre in Winnipeg which deals with customer service calls for all major
newspapers in the group. EBITDA for the newspaper group increased by 18% to
$292 million, from the $246 million recorded the previous year on a pro forma
basis.


In August 2002, the Company sold a number of newspapers and related assets to
G.T.C. Transcontinental Group Ltd. for aggregate cash proceeds of $257 million.
The Company
determined that these newspapers, which included eleven smaller market daily
papers and certain community papers in Atlantic Canada and Saskatchewan, were
not central to
its multi-platform sales, content and promotion strategy. The newspapers and
related assets included in the transaction generated approximately $95 million
in revenue and $30 million in EBITDA in fiscal 2002. The Companys online operations achieved a significant improvement in EBITDA,
cutting losses from $19 million in the previous fiscal year to $7 million in
the current year on a pro forma basis. These operations include the web portal,
canada.com, and other web based operations. Online revenues for the fiscal year
decreased by $1 million to $7.4 million
compared to the previous fiscal year on a pro forma basis. The Company achieved
substantial efficiency gains, cutting operating expenses to $14 million from
$28 million in the previous year on a pro forma basis as a result of technical
and physical integration of its online properties. Revenue from Fireworks Entertainment decreased to $157 million from $182
million recorded the previous year. Operating expenses at Fireworks also
declined to $158 million from $168 million the previous year, producing an
operating loss of $1 million compared to an operating profit of $14 million in
the previous year. Weak demand for television programming in Europe affected Fireworks
distribution revenues, particularly in the fourth quarter. Entertainment
revenues are also affected significantly by the timing of program and feature
film releases which was another significant contributor to the revenue decline
experienced in fiscal 2002.






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Current action series including Andromeda, now in production for its third
season, and Mutant X, in production for its second season, continue to be well
received in the US and international markets. Following the end of the year,
Fireworks launched several new television projects, including Adventure Inc.,
Black Hole High,and A Wrinkle in Time. Recent award-winning feature films for which Fireworks has secured
international distribution rights include The Believer and An American
Rhapsody. Other feature film projects now or soon-to-be released include The
Man from Elysian Fields with Andy Garcia and Mick Jagger, Me Without You,and
Rain. CanWests 45% share of revenues at TV3 in the Republic of Ireland increased 39%
to $28 million from $20 million the previous year. CanWests share of TV3s
EBITDA was $8 million, more than three times the level of the previous year.
Ratings were up 13% in prime time viewing hours, with an 18% growth in all-day
ratings at TV3. Improved ratings for locally produced programming, as well as
the inclusion of top-rated entertainment programming from Granada Media,
contributed substantially to the continued growth at TV3. Revenues from TV3/4 New Zealand in fiscal 2002 increased by 18% to $69 million
from $58 million the previous year. In local currency revenues increased by 9%
to NZ$100 million from NZ$92 million in 2001. EBITDA also improved, from an
EBITDA loss of $9 million in fiscal 2001 to an EBITDA loss of less than $2
million for the year ended August 31, 2002. Results from New Zealand have been
translated at an average exchange rate of $0.6910, an increase of 8% over the
prior years rate of exchange. A combination of factors contributed to the
improved results, including higher ratings, improved advertising market
conditions, and higher prices for advertising. A stronger New Zealand dollar
also helped to reduce the cost of imported programming.


TV3 gained two points in
ad market share to 25% compared to a 23% ad market share in the previous fiscal
year. In the last quarter of the year, TV3 achieved the highest share in
Auckland, New Zealands largest city, with an audience market share of 32. CanWest Radio in New Zealand continued to make steady progress, increasing both
its revenues and EBITDA. EBITDA grew by 14% to $16 million from $14 million in
the previous year on revenues of $61 million. It recorded operating expenses of
$44 million, a 4% reduction in costs from the previous year. Financing costs were $377 million for the year ended August 2002, compared to
$357 million in the previous year. The increase reflects a full twelve months
of financing costs related to the acquisition of the publications properties
which occurred late in the first quarter of last year, resulting in only nine
and one-half months of the carrying cost associated with the acquisition,
partially offset by reduced interest rates and debt repayments in 2002. Amortization of intangibles and goodwill was reduced to $18 million in 2002,
compared to $90 million in the previous year as a result of the adoption of the
new accounting policy under which goodwill and indefinite life intangibles are
no longer amortized. Amortization of property and equipment increased to $75
million from $61 million as a result of the acquisition of the publishing
properties. In 2002, the Company had investment gains, net of losses on write down of
investments, of $32 million. This is comprised of a gain of the sale of CKVU of
$68 million, a gain on the sale of Atlantic Canada and Saskatchewan community
newspapers of $49 million offset by write downs of $86 million as a result of
non temporary declines in fair value of other investments. In the previous
year, the net investment gain was $29 million. The provision for income taxes was $7 million in 2002, compared to a tax
recovery of $59 million in 2001. The effective tax rate






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##### 



MANAGEMENT DISCUSSION
          AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS



of 24% is significantly
lower than the Companys statutory rate of 38%, primarily as a result of the
non-taxable portion of gains. The previous years recovery included a future
income tax recovery of $71 million due to reductions in federal and provincial
income tax rates enacted during 2001. In 2002, the Company recorded a recovery from minority interest of $4 million,
compared to a charge of $3 million in the prior year. In 2002, the credit is
related to the minority interest in the National Postfrom September 1, 2001 to
March 2002. In the prior year the charge related to the minority interest in
Radio Works to January 2001. The Companys interest in the loss of Network TEN for the year was $12 million,
compared to income of $53 million the previous year. The Companys share of
earnings before TENs investment losses and write downs was $44 million in
2002, compared to $37 million in 2001, a $7 million, 19% increase. In 2002, our
share of TENs non-recurring charges included a one-time income tax settlement
of $17 million, a goodwill impairment loss related to Eye Corp. of $30 million,
and a $9 million write down of investments to fair value. In the prior year,
the Companys share of non-recurring charges included gains on sale of
investments of $29 million offset by a loss on the write down of the SCAPE
investment of $13 million. Results from TEN have been translated at an average
rate of $0.8311, up 4% from the average rate of exchange in 2001. See detailed
discussion of Network TEN below. The Companys interest in losses of equity accounted affiliates was $2 million
for 2002, compared to $14 million in 2001. The 2001 loss is primarily comprised
of the Companys
share of the National Postlosses. In 2002, the National Postwas consolidated. The Company incurred a $1 million loss from currency translation, realized on
distributions declared by Network TEN in 2002, compared to a $7 million loss in
2001. Net earnings for the year were $13 million, or $0.07 per share,


compared
to $47 million, or $0.27 per share in 2001. Adjusted earnings per share for
2001, excluding the amortization of goodwill and indefinite life intangibles,
were $0.68 per share. Fiscal 2001 Compared to Fiscal 2000 Consolidated revenue increased by $1,213
million, or 166%, to $1,945 million for the year ended August 31, 2001, from
$732 million in the previous year. This increase was primarily due to the
acquisitions of WIC in March 2000, RadioWorks in May 2000 and CanWest
Publications in November 2000.
 Total operating expenses (including selling, general and administrative
expenses) before amortization, increased by $916 million, or 156%, to $1,504
million for the year ended August 31, 2001, from $587 million for the same
period in 2000. This increase was primarily related to the acquisitions of WIC,
RadioWorks and CanWest Publications. EBITDA increased by $297 million, or 205%, to $441 million for the year ended
August 31, 2001, from $145 million in the previous year. The increase was
primarily attributable to the acquisitions of WIC, RadioWorks and CanWest
Publications (excluding the National Post). EBITDA of RadioWorks and CanWest
Publications (excluding the National Post) for the period were $10 million and
$224 million respectively. Offsetting the effect of these acquisitions were
declines in EBITDA from Global Television Network on a same station basis and
declines in EBITDA from TV3 and TV4 in New Zealand. In Canada, revenue from television operations increased $211 million, or 43%
for the year, to $701 million from $490 million in fiscal 2000. This increase
was due to higher airtime revenue of $236 million as a result of the
contributions from the former WIC stations. Revenue from Global Prime increased
$5 million, or 37%, from the same period in 2000. On a pro-forma, same station
basis, revenue from conventional television decreased $19 million, or 27%. This
decline was primarily the result of the 2000 Olympics, which were broadcast on
a competing network and delayed the commencement of the fall programming
schedule.

















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For Canadian broadcast operations, total operating expenses before
amortization increased by $149 million, or 46%, to $472 million, from $323
million in the prior year as a result of the acquisition of the WIC television
stations. Revenue from Fireworks Entertainment increased $70 million, or 63%, to $182
million in fiscal 2001 compared to $112 million in fiscal 2000. Several
developments contributed to revenue growth, including the delivery of two new
television series, Andromedaand Queen of Swords, the success of the feature
film Rat Race and increased film and television program
library sales  including from the Endemol library, which was acquired in August 2000. Operating expenses for Fireworks Entertainment increased $64 million, or 62%,
to $168 million for fiscal 2001, from $104 million in fiscal 2000, reflecting
increased participation by Fireworks in various production and distribution
projects. In New Zealand, revenue from television operations decreased $15 million, or
20%, to $58 million for the year from $73 million in fiscal 2000. Results from
New Zealand have been translated at an average rate of $0.638 compared to
$0.713 last year, a decline of 11% in the exchange value of the New Zealand
currency. Revenue in local currency decreased to NZ$92 million, or 10%, from
NZ$102 million in the prior year. The decline was primarily a result of a
generally soft market environment and the impact of the Olympics in September
2000. In New Zealand, total operating expenses before amortization for television
operations decreased $5 million, or 7%, to $67 million, from $72 million in the
same period the prior year. The decline was mainly attributable to the
depreciating value of the New Zealand dollar against the Canadian dollar. In
local currency terms, total operating expenses before amortization increased to
NZ$106 million, or 5%, from NZ$101 million
in fiscal 2000.


Revenue from radio operations in New Zealand increased $27 million, or 90%, to
$57 million for the year, up from $30 million in fiscal 2000. The Company
acquired 72%
of RadioWorks shares in May 2000 and the remaining 28% in January 2001.
RadioWorks contributed $39 million to consolidated revenue in the year ended
August 31, 2001. CanWest Radio NZs revenue in local currency was unchanged
from the prior year. Total operating expenses before amortization for radio operations in New
Zealand increased to $43 million, or 85%, from $23 million in fiscal 2000. In
local currency, the increase was NZ$34 million to NZ$67 million from NZ$33
million in the same period in the prior year. The increase was primarily the
result of the RadioWorks acquisition. Total operating expenses before
amortization for RadioWorks were NZ$45 million for the year ended August 31,
2001. Revenue from TV3 Ireland increased $4 million, or 13%, to $31 million for the
year ended August 31, 2001, from $27 million in the same period in fiscal 2000.
In March 2001, the Company restructured its interest in TV3 Ireland. As a
result, the accounting treatment was changed to a 45% proportionate
consolidation from 100% consolidation in previous periods. Results from TV3
Ireland were converted to Canadian dollars at an average rate of $1.7167 for
the 12 months, compared to $1.8243 for fiscal 2000, a 6% decline. On a local
currency basis, TV3 Irelands total revenue grew 62% to Ire£24 million for the
12 months, from Ire£15 million for the same period in the prior year, as TV3
continued to build advertiser support. TV3 Irelands total operating expenses before amortization decreased to $28
million, from $36 million for the same period last year, reflecting the change
in accounting treatment from 100% consolidated to 45% on a proportionately
consolidated basis. In local currency, TV3 Irelands operating expenses
increased by Ire£3 million or 14% to Ire£23 million, from Ire£20 million in
fiscal 2000.






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##### 



MANAGEMENT DISCUSSION
          AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS



Revenue of $918 million from the Companys newspaper group (excluding the
National Post) was included in operations for the period from November 16, 2000
to August 31, 2001. On a pro forma basis for the twelve months ended August 31,
2001, the newspaper group generated revenues of $1,188 million, compared to
$1,192 million in the previous period. The decline reflected a weakening in the
advertising market, which commenced in April 2001, following comparatively
strong first and second quarters. Approximately 78% of Publications revenues
were derived from advertising, while circulation revenues represented 17% of
total revenue. Total operating expenses before amortization of $694 million for the Companys
newspaper group were included in operations for the year ended August 31, 2001,
representing the period following the November 16, 2000 acquisition.
On a pro forma basis for the twelve months ended August 31, 2001, total
operating expenses for the newspaper group were $876 million, which represented
no material change compared to the same twelve months in 2000. A 13% year-over-year increase in newsprint prices was offset by the
consolidation of regional printing operations and other cost efficiency gains. EBITDA losses from CanWest Interactive were $16 million for the fiscal year
2001 on revenues of $7 million. In the fourth quarter, EBITDA losses were
reduced to $3 million, reflecting the significant progress achieved in reducing
costs through the consolidation and integration of technical platforms under
the canada.com brand. Amortization, including amortization of broadcast licences, circulation,
goodwill and capital assets, increased by $113 million to $156 million for the
year ended August 31, 2001, from $44 million in the previous year. The increase
is a result of the WIC, RadioWorks and CanWest Publications acquisitions.
Financing expenses increased $303 million to $357 million for


the year ended
August 31, 2001, from $54 million in fiscal 2000. The increase reflected a
higher level of debt outstanding as a result of the acquisitions of WIC in
March 2000, Radio Works in May 2000, and CanWest Publications in November 2000. Investment gains decreased $73 million to $29 million for the year ended August
31, 2001, from $101 million for the same period the previous year. For the year
ended August 31, 2001, the Company recorded gains on the sale of investments of
$8 million from the sale of publicly traded common shares of Alliance Atlantis
Communications Inc., previously acquired for investment purposes, and of $21
million from the reorganization or the Companys interest in TV3 Ireland. In
fiscal 2000, the Company recorded a gain on the sale of its investment in
publicly traded shares of CTV Inc. of $99 million. Dividend income included
dividends from Ulster TV of $3 million for the year ended August 31, 2001,
substantially unchanged compared to the previous year. Recovery of income taxes increased $107 million to $59 million for the year
ended August 31, 2001, from a charge of $48 million in the previous year. The
provision for income taxes
reflects a future income tax recovery of $71 million related to reductions in
federal and provincial income tax rates enacted during 2001. The net charge for minority interests increased by $5 million to $3 million,
from a credit of $2 million in the same period last year. This increase was
primarily the result of the depletion of the minority interest credit related
to TV3 Ireland and the inclusion of a charge related to the 28% minority
interest in RadioWorks until January 2001. Interest in earnings from Network TEN declined $20 million, or 27%, to $53
million for the year ended August 31, 2001, from $72 million in the prior year.
The decline was attributable to a reduction in revenue resulting from the
impact of the 2000 Olympics, broadcast on a competing network, and a generally
soft advertising market following the 2000 Olympics.

















---



##### 









Network TEN and Village Roadshow
discontinued SCAPE, their online partnership,
in March 2001. As a result, Network TEN wrote off its investment in SCAPE in
February 2001.
The Companys share of the loss amounted to $13 million. Partially offsetting
these decreases were investment gains related to the sale of certain
investments and other assets
by Network TEN. The Companys share of these gains was $29 million. Also
affecting the result was a decline of 11% in the average rate of exchange of
the Australian dollar. The Company incurred a $7 million loss from currency translation realized on
distributions declared by Network TEN


in the year ended August 31, 2001, compared to a loss of $1 million in the previous year. The Company incurred losses from equity accounted affiliates of $15 million for
the year ended August 31, 2001, representing the Companys share of net
earnings from CFCF and ROBTv of $2 million offset by its 50% share of losses
for the National Post. Net earnings decreased $131 million, or 74%, to $47 million for the year ended
August 31, 2001, compared to $178 million in the same
period last year.




CONSOLIDATED QUARTERLY FINANCIAL RESULTS

FOR THE THREE MONTH PERIODS ENDED (UNAUDITED)


(IN THOUSANDS OF DOLLARS, EXCEPT AS NOTED)


2002
        
        200131-Aug
        
        
        31-May
        
        
        28-Feb
        
        
        30-Nov
        
        
        31-Aug
        
        
        31-May
        
        
        28-Feb
        
        
        30-NovRevenue
        
        
        484,059
        
        
        
        617,014
        
        
        
        529,130
        
        
        
        642,580
        
        
        
        508,382
        
        
        
        585,467
        
        
        
        514,950
        
        
        
        335,976Operating profit before amortization
(EBITDA)
        
        
        52,512
        
        
        
        154,829
        
        
        
        91,875
        
        
        
        171,090
        
        
        
        65,772
        
        
        
        158,260
        
        
        
        113,448
        
        
        
        103,591Amortization of intangibles and goodwill
        
        
        4,375
        
        
        
        4,375
        
        
        
        4,375
        
        
        
        4,375
        
        
        
        23,904
        
        
        
        27,339
        
        
        
        24,648
        
        
        
        14,268Other amortization
        
        
        21,129
        
        
        
        20,793
        
        
        
        20,580
        
        
        
        18,822
        
        
        
        19,076
        
        
        
        17,217
        
        
        
        19,034
        
        
        
        10,478Interest in earnings (loss) of Network
TEN
        
        
        (34,003
        )
        
        
        7,989
        
        
        
        (5,243
        )
        
        
        19,442
        
        
        
        34,819
        
        
        
        4,969
        
        
        
        (4,411
        )
        
        
        17,190Net earnings (loss)
        
        
        (104,144
        )
        
        
        30,688
        
        
        
        (21,660
        )
        
        
        108,134
        
        
        
        (37,048
        )
        
        
        32,192
        
        
        
        10,473
        
        
        
        41,016Adjusted net earnings
(loss)1
        
        
        (104,144
        )
        
        
        30,688
        
        
        
        (21,660
        )
        
        
        108,134
        
        
        
        (17,922
        )
        
        
        47,123
        
        
        
        32,463
        
        
        
        55,518Cash flow from operations2
        
        
        18,228
        
        
        
        80,354
        
        
        
        99,388
        
        
        
        79,761
        
        
        
        (9,436
        )
        
        
        76,150
        
        
        
        109,167
        
        
        
        49,083Earnings per shareNet earnings (loss) per shareBasic
        
        
        ($0.59
        )
        
        $
        0.17
        
        
        
        ($0.12
        )
        
        $
        0.61
        
        
        
        ($0.21
        )
        
        $
        0.18
        
        
        $
        0.06
        
        
        $
        0.26Diluted
        
        
        ($0.59
        )
        
        $
        0.17
        
        
        
        ($0.12
        )
        
        $
        0.60
        
        
        
        ($0.21
        )
        
        $
        0.18
        
        
        $
        0.06
        
        
        $
        0.26Adjusted net earnings (loss) per
share1Basic
        
        
        ($0.59
        )
        
        $
        0.17
        
        
        
        ($0.12
        )
        
        $
        0.61
        
        
        
        ($0.10
        )
        
        $
        0.27
        
        
        $
        0.18
        
        
        $
        0.36Diluted
        
        
        ($0.59
        )
        
        $
        0.17
        
        
        
        ($0.12
        )
        
        $
        0.60
        
        
        
        ($0.10
        )
        
        $
        0.26
        
        
        $
        0.18
        
        
        $
        0.35Cash flow from operations per
share2Basic
        
        $
        0.10
        
        
        $
        0.45
        
        
        $
        0.56
        
        
        $
        0.45
        
        
        
        ($0.05
        )
        
        $
        0.43
        
        
        $
        0.62
        
        
        $
        0.31Diluted
        
        $
        0.10
        
        
        $
        0.44
        
        
        $
        0.55
        
        
        $
        0.44
        
        
        
        ($0.05
        )
        
        $
        0.43
        
        
        $
        0.61
        
        
        $
        0.31


There were no extraordinary items reported in the last eight quarters.



|1 |  | Adjusted to exclude the amortization of goodwill and indefinite life
intangibles.                                
|- |  | -----------------------------------------------------------------------------------------------------------------
| 
|2 |  | Before changes in non-cash operating accounts and amortization of and
investment in film and television programs.



---



##### 



MANAGEMENT DISCUSSION
          AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS



Liquidity and Capital Resources Cash flow from operations before changes in non-cash working capital and
investment in and amortization of investment in film and television programs
was $278 million for the year ended August 31, 2002, compared to $225 million
for the previous year. Fireworks invested $63 million in film and television
programs net of amortization during 2002, compared to $110 million in fiscal
2001.
 Distributions of $61 million from Network TEN were included in cash flow from
operations in 2002. As a result of losses incurred in 2002, Network TEN will
not make a distribution of 2002 earnings. TEN has adopted a policy of interim
and final dividends for 2003 which will allow for a distribution to be paid
early in the 2003 calendar year. Cash and short-term investments were $61 million at August 31, 2002, compared
to $20 million as of August 31, 2001. Capital expenditures were $53 million for the year ended August 31, 2002,
compared to $50 million for the previous fiscal year. Capital spending in 2002
included investment spending related to the Companys new printing plant in
Montreal, and fit-out of the digital specialty operations, Reach Canada, the
Companys contact centre and the Companys centralized business services and
information technology units. Planned capital expenditures for fiscal 2003
amount to approximately $50 million, including $7 million related to the
fit-out of the Companys central services. Proceeds from divestitures and the sale of investments, including CFCF, CKVU
and community newspapers, amounted to $477 million during 2002. In September
2001, the Company suspended the payment of dividends in favor of debt
reduction.


Long-term debt, including the current portion, decreased $402 million during
the year ended August 31, 2002 to $3,510 million. The Company made principal
payments during 2002 of $511 million, offset by the issuance of $106 million in
junior subordinated notes in satisfaction of payment in-kind interest. The total credit available under the Companys senior credit facility is $2,397
million, of which the Company had drawn approximately $1,797 million as of
August 31, 2002. The
facility includes revolving and non-revolving tranches with terms ranging from
6 to 8.5 years. The senior credit facility is collateralized by certain assets
of the Company. Scheduled repayments of the Companys senior credit facility
amount to $127 million in fiscal 2003. In addition, the Company has outstanding
$720 million in senior subordinated notes maturing in 2011. The senior
subordinated notes are guaranteed by certain subsidiaries. Total leverage under the Companys senior credit facility was 5.25 times EBITDA
for the year ended August 31, 2002, compared to a covenant of 5.75 times. On May 2002, the Company secured certain amendments to its senior secured
credit facility which, under certain conditions, (1) allow greater flexibility
to repay the junior
subordinated notes, and (2) defer the scheduled step-down of the total leverage
ratio from 5.75 times to 5.50 times until February 2004. The Company has entered into currency and interest rate swaps with certain
lenders under its senior indebtedness. The average cost of debt, including
junior subordinated notes, after taking into account other financial
instruments in place, was 10%.

















---



##### 







At August 31, 2002 the junior subordinated notes payable were $949 million.
These notes bear interest at 12 1/8% and mature in 2010. At the Companys
option, interest payments to November 2005 may be paid in cash, by the issuance
of additional notes or, subject to conditions, by the issuance of non-voting
shares of the Company. At August 31, 2002, Fireworks Entertainment had term loans outstanding in the
amount of US$17 million with maturity dates in 2003, collateralized by rights
to certain film and television programs, including an assignment of related
accounts receivable. In October
2002, Fireworks closed a US$110 million stand-alone credit facility with a
syndicate of lenders. This facility was used to repay existing debt financing
and to finance future growth. The facility is a three year revolving facility
secured by all assets of Fireworks Entertainment Inc. The loan bears interest
at floating rates of LIBOR + 2.25% to 3.5%. The Companys primary market risk exposures are interest rate and currency
exchange rate risk. The Company is exposed to interest rate risk and currency
exchange rate fluctuations resulting from the issuance of floating rate debt
and debt denominated
in U.S. dollars. In addition to monitoring the ratio of fixed-rate debt to
long-term debt, the Company uses interest rate swaps to manage the proportion
of total debt that is subject to variable rates. Cross-currency swaps are used
to hedge both the interest rate and the currency exposure on debt originally
issued in U.S. dollars. The Company does not enter into any derivatives for
trading purposes. The Company has fully hedged the currency exposure on all of its U.S. dollar
denominated debt, and has fixed the interest rate for the majority of its
floating rate debt by entering into a combination of cross-currency swaps and
interest rate swaps.


In addition to foreign exchange rate risk on foreign
currency denominated debt, the Company is also exposed to some currency risk as
a result of having investments and carrying on business in currencies other
than the Canadian dollar. All of the Companys foreign operations are self
sustaining, and therefore foreign exchange gains and losses are deferred as a
separate component of shareholders equity. The Company translates the earnings
of equity accounted subsidiaries and affiliates at the average rate of
translation of the relevant period. The Company recognizes deferred translation
gains and losses as appropriate upon dispositions and/or distributions from
such operations. The Companys primary currency exposure is to variations in
the Australian dollar relative to the Canadian dollar as a result of its
investment in Network TEN. Currently, the Company does not use derivative
financial instruments to manage its exposure to fluctuations in foreign
currency exchange rates. Based on current operations, the Company believes that cash flow from
operations, together with available borrowing capacity under the senior credit
facility, will be adequate to meet its anticipated requirements for working
capital, capital expenditures, interest payments and its potential obligation
to redeem Series 2 preference shares. Although the Company has no current undertakings or agreements with respect to
material acquisitions or investments, from time to time potential acquisitions
and investments are evaluated and, to the extent permitted by the terms of
senior debt instruments, the Company may make such acquisitions or investments
should attractive opportunities arise. The Company expects that the funding for
any such acquisitions
or investments would come from working capital, borrowing under the senior
credit facility or future credit facilities, additional equity and debt
financing, entering into joint
ventures or a combination of these options.













---



##### 



MANAGEMENT DISCUSSION
          AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS



NETWORK TEN The Company has a 57.5% economic interest in Network TEN, one of Australias
three non-government owned national television broadcast networks. While
Network TENs results are
not consolidated into the Companys financial statements, the Company receives
interest payments under Network TENs outstanding subordinated debentures, all
of which are owned by the Company and dividend payments in respect of the
Network TEN shares owned by the Company.
 Set forth below is a discussion of Network TENs results of operations without
giving effect to the Companys proportionate interest in Network TEN. Fiscal 2002 Compared to Fiscal 2001 Network TEN television operations in
Australia reported a record year in terms of revenues after significant ratings
gains for its prime time schedule in both its target demographic of 16-39 year
olds and other audience categories. Total revenues increased by 16% to A$587
million, from A$506 million the
previous year. This included a record fourth quarter for the television
operations of the company.
 Operating expenses of the Australian television operation increased by A$60
million, or 17%, to A$416 million for the year ended August 31, 2002, from
A$356 million in the same period in the previous year. The increase reflected
the investment in a winning program strategy that included the most watched
Australian program, Big Brother, and sports programming with wide audience
appeal, such as the AFL games. EBITDA increased by A$22 million, or 15%, to A$172 million for the year ended
August 31, 2002, from A$150 million for the same period in the previous year.


Revenues from Eye Corp., TENs out-of-home operation, increased by A$30
million, or 59%, to A$80 million for the year ended August 31, 2002, from A$50
million the previous year, which included only eight months of Eye Corp.
results. Operating expenses at Eye Corp. increased by 67% to A$78 million, from A$47
million the previous year due to the inclusion of a full year of Eye Corp.
results in 2002 compared to eight months in 2001. EBITDA of Eye Corp. decreased to A$2 million from A$4 million the previous
year. Shortly before the end of the fiscal year, Network TEN acquired the remaining
40% of Eye Corp. for A$10 million. The potential for growth and profits in the
out-of-home market remains substantial, but the difficult advertising
environment at this time has affected the out-of-home industry more than other
media. Acquisition of full ownership and control of the company will enable TEN
to make the necessary realignments of management and strategy to realize
further efficiencies. In 2002, Network TEN recorded an investment loss of A$20 million related to the
write down of other investments to fair value. In 2001, Network TEN had a net
investment income of A$35 million. As a result of the adoption of new accounting policies under Canadian GAAP no
amortization of goodwill and indefinite life intangibles was recorded. In the
previous year,
amortization of A$14 million was recorded. In 2002, Network TEN recognized a
goodwill impairment loss of A$168 million related to its investment in Eye
Corp. In accordance with the new accounting policy, A$102 million was recorded
as a charge against opening retained earnings, and A$66 million charged against
2002 earnings. The decline in fair value is attributable to weaknesses in the
out-of-home advertising market and to certain operational issues.

















---



##### 







Financing expenses, excluding interest in respect of subordinated debentures,
increased to A$27 million from A$18 million in the previous year, reflecting
higher debt levels. Income tax expense increased to A$71 million in 2002, compared to A$24 million
in 2001 as a result of increased taxable income, as well as the A$36 million
settlement with
the Australian Tax Office, as described in the following section. Network TENs earnings, excluding interest in respect of subordinated
debentures, decreased to a loss of A$23 million for the year ended August 31,
2002, from earnings of A$123 million in the previous year. Fiscal 2001 Compared to Fiscal 2000 Total revenues increased A$7 million, or 1%, to A$556 million for the year
ended August 31, 2001, from A$548 million. Revenues of A$50 million from Eye
Corp., in which Network TEN acquired a 60% controlling interest in December
2000, offset declines in television revenues.
 Operating expenses before depreciation and amortization increased A$54 million,
or 15%, to A$406 million for the year ended August 31, 2001, from A$353 million
for the previous year. The increase is primarily attributable to the inclusion
of A$47 million in Eye Corp. operating expenses, as well as increased operating
costs associated with transmission of digital broadcast signals. EBITDA decreased A$46 million, or 24%, to A$149 million for the year ended
August 31, 2001, from A$195 million for the previous year. Network TENs investment income totaled A$35 million for the year ended August
31, 2001. This included gains on sale of certain listed investments of A$57
million and sale of excess


real property of A$7 million. These gains were
partially offset by a loss of A$29 million resulting from the write-off of
certain of Network TENs online investments, primarily the result of the
discontinuance of its SCAPE joint ventures. Amortization expenses increased by A$12 million, to A$25 million for the year
ended August 31, 2001, from A$14 million in the previous year. This increase
was primarily
attributable to the additional amortization resulting from the acquisition of
60% of Eye Corp. Financing expenses, excluding interest in respect of subordinated debentures,
increased to A$18 million for the year ended August 31, 2001, from A$2 million
in the previous year, reflecting higher debt levels. Income tax expense decreased by A$10 million, to A$24 million for the year
ended August 31, 2001, from A$34 million in the previous year, as a result of
the reduction in earnings. Network TENs earnings, excluding interest in respect of subordinated
debentures, decreased by A$25 million, or 17%, to A$123 million for the year
ended August 31, 2001, from A$148 million in the previous year. Liquidity and Capital Resources Cash flow from operations before changes in non-cash working capital decreased
by A$37 million in the 12 months ended August 31, 2002 to A$94 million,
compared to the previous year.
 Capital expenditures for replacement of capital assets were A$32 million for
the year ended August 31, 2002, compared to A$23 million in the same period
last year. As required by its existing broadcast licence, Network TEN converted
to digital signal transmission in January 2001. The total capital cost of the
conversion is estimated at A$80 million, which will be expended over a five
year period.













---



##### 



MANAGEMENT DISCUSSION
          AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS



In August 2002, Network TEN acquired the remaining interest in Eye Corp. that
it did not already own for A$10 million. In January 2002, Network TEN paid distributions aggregating A$139 million. As a result of losses incurred in 2002, Network TEN will not make a
distribution of 2002 earnings. TEN has adopted a policy of interim and final
dividends for the 2003 fiscal year. This will allow a cash distribution to be
paid early in the 2003 calendar year from earnings generated in the first half
of fiscal 2003. As of August 31, 2002, Network TEN had cash on hand of A$12 million, compared
to A$22 million as of August 31, 2001. Network TEN has a credit facility with a syndicate of banks providing for
operating and term credit facilities in the aggregate amount of A$700 million.
The credit facility is secured by a lien on substantially all of the assets of
Network TEN and its subsidiaries. Outstanding loans under Network TENs credit
facility totaled A$460 million on August 31, 2002. A longstanding dispute between TEN and the Australian Tax Office (ATO)
regarding the deductibility of debenture interest paid to CanWest was resolved
in August 2002. As a result, the ATO will allow TEN to continue to deduct
interest on its subordinated debentures until June 30, 2004. After that date,
in accordance with new tax legislation in Australia that will come into effect
on July 1, 2004, TEN will no longer be entitled to tax deductions for interest
in respect of the subordinated debentures. The settlement resulted in a
non-recurring income tax expense of A$36 million in 2002.


REGULATORY STRUCTURE Television broadcasting is a regulated industry in each of the countries in
which CanWest operates. Depending upon the jurisdiction, the Company must meet
varying requirements in respect of programming and advertising. All of the
broadcasting licences held by the Company are in good standing and the Company
is confident of its ability to continue to satisfy the conditions of licence of
its various broadcast undertakings. During 2001, the Canadian conventional
television licences were renewed for a further seven years, the maximum
permitted term.
 OUTLOOK The recession, which remained entrenched through the first half of 2002, seems
to have abated in most markets, with Australia and Canada recovering first,
both registering robust economic growth, particularly in comparison to the
United States. Results to date in fiscal 2003 and forward sales bookings in our
Canadian and Australian television operations support managements expectation
that the positive trends in demand for advertising will continue in all markets
in the coming year, and that it would be reasonable to anticipate a
continuation of the improvement in operating results evident in recent months
in Canada and at all of the Companys international operations.
 Integration of the newly acquired newspaper and interactive assets in Canada
with the Companys existing Canadian media assets is already well underway.
Nevertheless, considerable additional scope remains to extract full value from
the cost reduction and revenue enhancement opportunities available from
combining television, newspaper and interactive assets on a national scale in
Canada.

















---



##### 







Over the past year, the Company has revamped its national and local sales
organizations to take advantage of multi-platform sales opportunities. The
Company has created a national promotions team to extract value from the
cross-promotion of its various media. The Company also has strengthened its
executive capacity to drive the integration of news and information content in
order to enhance both the quantity and quality available for all our media
outlets. Building on these initiatives will be top operating priorities in
2003. Initiatives currently underway will provide the Companys newspaper publishers
with the means to improve overall information content with enhanced local
reporting and access to more and better quality national and international
reporting and quality features through the facilities of an expanded CanWest
news service and national news network. The tremendous success of Global
National with Kevin Newman, and the Global Sundaycurrent affairs program also
provide valuable platforms on which to build a more competitive television news
and public affairs franchise. All of these initiatives will improve the
competitive position of CanWest Canadian media operations and should contribute
to improved earnings in future years. Debt reduction remains the Companys senior corporate priority. With a
reduction of over $500 million in senior debt achieved over the past year, and
with the expectation of improved operating results and significant additional
potential to generate cash from the sale of other non-core assets, the Company
anticipates a significant opportunity to reduce debt further in fiscal 2003. Higher ratings and market shares of Canadian television operations at Global,
as well as at the Companys international operations, should contribute to
continued increased revenues and EBITDA profits as advertising markets recover.
In Canada


investments in new programming such as PGA Golf, acclaimed
mini-series such as Band of Brothers and continued strong performance from the
prime time schedules should help Global and CH to remain the first choice among
conventional television alternative for Canadian advertisers. The success of
the Companys new digital specialty channels, in particular Fox SportsWorld and
LoneStar, have diversified the Companys offering to Canadian advertisers and
will become increasingly important as the number of subscribers to digital
television services continues to grow. In March 2003, the Company will add to that diversified offering with the
inclusion of a jazz themed digital channel, COOL TV and the launch of CanWests
first Canadian radio
station COOL 99.1 FM in the Companys home city of Winnipeg. The inclusion of
radio and music-themed television programming will add to the range of
multi-platform offerings to Canadian advertisers. In sum, the combination of reduced unit costs, solid ratings performance in
television, improving advertising markets for both television and newspapers,
the immediate prospects are for sustained positive momentum in revenues and
EBITDA. Further progress in the reduction of corporate debt should reduce
interest costs, improve the Companys balance sheet and contribute to higher
profits going forward. Differences Between Canadian GAAP and U.S. GAAP The preceding discussion and
analysis has been based upon financial statements prepared in accordance with
Canadian GAAP, which differs in certain respects from United States GAAP. The
significant differences relevant to the Company are discussed in detail in Note
20 of Notes to the Consolidated Financial Statements for the years ended August
31, 2002
and August 31, 2001.













---



##### 



MANAGEMENT'S
REPORT TO SHAREHOLDERS







The  accompanying financial statements were prepared by the management of the
Company, which is responsible for the integrity and objectivity of the
information contained therein. The statements have been prepared by qualified
personnel in accordance with policies and procedures established by management.
The Companys procedures and related internal control systems are designed to
provide assurance that accounting records are reliable and to safeguard the
Companys assets. In managements opinion, the consolidated financial statements fairly reflect
the financial position of the Company, the results of its operations and cash
flow, and are prepared in accordance with generally accepted accounting
principles. In addition to the consolidated financial statements, management has prepared
unaudited combined financial information, which includes the accounts of the
Companys investment in Network TEN on a proportionately consolidated basis,
which are supplementary to the consolidated financial statements. Management
believes that the unaudited combined financial information provide additional
meaningful information regarding the magnitude and impact of the Companys
investment in Network TEN. PricewaterhouseCoopers LLP, as the Companys external auditors, have audited
the consolidated financial statements, and their report can be found on page
37. Their opinion
is based upon an examination conducted in accordance with generally accepted
auditing standards in Canada and a review of certain of the Companys
accounting policies


and procedures and internal control systems. Based upon the evaluation of these
systems, the external auditors conduct appropriate tests of the Companys
accounting records and obtain sufficient audit evidence to provide reasonable
assurance that the financial statements are presented fairly, in all material
respects, in accordance with Canadian generally accepted accounting principles. The Audit Committee, none of the members of which are officers of the Company,
meets at various times throughout the year and reviews the Companys
consolidated financial statements before recommending them to the Board of
Directors for approval. It also reviews reports prepared by the external
auditors of the Company on the Companys accounting policies and procedures and
internal control systems. The Audit Committee recommends the appointment of the
Companys external auditors, who are appointed
annually by the Companys shareholders.  (-s- JOHN MAGUIRE) JOHN MAGUIRE
V.P. FINANCE AND
CHIEF FINANCIAL OFFICER
NOVEMBER 1, 2002
















---



##### 



(PRICEWATERHOUSECOOPERS LOGO)

|                 |  |                            
|---------------- |  | ---------------------------
|November 1, 2002 |  | PricewaterhouseCoopers LLP 
|                 |  | Chartered Accountants      
|                 |  | One Lombard Place          
|                 |  | Suite 2300                 
|                 |  | Winnipeg Manitoba          
|Auditors Report |  | Canada R3B 0X6             
|                 |  | Telephone +1 (204) 926 2400
|                 |  | Facsimile +1 (204) 944 1020

To the Shareholders of
CanWest Global Communications Corp.

We have audited the consolidated balance sheets of CanWest Global
Communications Corp.as at
August 31, 2002 and August 31, 2001 and the consolidated statements of
earnings, retained earnings
and cash flows for the years then ended. These financial statements are the
responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements
based on our audits.

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

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

(-s- PriceWaterhouseCoopers LLP

Chartered Accountants



November 1, 2002

Comments by Auditors on Canada-U.S. Reporting Difference

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph
when there are changes in accounting principles that have a material effect on
the comparability of the
Companys financial statements, such as the changes described in note 1 to the
consolidated financial
statements. Our report to the shareholders dated November 1, 2002 is expressed
in accordance with
Canadian reporting standards which do not require a reference to such changes
in accounting principles
in the auditors report when the changes are properly accounted for and
adequately disclosed in the
financial statements.

(-s- PriceWaterhouseCoopers LLP

Chartered Accountants

PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers
LLP and the other member firms of PricewaterhouseCoopers
International Limited, each of which is a separate and independent legal
entity.





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##### 



CONSOLIDATED
STATEMENTS OF EARNINGS



FOR THE YEARS ENDED AUGUST 31

2002
        
        
        2001$000
        
        
        $000Revenue
        
        
        2,272,783
        
        
        
        1,944,775Operating expenses
        
        
        1,244,263
        
        
        
        1,121,392Selling general and administrative expenses
        
        
        558,214
        
        
        
        382,312470,306
        
        
        
        441,071Amortization of intangibles and goodwill
        
        
        17,500
        
        
        
        90,159Amortization of property, plant and equipment
        
        
        74,654
        
        
        
        60,565Other amortization
        
        
        6,670
        
        
        
        5,240371,482
        
        
        
        285,107Financing expenses
        
        
        (376,632
        )
        
        
        (356,755
        )Investment gains net of write-down of investments
        
        
        32,043
        
        
        
        28,630Dividend income
        
        
        3,241
        
        
        
        2,95230,134
        
        
        
        (40,066
        )Provision for (recovery of) income taxes
        
        
        7,108
        
        
        
        (59,019
        )Earnings before the following
        
        
        23,026
        
        
        
        18,953Minority interests
        
        
        4,330
        
        
        
        (3,196
        )Interest in earnings (loss) of Network TEN
        
        
        (11,815
        )
        
        
        52,567Interest in loss of other equity accounted affiliates
        
        
        (1,523
        )
        
        
        (14,491
        )Realized currency translation adjustments
        
        
        (1,000
        )
        
        
        (7,200
        )Net earnings for the year
        
        
        13,018
        
        
        
        46,633Net earnings per shareBasic
        
        
        $0.07
        
        
        
        $0.27Diluted
        
        
        $0.07
        
        
        
        $0.27


The notes constitute an integral part of the consolidated financial statements.














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##### 





CONSOLIDATED BALANCE SHEETS

AS AT AUGUST 31



2002
        
        
        2001$000
        
        
        $000ASSETSCurrent AssetsCash
        
        
        61,090
        
        
        
        19,489Accounts receivable
        
        
        470,246
        
        
        
        475,618Income taxes recoverable
        
        
        33,334
        
        
        
        Inventory
        
        
        19,836
        
        
        
        30,817Investment in film and television programs
        
        
        98,096
        
        
        
        96,385Future income taxes
        
        
        30,013
        
        
        
        33,243Other
        
        
        13,726
        
        
        
        17,840726,341
        
        
        
        673,392Investment in Network TEN
        
        
        4,494
        
        
        
        107,210Other investments
        
        
        162,361
        
        
        
        415,413Investment in film and television programs
        
        
        317,176
        
        
        
        355,994Property, plant and equipment
        
        
        679,224
        
        
        
        707,811Other assets
        
        
        103,975
        
        
        
        130,966Intangibles
        
        
        1,096,458
        
        
        
        1,080,412Goodwill
        
        
        2,631,099
        
        
        
        2,828,0225,721,128
        
        
        
        6,299,220LIABILITIESCurrent LiabilitiesBank loans and advances
        
        
        
        
        
        
        28,999Accounts payable
        
        
        164,988
        
        
        
        131,542Accrued liabilities
        
        
        227,104
        
        
        
        268,891Income taxes payable
        
        
        
        
        
        
        1,175Film and television program accounts payable
        
        
        64,834
        
        
        
        45,084Deferred revenue
        
        
        60,596
        
        
        
        75,970Current portion of long term debt
        
        
        172,753
        
        
        
        116,500690,275
        
        
        
        668,161Long term debt
        
        
        3,337,163
        
        
        
        3,795,262Other accrued liabilities
        
        
        86,217
        
        
        
        88,809Future income taxes
        
        
        431,562
        
        
        
        440,9924,545,217
        
        
        
        4,993,224SHAREHOLDERS EQUITYCapital stock
        
        
        896,422
        
        
        
        896,313Contributed surplus
        
        
        3,647
        
        
        
        3,647Retained earnings
        
        
        317,376
        
        
        
        475,053Cumulative foreign currency translation adjustments
        
        
        (41,534
        )
        
        
        (69,017
        )1,175,911
        
        
        
        1,305,9965,721,128
        
        
        
        6,299,220
 The notes constitute an integral part of the consolidated financial statements.


Signed on behalf of the board   (-s- ISRAEL ASPER)  Director (-s- JALYNN BENNETT) Director













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##### 



CONSOLIDATED
STATEMENTS OF RETAINED EARNINGS

FOR THE YEARS ENDED AUGUST 31

2002
        
        
        2001$000
        
        
        $000Retained earnings  beginning of year, as previously reported
        
        
        475,053
        
        
        
        529,112Adjustment for adoption of new accounting pronouncements
        
        
        (170,695
        )
        
        
        (5,164
        )Retained earnings  beginning of year, as adjusted
        
        
        304,358
        
        
        
        523,948Net earnings for the year
        
        
        13,018
        
        
        
        46,633DividendsCash
        
        
        
        
        
        
        (49,003
        )Stock
        
        
        
        
        
        
        (46,525
        )Retained earnings  end of year
        
        
        317,376
        
        
        
        475,053


The notes constitute an integral part of the consolidated financial statements.














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##### 





CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED AUGUST 31

2002
        
        
        2001$000
        
        
        $000CASH GENERATED (UTILIZED) BY:Operating activitiesNet earnings for the year
        
        
        13,018
        
        
        
        46,633Items not affecting cashAmortization
        
        
        108,765
        
        
        
        166,979Interest paid in kind
        
        
        105,790
        
        
        
        75,947Future income taxes
        
        
        11,209
        
        
        
        (97,281
        )Interest in (earnings) loss of Network TEN
        
        
        11,815
        
        
        
        (52,567
        )Interest in loss of other equity accounted affiliates
        
        
        1,523
        
        
        
        14,491Minority interests
        
        
        (4,330
        )
        
        
        3,196Realized currency translation adjustments
        
        
        1,000
        
        
        
        7,200Investment gains net of write-down of investments
        
        
        (32,043
        )
        
        
        (28,630
        )Write-off of deferred financing fees
        
        
        
        
        
        
        17,900Distributions from Network TEN
        
        
        60,984
        
        
        
        71,096277,731
        
        
        
        224,964Investment in film and television programs
        
        
        (194,619
        )
        
        
        (267,437
        )Amortization of film and television programs
        
        
        132,033
        
        
        
        157,629Other changes in non-cash operating accounts
        
        
        (55,554
        )
        
        
        (51,406
        )159,591
        
        
        
        63,750Investing activitiesAcquisitions
        
        
        
        
        
        
        (2,007,291
        )Other investments
        
        
        (5,187
        )
        
        
        (1,733
        )Proceeds from sale of other investments
        
        
        87,000
        
        
        
        65,596Proceeds from divestitures
        
        
        390,059
        
        
        
        32,454Purchase of property and equipment
        
        
        (53,338
        )
        
        
        (49,641
        )418,534
        
        
        
        (1,960,615
        )Financing activitiesDividends paid
        
        
        
        
        
        
        (49,003
        )Issuance of long term debt
        
        
        3,255
        
        
        
        3,903,291Repayment of long term debt
        
        
        (510,889
        )
        
        
        (2,030,988
        )Issuance of share capital
        
        
        109
        
        
        
        4,012Net change in bank loans and advances
        
        
        (28,999
        )
        
        
        12,744(536,524
        )
        
        
        1,840,056Net change in cash
        
        
        41,601
        
        
        
        (56,809
        )Cash and cash equivalents  beginning of year
        
        
        19,489
        
        
        
        76,298Cash and cash equivalents  end of year
        
        
        61,090
        
        
        
        19,489Cash flow per shareBasic
        
        
        $1.57
        
        
        
        $1.31Diluted
        
        
        $1.52
        
        
        
        $1.31


The notes constitute an integral part of the consolidated financial statements.










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##### 



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001

1. SIGNIFICANT ACCOUNTING POLICIES



The Company is an international media company with interests in broadcast
television, publishing, radio, specialty cable channels, out-of-home
advertising, production and distribution of film and television programming and
internet websites in Canada, Australia, New Zealand, Ireland and Northern
Ireland. The Companys operating segments include television and radio
broadcasting, entertainment and publishing and online operations. In Canada,
the Television Broadcasting segment includes the operation of the Global
Television Network, Global Prime and various other conventional and specialty
channels. The Canadian Publishing and Online segment includes the publication
of a number of newspapers, including metropolitan daily newspapers, community
newspapers and the National Post, as well as operation of the canada.com web
portal and other web-based operations. The Entertainment segment includes the
operation of Fireworks Entertainment, a producer
and distributor of film and television programs. The New Zealand Television
Broadcasting segment includes the operations of the TV3 and TV4 Television
Networks. The New Zealand Radio Broadcasting segment includes the More FM and
RadioWorks radio networks. The Irish Television Broadcasting segment includes
the Companys 45% interest in the Republic of Irelands TV3 Television Network.
The Corporate and Other segment includes the Companys 57.5% economic interest in The TEN Group Pty Limited, which owns and
operates Australias TEN Television Network (Network TEN) and various
portfolio investments in media operations, including a 29.9% equity interest in
Northern Irelands Ulster Television plc (UTV). The Companys broadcast customer base is comprised primarily of large
advertising companies who place advertisements with the Company on behalf of
their customers. Publishing revenues include advertising, circulation and
subscriptions which are derived from a variety of sources. The Companys
advertising revenues are seasonal. Revenues are highest in the first and third
quarters, while expenses are relatively constant throughout the year. A summary of significant accounting policies followed in the preparation of
these consolidated financial statements is as follows: BASIS OF PRESENTATION The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada. All amounts are expressed
in Canadian dollars unless otherwise noted. A reconciliation to accounting
principles generally accepted in the United States is provided in note 20.


PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and
its subsidiaries, and the Companys pro rata 45% share of the assets,
liabilities, and results of operations of TV3 Ireland from March 28, 2001, the
date when it ceased to be a subsidiary and became a jointly controlled
enterprise.
 INVESTMENTS The Company accounts for its investment in Network TEN, ROBTv (to the date of
its sale on August 31, 2001) and CF Television Inc. (to the date of its sale on
September 12, 2001), mentv and Mystery using the equity method. The Companys
accounting for its investment in The National Post Company is described in note
2.
 Other investments are recorded at the lower of cost and net realizable value. A
provision for loss in value of other investments is made when the decline in
current market values is considered other than temporary. INVESTMENT IN FILM AND TELEVISION PROGRAM RIGHTS a) Broadcast rights
 The Company has entered into various agreements for the rights to broadcast
certain feature films and television programs. The Company records a liability
for broadcast rights and the corresponding asset when the programs are
available for telecast. Broadcast rights are charged to operations as programs
are telecast over the anticipated period of use. Broadcast rights are carried
at the lower of unamortized cost and net recoverable value based on discounted
future cash flows.
 b) Film and television programs Investment in film and television programs represents the unamortized costs of
film and television programs that have been produced by the Company, or for
which the Company has acquired distribution rights. Included in investment in
film and television programs are film and television programs in progress and
in development, and acquired film and television program libraries. Costs of
completed film and television programs include all production costs and
capitalized interest, which are expected to be recovered from exploitation,
exhibition or licencing. Film and television programs in progress represent the
accumulated costs of productions that have not yet been completed by the
Company.
 Costs of film and television programs in development represent expenditures
made on projects prior to production, including investments in scripts.
Advances or contributions received from third parties to assist in development
are deducted from these costs. Upon commencement of production, development
costs are reclassified to investment in film and television programs.
Development costs are written off at the earlier of when determined not to be
recoverable and three years following the year incurred. Costs of advertising
and marketing are expensed as incurred.

















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##### 







Amortization of investment in completed films and television programs and
accrual of participation costs are calculated using the individual film
forecast computation method, based on the ratio that current period revenue
earned from the film and television programs bears to managements estimate of
ultimate revenue expected to be recognized from the exploitation of the film or
television program. Estimates of ultimate future revenue are prepared on a title-by-title basis and
reviewed periodically based on current market conditions. For episodic
television series, until ultimate revenue estimates include revenues from
secondary markets, capitalized costs for each episode are limited to the amount
of revenue contracted for each episode. Ultimate revenue includes estimates of
secondary market revenue only when the Company can demonstrate through its
experience or industry norms, that the number of episodes already produced,
plus those for which a firm commitment exists and the Company expects to
deliver, can be licenced successfully in the secondary market. Ultimate revenue
estimates include revenues for up to ten years for film and television programs
produced by the Company, and up to 20 years for acquired libraries. The valuation of film and television programs, including acquired film
libraries, is reviewed on a title-by-title basis. When an event or change in
circumstances indicates that the fair value of a film or television program is
less than its unamortized cost, the fair value is determined using managements
estimate of discounted future cash flows. A write-down is recorded equivalent
to the amount by which the unamortized costs exceeds the estimated fair value
of the film or television program. FOREIGN CURRENCY TRANSLATION The Companys operations in Australia, New Zealand and Ireland represent
self-sustaining foreign operations, and the respective accounts have been
translated into Canadian dollars in accordance with the current rate method.
Assets and liabilities are translated at the exchange
rates prevailing at the balance sheet dates, and revenue and expenses are
translated on the basis of average exchange rates during the periods. Any gains
or losses arising from the translation of these accounts are deferred and
included as a component of shareholders equity as cumulative foreign currency
translation adjustments. An applicable portion of these deferred gains and
losses is included in the determination of net earnings when there is a
reduction of the net investment.
 PROPERTY AND EQUIPMENT Property, plant and equipment are recorded at cost. Amortization is provided
over the assets estimated useful lives on a straight-line basis at the
following annual rates:
 Buildings
        
        
        2 1/2
        %
        
        
        
        
        
        
        5
        %Machinery and equipment
        
        
        4
        %
        
        
        
        
        
        
        33 1/3
        %Leasehold and land improvements
        
        
        2 1/2
        %
        
        
        
        
        
        
        20
        %
 INTANGIBLE ASSETS Broadcast licences, newspaper mastheads, circulation and other intangible
assets are recorded at their cost which represents the fair market value at the
date of the acquisition.


Circulation and other finite life intangibles are amortized over periods from 5
to 40 years. Intangibles with indefinite lives are not subject to amortization
and are tested for impairment annually. Impairment of indefinite life
intangibles is tested by comparing the fair value of the intangible asset to
its carrying value. GOODWILL Goodwill represents the cost of acquired businesses in excess of the fair value
of net identifiable assets acquired. Effective September 1, 2001, goodwill is
not subject to amortization, whereas previously goodwill was amortized over a
40 year period. Goodwill is tested for impairment annually by comparing the
fair value of goodwill assigned to a particular reporting unit to its carrying
value.
 PRE-OPERATING COSTS Pre-operating costs incurred in new business undertakings are deferred prior to
the commencement of commercial operations, which is generally the time at which
subscriber revenues commence. Pre-operating costs are amortized over a period
of five years.
 REVENUE RECOGNITION Revenue derived from broadcasting activities consists primarily of the sale of
airtime which is recognized at the time commercials are broadcast. Circulation
and advertising revenue from publishing activities is recognized when the
newspaper is delivered. Subscription revenue is recognized on a straight-line
basis over the term of the subscription.
 Revenue derived from the sale or licencing of film and television program
distribution rights is recognized when all of the following conditions are met:
persuasive evidence of a sale or licensing arrangement exists; the film is
complete and has been delivered or is available for immediate and unconditional
delivery; the licence period has begun; the fee is fixed or determinable and
collection of the fee is reasonably assured. Amounts received or receivable and not yet recognized as revenue are included
in deferred revenue. INCOME TAXES The asset and liability method is used to account for income taxes. Under this
method, future income tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts and the tax bases of assets and
liabilities. Future income tax assets and liabilities are measured using
substantively enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on future
income tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Future income tax assets
are recognized to the extent that realization is considered more likely than
not.
 Income taxes on unremitted earnings of Network TEN are provided at rates
applicable to distributions. Income taxes on unremitted earnings of foreign
operations other than Network TEN are not provided as such earnings are
expected to be indefinitely reinvested.













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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...







INVENTORY Inventory, consisting primarily of printing materials, is valued at the lower
of cost and net realizable values.
 PENSION PLANS AND POST RETIREMENT BENEFITS The Company maintains a number of defined benefit and defined contribution
pension plans. For the defined benefit plans, the pension expense is determined
using the projected benefit method prorated based on service. For the defined
contribution plans, the pension expense is the Companys contribution to the
plan. The Company also maintains post retirement benefit plans for certain of
its employees, the cost of which is expensed as benefits are earned by the
employees.
 CASH AND CASH EQUIVALENTS For the purpose of the statements of cash flows, cash includes cash and
short-term investments with maturities at the date of purchase of up to three
months.
 PER SHARE CALCULATIONS Basic earnings and cash flow per share are calculated using the daily weighted
average number of shares outstanding. Cash flow is defined as cash flow from
operations excluding amortization of film and programs, investment in film and
television programs and changes in non-cash operating accounts.
 Diluted earnings and cash flow per share are calculated using the daily
weighted average number of shares that would have been outstanding during the
year had all potential common shares been issued at the beginning of the year,
or when the underlying options or convertible securities were granted or
issued, if later. The treasury stock method is employed to
determine the incremental number of shares that would have been outstanding had
the Company used proceeds from the exercise of options to acquire shares. Basic earnings per share was calculated based on weighted average shares
outstanding for 2002 of 176,957,000 (2001  171,421,000). The dilutive effect
of outstanding stock options in 2002 is 27,000 shares (2001  130,000 shares).
The dilutive effect of preference shares is 5,275,000 shares (2001  659,000
shares) resulting in a denominator for diluted earnings per share of
182,259,000 (2001  172,210,000). The Company had 1,721,000 options outstanding
in 2002 which would have been anti-dilutive (2001  971,000 options). STOCK-BASED COMPENSATION PLANS The Company has share-based compensation plans as described in note 10. The
Company utilizes the intrinsic value approach to accounting for stock-based
compensation. No compensation expense is recognized for these plans when the
options are issued. Any consideration paid by employees on exercise of stock
options is credited to share capital.
 The following are pro forma results as if the Company had applied the fair
value based method of accounting for stock-based compensation.


The fair value of the options granted during 2002 was estimated using the
Black-Scholes option pricing model with the assumptions of no dividend yield
(2001  2%), an expected volatility of 40% (2001  60%), risk free interest
rates of 4.8% to 5.4% (2001  5.4% to 5.6%) and an expected life of 6 to 9
years (2001  6 to 9 years). The total fair value of 233,458 stock options that were granted by the Company
during 2002 was $1,542,300 (during 2001, 240,440 stock options were granted
with a total fair value of $1,969,000). The proforma cost of stock compensation
expense for the year ended August 31, 2002 would be $2,303,000
(2001 
$1,229,000). A value of $4,548,000 will be charged to proforma net earnings in
future years according to the vesting terms of the options. The resulting
proforma net earnings and diluted earnings per share for the year ended August
31, 2002 are $10,715,000 and $0.06 respectively (2001  $45,404,000 and $0.26). The effects of applying this method in the proforma disclosure are not
indicative of future amounts. The Companys proforma disclosure does not apply
to awards prior to 1996, and additional awards in future years are anticipated. FINANCIAL INSTRUMENTS The Company uses various financial instruments to reduce its exposure to
fluctuations in interest and U.S. currency exchange rates. The Company does not
hold or issue any derivative financial instruments for speculative trading
purposes. The interest differential to be paid or received under interest rate
swap agreements is recognized as an adjustment to interest expense. The Company
translates its U.S. denominated debt that is hedged by cross-currency swaps at
the rate implicit in the swap agreement.
 USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect reported amounts of assets, liabilities, revenue and expenses, and
disclosure of contingencies. Future events could alter such estimates in the
near term.
 The Company operates in highly competitive markets. The Company has estimated
the useful lives of intangible assets and the value of goodwill, based on
historical customer patterns, industry trends and existing competitive factors.
Significant long-term changes in these factors could result in a material
impairment of the value and life of intangible assets and goodwill. In addition, management estimates ultimate revenue from film and television
programs to determine amortization and fair values of investments in film and
television programs. Actual revenues may differ from these estimates.






---



##### 







CHANGES IN ACCOUNTING POLICIES a) Income taxes
 On September 1, 2000 the Company adopted the recommendations of the Canadian
Institute of Chartered Accountants (CICA) Handbook Section 3465, Income Taxes,
which replaced the deferral method with the asset and liability method of tax
allocation. The Company has applied the change retroactively, restating prior
years. The cumulative effect of the change on opening retained earnings at
September 1, 2000 was a $5.2 million reduction.
 b) Business combinations, intangibles and goodwill In July 2001, the Accounting Standards Board of the CICA issued Handbook
Section 1581, Business Combinations, and Handbook Section 3062, Goodwill and
Other Intangibles.
 Under Section 1581, all business combinations initiated after June 30, 2001,
must be accounted for as a purchase. In addition, the standards require
classification of carrying amounts of goodwill and other intangibles related to
purchase business combinations in accordance with the new definitions of
intangibles. The standard requires intangibles assets to be recognized
separately from goodwill if an asset arises from contractual or other legal
rights, or is separable. These provisions are applicable to business
combinations consummated after June 30, 2001 and for any recognized intangibles
acquired in a business combination prior to July 1, 2001 when Section 3062 is
first applied. This section


was adopted by the Company on September 1, 2001 and applied prospectively. On September 1, 2001, the Company adopted Section 3062, Goodwill and Other
Intangibles. As a result of adopting the new standard, goodwill and certain
intangibles with indefinite lives, including newspaper mastheads and broadcast
licences, are no longer amortized. Circulation and other intangibles are
amortized over periods from 5 to 40 years. As
a result of applying the new standards, no impairment in intangibles with
indefinite lives or goodwill have been identified at the Company or any of its
subsidiaries. However, an initial goodwill impairment was identified by Network
TEN in its reporting unit, Eye Corp., resulting in a charge to the Companys
retained earnings of $45.3 million (net of income tax
recoveries of $2.5 million). In addition, as a result of events occurring after
the beginning of 2001, a goodwill impairment of $30.2 million (net of income
tax recoveries of $2.0 million) has been reflected in the Companys interest in
loss of Network TEN in the Companys statement of earnings for the period ended
August 31, 2002 (see note 3). This change in accounting policy has been applied prospectively commencing
September 1, 2001. The tables below provide a reconciliation of previously
reported 2001 earnings to net earnings adjusted to exclude amortization of
goodwill and intangible assets with indefinite lives.




2002
        
        
        2001$000
        
        
        $000Reported net earnings for the year
        
        
        13,018
        
        
        
        46,633Amortization of goodwill and indefinite life intangibles, net of tax of $11,975 for the year ended August 31, 2001
        
        
        
        
        
        
        64,338Amortization of goodwill and indefinite life intangibles in equity accounted affiliates, net of tax of nil
        
        
        
        
        
        
        6,211Net earnings for the year adjusted to exclude amortization expense recognized in 2001
        
        
        13,018
        
        
        
        117,182Net earnings per share:Reported net earningsBasic
        
        
        $0.07
        
        
        
        $0.27Diluted
        
        
        $0.07
        
        
        
        $0.27Adjusted net earningsBasic
        
        
        $0.07
        
        
        
        $0.68Diluted
        
        
        $0.07
        
        
        
        $0.68




c) Accounting for film and television programs In June 2000, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 00-2
Accounting by Producers or Distributors of Films(SOP 00-2). SOP 00-2,
established new accounting standards for producers or distributors of films,
including changes in revenue recognition, capitalization and amortization of
costs of films and television programs and accounting for development, overhead
and other exploitation costs, including advertising and marketing expenses.


The Company has retroactively adopted SOP 00-2 effective as of September 1,
2001. Prior years financial statements have not been restated, as the effect
of the new policy on prior periods was not reasonably determinable.
Accordingly, opening retained earnings for the year ended August 31, 2002 was
reduced to reflect the cumulative effect of the accounting change in the amount
of $125.4 million (net of income taxes of $nil).













---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...








The principal changes as a result of applying SOP 00-2 are as follows: Cash outflows incurred to acquire, produce and develop film and television
programs, which were previously presented under investing activities in the
consolidated statement of cash flows, are presented under cash flows from
operating activities. Advertising and marketing participation costs, which were previously
capitalized to investment in film and television programs and amortized using
the individual film forecast
method, are now expensed as incurred. This change resulted in a reduction of
$26.0 million in investment in film and television programs and a reduction of
$9.2 million in other assets. Ultimate revenue includes estimates of revenue that are expected to be
recognized from the exploitation, exhibition and sale of a film or program in
all markets and territories, subject to certain limitations. These limitations
include certain exclusions for estimates of secondary market revenue that were
previously included by the Company in ultimate revenue. This change resulted in
a reduction of $18.6 million to investment in film and television programs. The valuation of investment in film and television programs is reviewed on a
title-by-title basis when an event or change in circumstances indicate that the
fair value of a film or television program is less than its unamortized cost.
The fair value of the film or television program, previously determined using
an undiscounted expected future revenue approach, is now determined using
managements future revenue estimates and a discounted cash flow approach. A
write-down is recorded equivalent to the amount by which the unamortized costs
exceed the estimated fair value of the film or television program. This change
resulted in a reduction of $69.0 million in investment in film and television
programs. Development costs related to overall deals that cannot be identified with
specific projects, which were previously capitalized, are now expensed as
incurred. This change resulted in a reduction of $2.6 million in investment in
film and television programs. The effect of this change in accounting policy on the Companys net earnings
for 2002 is not readily determinable. PROPOSED ACCOUNTING POLICIES Foreign currency translation and hedging relationships
 In November 2001, the Accounting Standards Board of the CICA approved
amendments to Handbook Section 1650, Foreign Currency Translation, and a new
accounting Guideline, Hedging Relationships. The amendments to Section 1650,
applicable for the Company in fiscal 2003 with retroactive application,
eliminate the deferral and amortization method for unrealized translation gains
and losses on non-current monetary assets and liabilities and require the
disclosure of exchange gains and losses included in net income. The Guideline,
applicable for the Company in fiscal 2004, deals with the identification,
documentation and designation and effectiveness of hedges. The impact of
implementing these changes is not expected to be significant.


2. ACQUISITIONS AND DIVESTITURES ACQUISITIONS a)Effective March 31, 2002, the Company acquired the remaining 50% interest in
The National Post Company not already owned. The purchase price consisted of
cash and other consideration in the form of agreements and undertakings,
exchanged by the parties, which had a nominal value. In addition, the vendor
agreed to provide $22.5 million to fund losses and cash requirements of The
National Post Company to March 31, 2002. In September
2001, the Company assumed control of the National Post; therefore, the Company
changed its method of accounting for the National Post to a consolidation basis
from an equity basis.
 b)In April 2001, through an amalgamation of CanWest Broadcasting Ltd. (CBL),
the 29.34% minority interest in CBL was exchanged for 21,783 Series 2
preference shares of the Company, rendering CBL a wholly owned subsidiary. The
redemption and conversion value of the shares is based on valuations which have
not been finally determined and was estimated at $50.0 million. As at August
31, 2002, the estimated redemption and conversion value is $54.7 million. c)In January 2001, the Company acquired the shares of RadioWorks that it did
not already own. The cost to acquire this 28% interest was $21.8 million. d)On November 16, 2000, the Company acquired substantially all of the Canadian
newspaper and other Canadian media assets including a 50% interest in the
National Post (CanWest Publications) of Hollinger International Inc. and
certain of its affiliates (Hollinger) for consideration of approximately $3.1
billion, including certain costs related to the acquisition. The purchase price is subject to adjustment based on the working capital of
CanWest Publications at August 31, 2000 and the results of its operations from
September 1, 2000 to November 16, 2000. The amount of such adjustment is
subject to negotiation between the parties and has not been finally determined.
When finalized, the working capital adjustment payable or refundable will
increase or decrease the amount of goodwill recorded on the acquisition. The Company partially financed the acquisition and refinanced certain existing
credit facilities by entering into a new senior secured credit facility, of
which the Company had drawn approximately $2.5 billion at closing. In addition,
the Company issued US$425.0 million and $60.7 million in senior subordinated
notes, and approximately $767.0 million in subordinated notes payable to
Hollinger. The Company also issued 2.7 million Series 1 preferred shares and
24.3 million non-voting shares to Hollinger. During the year ended August 31, 2002, the Company adjusted the allocation of
the purchase price based on valuations of intangibles which were completed in
the year. This resulted in an increase in mastheads, circulation and other
intangibles, a reduction in goodwill and an increase in the future tax
liability. The prior period was restated to reflect this reallocation.






---



##### 







The Company accounted for these acquisitions using the purchase method. As
such, the results of operations reflect the revenues and expenses of the
acquired operations since the dates of acquisition. A summary of the fair value of assets acquired is as follows:







2002
        
        
        2001National Post1
        
        
        CanWest Publications2
        
        RadioWorks
        
        CBL
        
        
        Total$000
        
        
        $000
        
        $000
        
        $000
        
        
        $000Current assets
        
        
        50,257
        
        
        
        324,382
        
        
        
        
        
        
        
        
        
        
        
        324,382Property, plant and equipment
        
        
        12,436
        
        
        
        537,053
        
        
        
        
        
        
        
        
        
        
        
        537,053Other investments
        
        
        
        
        
        
        101,561
        
        
        
        
        
        
        
        
        
        
        
        101,561Other assets
        
        
        
        
        
        
        67,412
        
        
        
        
        
        
        
        
        
        
        
        67,412Circulation and other intangibles
        
        
        10,700
        
        
        
        129,300
        
        
        
        
        
        
        
        
        
        
        
        129,300Newspaper mastheads and broadcast licences
        
        
        35,000
        
        
        
        330,000
        
        
        
        
        
        
        
        25,466
        
        
        
        355,466Goodwill
        
        
        62,987
        
        
        
        2,101,619
        
        
        
        16,928
        
        
        
        
        
        
        
        2,118,547Total assets
        
        
        171,380
        
        
        
        3,591,327
        
        
        
        16,928
        
        
        
        25,466
        
        
        
        3,633,721Current liabilities
        
        
        (50,665
        )
        
        
        (294,856
        )
        
        
        
        
        
        
        
        
        
        
        (294,856
        )Other accrued liabilities
        
        
        
        
        
        
        (10,000
        )
        
        
        
        
        
        
        
        
        
        
        (10,000
        )Future income taxes
        
        
        (14,600
        )
        
        
        (158,587
        )
        
        
        
        
        
        
        
        
        
        
        (158,587
        )Minority interests
        
        
        (22,500
        )
        
        
        
        
        
        
        4,842
        3
        
        
        24,534
        3
        
        
        29,376Total liabilities
        
        
        (87,765
        )
        
        
        (463,443
        )
        
        
        4,842
        
        
        
        24,534
        
        
        
        (434,067
        )83,615
        
        
        
        3,127,884
        
        
        
        21,770
        
        
        
        50,000
        
        
        
        3,199,654Consideration:Cash
        
        
        
        
        
        
        1,985,521
        
        
        
        21,770
        
        
        
        
        
        
        
        2,007,291Shares
        
        
        
        
        
        
        375,516
        
        
        
        
        
        
        
        50,000
        
        
        
        425,516Note payable
        
        
        
        
        
        
        766,847
        
        
        
        
        
        
        
        
        
        
        
        766,847Carrying value of The National Post Company
investment at date of acquisition
        
        
        83,615
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        83,615
        
        
        
        3,127,884
        
        
        
        21,770
        
        
        
        50,000
        
        
        
        3,199,654


|1 |  | The remaining 50% interest at acquisition of control, September 1, 2001.                               
|- |  | -------------------------------------------------------------------------------------------------------
| 
|2 |  | Including a 50% interest in National Post.                                                             
| 
|3 |  | The allocation of consideration to minority
interests represents the extinguishment of those interests.



DIVESTITURES a)On August 7, 2002, the Company sold its interest in community newspapers and
related assets in Atlantic Canada and Saskatchewan for cash proceeds of $257.0
million. The accounting gain on this sale was $48.9 million; assets and
liabilities disposed amounted to $227.3 million and $19.2 million,
respectively.
 b)On October 31, 2001, the Company completed the sale of CKVU Sub Inc., and
received proceeds of $133.0 million. The accounting gain on the sale was $67.7
million; assets and liabilities disposed amounted to $84.1 million and $18.8
million, respectively. c)On September 12, 2001, the Company completed the sale of
CF Television Inc., and received proceeds of $87.0 million. No gain or loss
arose from this transaction; assets and liabilities disposed amount to $87.0
million and nil, respectively.


d)On August 31, 2001 the Company sold its 50% interest in ROBTv for $30.0
million. No gain or loss arose from this sale; assets and liabilities disposed
amount to $30.0 million and nil, respectively. e)On March 28, 2001, the Company restructured its controlling interest in TV3
Ireland through a series of transactions, which included: (i) the repayment by
TV3 Ireland of loans made by the Company and another minority investor, (ii)
the exercise of certain call options by the Company and (iii) the acquisition
by Granada Media plc of a
45% interest in TV3 Ireland from the Company and another minority investor. The
Company received cash, net of the call price and including repayment of loans
made to TV3 Ireland of $32.5 million and recorded a gain on disposition of
$30.7 million. The Company and Granada Media plc also entered into a joint
venture agreement to jointly control TV3 Ireland. As a result, effective March
28, 2001, the Company began to proportionately consolidate its 45% interest in
TV3 Ireland.













---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...








3. INVESTMENT IN NETWORK TEN



The Company owns approximately 15% of the issued ordinary shares and all of the
convertible debentures and subordinated debentures of Network TEN, an
Australian television broadcast network. The subordinated debentures have an
aggregate principal amount of A$45.5 million and pay interest based on
distributions to holders of Network TENs ordinary shares. The convertible
debentures have an aggregate principal amount of A$45,500 and pay a market
linked rate of interest. The combination of ordinary shares and subordinated
debentures yield distributions equivalent to approximately 57.5% of all
distributions paid by Network TEN. The convertible debentures are convertible,
upon payment of an aggregate of A$45.5 million, into a number of ordinary
shares which would represent 50% of the issued and outstanding shares of
Network TEN at the time of conversion.


As a result of its contractual right to representation on Network TENs board
of directors and other factors, the Company accounts for its interest in
Network TEN on the equity basis. The Company has appointed three of the
thirteen members of the board of directors
of Network TEN. The following selected consolidated financial information of Network TEN has
been prepared in accordance with accounting principles generally accepted in
Canada. The accounts have been translated to Canadian dollars using the current
rate method.




SUMMARY CONSOLIDATED BALANCE SHEETS

2002
        
        
        2001$000
        
        
        $000AssetsCurrent assets
        
        
        285,303
        
        
        
        192,460Other assets
        
        
        4,825
        
        
        
        7,893Property, plant and equipment
        
        
        71,875
        
        
        
        61,967Long term investments
        
        
        2,188
        
        
        
        17,516Intangibles
        
        
        246,305
        
        
        
        245,721Goodwill
        
        
        49,304
        
        
        
        215,615659,800
        
        
        
        741,172Liabilities and Shareholders EquityCurrent liabilities
        
        
        191,736
        
        
        
        194,813Other long term liabilities
        
        
        442,975
        
        
        
        251,390Minority interest
        
        
        
        
        
        
        54,433Subordinated debentures issued to the Company
        
        
        40,154
        
        
        
        40,154Share capital
        
        
        40,146
        
        
        
        40,146Retained earnings (deficit)
        
        
        (52,232
        )
        
        
        177,251Cumulative foreign currency translation adjustment
        
        
        (2,979
        )
        
        
        (17,015
        )659,800
        
        
        
        741,172OTHER CONSOLIDATED FINANCIAL DATA2002
        
        
        
        2001$000
        
        
        
        $000Cash flow from operations1
        
        
        75,000
        
        
        
        105,000Distributions paid
        
        
        111,900
        
        
        
        130,000Capital expenditures
        
        
        25,700
        
        
        
        18,600


|1 |  | Cash flow from operations before changes in non-cash operating accounts.
|- |  | ------------------------------------------------------------------------














---



##### 





SUMMARY CONSOLIDATED STATEMENTS OF EARNINGS2002
        
        
        2001$000
        
        
        $000Revenue
        
        
        555,653
        
        
        
        445,179Operating expenses
        
        
        411,904
        
        
        
        324,999Operating profit before amortization
        
        
        143,749
        
        
        
        120,180Amortization of intangibles and goodwill
        
        
        
        
        
        
        10,802Amortization of property, plant, equipment and other
        
        
        15,130
        
        
        
        9,329128,619
        
        
        
        100,049Investment income and gains of net losses
on write-down investments
        
        
        (17,221
        )
        
        
        26,427Financing expenses
        
        
        (28,270
        )
        
        
        (71,343
        )Goodwill impairment loss1
        
        
        (56,114
        )
        
        
        27,014
        
        
        
        55,133Provision for income taxes2
        
        
        59,511
        
        
        
        19,328Earnings (loss) before the following
        
        
        (32,497
        )
        
        
        35,805Minority interests
        
        
        4,737
        
        
        
        4,354Interest in earnings of equity accounted affiliates
        
        
        
        
        
        
        940Net earnings (loss) for the year
        
        
        (27,760
        )
        
        
        41,099Interest in respect of subordinated debentures
held by the Company
        
        
        5,370
        
        
        
        56,697Earnings (loss) for the period before interest
in respect of subordinated debentures3
        
        
        (22,390
        )
        
        
        97,796SUMMARY STATEMENTS OF RETAINED EARNINGS
        
        
        2002
        
        
        
        2001$000
        
        
        
        $000Retained earnings  beginning of year as previously reported
        
        
        177,251
        
        
        
        220,853Adjustment for adoption of new accounting pronouncements1
        
        
        (83,109
        )
        
        
        Retained earnings  beginning of year as adjusted
        
        
        94,142
        
        
        
        220,853Earnings (loss) for the year before interest in respect of
subordinated debentures
        
        
        (22,390
        )
        
        
        97,796Distributions paid
        
        
        (123,984
        )
        
        
        (141,398
        )Retained earnings (deficit)  end of year
        
        
        (52,232
        )
        
        
        177,251


|1 |  | On December 18, 2000, Network TEN acquired 60% of Eye Corp. for A$189.9
million. Under Australian generally accepted accounting principles
(GAAP), on February 28, 2002 the Eye Corp. goodwill was written down by
A$137.5 million to A$113.8 million. In August, 2002, Network TEN
determined that there was a
further impairment of Eye Corp. goodwill which resulted in an additional
write down of A$40.9 million. Under Canadian GAAP, in accordance with the
adoption
of CICA Handbook Section 3062, the Eye Corp. goodwill impairment was
recorded as a charge of $83.1 million to retained earnings as of
September 1, 2001, with a further goodwill impairment loss of $56.1
million recorded as a charge to net earnings for year ended August 31,
2002. Under Canadian GAAP, the fair value of Eye Corp. has been
determined on a discounted cash flow basis. The decline in fair value is
attributable to weaknesses in the out-of-home advertising market and to
certain operational issues.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|2 |  | Network TEN had been in dispute with the Australian Tax Office (ATO)
regarding the deductibility of debenture interest paid to the Company
since 1997. Network TEN reached an agreement with the ATO during 2002.
Under the agreement Network TEN will be entitled to deduct debenture
interest until June 30, 2004. The settlement resulted in a non-recurring
income tax expense charge of A$36.2 million to Network TEN in the year
ended August 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| 
|3 |  | The Companys economic interest in Network TENs earnings (loss) for the
year ended August 31, 2002 is ($11.8) million (2001- $52.6 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| 
|  |  | At August 31, 2002 the Companys share of undistributed earnings of
Network TEN was nil, (August 31, 2001  $101.9 million). The Company
estimates that the market value of the Companys investment in Network
TEN, based on quoted market rates for Ten Network Holdings Limited at
August 31, 2002, was approximately $842 million (August 31, 2001  $810
million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    














---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...



4. OTHER INVESTMENTS

2002
        
        2001Cost
        
        Market Value1
        
        Cost
        
        Market Value1$000
        
        $000
        
        $000
        
        $000Investments in publicly traded companies  at costUlster Television plc2
        
        
        92,006
        
        
        
        148,340
        
        
        
        92,006
        
        
        
        95,109Other
        
        
        59,160
        
        
        
        52,355
        
        
        
        118,741
        
        
        
        73,781151,166
        
        
        
        200,695
        
        
        
        210,747
        
        
        
        168,890Investments in private companies  at cost
        
        
        8,602
        
        
        
        
        
        
        
        34,052Investments  on an equity basis
        
        
        2,593
        
        
        
        
        
        
        
        170,614162,361
        
        
        
        
        
        
        
        415,413


During 2002, the Company wrote down the value of various other investments by
$85.5 million to reflect the non-temporary decline in market value.



|1 |  | Market values are based on quoted closing prices at August 31. The Company
considers the excess of cost over market value to be a temporary decline in
value, the result of short-term market volatility.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|2 |  | The Companys 29.9% equity interest is accounted for at cost, as the Company
has not been successful in its attempts to gain board representation or to
influence UTVs management.                      

5. INVESTMENT IN FILM AND TELEVISION PROGRAMS

2002
        
        2001Current
        
        Long term
        
        Current
        
        Long term$000
        
        $000
        
        $000
        
        $000Broadcast rights1
        
        
        98,096
        
        
        
        23,172
        
        
        
        96,385
        
        
        
        8,335Non-theatrical films and television programs:Released1
        
        
        
        
        
        
        112,297
        
        
        
        
        
        
        
        109,312Acquired library1
        
        
        
        
        
        
        90,314
        
        
        
        
        
        
        
        123,018Programs in progress
        
        
        
        
        
        
        50,779
        
        
        
        
        
        
        
        52,929Development costs
        
        
        
        
        
        
        1,520
        
        
        
        
        
        
        
        2,311Theatrical films:Released1
        
        
        
        
        
        
        37,029
        
        
        
        
        
        
        
        24,416Acquired library1
        
        
        
        
        
        
        661
        
        
        
        
        
        
        
        979Programs in progress
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        32,666Development costs
        
        
        
        
        
        
        1,404
        
        
        
        
        
        
        
        2,02898,096
        
        
        
        317,176
        
        
        
        96,385
        
        
        
        355,994


|1 |  | Net of accumulated amortization.
|- |  | --------------------------------














---



##### 









The Company expects that 51% of the unamortized cost of released film and
television programs will be amortized during the year ended August 31, 2003.
The Company expects that 77% of the unamortized cost of released film and
television programs will be amortized during the three year period ended August
31, 2005. The Company expects that over 80% of the amounts of all such
programming will be amortized by August 31, 2006. The Company expects that
acquired libraries will be fully amortized in 18 years. The Company expects
that
$1.4 million of participation liabilities will be paid during the year ended
August 31, 2003. The Company has entered into various agreements for the right to broadcast
certain feature films and syndicated television programs in the future. These
agreements, which range in term from one to five years, generally commit the
Company to acquire specific programs or


films or certain levels of future
productions. The acquisition of these additional broadcast rights is contingent
on the actual production and/or the airing of the programs or films. Management
estimates that these agreements will result in future annual broadcast rights
expenditures of $250 million to $277 million. In addition, the Company has entered into various agreements to acquire
investments in film and television programs amounting to $17.5 million (US$11.2
million) (2001  $55.7 million (US$36.0 million)). Subsidiaries of the Company
have provided financial guarantees on certain credit facilities arranged for
the acquisition of film and television programs. An amount of $17.7 million
(US$11.4 million) (2001  $18.6 million (US$12.0 million)) has been guaranteed,
in addition to the guarantee of certain interest obligations on such
facilities.




6. PROPERTY, PLANT AND EQUIPMENT

2002Cost
        
        Accumulated amortization
        
        Net$000
        
        $000
        
        $000Land
        
        
        60,002
        
        
        
        
        
        
        
        60,002Buildings
        
        
        170,302
        
        
        
        36,630
        
        
        
        133,672Machinery and equipment
        
        
        669,265
        
        
        
        201,293
        
        
        
        467,972Leasehold and land improvements
        
        
        29,293
        
        
        
        11,715
        
        
        
        17,578928,862
        
        
        
        249,638
        
        
        
        679,224


2001Cost
        
        Accumulated amortization
        
        Net$000
        
        $000
        
        $000Land
        
        
        61,409
        
        
        
        
        
        
        
        61,409Buildings
        
        
        212,497
        
        
        
        35,426
        
        
        
        177,071Machinery and equipment
        
        
        604,551
        
        
        
        146,108
        
        
        
        458,443Leasehold and land improvements
        
        
        18,550
        
        
        
        7,662
        
        
        
        10,888897,007
        
        
        
        189,196
        
        
        
        707,811















---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...





7. INTANGIBLES AND GOODWILL

2002Cost
        
        Accumulated amortization
        
        Net$000
        
        $000
        
        $000IntangiblesFinite life:Circulation and other
        
        
        140,000
        
        
        
        26,972
        
        
        
        113,028Indefinite life:Broadcast licences
        
        
        706,031
        
        
        
        81,091
        
        
        
        624,940Newspaper mastheads
        
        
        365,000
        
        
        
        6,510
        
        
        
        358,4901,071,031
        
        
        
        87,601
        
        
        
        983,430Total intangibles
        
        
        1,211,031
        
        
        
        114,573
        
        
        
        1,096,458Goodwill
        
        
        2,753,967
        
        
        
        122,868
        
        
        
        2,631,099


2001Cost
        
        Accumulated amortization
        
        Net$000
        
        $000
        
        $000IntangiblesFinite life:Circulation and other
        
        
        129,300
        
        
        
        9,471
        
        
        
        119,829Indefinite life:Broadcast licences
        
        
        726,574
        
        
        
        89,481
        
        
        
        637,093Newspaper mastheads
        
        
        330,000
        
        
        
        6,510
        
        
        
        323,4901,056,574
        
        
        
        95,991
        
        
        
        960,583Total intangibles
        
        
        1,185,874
        
        
        
        105,462
        
        
        
        1,080,412Goodwill
        
        
        2,958,716
        
        
        
        130,694
        
        
        
        2,828,022




a) The divestiture of CKVU resulted in decreases in broadcast licences and
goodwill of $22.4 million and $44.8 million respectively. b) Sale of community newspapers and related assets in Atlantic Canada and
Saskatchewan resulted in a decrease of goodwill of $187.9 million. c) Acquisition of the remaining 50% interest in the National Post resulted in a
net increase of goodwill of $32.4 million.


d) Changes in the currency translation rates used to translate the balances of
goodwill and broadcast licences resulted in net increases in the balances of
$2.2 million and $10.3 million respectively. e) The resolution of an income tax issue related to a period prior
to an acquisition resulted in a $13.4 million reduction in goodwill. f) Amortization of circulation and other intangibles was $17.5 million for the
year ended August 31, 2002.

















---



##### 







8. LONG TERM DEBT

Interest Rate1
        
        2002
        
        Interest Rate1
        
        2001$000
        
        
        
        $000Term bank loans2
        
        
        9.73
        %
        
        
        1,791,938
        
        
        
        9.14
        %
        
        
        2,286,018Senior subordinated notes3
        
        
        7.8
        %
        
        
        705,700
        
        
        
        9.08
        %
        
        
        703,585Term
loans US$17,162 (2001 - US$26,329)4
        
        
        4.04
        %
        
        
        26,758
        
        
        
        6.40
        %
        
        
        40,691Term and demand loan 21,375
(2001 - IRE£16,505)5
        
        
        5.8
        %
        
        
        32,686
        
        
        
        5.32
        %
        
        
        29,486Term and demand loan (2001 - NZ$7,275)6
        
        
        
        
        
        
        
        
        
        
        6.50
        %
        
        
        4,938Note payable due May, 20036
        
        
        3.7
        %
        
        
        4,250
        
        
        
        3.25
        %
        
        
        4,250Junior subordinated notes7
        
        
        12.125
        %
        
        
        948,584
        
        
        
        12.125
        %
        
        
        842,794Long term debt
        
        
        
        
        
        
        3,509,916
        
        
        
        
        
        
        
        3,911,762Less portion due within one year
        
        
        
        
        
        
        (172,753
        )
        
        
        
        
        
        
        (116,500
        )Long term portion
        
        
        
        
        
        
        3,337,163
        
        
        
        
        
        
        
        3,795,262


|1 |  | The weighted average interest rate gives effect to interest rate swaps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|2 |  | Credit facilities provide for revolving and term loans in the maximum
amounts of $600,000,000 and $1,796,500,000 respectively. At August 31,
2002, the Company had drawn on availabilities under all of its term
facilities, including U.S. dollar loans of US$705,765,000 and had no
amounts drawn under revolving facilities. The revolving credit facility
matures in November 2006. The amount of credit available under the
$1,796,500,000 term facilities decreases periodically until maturity
between November 2006 and May 2009. Additional term facilities of
$15,000,000, of which no amount was drawn at August 31, 2002, mature
in August 2005. The loans bear interest at floating rates, and are
collateralized by certain assets of the Company.
| 
|  |  | Up to $30,000,000 of the revolving credit facility is available on an
operating basis, of which no amount was utilized at August 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| 
|3 |  | The senior subordinated notes mature on May 15, 2011, bear interest at
10.625% and include loans of US$425,000,000 and Canadian dollar loans of
$60,724,000. Most of the Canadian dollar loans are held by the majority
shareholder of the Company. The notes rank junior to the Companys senior
credit facility and are guaranteed by certain subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                                                    
| 
|4 |  | Consists of term bank loans with maturity dates commencing October 2002
to December 2003. The debt bears interest at floating rates of LIBOR +
2.0% and is collateralized by the Companys rights to certain film and
television programs including an assignment of accounts receivable and all
expected future revenues from exploitation of the financed film and
television programs.                                                                                                                                                                                                                                                                                                                                                                       
| 
|5 |  | These credit facilities provide for demand bank loans at August 31, 2002
in the maximum amount of 47,500,000 (2001  IRE£46,086,000). The debt
bears interest at floating rates and is secured by a letter of credit
provided by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| 
|6 |  | Note payable is due to a related party. The debt bears interest at prime
less 2% and is unsecured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| 
|7 |  | The junior subordinated notes mature in November 2010, bear interest at a
fixed rate of 12.125%, and are redeemable at par until May 2003. At the
Companys option, interest payments to November 2005 may be paid in cash,
the issuance of additional notes, or subject to conditions, the issuance
of non-voting shares of the Company. The notes rank junior to senior debt
and are collateralized by way of assets of certain subsidiaries of the
Company. The notes include $104,676,928 in notes issued during 2002 in
satisfaction of interest as well as an accrual of $9,977,511 for notes to
be issued in January 2003, (2001  $67,082,427 and $8,864,781
respectively).                                                                             



The Company has entered into various cross-currency interest rate and interest
rate swaps resulting in fixed interest costs on its senior indebtedness, in the
principal amount of $1,796,500,000 at August 31, 2002 at rates ranging from
5.7% to 6.63%, plus a margin, for terms matching the maturity of the loans. (At
August 31, 2001 the Company had fixed $1,884,000,000 at interest rates ranging
from 5.7% to 6.73%, plus a margin.) In addition, the Company has entered into
swaps resulting in floating rates on the US$425,000,000 senior subordinated
notes. The Company is subject to covenants under certain of the credit facilities
referred to above, including thresholds for leverage and interest coverage, and
is also subject to certain restrictions under negative covenants.


Principal payments of long-term debt, based on terms existing at August 31,
2002 over the next five years, are: $000Year ending August 31,
        
        
        2003
        
        
        
        172,7532004
        
        
        
        141,1902005
        
        
        
        166,1132006
        
        
        
        204,8002007
        
        
        
        192,027
 In addition to the facilities described above, the Company has additional
operating loan facilities payable on demand of NZ$5,000,000
at floating rates. As at August 31, 2002, the Companys indebtedness under
these facilities was NIL (2001  $728,000).






---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...





9. BUSINESS COMBINATION RESTRUCTURING ACCRUALS



At August 31, 2000, the Company had restructuring accruals of $113.1 million
related to the acquisition and integration of WIC Western International
Communications Ltd. (WIC). This balance was made up of approximately $75
million in required regulatory benefits, payable over a 6-year period, $12.5
million in severance costs, $10.0 million related to integration and rebranding
of WIC and $15.6 million in other restructuring costs. During 2001, the Company recorded restructuring accruals of $43.0 million
related to the acquisition and restructuring of its publishing operations.
Restructuring activities include the centralization of certain call centres,
integration of the Companys interactive and news and editorial operations, and
centralization of business, finance and information technology functions. This
balance was made up of $23.8 million in involuntary severance costs, and $19.2
million in other restructuring costs. In the year ended August 31, 2002, the Company established a restructuring
accrual of $7.0 million related to its acquisition and restructuring of the
National Post. This balance is primarily related to involuntary severance costs
and contract cancellation costs. For the year ended August 31, 2002, expenditures charged to the restructuring
accruals were $43.9 million (August 31, 2001- $19.5 million). As at August 31,
2002, an aggregate balance of $99.7 million remains accrued for future
expenditures. 10. CAPITAL STOCK AUTHORIZED
Authorized capital consists of an unlimited number of preference shares
issuable in series, multiple voting shares, subordinate voting shares and
non-voting shares. The multiple voting shares, the subordinate voting shares and the non-voting
shares rank equally on a per share basis in respect of dividends and
distributions of capital, and are
subordinate to the preference shares. Subordinate voting shares carry one vote
per share, and multiple voting shares carry ten votes per share. Non-voting
shares do not vote, except at meetings where the holders of such shares would
be entitled, by law, to vote separately as a class.


Multiple voting shares are convertible into subordinate voting shares and
non-voting shares on a one-for-one basis at any time at the option of the
holder. Subordinate voting shares are convertible into non-voting shares on a
one-for-one basis at any time at the option of the holder. Non-voting shares
are convertible into subordinate voting shares on
a one-for-one basis provided the holder is Canadian. Series 1 preference shares carry 19 votes per share, and carry preferential
votes pertaining to the election of up to two directors of the Company. Each
series 1 preference share is convertible, at the option of the holder, into
0.15 subordinate voting or non-voting shares. Series 2 preference shares were
issued on the amalgamation of subsidiaries of
the Company, including CanWest Broadcasting Ltd. and are held by the former
minority shareholders of CanWest Broadcasting Ltd. Series 2 preference shares
are not eligible to vote. Series 2 preference shares are, at the option of the
Company, redeemable for cash, or convertible to subordinate voting or
non-voting shares based on the market value of the subordinate voting or
non-voting shares at the date of conversion. The Companys articles of
incoporation state that in the event the Company does not redeem
or convert the series 2 preference shares within a period of twelve months
following the date on which the sale proceeds of CKVU are conclusively
determined, they will convert automatically. The Company expects the redemption
or conversion of the series 2
preference shares to occur within the next fiscal year. Should the series 2
preference shares be converted, a significant dilutive effect would occur. The
redemption price or conversion value of the shares is determined in accordance
with a formula contained in the articles. The formula amount is based, among
other things, on the proceeds of the sale of CKVU (net of costs and inherent
tax), the revenues of the Manitoba and Saskatchewan television stations for the
twelve months ending October 31, 2001, and the value of certain other assets.
The redemption or conversion price has not yet been finally determined, but is
estimated by the Company at August 31, 2002, to be $54.7 million. The series 1 and 2 preference shares are not entitled to dividends and
distributions in the normal course or in respect of a liquidation on wind up,
and have no right to vote separately as a class.




ISSUED
        
        2002
        
        
        2001$000
        
        
        $00076,785,976 (2001 - 76,785,976) multiple voting shares
        
        
        3,199
        
        
        
        3,19998,371,658 (2001 - 70,545,434) subordinate voting shares
        
        
        816,418
        
        
        
        419,5831,903,401 (2001 - 29,308,918) non-voting shares
        
        
        26,805
        
        
        
        417,375Nil (2001 - 2,700,000) Series 1 preference shares
        
        
        
        
        
        
        6,15621,783 (2001 - 21,783) Series 2 preference shares
        
        
        50,000
        
        
        
        50,000896,422
        
        
        
        896,313






---



##### 







Changes in outstanding share capital during the two years ended August 31, 2002
were as follows:

Number of shares
        
        
        $000MULTIPLE VOTING SHARE CAPITAL:Balance  August 31, 2000
        
        
        78,040,908
        
        
        
        3,252Changes pursuant to:Conversion to non-voting shares
        
        
        (1,254,932
        )
        
        
        (53
        )Balance  August 31, 2001 and 2002
        
        
        76,785,976
        
        
        
        3,199SUBORDINATE VOTING SHARE CAPITAL:Balance  August 31, 2000
        
        
        69,395,035
        
        
        
        394,050Changes pursuant to:Share purchase plans
        
        
        69,502
        
        
        
        836Exercise of stock options
        
        
        195,197
        
        
        
        735Dividend reinvestment plan
        
        
        165,434
        
        
        
        2,344Stock dividend
        
        
        760,917
        
        
        
        18,050Conversion to non-voting shares  net
        
        
        (40,651
        )
        
        
        3,568Balance  August 31, 2001
        
        
        70,545,434
        
        
        
        419,583Changes pursuant to:Share purchase plans
        
        
        6,077
        
        
        
        66Exercise of stock options
        
        
        9,645
        
        
        
        43Redeemed fractions
        
        
        (11
        )
        
        
        Conversion from Series 1 preference share
        
        
        405,000
        
        
        
        6,156Conversion from non-voting shares  net
        
        
        27,405,513
        
        
        
        390,570Balance  August 31, 2002
        
        
        98,371,658
        
        
        
        816,418NON-VOTING SHARE CAPITAL:Balance  August 31, 2000
        
        
        2,607,837
        
        
        
        22,958Changes pursuant to:Shares issued as consideration in an acquisition
        
        
        24,300,000
        
        
        
        369,360Conversion from multiple voting shares
        
        
        1,254,932
        
        
        
        53Stock dividend
        
        
        1,100,082
        
        
        
        28,475Dividend reinvestment plan
        
        
        5,416
        
        
        
        97Conversion from subordinate voting shares  net
        
        
        40,651
        
        
        
        (3,568
        )Balance  August 31, 2001
        
        
        29,308,918
        
        
        
        417,375Changes pursuant to:Redeemed fractions
        
        
        (4
        )
        
        
        Conversion to subordinate voting shares  net
        
        
        (27,405,513
        )
        
        
        (390,570
        )Balance  August 31, 2002
        
        
        1,903,401
        
        
        
        26,805SERIES 1 PREFERENCE SHARE CAPITAL:Balance  August 31, 2000
        
        
        
        
        
        
        Shares issued as consideration in an acquisition
        
        
        2,700,000
        
        
        
        6,156Balance  August 31, 2001
        
        
        2,700,000
        
        
        
        6,156Conversion to subordinate voting shares
        
        
        (2,700,000
        )
        
        
        (6,156
        )Balance  August 31, 2002
        
        
        
        
        
        
        SERIES 2 PREFERENCE SHARE CAPITAL:Balance  August 31, 2000
        
        
        
        
        
        
        Shares issued as consideration in an acquisition
        
        
        21,783
        
        
        
        50,000Balance  August 31, 2001 and 2002
        
        
        21,783
        
        
        
        50,000






---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...







SHARE COMPENSATION PLANS The Companys board of directors has approved share compensation plans, the
purpose of which is to provide employees and certain directors of the Company
and its subsidiaries with the opportunity to participate in the growth and
development of the Company through the granting of options and share purchase
loans. At any time, the number of subordinate voting and non-voting shares
reserved and set aside for purposes of the plans may not exceed 10% of the
issued shares of the Company.
 Options vest over a five or six-year period, are fully exercisable on vesting
and expire ten years after issuance, except that under certain specified
conditions the options vest and become exercisable


immediately. The exercise
price represents the market trading price at the date on which the option was
granted.
 Under management and employee share purchase plans, employees may purchase
subordinate voting shares or non-voting shares from treasury at the market
trading price using non-interest bearing short term loans provided by the
Company. The shares are held as collateral by a trustee until the loans are
repaid. Changes in outstanding options to purchase subordinate voting shares or
non-voting shares for the two years ended August 31 were as follows:




2002
        
        
        2001Options
        
        
        Average Price
        
        
        Options
        
        
        Average PriceOptions outstanding, beginning of year
        
        
        1,646,321
        
        
        
        15.75
        
        
        
        1,651,792
        
        
        
        14.52Changes pursuant to:Options granted
        
        
        233,458
        
        
        
        11.52
        
        
        
        240,440
        
        
        
        14.66Options exercised
        
        
        (9,645
        )
        
        
        4.30
        
        
        
        (195,197
        )
        
        
        3.77Options expired
        
        
        (50,866
        )
        
        
        16.68
        
        
        
        (50,714
        )
        
        
        16.88Options outstanding, end of year
        
        
        1,819,268
        
        
        
        15.24
        
        
        
        1,646,321
        
        
        
        15.75




The following options to purchase subordinate voting shares or non-voting
shares were outstanding and exercisable as at August 31, 2002:







Year Granted
        
        Exercise Price
        
        Expiry Date
        
        
        Number Outstanding
        
        
        Number Exercisable1993
        
        $2.13
        
        
        2003
        
        
        
        9,651
        
        
        9,6511994
        
        $3.53
        
        
        2004
        
        
        
        7,923
        
        
        7,9231995
        
        $4.54
        
        
        2005
        
        
        
        12,024
        
        
        12,0241996
        
        $7.12- $12.76
        
        
        2006
        
        
        
        551,870
        
        
        551,8701997
        
        $14.07- $22.22
        
        
        2007
        
        
        
        150,466
        
        
        150,4661998
        
        $22.67- $25.67
        
        
        2008
        
        
        
        149,332
        
        
        140,0501999
        
        $18.70- $21.14
        
        
        2009
        
        
        
        62,783
        
        
        41,5572000
        
        $16.00- $16.79
        
        
        2010
        
        
        
        411,551
        
        
        170,6442001
        
        $12.03- $15.20
        
        
        2011
        
        
        
        233,138
        
        
        52,5052002
        
        $8.14- $12.90
        
        
        2012
        
        
        
        230,530
        
        
        158,1061,819,268
        
        
        1,294,796




DIVIDEND REINVESTMENT PLAN
The Company has established a dividend reinvestment plan. Under the terms of
this plan, shareholders may, under certain conditions, apply their cash
dividends to the purchase of shares from treasury at a price equal to 95% of
the average market trading price of the shares.









---



##### 







11. CUMULATIVE TRANSLATION ADJUSTMENTS



The cumulative foreign currency translation adjustments account reflects the
net changes in the respective book values of the Companys investments in
self-sustaining foreign operations due to exchange rate fluctuations since the
respective dates of their acquisition or start-up. The changes in this account arise from changes in the Australian, New Zealand,
Irish, Euro, and United States currencies relative to the Canadian currency,
and changes in the Companys net investment in the book values of international
operations. Changes in this account were as follows:







2002
        
        
        2001$000
        
        
        $000Deferred loss, beginning of year
        
        
        69,017
        
        
        
        87,728Deferred foreign currency gain during the year
        
        
        (26,483
        )
        
        
        (11,511
        )Realization of translation loss due to distributions
        
        
        (1,000
        )
        
        
        (7,200
        )Deferred loss, end of year
        
        
        41,534
        
        
        
        69,017The balance of cumulative translation adjustments
at the end of the year represents net unrealized
losses (gains) as follows:2002
        
        
        
        2001$000
        
        
        
        $000Australian dollar
        
        
        8,120
        
        
        
        19,759New Zealand dollar
        
        
        40,266
        
        
        
        55,467Irish punt
        
        
        
        
        
        
        (932
        )Euro
        
        
        272
        
        
        
        United States dollar
        
        
        (7,124
        )
        
        
        (5,277
        )41,534
        
        
        
        69,017






---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...





12. INCOME TAXES



The Companys provision for income taxes reflects an effective income tax rate
which differs from the combined Canadian statutory rate as follows:







2002
        
        
        
        2001$000
        
        
        
        $000Income taxes at combined Canadian statutory rate of 38.7%
(2001  41.3%)
        
        
        11,661
        
        
        
        (16,547
        )Non-taxable portion of capital gains
        
        
        (17,049
        )
        
        
        (11,716
        )Non-deductible amortization expense
        
        
        6,766
        
        
        
        30,980Effect of valuation allowance on future tax assets
        
        
        3,090
        
        
        
        2,490Effect of foreign income tax rates differing
from Canadian income tax rates
        
        
        (1,924
        )
        
        
        (995
        )Effect of substantively enacted income tax
rate change on future tax balances
        
        
        
        
        
        
        (70,573
        )Large corporation tax
        
        
        3,250
        
        
        
        1,788Other
        
        
        1,314
        
        
        
        5,554Provision for (recovery of) income taxes
        
        
        7,108
        
        
        
        (59,019
        )An analysis of earnings (loss) before tax by jurisdiction follows:2002
        
        
        
        2001$000
        
        
        
        $000Canada
        
        
        9,463
        
        
        
        (64,960
        )Foreign
        
        
        20,671
        
        
        
        24,894Earnings (loss) before tax
        
        
        30,134
        
        
        
        (40,066
        )An analysis of the provision for (recovery of) current and future
income taxes by jurisdiction follows:2002
        
        
        
        2001$000
        
        
        
        $000Current income taxesCanada
        
        
        (2,047
        )
        
        
        30,859Foreign
        
        
        302
        
        
        
        203Net earnings (loss) before tax
        
        
        (1,745
        )
        
        
        38,262Future income taxesCanada
        
        
        8,703
        
        
        
        (94,819
        )Foreign
        
        
        150
        
        
        
        (2,462
        )8,853
        
        
        
        (97,281
        )Provision for (recovery of) income taxes
        
        
        7,108
        
        
        
        (59,019
        )








---



##### 







Significant components of the Companys future tax assets and liabilities are as follows:

August, 31,2002
        
        
        2001$000
        
        
        $000Future tax assetsNon-capital loss carryforwards
        
        
        107,909
        
        
        
        47,984Accounts payable and other accruals
        
        
        45,417
        
        
        
        63,192Pension and post retirement benefits
        
        
        
        
        
        
        5,660Less: Valuation allowance
        
        
        (61,439
        )
        
        
        (13,329
        )Total future tax assets
        
        
        91,887
        
        
        
        103,507Future tax liabilitiesTax depreciation in excess of book amortization
        
        
        56,407
        
        
        
        73,504Pension obligations
        
        
        14,823
        
        
        
        Intangible assets
        
        
        408,797
        
        
        
        413,126Other assets
        
        
        13,409
        
        
        
        24,626Total future tax liabilities
        
        
        493,436
        
        
        
        511,256Net future tax liability
        
        
        401,549
        
        
        
        407,749Net current future tax asset
        
        
        30,013
        
        
        
        33,243Net long term future tax liability
        
        
        431,562
        
        
        
        440,992




As at August 31, 2002 the Company had non capital loss carry forwards for
income tax purposes of $408,061,000, that expire as follows:2006  $2,010,000,
2007  $12,900,000, 2008  $63,919,000, 2009 
$128,934,000, thereafter  $200,298,000.

13. STATEMENTS OF CASH FLOWS

The following amounts comprise the net change in non-cash operating accounts
included in the statements of cash flows:






2002
        
        
        2001$000
        
        
        $000CASH GENERATED (UTILIZED) BY:Accounts receivable
        
        
        6,415
        
        
        
        55,986Broadcast rights
        
        
        (25,733
        )
        
        
        (55,395
        )Inventory
        
        
        12,342
        
        
        
        (7,342
        )Other current assets
        
        
        1,400
        
        
        
        (5,825
        )Other assets
        
        
        10,379
        
        
        
        25,121Accounts payable and accrued liabilities
        
        
        (54,347
        )
        
        
        (35,928
        )Income taxes payable
        
        
        (6,724
        )
        
        
        (49,125
        )Deferred revenue
        
        
        (18,620
        )
        
        
        5,046Film and program accounts payable
        
        
        19,334
        
        
        
        16,056(55,554
        )
        
        
        (51,406
        )The following amounts were paid on account of interest and income taxes:2002
        
        
        
        2001$000
        
        
        
        $000Interest
        
        
        261,265
        
        
        
        241,618Income taxes
        
        
        23,961
        
        
        
        73,796













---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...




14. RETIREMENT ASSETS AND OBLIGATIONS

Information on the Companys pension and post retirement benefit plans follows:

Pension Benefits
        
        
        Post Retirement Benefits2002
        
        
        2001
        
        
        2002
        
        
        2001$000
        
        
        $000
        
        
        $000
        
        
        $000Plan AssetsFair value  beginning of year
        
        
        220,346
        
        
        
        96,351
        
        
        
        
        
        
        
        Plan assets acquired
        
        
        8,163
        
        
        
        132,425
        
        
        
        
        
        
        
        Investment income
        
        
        3,739
        
        
        
        (2,444
        )
        
        
        
        
        
        
        Employer contributions
        
        
        3,699
        
        
        
        609
        
        
        
        400
        
        
        
        Employee contributions
        
        
        5,800
        
        
        
        4,475
        
        
        
        
        
        
        
        Benefits, refund of contributions
and administrative expenses
        
        
        (7,027
        )
        
        
        (11,070
        )
        
        
        (400
        )
        
        
        Fair value  end of year
        
        
        234,720
        
        
        
        220,346
        
        
        
        
        
        
        
        The valuation of the plan net assets is based on
market values with unrealized
gains and losses averaged over a five year periodPlan ObligationsAccrued benefit obligation  beginning of year
        
        
        226,361
        
        
        
        77,704
        
        
        
        35,121
        
        
        
        5,816Obligation acquired
        
        
        8,084
        
        
        
        132,425
        
        
        
        
        
        
        
        26,927Accrued interest on benefits
        
        
        18,252
        
        
        
        13,814
        
        
        
        2,503
        
        
        
        1,959Current service cost
        
        
        15,174
        
        
        
        10,586
        
        
        
        1,198
        
        
        
        419Past service costs
        
        
        11,868
        
        
        
        
        
        
        
        
        
        
        
        Benefits, refund of contributions
        
        
        (7,027
        )
        
        
        (10,499
        )
        
        
        (400
        )
        
        
        Experience loss
        
        
        4,900
        
        
        
        2,331
        
        
        
        2,744
        
        
        
        Accrued benefit obligation  end of year
        
        
        277,612
        
        
        
        226,361
        
        
        
        41,166
        
        
        
        35,121The Companys accrued benefit asset is determined as follows:Plan deficit
        
        
        (42,892
        )
        
        
        (6,015
        )
        
        
        (41,166
        )
        
        
        (35,121
        )Unamortized net actuarial loss
        
        
        41,662
        
        
        
        21,069
        
        
        
        2,752
        
        
        
        Unamortized transitional (asset) obligation
        
        
        (5,573
        )
        
        
        (5,029
        )
        
        
        4,938
        
        
        
        5,377Unamortized past service costs
        
        
        11,542
        
        
        
        
        
        
        
        
        
        
        
        Valuation allowance
        
        
        (916
        )
        
        
        (1,002
        )
        
        
        
        
        
        
        Accrued plan asset
        
        
        3,823
        
        
        
        9,023
        
        
        
        (33,476
        )
        
        
        (29,744
        )The valuation allowance represents the amount of surplus not
recognized on the Companys balance sheetThe Companys benefit expense is determined as follows:Current service cost
        
        
        15,174
        
        
        
        10,586
        
        
        
        1,198
        
        
        
        419Employee contributions
        
        
        (5,800
        )
        
        
        (4,475
        )
        
        
        
        
        
        
        Accrued interest on benefits
        
        
        18,252
        
        
        
        13,814
        
        
        
        2,503
        
        
        
        1,959Expected return on plan assets
        
        
        (19,174
        )
        
        
        (16,451
        )
        
        
        
        
        
        
        Amortization of transitional (asset) obligation
        
        
        (358
        )
        
        
        (358
        )
        
        
        439
        
        
        
        439Amortization of past service costs
        
        
        527
        
        
        
        
        
        
        
        
        
        
        
        Amortization of net experience losses
        
        
        57
        
        
        
        
        
        
        
        
        
        
        
        Changes in valuation allowance
        
        
        (86
        )
        
        
        (61
        )
        
        
        
        
        
        
        Benefit expense
        
        
        8,592
        
        
        
        3,055
        
        
        
        4,140
        
        
        
        2,817Employer contribution
to the defined contribution plan
        
        
        1,552
        
        
        
        463
        
        
        
        
        
        
        
        Total pension and post retirement benefit expense
        
        
        10,144
        
        
        
        3,518
        
        
        
        4,140
        
        
        
        2,817Significant actuarial assumptions in measuring the
Companys accrued benefit obligations are as follows:Discount rate
        
        
        6.75-7.25
        %
        
        
        7.25
        %
        
        
        7.25
        %
        
        
        7.00
        %Expected long-term rate of return
on pension plan assets
        
        
        7.00-7.25
        %
        
        
        7.25-8.00
        %
        
        
        7.00
        %
        
        
        7.00
        %Rate of compensation increase
        
        
        3.50-4.00
        %
        
        
        4.00
        %
        
        
        4.00
        %
        
        
        4.00
        %






---



##### 







15. FINANCIAL INSTRUMENTS

Financial instruments consist of the following:

2002
        
        
        2001Carrying Value
        
        
        Fair Value
        
        
        Carrying Value
        
        
        Fair Value$000
        
        
        $000
        
        
        $000
        
        
        $000Short term assets
        
        
        578,396
        
        
        
        578,396
        
        
        
        512,947
        
        
        
        512,947Other investments
        
        
        162,361
        
        
        
        209,515
        
        
        
        415,413
        
        
        
        410,838Short term liabilities
        
        
        629,679
        
        
        
        629,679
        
        
        
        591,016
        
        
        
        591,016Long term debt
        
        
        3,337,163
        
        
        
        3,281,163
        
        
        
        3,795,262
        
        
        
        3,701,198Other long term liabilities
        
        
        86,217
        
        
        
        86,217
        
        
        
        88,809
        
        
        
        88,809Unrealized net loss on interest rates swaps
        
        
        
        
        
        
        56,000
        
        
        
        
        
        
        
        94,064




The fair value of short-term assets and liabilities, which include cash and
short-term investments, accounts receivable, income taxes recoverable, and
other assets, bank loans and advances, accounts payable and accrued liabilities
and film and program accounts payable approximate their fair value due to the
short-term nature of these financial instruments. The fair value of other investments is primarily based on quoted market prices
for publicly traded securities, and the most recent purchase transactions and
agreements for non-listed securities. The fair value of long-term debt subject to floating interest rates
approximates the carrying value. The fair value of long-term debt, subject to
fixed interest rates, is estimated by discounting future cash flows, including
interest payments, using rates currently available for debt of similar terms
and maturity.


The fair values of other long-term liabilities, including
business combination restructuring accruals, and film and television program
accounts payable, approximates their carrying values. The fair values of unrealized net gains and losses on interest rate and
cross-currency swaps are based on the amounts at which they could be settled
based on estimates of market rates. CREDIT RISK The Company is exposed to credit risk, primarily in relation to accounts
receivable. Exposure to credit risk varies due to the concentration of
individual balances with large advertising agencies. The Company performs
regular credit assessments of its customers and provides allowances for
potentially uncollectable accounts receivable.
 INTEREST RATE RISK The Company manages its exposure to fluctuations in interest rates through the
use of interest rate and cross-currency interest rate swap agreements, more
fully described in note 8.















---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...





16. JOINTLY CONTROLLED ENTERPRISE

The following amounts included in the consolidated financial statements represent
the Companys proportionate interest in TV3 Ireland.

2002
        
        
        2001$000
        
        
        $000Balance sheetsAssetsCurrent assets
        
        
        9,329
        
        
        
        7,106Long term assets
        
        
        12,732
        
        
        
        12,80122,061
        
        
        
        19,907LiabilitiesCurrent liabilities
        
        
        32,906
        
        
        
        5,700Long term liabilities
        
        
        4,643
        
        
        
        29,48637,549
        
        
        
        35,186Statements of earningsRevenue
        
        
        25,643
        
        
        
        9,542Expenses
        
        
        24,630
        
        
        
        8,051Net earnings
        
        
        1,013
        
        
        
        1,491Statements of cash flowsCash generated (utilized) by:Operating activities
        
        
        (1,936
        )
        
        
        207Investing activities
        
        
        (130
        )
        
        
        (227
        )Financing activities
        
        
        2,903
        
        
        
        334Net increase in cash
        
        
        837
        
        
        
        314




17. COMMITMENTS AND CONTINGENCIES a) The Companys future minimum payments under the terms of its operating lease
commitments for the next five years are as follows: 2003
        
        
        26,216,9872004
        
        
        23,265,2072005
        
        
        20,926,7482006
        
        
        17,807,4622007
        
        
        15,553,883
 b) On March 5, 2001, a statement of claim was filed against the Company and
certain of the Companys subsidiaries by CBLs former minority interests
requesting, among other things, that their interests in CBL be purchased
without minority discount. In addition, the claim alleges the Company
wrongfully terminated certain agreements and acted in an oppressive and
prejudicial matter towards the plaintiffs. The lawsuit seeks damages in excess
of $345 million. The Company


believes the allegations are substantially without
merit and not likely to have a material adverse effect on its business,
financial condition
or results of operation. The Company intends to vigorously defend this lawsuit. c)The Company is involved in various legal matters arising in the ordinary
course of business. The resolution of these matters is not expected to have a
material adverse effect on the Companys financial position, results of
operations or cash flows. 18. EVENTS SUBSEQUENT TO AUGUST 31, 2002 In October 2002, Fireworks Entertainment closed a US$110 million stand-alone
credit facility with a syndicate of lenders. This facility was used to repay
existing Fireworks financing of US$26 million and will finance future growth.
The facility is a three-year revolving facility secured by all assets of
Fireworks, and bears interest at LIBOR plus 2.25% to 3.5%.








---



##### 









19. SEGMENTED INFORMATION The Company operates primarily within the publishing, online, broadcasting and
entertainment industries in Canada, New Zealand, Ireland and Australia.


Each segment reported below operates as a strategic business unit with separate
management. Segment performance is measured primarily on the basis of operating
profit. There are no significant inter-segment transactions. Segmented
information in Canadian dollars is as follows:




Publishing
        
        
        
        
        
        
        
        
        Corporateand online
        
        
        Broadcasting
        
        
        Entertainment
        
        
        and other
        
        
        ConsolidatedCanada
        
        
        Canada
        
        
        New Zealand
        
        
        Ireland
        
        
        CanadaTV
        
        
        Radio$000
        
        
        $000
        
        
        $000
        
        
        $000
        
        
        $000
        
        
        $000
        
        
        $000
        
        
        $000Revenue from external customers2002
        
        
        1,270,336
        
        
        
        691,888
        
        
        
        69,079
        
        
        
        60,724
        
        
        
        28,317
        
        
        
        152,439
        
        
        
        
        
        
        
        2,272,7832001
        
        
        919,923
        
        
        
        701,027
        
        
        
        58,436
        
        
        
        56,864
        
        
        
        31,056
        
        
        
        177,469
        
        
        
        
        
        
        
        1,944,775Operating profit (loss) before amortization2002
        
        
        288,028
        
        
        
        191,092
        
        
        
        (1,938
        )
        
        
        16,361
        
        
        
        7,654
        
        
        
        (743
        )
        
        
        (30,148
        )
        
        
        470,3062001
        
        
        207,804
        
        
        
        226,458
        
        
        
        (8,939
        )
        
        
        14,301
        
        
        
        2,748
        
        
        
        13,551
        
        
        
        (14,852
        )
        
        
        441,071Amortization of intangibles and goodwill2002
        
        
        17,500
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        17,5002001
        
        
        50,504
        
        
        
        33,645
        
        
        
        2,246
        
        
        
        2,834
        
        
        
        61
        
        
        
        840
        
        
        
        29
        
        
        
        90,159Amortization of capital assets and other2002
        
        
        44,986
        
        
        
        25,924
        
        
        
        2,574
        
        
        
        2,086
        
        
        
        1,869
        
        
        
        505
        
        
        
        3,380
        
        
        
        81,3242001
        
        
        32,649
        
        
        
        24,195
        
        
        
        2,731
        
        
        
        1,919
        
        
        
        3,046
        
        
        
        386
        
        
        
        879
        
        
        
        65,805Financing expenses (revenue)2002
        
        
        238,521
        
        
        
        125,170
        
        
        
        261
        
        
        
        188
        
        
        
        1,728
        
        
        
        15,933
        
        
        
        (5,169
        )
        
        
        376,6322001
        
        
        227,464
        
        
        
        113,751
        
        
        
        104
        
        
        
        234
        
        
        
        3,374
        
        
        
        16,618
        
        
        
        (4,790
        )
        
        
        356,755Investment gains net of write downs
and dividend income2002
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        35,284
        
        
        
        35,2842001
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        31,582
        
        
        
        31,582Earnings (loss) before taxes2002
        
        
        (12,979
        )
        
        
        31,898
        
        
        
        (4,898
        )
        
        
        14,087
        
        
        
        3,809
        
        
        
        (17,181
        )
        
        
        15,398
        
        
        
        30,1342001
        
        
        (100,046
        )
        
        
        42,536
        
        
        
        (14,298
        )
        
        
        9,314
        
        
        
        (3,733
        )
        
        
        (4,292
        )
        
        
        30,453
        
        
        
        (40,066
        )Capital expenditures2002
        
        
        17,063
        
        
        
        14,392
        
        
        
        1,518
        
        
        
        1,207
        
        
        
        479
        
        
        
        396
        
        
        
        18,283
        
        
        
        53,3382001
        
        
        21,932
        
        
        
        16,465
        
        
        
        2,163
        
        
        
        1,090
        
        
        
        86
        
        
        
        1,481
        
        
        
        6,424
        
        
        
        49,641Property, plant and equipment2002
        
        
        490,932
        
        
        
        122,956
        
        
        
        22,635
        
        
        
        8,481
        
        
        
        4,183
        
        
        
        2,245
        
        
        
        27,792
        
        
        
        679,2242001
        
        
        523,381
        
        
        
        130,211
        
        
        
        22,099
        
        
        
        8,781
        
        
        
        4,288
        
        
        
        2,312
        
        
        
        16,739
        
        
        
        707,811Intangibles2002
        
        
        478,439
        
        
        
        491,157
        
        
        
        47,657
        
        
        
        75,333
        
        
        
        2,219
        
        
        
        
        
        
        
        1,653
        
        
        
        1,096,4582001
        
        
        450,239
        
        
        
        513,807
        
        
        
        43,851
        
        
        
        70,020
        
        
        
        1,330
        
        
        
        
        
        
        
        1,165
        
        
        
        1,080,412Goodwill2002
        
        
        1,920,333
        
        
        
        604,752
        
        
        
        19,613
        
        
        
        54,323
        
        
        
        1,223
        
        
        
        30,855
        
        
        
        
        
        
        
        2,631,0992001
        
        
        2,060,559
        
        
        
        662,733
        
        
        
        19,613
        
        
        
        53,039
        
        
        
        1,223
        
        
        
        30,855
        
        
        
        
        
        
        
        2,828,022Total assets2002
        
        
        3,219,846
        
        
        
        1,588,000
        
        
        
        141,677
        
        
        
        150,176
        
        
        
        21,530
        
        
        
        425,146
        
        
        
        174,753
        
        
        
        5,721,1282001
        
        
        3,360,423
        
        
        
        1,721,356
        
        
        
        133,018
        
        
        
        141,761
        
        
        
        21,950
        
        
        
        518,168
        
        
        
        402,544
        
        
        
        6,299,220




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...





Publishing
        
        
        
        
        
        
        
        
        Corporateand online
        
        
        Broadcasting
        
        
        Entertainment
        
        
        and other
        
        
        ConsolidatedCanada
        
        
        Canada
        
        
        New Zealand
        
        
        Ireland
        
        
        CanadaTV
        
        
        Radio$000
        
        
        $000
        
        
        $000
        
        
        $000
        
        
        $000
        
        
        $000
        
        
        $000
        
        
        $000Reconciliation of net earnings before taxes to net earnings  year ended August 31, 2002Earnings (loss) before income tax
        
        
        (12,979
        )
        
        
        31,898
        
        
        
        (4,898
        )
        
        
        14,087
        
        
        
        3,809
        
        
        
        (17,181
        )
        
        
        15,398
        
        
        
        30,134(Provision for) recovery of income taxes
        
        
        (8,731
        )
        
        
        (6,595
        )
        
        
        42
        
        
        
        94
        
        
        
        (612
        )
        
        
        (1,125
        )
        
        
        9,819
        
        
        
        (7,108
        )Minority interests
        
        
        4,330
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        4,330Interest in loss of Network TEN1
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (11,815
        )
        
        
        (11,815
        )Interest in loss of other equity
accounted affiliates
        
        
        
        
        
        
        (1,523
        )
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (1,523
        )Realized translation adjustments
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (1,000
        )
        
        
        (1,000
        )Net earnings (loss) for the year
        
        
        (17,380
        )
        
        
        23,780
        
        
        
        (4,856
        )
        
        
        14,181
        
        
        
        3,197
        
        
        
        (18,306
        )
        
        
        12,402
        
        
        
        13,018Reconciliation of net earnings before taxes to net earnings  year ended August 31, 2001Earnings (loss) before income tax
        
        
        (100,046
        )
        
        
        42,536
        
        
        
        (14,298
        )
        
        
        9,314
        
        
        
        (3,733
        )
        
        
        (4,292
        )
        
        
        30,453
        
        
        
        (40,066
        )(Provision for) recovery of income taxes
        
        
        18,304
        
        
        
        35,099
        
        
        
        2,821
        
        
        
        (614
        )
        
        
        269
        
        
        
        (73
        )
        
        
        3,213
        
        
        
        59,019Minority interests
        
        
        
        
        
        
        (2,531
        )
        
        
        
        
        
        
        (665
        )
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (3,196
        )Interest in earnings of Network TEN1
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        52,567
        
        
        
        52,567Interest in earnings (loss) of other equity
accounted affiliates
        
        
        (16,385
        )
        
        
        1,894
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (14,491
        )Realized translation adjustments
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (7,200
        )
        
        
        (7,200
        )Net earnings (loss) for the year
        
        
        (98,127
        )
        
        
        76,998
        
        
        
        (11,477
        )
        
        
        8,035
        
        
        
        (3,464
        )
        
        
        (4,365
        )
        
        
        79,033
        
        
        
        46,633


|1 |  | Selected financial information for Network TEN is presented in note 3.
|- |  | ----------------------------------------------------------------------



---



##### 









20. UNITED STATES ACCOUNTING PRINCIPLES These consolidated financial statements have been prepared in accordance with
Canadian GAAP. In certain aspects GAAP as applied in the United States
(U.S.) differs from Canadian GAAP. PRINCIPAL DIFFERENCES AFFECTING THE COMPANY COMPREHENSIVE INCOME
Comprehensive income, defined as all changes in equity other than those
resulting from investments by owners and distributions to owners, must be
reported under U.S. GAAP. There is no similar requirement under Canadian GAAP. PRE-OPERATING COSTS
In the U.S., pre-operating costs are expensed in the period incurred. In
accordance with Canadian GAAP, the Company defers pre-operating costs until
commencement of commercial operations and amortizes the deferred costs over a
period of five years. FOREIGN CURRENCY TRANSLATION
In the U.S., distributions from self-sustaining foreign operations do not
result in a realization of the cumulative translation adjustments account.
Realization of such foreign currency translation adjustments occur only upon
the sale of all or a part of the investment giving rise to the translation
adjustments. In accordance with Canadian GAAP, reductions in the net
investment in self-sustaining foreign operations result in a proportionate
reduction in the cumulative foreign currency translation adjustment accounts. PROGRAMMING COMMITMENTS
Under Canadian GAAP, certain programming commitments related to an acquisition
imposed by regulatory requirements were accrued in the purchase equation. Under
U.S. GAAP, these costs are expensed as incurred. EQUITY ACCOUNTED AFFILIATES
Under U.S. GAAP, investments placed in trust due to regulatory requirements
must be accounted for at cost. Under Canadian GAAP, these investments are
accounted as cost, equity or consolidated investments based on the level of
influence that the investor has over the investment. INVESTMENT IN WIC ON AN EQUITY BASIS
Under Canadian GAAP, the investment in WIC was accounted for using the equity
method during the period that this investment was held in trust pending
completion of the regulatory approval process. Under US GAAP, the investment
was accounted for on a cost basis then, as a result of receiving approval to
complete the purchase of WIC, the Company changed its method of accounting for
WIC to the equity method. The change in accounting policy was retroactively
applied as required under APB Opinion No. 18, The Equity Method of Accounting
for Investments in Common Stock. Effective July 6, 2000, the Company
consolidated its investment in WIC for both Canadian and US GAAP purposes.


IMPAIRMENT OF LONG-LIVED ASSETS
Under U.S. GAAP, the Company recognizes an impairment loss on property,
equipment and broadcast licences and circulation if the undiscounted expected
future cash flows are less than the carrying value. The impairment loss
recognized would be an amount equal to the difference between the carrying
amount and the fair value of the assets. Under Canadian GAAP, the impairment
loss would be equal to the difference between the carrying amount and the
undiscounted expected future cash flows. Under U.S. GAAP, goodwill associated with assets acquired in a purchase
business combination is included in impairment evaluations of other long-lived
assets when events or circumstances exist that indicate the carrying value of
those assets may not be recoverable. In addition, impairments of goodwill would
be recognized when a review indicates that the goodwill will not be
recoverable, as determined based on projected income and cash flows on an
undiscounted basis from the underlying operations. In such circumstances, the
goodwill will be reduced to the estimated recoverable amount. Under Canadian
GAAP, prior to the acquisition of WIC and Southam Publications, the Company has
not had any significant goodwill arising on its acquisitions. The Company regularly assesses the carrying value of its assets and has
determined that there is no impairment in long-lived assets at this time. INVESTMENT IN MARKETABLE SECURITIES
In the U.S., investment assets classified as available for sale are carried
at market, and unrealized temporary gains and losses are included, net of tax,
in accumulated comprehensive income. In accordance with Canadian GAAP, the
Company carries its investment in marketable securities at lower of cost and
net realizable value. A provision for loss in value of marketable securities is
made when a decline in market value is considered other than temporary. EFFECT OF TAX RATE CHANGES
Under U.S. GAAP, changes in tax rates are applied to reduce or increase future
income tax assets or liabilities when the proposed tax rate change has received
legislative approval. Under Canadian GAAP, tax rate changes are applied when
the change in tax rate is considered substantively enacted. CASH FLOW STATEMENT
The Canadian accounting standard for the preparation of cash flow statements is
consistent with the guidance provided under IAS 7, and accordingly, the cash
flow statements presented herein have not been reconciled to U.S. GAAP under
the accommodation provided by the Securities and Exchange Commission of the
United States (SEC).






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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...







PROPORTIONATE CONSOLIDATION
In the U.S., investments in jointly controlled entities are accounted as equity
investments. Canadian GAAP requires the accounts of jointly controlled
enterprises to be proportionately consolidated. This accounting difference
applies to the Companys investment in TV3 Ireland. ACCOUNTING FOR DERIVATIVE INSTRUMENTSAND HEDGING ACTIVITIES
Under U.S. GAAP, entities are required to recognize all derivative instruments
as either assets or liabilities in the balance sheet, and measure those
instruments at fair value. The changes in fair value of the derivative are
included either in the statement of earnings or other comprehensive income,
depending on the nature of the instrument. Under Canadian GAAP, hedging
derivatives are eligible for hedge accounting if certain criteria are met.
Non-hedging derivatives are recognized at their fair value as either assets or
liabilities. CUMULATIVE EFFECT OF THE PROSPECTIVE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
Under U.S. GAAP, the transitional impairment of goodwill related to Network TEN
is recorded as a charge to net earnings in accordance with Statement of
Financial Accounting Standard No. 142, Goodwill and Other
Intangibles, whereas
under Canadian GAAP it is recorded as a charge to opening retained earnings.
The principles and methods for computing impairment in accordance with FAS 142
are similar to those prescribed under Canadian GAAP, as described in notes 1
and 3. DEBT CLASSIFICATION
Effective for 2002, in accordance with new requirements under Canadian GAAP,
which are consistent with US GAAP, the Company has classified all debt maturing
in the following twelve months as current if refinancing was not in place.
Previously under Canadian GAAP, debt which the Company intended to refinance
was classified as long-term. For 2001, under US GAAP this debt was
reclassified as current. INTEGRATION COSTS RELATED TO CANWEST PUBLICATIONS
Under Canadian GAAP certain integration costs related to the CanWest
Publications acquisition were accrued in the purchase equation. Under US GAAP,
these costs are expensed as incurred.


NEW ACCOUNTING STANDARDS
a) Accounting for asset retirement obligations
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 143, Accounting for Asset Retirement
Obligations. FAS 143 requires that an asset retirement obligation be recognized
as a liability, measured at fair value, in the period in which the obligation
is incurred or a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long lived assets and amortized to expense over the useful life of the asset.
FAS 143 is effective for financial statements issued for fiscal years beginning
after June 15, 2002. The Company is currently considering the impact of FAS
143. b) Accounting for the impairment or disposal of long-lived assets
In fiscal 2003, the Company will adopt new standards approved by the Financial
Accounting Standards Board, Statement of Financial Accounting Standard No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. The Standard
requires that an impairment loss should be recognized if the carrying amount of
a long-lived asset is not recoverable and exceeds its fair value for assets in
use. Long-lived assets classified as held for sale should be measured at the
lower of their carrying amount or fair value less cost to sell. The standard
also changes the criteria for classification of operating results as
discontinued operations. FAS 144 is effective for financial statements
prepared beginning on or after December 15, 2001. The Company is currently
considering the impact of FAS 144. c) Technical corrections
In April 2002, Statement of Financial Accounting Standard No. 145 was issued
rescinding the requirement to include gains and losses on the settlement of
debt as extraordinary items. FAS 145 is applicable for fiscal years beginning
on or after May 15, 2002. The standard has been adopted by the Company with no
impact. d) Accounting for costs associated with exit or disposal activities
In June, 2002, Statement of Financial Accounting Standard No. 146 was issued.
The standard requires that liabilities for exit or disposal activity costs be
recognized and measured at fair value when the liability is incurred. This
standard is effective for disposal activities initiated after December 31,
2002.






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##### 





RECONCILIATION TO US GAAP
Consolidated Statements of Earnings
The following is a reconciliation of net earnings reflecting the
differences between Canadian and U.S. GAAP:

2002
        
        
        2001$000
        
        
        $000Net earnings in accordance with Canadian GAAP
        
        
        13,018
        
        
        
        46,633Pre-operating costs net of tax of $1,331 (2001  ($1,175))
        
        
        (100
        )
        
        
        3,337Realization of cumulative translation adjustments net of tax of nil
        
        
        1,000
        
        
        
        7,200Programming costs imposed by regulatory requirement
net of tax of $2,438 (2001  $774)
        
        
        (3,232
        )
        
        
        (1,026
        )Integration costs related to CanWest Publications
net of tax of $827
        
        
        (1,470
        )
        
        
        Reversal of amortization of goodwill related to future
programming costs imposed by regulatory requirement
on business combination net of tax of nil
        
        
        
        
        
        
        938Equity accounted affiliates in trust net of tax of nil
        
        
        3,375
        
        
        
        (3,375
        )Investment in WIC on an equity basis,
net of tax of nil (2001  $2,758)
        
        
        
        
        
        
        (4,138
        )Amortization of WIC goodwill adjustment resulting from
retroactive equity accounting of WIC upon regulatory
approval, net of tax of nil
        
        
        
        
        
        
        (1,572
        )Net earnings in accordance with U.S. GAAP before
cumulative effect of adoption of new accounting policies
        
        
        12,591
        
        
        
        47,997Cumulative effect of adoption of new accounting policies
net of tax of $2,500
        
        
        (170,695
        )
        
        
        Net earnings (loss) in accordance with U.S. GAAP
        
        
        (158,104
        )
        
        
        47,997Amortization of goodwill and indefinite life intangibles,
net of tax of ($11,975)
        
        
        
        
        
        
        64,972Amortization of goodwill and indefinite life intangibles
in equity accounted affiliates, net tax of nil
        
        
        
        
        
        
        6,211Net earnings (loss) in accordance with U.S. GAAP adjusted
to exclude amortization expense recognized in 2001
        
        
        (158,104
        )
        
        
        119,180Earnings per share:Net earnings before cumulative effect of adoption of
new accounting policies
 Basic
        
        
        $0.07
        
        
        
        $0.28Diluted
        
        
        $0.07
        
        
        
        $0.28Net
earnings (loss)
 Basic
        
        
        ($0.89
        )
        
        
        $0.28Diluted
        
        
        ($0.89
        )
        
        
        $0.28Adjusted
net earnings (loss)
 Basic
        
        
        ($0.89
        )
        
        
        $0.70Diluted
        
        
        ($0.89
        )
        
        
        $0.69






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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...





STATEMENTS OF COMPREHENSIVE INCOME

Comprehensive income (loss)  current periods:

2002
        
        
        2001$000
        
        
        $000Net earnings (loss) in accordance with U.S. GAAP
        
        
        (158,104
        )
        
        
        47,997Other comprehensive income, net of tax:Foreign currency translation gain
        
        
        26,483
        
        
        
        11,511Unrealized gains (losses) on securities, available for sale,
net of tax of nil (2001  $5,755)
        
        

31,387
        
        
        
        (73,178
        )Realization of prior years unrealized (gains) losses
on sale / write-down of securities available for sale,
net of tax of nil (2001  $486)
        
        
        60,000
        
        
        
        (987
        )91,387
        
        
        
        (74,165
        )Unrealized gains (losses) on interest rate and cross currency
interest rate swaps, net of tax of ($16,748)
(2001  $41,388),
        
        
        21,316
        
        
        
        (52,676
        )Less: Reclassification of foreign currency translation
gains on US denominated debt to statement
of earnings, net of tax of $3,478 (2001  ($404))
        
        
        (4,427
        )
        
        
        51516,889
        
        
        
        (52,161
        )134,759
        
        
        
        (114,815
        )Comprehensive income
        
        
        (23,345
        )
        
        
        (66,818
        )


COMPREHENSIVE INCOME (LOSS)  ACCUMULATED BALANCES:

Foreign currency
        
        
        Unrealized gains on
        
        
        Unrealized gainstranslation
        
        
        securities
        
        
        (losses) on swaps
        
        
        TotalBalance, August 31, 2000
        
        
        (85,958
        )
        
        
        32,307
        
        
        
        
        
        
        
        (53,651
        )Change during 2001
        
        
        11,511
        
        
        
        (74,165
        )
        
        
        (52,161
        )
        
        
        (114,815
        )Balance, August 31, 2001
        
        
        (74,447
        )
        
        
        (41,858
        )
        
        
        (52,161
        )
        
        
        (168,466
        )Change during 2002
        
        
        26,483
        
        
        
        91,387
        
        
        
        16,889
        
        
        
        134,759Balance,
August 31, 2002
        
        
        (47,964
        )
        
        
        49,529
        
        
        
        (35,272
        )
        
        
        (33,707
        )






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##### 







CONSOLIDATED BALANCE SHEETS

Balance sheet captions restated to reflect the above items are
presented below:

2002
        
        
        2001$000
        
        
        $000ASSETSCurrent assets
        
        
        683,677
        
        
        
        640,149Investment in Network TEN
        
        
        4,494
        
        
        
        107,210Property, plant and equipment
        
        
        675,041
        
        
        
        687,811Intangibles and goodwill
        
        
        3,743,404
        
        
        
        3,946,499Other investments
        
        
        196,253
        
        
        
        370,180Other assets
        
        
        407,080
        
        
        
        476,0085,709,949
        
        
        
        6,227,857LIABILITIESCurrent liabilities
        
        
        621,609
        
        
        
        729,624Long term debt
        
        
        3,339,507
        
        
        
        3,732,710Other liabilities
        
        
        115,160
        
        
        
        147,343Future income taxes
        
        
        416,266
        
        
        
        377,5374,492,542
        
        
        
        4,987,214SHAREHOLDERS EQUITYCapital stock
        
        
        896,422
        
        
        
        896,313Contributed surplus
        
        
        3,647
        
        
        
        3,647Retained earnings
        
        
        351,045
        
        
        
        509,149Accumulated other comprehensive income (loss)
        
        
        (33,707
        )
        
        
        (168,466
        )1,217,407
        
        
        
        1,240,6435,709,949
        
        
        
        6,227,857


A reconciliation of shareholders equity reflecting the differences between Canadian and U.S. GAAP is set out below:

2002
        
        
        2001$000
        
        
        $000Shareholders equity in accordance with Canadian GAAP
        
        
        1,175,911
        
        
        
        1,305,996Adjustments relating to pre-operating costs, net of tax
of $3,608 (2001  $2,277)
        
        
        (6,473
        )
        
        
        (6,373
        )Adjustment to goodwill resulting from retroactive equity
accounting of WIC upon regulatory approval net of tax of nil
        
        
        38,503
        
        
        
        38,503Programming costs imposed by regulatory requirement on
business combination net of tax of $3,212 (2001  $774)
        
        
        (4,258
        )
        
        
        (1,026
        )Integration costs related to CanWest Publications
net of tax of $827
        
        
        (1,470
        )
        
        
        Reversal of amortization of goodwill related to future
programming costs imposed by regulatory requirement
on business combination net of tax of nil
        
        
        938
        
        
        
        938Adjustment to reflect losses on interest rate and cross currency
swaps net of tax of $24,640 (2001  $41,388)
        
        
        (31,360
        )
        
        
        (52,676
        )Foreign exchange gain on US$denominated debt net of tax
of $3,074 (2001  ($404))
        
        
        (3,913
        )
        
        
        514Equity accounted affiliates in trust net of tax of nil
        
        
        
        
        
        
        (3,375
        )Unrealized gain (loss) on other investments net of tax of nil
        
        
        49,529
        
        
        
        (41,858
        )Shareholders equity in accordance with U.S. GAAP
        
        
        1,217,407
        
        
        
        1,240,643






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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...





OTHER

The following amounts are included in accounts receivable:

2002
        
        
        2001$000
        
        
        $000Allowance for doubtful accounts
        
        
        14,800
        
        
        
        14,500The following amounts are included in operating expenses:2002
        
        
        
        2001$000
        
        
        
        $000Bad debt expense
        
        
        5,700
        
        
        
        7,800Rent expense
        
        
        17,300
        
        
        
        12,700The following amounts are included in accrued liabilities:2002
        
        
        
        2001$000
        
        
        
        $000Accrued salaries
        
        
        63,000
        
        
        
        57,000


Amortization expense related to existing finite life intangibles will be $17.5
million per year to 2005, and $8.8 million and $1.5 million in 2006 and 2007
respectively.