Exhibit 99.2



DHX Media Ltd.



Consolidated Financial Statements

June 30, 2016 and 2015

(expressed in thousands of Canadian dollars)











September 28, 2016



Management’s Responsibility for Financial Reporting



The accompanying consolidated financial statements of DHX Media
Ltd. (the “Company”) are the responsibility of management and have been approved by the Audit Committee of the
Board of Directors (the “Board”). The Board is responsible for ensuring that management fulfills its responsibilities
for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board
carries out this responsibility through its Audit Committee. The Audit Committee reviews the Company’s consolidated financial
statements and recommends their approval by the Board.



The Audit Committee is appointed by the Board and all of its members
are independent directors. It meets with the Company’s management and reviews internal control and financial reporting matters
to ensure that management is properly discharging its responsibilities before submitting the consolidated financial statements
to the Board for approval.



The consolidated financial statements have been prepared by management
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. When
alternative methods of accounting exist, management has chosen those it deems most appropriate in the circumstances. The consolidated
financial statements include amounts based on informed judgments and estimates of the expected effects of current events and transactions
with appropriate consideration to materiality. In addition, in preparing the consolidated financial statements, management must
make determinations as to the relevancy of information to be included, and make estimates and assumptions that affect reported
information. Actual results in the future may differ materially from our present assessment of this information because future
events and circumstances may not occur as expected.



PricewaterhouseCoopers LLP, appointed as the Company's auditors
by the shareholders, has audited these consolidated financial statements and their report follows.



|(signed) “Dana Landry”  | (signed) “Keith Abriel”
|----------------------- | -----------------------
|Chief Executive Officer | Chief Financial Officer
|Halifax, Nova Scotia    | Halifax, Nova Scotia   



















September 28, 2016



Independent Auditor’s Report



To the Shareholders of

DHX Media Ltd.



We have audited the accompanying consolidated financial statements
of DHX Media Ltd. and its subsidiaries, which comprise the consolidated balance sheets as at June 30, 2016 and June 30, 2015 and
the consolidated statements of changes in equity, income, comprehensive income and cash flows for the years then ended, and the
related notes, which comprise a summary of significant accounting policies and other explanatory information.



Management’s responsibility for the consolidated
financial statements

Management is responsible for the preparation and fair presentation
of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.



Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.



An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the consolidated financial statements.



We believe that the audit evidence we have
obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.



Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of DHX Media Ltd. and its subsidiaries as at June 30, 2016 and June 30,
2015 and their financial performance and their cash flows for the years then ended in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board.



(signed) “PricewaterhouseCoopers LLP”



Chartered Professional Accountants

Halifax, Nova Scotia







PricewaterhouseCoopers LLP

1601 Lower Water Street, Suite 400, Halifax, Nova Scotia
Canada B3J 3P6 www.pwc.ca/com

T: +1 902 491 7400, F: +1 902 422 1166



“PwC” refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership.











|DHX Media Ltd.                              
|--------------------------------------------
|Consolidated Balance Sheet                  
|As at June 30, 2016 and 2015                
|(expressed in thousands of Canadian dollars)



|                                                                                 |  | June 30, |         |  | June 30, | 
|-------------------------------------------------------------------------------- |  | -------- | ------- |  | -------- | 
|                                                                                 |  | 2016     |         |  | 2015     | 
|                                                                                 |  | $        |         |  | $        | 
|Assets                                                                           |  |          |         |  |          | 
|                                                                                 |  |          |         |  |          | 
|Current assets                                                                   |  |          |         |  |          | 
|                                                                                 |  |          |         |  |          | 
|Cash and cash equivalents                                                        |  |          | 80,446  |  |          | 
|Amounts receivable (note 6)                                                      |  |          | 184,292 |  |          | 
|Prepaid expenses and other                                                       |  |          | 7,779   |  |          | 
|Investment in film and television programs (note 7)                              |  |          | 239,752 |  |          | 
|                                                                                 |  |          |         |  |          | 
|                                                                                 |  |          | 512,269 |  |          | 
|                                                                                 |  |          |         |  |          | 
|Long-term amounts receivable (note 6)                                            |  |          | 20,753  |  |          | 
|Deferred financing fees                                                          |  |          | 526     |  |          | 
|Property and equipment (note 8)                                                  |  |          | 17,683  |  |          | 
|Intangible assets (note 9)                                                       |  |          | 144,610 |  |          | 
|Goodwill (note 10)                                                               |  |          | 205,342 |  |          | 
|                                                                                 |  |          |         |  |          | 
|                                                                                 |  |          | 901,183 |  |          | 
|Liabilities                                                                      |  |          |         |  |          | 
|                                                                                 |  |          |         |  |          | 
|Current liabilities                                                              |  |          |         |  |          | 
|                                                                                 |  |          |         |  |          | 
|Accounts payable and accrued liabilities (note 7)                                |  |          | 128,444 |  |          | 
|Deferred revenue                                                                 |  |          | 27,601  |  |          | 
|Interim production financing (note 11)                                           |  |          | 92,003  |  |          | 
|Current portion of long-term debt and obligations under finance leases (note 11) |  |          | 11,567  |  |          | 
|                                                                                 |  |          |         |  |          | 
|                                                                                 |  |          | 259,615 |  |          | 
|                                                                                 |  |          |         |  |          | 
|Long-term debt and obligations under finance leases (note 11)                    |  |          | 280,506 |  |          | 
|Long-term deferred revenue                                                       |  |          | 4       |  |          | 
|Other liabilities                                                                |  |          | 15,010  |  |          | 
|Deferred income taxes (note 14)                                                  |  |          | 9,213   |  |          | 
|                                                                                 |  |          |         |  |          | 
|                                                                                 |  |          | 564,348 |  |          | 
|                                                                                 |  |          |         |  |          | 
|Shareholders’ Equity                                                             |  |          | 336,835 |  |          | 
|                                                                                 |  |          |         |  |          | 
|                                                                                 |  |          | 901,183 |  |          | 
|                                                                                 |  |          |         |  |          | 
|Commitments and contingencies (note
    18)                                      |  |          |         |  |          | 



The accompanying notes form an integral part of these consolidated
financial statements.











|DHX Media Ltd.                              
|--------------------------------------------
|Consolidated Statement of Changes in Equity 
|For the years ended June 30, 2016 and 2015  
|(expressed in thousands of Canadian dollars)



|                                                                        |  | Common shares $ |         |   | Contributed surplus $ |  |        | Accumulated other comprehensive
    loss $ |  |  | Retained earnings $ |   |  | Total $ |       
|----------------------------------------------------------------------- |  | --------------- | ------- | - | --------------------- |  | ------ | ------------------------------------------ |  |  | ------------------- | - |  | ------- | ------
|                                                                        |  |                 |         |   |                       |  |        |                                            |  |  |                     |   |  |         |       
|Balance
    - June 30, 2014                                             |  |                 | 207,227 |   |                       |  | 12,486 |                                            |  |  | (1,203              | ) |  |         | 4,839 
|Net income for the year                                                 |  |                 | —       |   |                       |  | —      |                                            |  |  | —                   |   |  |         | 19,533
|Other
    comprehensive loss for the year                               |  |                 | —       |   |                       |  | —      |                                            |  |  | (7,152              | ) |  |         | —     
|Comprehensive income for
    the year                                   |  |                 | —       |   |                       |  | —      |                                            |  |  | (7,152              | ) |  |         | 19,533
|Shares issued pursuant to
    the employee share purchase plan ("ESPP") |  |                 | 173     |   |                       |  | —      |                                            |  |  | —                   |   |  |         | —     
|Share issue costs, net of
    tax                                       |  |                 | (136    | ) |                       |  | —      |                                            |  |  | —                   |   |  |         | —     
|Shares issued for Nerd Corps
    acquisition (note 5(i))                |  |                 | 26,075  |   |                       |  | —      |                                            |  |  | —                   |   |  |         | —     
|Dividends reinvested and
    paid                                       |  |                 | 123     |   |                       |  | —      |                                            |  |  | —                   |   |  |         | (6,576
|Share-based compensation                                                |  |                 | —       |   |                       |  | 4,254  |                                            |  |  | —                   |   |  |         | —     
|Stock
    options exercised                                             |  |                 | 3,295   |   |                       |  | (984   | )                                          |  |  | —                   |   |  |         | —     
|Balance
    - June 30, 2015                                             |  |                 | 236,757 |   |                       |  | 15,756 |                                            |  |  | (8,355              | ) |  |         | 17,796
|Net income for the year                                                 |  |                 | —       |   |                       |  | —      |                                            |  |  | —                   |   |  |         | 27,668
|Other
    comprehensive loss for the year                               |  |                 | —       |   |                       |  | —      |                                            |  |  | (11,931             | ) |  |         | —     
|Comprehensive income for
    the year                                   |  |                 | —       |   |                       |  | —      |                                            |  |  | (11,931             | ) |  |         | 27,668
|Shares issued pursuant to
    the ESPP                                  |  |                 | 264     |   |                       |  | —      |                                            |  |  | —                   |   |  |         | —     
|Normal course issuer bid
    ("NCIB") shares repurchased and cancelled  |  |                 | (1,265  | ) |                       |  | —      |                                            |  |  | —                   |   |  |         | (3,775
|Stock options exercised                                                 |  |                 | 3,995   |   |                       |  | (1,249 | )                                          |  |  | —                   |   |  |         | —     
|Dividends reinvested and
    paid                                       |  |                 | 597     |   |                       |  | —      |                                            |  |  | —                   |   |  |         | (7,884
|Share-based compensation                                                |  |                 | —       |   |                       |  | 5,981  |                                            |  |  | —                   |   |  |         | —     
|Issued
    for cash consideration, net of costs and tax effect          |  |                 | 62,480  |   |                       |  | —      |                                            |  |  | —                   |   |  |         | —     
|Balance
    - June 30, 2016                                             |  |                 | 302,828 |   |                       |  | 20,488 |                                            |  |  | (20,286             | ) |  |         | 33,805



The accompanying notes form an integral part of these consolidated
financial statements.











|DHX Media Ltd.                                                            
|--------------------------------------------------------------------------
|Consolidated Statement of Income                                          
|For the years ended June 30, 2016 and 2015                                
|(expressed in thousands of Canadian dollars, except for amounts per share)



|                                                                    |  | June 30, 2016 |         |   | June 30, 2015 | 
|------------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | 
|                                                                    |  | $             |         |   | $             | 
|Revenues
    (note 22)                                              |  |               | 304,817 |   |               | 
|                                                                    |  |               |         |   |               | 
|Expenses (note
    16)                                              |  |               |         |   |               | 
|Direct production costs and expense of film and television produced |  |               | 144,376 |   |               | 
|Acquisition costs                                                   |  |               | —       |   |               | 
|Amortization of property and equipment and intangible assets        |  |               | 14,523  |   |               | 
|Development expenses and other                                      |  |               | 5,950   |   |               | 
|Tangible benefit obligation expense                                 |  |               | —       |   |               | 
|Write-down of investment in film and television programs            |  |               | 1,750   |   |               | 
|Selling, general and administrative                                 |  |               | 75,614  |   |               | 
|Finance expense (note 15)                                           |  |               | 30,153  |   |               | 
|Finance income (note 15)                                            |  |               | (338    | ) |               | 
|                                                                    |  |               |         |   |               | 
|                                                                    |  |               | 272,028 |   |               | 
|                                                                    |  |               |         |   |               | 
|Income before income taxes                                          |  |               | 32,789  |   |               | 
|                                                                    |  |               |         |   |               | 
|Provision for (recovery of) income taxes                            |  |               |         |   |               | 
|Current income taxes (note 14)                                      |  |               | 16,934  |   |               | 
|Deferred income taxes (note 14)                                     |  |               | (11,813 | ) |               | 
|                                                                    |  |               |         |   |               | 
|                                                                    |  |               | 5,121   |   |               | 
|                                                                    |  |               |         |   |               | 
|Net income for the year                                             |  |               | 27,668  |   |               | 
|                                                                    |  |               |         |   |               | 
|Basic earnings
    per common share (note 20)                       |  |               | 0.22    |   |               | 
|                                                                    |  |               |         |   |               | 
|Diluted earnings
    per common share (note 20)                     |  |               | 0.22    |   |               | 



The accompanying notes form an integral part of these consolidated
financial statements.











|DHX Media Ltd.                                
|----------------------------------------------
|Consolidated Statement of Comprehensive Income
|For the years ended June 30, 2016 and 2015    
|(expressed in thousands of Canadian dollars)  



|                                                                        |  | June 30, 2016 |         |   | June 30, 2015 | 
|----------------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | 
|                                                                        |  | $             |         |   | $             | 
|                                                                        |  |               |         |   |               | 
|Net income for the year                                                 |  |               | 27,668  |   |               | 
|                                                                        |  |               |         |   |               | 
|Other comprehensive loss                                                |  |               |         |   |               | 
|                                                                        |  |               |         |   |               | 
|Items that will be subsequently reclassified to the statement of income |  |               |         |   |               | 
|Cumulative translation adjustment                                       |  |               | (11,931 | ) |               | 
|                                                                        |  |               |         |   |               | 
|Comprehensive income for the year                                       |  |               | 15,737  |   |               | 



The accompanying notes form an integral part of these consolidated
financial statements.











|DHX Media Ltd.                              
|--------------------------------------------
|Consolidated Statement of Cash Flows        
|For the years ended June 30, 2016 and 2015  
|(expressed in thousands of Canadian dollars)



|                                                                              |  | June 30, |         |   | June 30, | 
|----------------------------------------------------------------------------- |  | -------- | ------- | - | -------- | 
|                                                                              |  | 2016     |         |   | 2015     | 
|                                                                              |  | $        |         |   | $        | 
|Cash provided by (used in)                                                    |  |          |         |   |          | 
|                                                                              |  |          |         |   |          | 
|Operating activities                                                          |  |          |         |   |          | 
|Net income for the year                                                       |  |          | 27,668  |   |          | 
|Charges (credits) not involving cash                                          |  |          |         |   |          | 
|Amortization of property and equipment                                        |  |          | 4,490   |   |          | 
|Amortization of intangible assets                                             |  |          | 10,033  |   |          | 
|Unrealized foreign exchange loss (gain)                                       |  |          | 12,570  |   |          | 
|Amortization of deferred financing fees                                       |  |          | 1,636   |   |          | 
|Write-down of investment in film and television programs                      |  |          | 1,750   |   |          | 
|Accretion on tangible benefit obligation                                      |  |          | 490     |   |          | 
|Debt extinguishment charge                                                    |  |          | 1,364   |   |          | 
|Share-based compensation                                                      |  |          | 5,981   |   |          | 
|Tangible benefit obligation expense                                           |  |          | —       |   |          | 
|Loss on disposal of fixed assets                                              |  |          | —       |   |          | 
|Amortization of debt premium                                                  |  |          | 72      |   |          | 
|Movement in the fair value of embedded derivatives                            |  |          | 1,950   |   |          | 
|Deferred tax recovery                                                         |  |          | (11,812 | ) |          | 
|Net investment in film and television programs (note 21)                      |  |          | (51,837 | ) |          | 
|Net change in non-cash balances related to operations (note 21)               |  |          | (25,646 | ) |          | 
|                                                                              |  |          |         |   |          | 
|Cash provided by (used in) operating activities                               |  |          | (21,291 | ) |          | 
|                                                                              |  |          |         |   |          | 
|Financing activities                                                          |  |          |         |   |          | 
|Proceeds from issuance of common shares, net of issue costs                   |  |          | 61,346  |   |          | 
|Dividends paid                                                                |  |          | (7,287  | ) |          | 
|Proceeds from issuance of common shares related to ESPP and options exercised |  |          | 3,010   |   |          | 
|Common shares repurchased and cancelled pursuant to the NCIB                  |  |          | (5,040  | ) |          | 
|Deferred financing fees                                                       |  |          | —       |   |          | 
|Repayment of bank indebtedness                                                |  |          | —       |   |          | 
|Proceeds from interim production financing                                    |  |          | 24,261  |   |          | 
|Proceeds from long-term debt, net of costs                                    |  |          | 94,119  |   |          | 
|Decrease in restricted cash                                                   |  |          | —       |   |          | 
|Repayment of long-term debt and obligations under finance leases              |  |          | (91,554 | ) |          | 
|                                                                              |  |          |         |   |          | 
|Cash provided by financing activities                                         |  |          | 78,855  |   |          | 
|                                                                              |  |          |         |   |          | 
|Investing activities                                                          |  |          |         |   |          | 
|Business acquisitions, net of cash acquired                                   |  |          | —       |   |          | 
|Acquisition of property and equipment                                         |  |          | (2,336  | ) |          | 
|Acquisition/cost of intangible assets                                         |  |          | (17,943 | ) |          | 
|                                                                              |  |          |         |   |          | 
|Cash used in investing activities                                             |  |          | (20,279 | ) |          | 
|                                                                              |  |          |         |   |          | 
|Effect of foreign exchange rate changes on cash                               |  |          | 254     |   |          | 
|                                                                              |  |          |         |   |          | 
|Net change in cash and cash equivalents during the year                       |  |          | 37,539  |   |          | 
|                                                                              |  |          |         |   |          | 
|Cash and cash equivalents - Beginning of year                                 |  |          | 42,907  |   |          | 
|                                                                              |  |          |         |   |          | 
|Cash and cash equivalents - End of year                                       |  |          | 80,446  |   |          | 



The accompanying notes form an integral part of these consolidated
financial statements.











|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 1 | Nature of business
| | - | ------------------



DHX Media Ltd. (the “Company”) is a public
company, and the ultimate parent, whose common shares are traded on the Toronto Stock Exchange (“TSX”), admitted on
May 19, 2006, under the symbols DHX.A and DHX.B. On June 23, 2015, the Company commenced trading its Variable Voting Shares on
the NASDAQ Global Trading Market (“NASDAQ”) under the symbol DHXM. The Company, incorporated on February 12, 2004 under
the laws of the Province of Nova Scotia, Canada, and continued on April 25, 2006 under the Canada Business Corporation Act, develops,
produces and distributes films and television programs for the domestic and international market, broadcasts films and television
programs for the domestic markets, as well, the Company manages copyrights, licensing and brands for third parties. The address
of the Company’s head office is 1478 Queen Street, Halifax, Nova Scotia, Canada, B3J 2H7.



| | 2 | Basis of preparation
| | - | --------------------



The Company prepares its consolidated financial statements
(the “financial statements”) in accordance with Canadian generally accepted accounting principles (“GAAP”)
as set out in the Chartered Professional Accountants of Canada Handbook - Accounting - Part 1 (“CPA Canada Handbook”),
which incorporates International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).



These financial statements include all adjustments, composed
of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations,
financial position and cash flows.



These financial statements have been authorized for issuance
by the Board of Directors on September 27, 2016.



| | 3 | Significant accounting policies, judgments and estimation uncertainty
| | - | ---------------------------------------------------------------------



The significant accounting policies used in the preparation
of these financial statements are described below:



Basis of measurement



The financial statements have been prepared under a historical
cost basis, except for certain financial assets and financial liabilities, including derivative instruments that are measured at
fair value.



Consolidation



The financial statements include the accounts of DHX Media
Ltd. and all of its subsidiaries. The financial statements of all subsidiaries are prepared for the same reporting period, using
consistent accounting policies. Intercompany accounts, transactions, income and expenses and unrealized gains and losses resulting
from transactions amongst the consolidated companies have been eliminated upon consolidation.



Subsidiaries are those entities, including structured entities,
which the Company controls. Consistent with the film and television industry, the Company utilizes structured entities as a vehicle
to create and fund some of its film and television projects. When the Company makes substantive decisions on creation of the content
and financing within the structured entities it consolidates them. For accounting purposes, control is established by the Company
when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is obtained by the
Company and are de-consolidated from the date that control ceases.



(1)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Foreign currency translation



| | (i) | Functional and presentation currency
| | --- | ------------------------------------



Items included in the financial statements of each consolidated
entity of the Company are measured using the currency of the primary economic environment in which the entity operates (the "functional
currency"). Primary and secondary indicators are used to determine the functional currency (primary indicators have priority
over secondary indicators). The primary indicator which applies to the Company is the currency that mainly influences revenues
and expenses. Secondary indicators include the currency in which funds from financing activities are generated. For the Company
and all material subsidiaries other than W!LDBRAIN Entertainment Inc. (“Wildbrain”), Copyright Promotions Licensing
Group Ltd. (“CPLG”), Cookie Jar Entertainment (USA) Inc. (“CJUSA”), DHX UK Holdings Limited (“DHX
UK”), and Wildbrain International Limited ("Wildbrain UK") the Canadian dollar has been determined to be the functional
currency. For Wildbrain and CJUSA, the functional currency is the US dollar, and for CPLG, DHX UK, and Wildbrain UK, the functional
currency is UK pounds sterling. These financial statements are presented in Canadian dollars, which is the Company's functional
currency. The financial statements of consolidated entities that have a functional currency other than Canadian dollars (“foreign
operations”) are translated into Canadian dollars as follows:



| | (a) | assets and liabilities - at the closing rate at the date of the balance sheet; and
| | --- | ----------------------------------------------------------------------------------

| | (b) | income and expenses - at the average rate for the period (as this is considered to be a reasonable approximation of actual
rates).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------



All resulting changes are recognized in other comprehensive
income as cumulative translation adjustments.



When the Company disposes of its entire interest in a
foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains
or losses accumulated in other comprehensive income related to the foreign operation are recognized in profit or loss. If the Company
disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains
or losses accumulated in other comprehensive income related to the subsidiary is reallocated between controlling and non-controlling
interests.



| | (ii) | Transactions and balances
| | ---- | -------------------------



Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of foreign currency transactions and from the translation, at year-end exchange rates, of monetary assets and
liabilities denominated in currencies other than the functional currency are recognized in the consolidated statement of income.



(2)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Revenue recognition



Revenue from the licensing of film and television programs
is recognized when:



| | (a) | the production has been completed;
| | --- | ----------------------------------

| | (b) | the contractual delivery arrangements have been satisfied
and the Company retains neither continuing managerial involvement to the degree usually associated with the ownership nor effective
control over the goods sold;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | the customer has access to the production and can
benefit from the content;
| | --- | ---------------------------------------------------------------------------

| | (d) | the amount of revenue can be measured reliably;
| | --- | -----------------------------------------------

| | (e) | collectability of proceeds is probable; and
| | --- | -------------------------------------------

| | (f) | the costs incurred or to be incurred in respect of
the contractual arrangement can be measured reliably.
| | --- | --------------------------------------------------------------------------------------------------------



Cash payments received or advances currently due pursuant
to a broadcast license or distribution arrangement are recorded as deferred revenue until all of the foregoing conditions of revenue
recognition have been met.



Revenues from production services for third parties and
other revenue, as appropriate, are recognized on a percentage-of-completion basis. Percentage-of-completion is based upon the proportion
of costs incurred in the current period to total expected costs. A provision is made for the entire amount of future estimated
losses, if any, on productions-in-progress.



Revenue from live tours is recorded in the period in
which the show is performed, the amount of revenue can be reliably measured, the costs incurred or to be incurred can be measured
and collectability is reasonably assured. Merchandising revenue is recognized at the point of sale to customers.



Royalty revenue is accrued for royalty streams for which
the receipt of revenue is probable and is recognized in accordance with the substance of the relevant agreements and statements
received from third party agents.



Revenue from the management of copyrights, licensing
and brands for third parties through representation agreements is recognized when the amount of revenue can be reliably measured,
the services have been provided and collectability is reasonably assured. Amounts received or advances currently due pursuant to
a contractual arrangement, which have not yet met the criteria established to be recognized as revenue, are recorded as deferred
revenue.



Revenue from the Company's broadcasting business is recognized
as follows:



| | (a) | subscriber fee revenues are recognized monthly based
on estimated subscriber levels for the period-end, which are based on the preceding month's actual subscribed as submitted by
the broadcast distribution undertakings;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | advertising and promotion revenue, net of agency commission
where applicable, is recorded when the advertising or promotion airs on the Company's television stations; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | other revenues, including sponsorship revenue, as
earned.
| | --- | ---------------------------------------------------------



(3)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Gross versus net revenue



The Company evaluates arrangements with third parties
to determine whether revenue should be reported on a gross or net basis under each individual arrangement by determining whether
the Company acts as the principal or agent under the terms of each arrangement. To the extent that the Company acts as the principal
in an arrangement, revenues are reported on a gross basis, resulting in revenues and expenses being classified in their respective
financial statement line items. Conversely, to the extent that the Company acts as the agent in an arrangement, revenues are reported
on a net basis, resulting in revenues being presented net of any related expenses. Determining whether the Company acts as principal
or agent is based on an evaluation of which party has substantial risks and rewards of ownership under the terms of an arrangement.
The most significant factors that the Company considers include identification of the primary obligor, as well as which party has
credit risk, general and inventory risk (or equivalent) and latitude in establishing prices.



Investment in film and television programs



Investment in film and television programs represents
the balance of costs of film and television programs which have been produced by the Company or for which the Company has acquired
distribution rights and the Company’s right to participate in certain future cash flows of film and television programs produced
and distributed by other unrelated parties (“Acquired Participation Rights”). Investment in film and television programs
also includes acquired film and television libraries or properties that are in production.



Costs of acquiring and producing film and television
programs are capitalized. The costs are measured net of federal and provincial program contributions earned and are charged to
income based on the flow-of-revenue, whereby capitalized costs are charged to income and ultimate participation costs are accrued
in the proportion that current revenue bears to management’s estimate of ultimate revenue expected to be recognized from
the exploitation, exhibition or licensing of the film or television program. For film and television programs produced by the Company,
capitalized costs include all direct production and financing costs incurred during production that are expected to benefit future
periods. Financing costs are capitalized to the costs of a film or television program until substantially all of the activities
necessary to prepare the film or television program for delivery are complete. Production financing provided by third parties that
acquire participation amounts is recorded as a reduction of the cost of the production. Acquired participation costs are recognized
initially at the amounts paid or the fair value of amounts due to the counterparty.



For films and episodic television series produced by
the Company, ultimate revenue included estimates over a period of time. For acquired film and television libraries previously released,
ultimate revenue includes estimates of revenue over a period not to exceed twenty years from the date of acquisition.



Investments in film and television programs are included
within current assets. The normal operating cycle of the Company can be greater than 12 months. See note 7 for the expected realization
of the investment in film and television programs in the next 12 months.



Ultimate revenue estimates are prepared on a title-by-title
basis and are reviewed periodically based on current market conditions. For film, ultimate revenue estimates include box office
receipts, sale of DVDs, licensing of television broadcast rights and licensing of other ancillary film rights to third parties.
For television programs, ultimate revenue estimates include licensed rights to broadcast television programs in development and
rights to renew licenses for episodic television programs in subsequent seasons, as well as estimates of secondary market revenue.
Ultimate estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying
value of investment in film and television programs may be required as a consequence of changes in management’s future revenue
estimates.



(4)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Investment in film and television programs (continued)



The investment in film and television programs (including
acquired participation rights), is measured at the lower of cost and net realizable value. The net realizable value of the film
or television programs is determined using management’s estimates of future revenues and costs. A write-down is recorded
equivalent to the amount by which the costs exceed the estimated net realizable value of the film or television program or acquired
participation right.



Broadcast rights



Program and film rights for broadcasting are purchased
on a fixed or variable cost basis. The asset and liability for fixed cost purchases are recognized at the time the rights are known
and determinable, and if they are available for airing. The cost of fixed program and film rights is expensed over the lesser of
the availability period and the maximum period that varies depending upon the type of program, generally ranging from 24 to 60
months based on the expected pattern of consumption of the economic benefit. Program and film rights for broadcasting acquired
on a variable cost basis are not capitalized and their cost is determined and expensed over their contracted exhibition period,
on the basis of the average number of subscribers to the network exhibiting the program and of other contracting terms.



In the event that the recognition criteria for fixed
cost purchases described above are not met and the Company has already paid amounts to obtain future rights, such amounts are considered
as prepaid program and film rights and are included as prepaids on the consolidated balance sheet.



Any impairment charges are reported as operating expenses
on the consolidated statement of income.



Deferred financing fees and debt issue costs



Debt issue costs related to bank indebtedness are recorded
as a deferred charge and amortized, using the straight line method, over the term of the related bank indebtedness and the expense
is included in interest expense. Debt issue costs related to long-term debt are recorded as a reduction of long-term debt and amortized
using the effective interest method and the expense is included in interest expense.



Business combinations



The Company applies the acquisition method to account
for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred,
the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Company. The consideration
transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date. Acquisition-related costs are expensed as incurred.



Any contingent consideration to be transferred by the
group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration
that is deemed to be an asset or liability is recognized either in profit or loss or as a change to other comprehensive income.
Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within
equity.



Goodwill is initially measured as the excess of the aggregate
of the fair value of consideration transferred over the fair value of identifiable assets acquired and liabilities assumed. If
this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit
or loss.



(5)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Development costs



Development costs include costs of acquiring film rights
to books, stage plays or original screenplays and costs to adapt such projects. Such costs are capitalized and included in investment
in film and television programs upon commencement of production. Advances or contributions received from third parties to assist
in development are deducted from these costs. Projects in development are written off as development expenses at the earlier of
the date determined not to be recoverable or when projects under development are abandoned, or three years from the date of the
initial recognition of the investment, if there have been no active development milestones or significant development expenditures
within the last year.



Property and equipment



Property and equipment are carried at historical cost,
less accumulated amortization and accumulated impairment losses. Subsequent costs are included in the asset’s carrying amount
or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Company and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced.
Repairs and maintenance costs are charges to the consolidated statement of income during the period in which they are incurred.
Amortization is provided, commencing when the asset is available for use, over the estimated useful life of the asset, using the
following annual rates and methods:



|Buildings                               | 4% declining balance                    
|--------------------------------------- | ----------------------------------------
|Furniture, fixtures and other equipment | 5% - 20% declining balance              
|Computer equipment                      | 30% declining balance                   
|Post-production equipment               | 30% declining balance                   
|Computer software                       | 2 years straight-line                   
|Website design                          | 2 years straight-line                   
|Leasehold improvements                  | 5 years straight-line over term of lease



The Company allocates the amount initially recognized
in respect of an item of property and equipment to its significant parts and depreciates separately each such part. Residual values,
method of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.



Gains and losses on disposals of property and equipment
are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains and losses
in the consolidated statement of income.



Goodwill



Goodwill represents the cost of acquired businesses in
excess of the fair value of net identifiable assets acquired at the date of acquisition. Goodwill is carried at cost less any accumulated
impairment losses and is not subject to amortization. Goodwill is tested for impairment annually or more frequently if events or
circumstances indicate that the asset might be impaired. Goodwill is allocated to a cash generating unit (“CGU”), or
group of CGUs, which is the lowest level within an entity at which the goodwill is monitored for internal management purposes,
which is not higher than an operating segment. Impairment is tested by comparing the recoverable amount of goodwill assigned to
a CGU or group of CGUs to its carrying value.



(6)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Identifiable intangible assets



Identifiable intangible assets are carried at cost, including
amounts of purchase price allocations upon acquisitions. Amortization is provided on a straight-line basis over the estimated useful
life of the assets, using the following annual rates and methods:



|Broadcaster relationships          | 7 to 10 years straight-line 
|---------------------------------- | ----------------------------
|Customer relationships             | 10 years straight-line      
|Brands                             | 10 years straight-line      
|Production and distribution rights | 10 to 25 years straight-line
|Production backlog                 | 2 to 3 years straight-line  
|Non-compete contracts              | 3 years straight-line       
|Production software                | 5 years straight-line       



Broadcast licenses



Intangible assets with indefinite useful lives are not
amortized. Broadcast licenses are considered to have an indefinite life based on management’s intent and ability to renew
the licenses without significant cost and without material modification of the existing terms and conditions of the license. The
assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not,
the change in useful life from indefinite to finite is made on a prospective basis.



Broadcast licenses are tested for impairment annually
or more frequently if events or circumstances indicate that they may be impaired.



Broadcast licenses by themselves do not generate cash
inflows and therefore, when assessing these assets for impairment, the Company looks to the CGUs to which the asset belongs.



Impairment of non-financial assets



Property and equipment and intangible assets are tested
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Long-lived
assets that are not amortized are subject to an annual impairment test. For the purposes of measuring recoverable amounts, assets
are grouped into CGUs. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in
use, being the present value of the expected future cash flows of the relevant CGU. An impairment loss is recognized for the amount
by which the asset’s carrying amount exceeds its recoverable amount.



Borrowing costs



Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, including investment in films and property and equipment, are added to the cost
of those assets, until such time as the assets are substantially complete and ready for use. All other borrowing costs are recognized
as a finance expense in the consolidated statement of income in the period in which they are incurred.



(7)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Government financing and assistance



The Company has access to several government programs,
including tax credits that are designed to assist film and television production and distribution in Canada. The Company records
government assistance when the related costs have been incurred and there is reasonable assurance that they will be realized. Amounts
received or receivable in respect of production assistance are recorded as a reduction of the production costs of the applicable
production. Government assistance with respect to distribution rights is recorded as a reduction of investment in film and television
programs. Government assistance towards current expenses is recorded as a reduction of the applicable expense item.



Provisions



Provisions are recognized when the Company has a present
legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required
to settle the obligation and the amount can be reliably estimated. Provisions are measured at management’s best estimate
of the expenditure required to settle the obligation at the end of the reporting period and are discounted to present value where
the effect is material. The Company performs evaluations to identify onerous contracts and, where applicable, records provisions
for such contracts.



Leases



Upon initial recognition, the Company classifies all
leases as either a finance lease or an operating lease, depending on the substance of the transaction. Finance leases are classified
as such because they are found to transfer substantially all the rewards incidental to ownership of the asset to the lessee, whereas
operating leases are classified as such because they are not found to meet the criteria required for classification as a finance
lease. Upon commencement of the lease, finance leases are recorded as assets with corresponding liabilities in the consolidated
balance sheet at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The rate
used to discount the payments is either the interest rate implicit in the lease or the Company's incremental borrowing rate. The
asset is amortized over the shorter of the term of the lease and the useful life of the asset while the liability is decreased
by the actual lease payments and increased by any accretion expense. Payments made under operating leases are charged to the statement
of income on a straight-line basis over the period of the lease.



Income taxes



The tax expense for the period comprises current and
deferred tax. Tax is recognized in the statement of income, except to the extent that it relates to items recognized in other comprehensive
income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.



Current tax is the expected tax payable on the taxable
income for the period, using tax rates enacted or substantively enacted, at the end of the reporting period, and any adjustment
to tax payable in respect of previous periods.



Deferred tax is recognized in respect of temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, as well as the
benefit of losses that are probable to be realized and are available for carry forward to future years to reduce income taxes.
Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted
at the balance sheet date and are expected to apply when the deferred tax asset or liability is settled. Deferred tax liabilities
are generally recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable
that the assets can be recovered.



(8)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Income taxes (continued)



The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable earnings will
be available to allow all or part of the asset to be recovered.



Deferred income tax is provided on temporary differences
arising on investments in subsidiaries and associates, except, in the case of subsidiaries, where the timing of the reversal of
the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the
foreseeable future.



The effect of a change in tax rates on deferred tax assets
and liabilities is included in earnings in the period that the change is substantively enacted, except to the extent it relates
to items previously recognized outside earnings in which case the rate change impact is recognized in a manner consistent with
how the items were originally recognized.



Deferred income tax assets and liabilities are presented
as non-current.



Share-based compensation



The Company grants stock options to certain directors,
officers, employees and consultants of the Company. Stock options vest over periods of up to 4 years and expire after 5 years.
Each vesting tranche of stock options is considered a separate award with its own vesting period and estimated grant date fair
value. The estimated grant date fair value of each vesting tranche is estimated using the Black-Scholes option pricing model. The
non-cash compensation expense is recognized over each tranche’s vesting period by increasing contributed surplus based on
the number of awards expected to vest. The number of awards expected to vest is reviewed at least annually with any impact being
recognized immediately.



Earnings per share



Basic earnings per share (“EPS”) is calculated
by dividing the net income for the period attributable to equity owners of the Company by the weighted average number of common
shares outstanding during the period.



Diluted EPS is calculated by adjusting the weighted average
number of common shares outstanding for dilutive instruments. The number of shares included with respect to options, warrants and
similar instruments is computed using the treasury stock method. The Company’s potentially dilutive common shares comprise
stock options granted and warrants.



(9)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Financial instruments



Financial instruments are classified as follows:



| | · | Financial assets classified as "Available-for-Sale"
are recognized initially at fair value plus transaction costs and are subsequently carried at fair value with the changes in fair
value recorded in other comprehensive income. Available-for-Sale assets are classified as non-current, unless the investment matures
or management expects to dispose of them within twelve months.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Derivative financial instruments are classified as “Held-for-Trading” and recognized initially on the balance sheet
at fair value. Financial assets classified as Held-for-Trading are recognized at fair value with the changes in fair value recorded
in net income.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Cash, trade receivables and long-term amounts receivables are classified as “Loans and Receivables”. After their
initial fair value measurement, they are measured at amortized cost using the effective interest method, less a provision for impairment,
established on an account-by-account basis, based on, among other factors, prior experience and knowledge of the specific debtor
and management’s assessment of the current economic environment.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Bank indebtedness, accounts payable and accrued liabilities, interim production financing, long-term debt and other liabilities
are classified as “Other Financial Liabilities”. Other Financial Liabilities are initially recognized at fair value
less transaction costs. Subsequent to initial recognition, Other Financial Liabilities are measured at amortized cost using the
effective interest method.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Impairment of financial assets



At each reporting date, the Company assesses whether
there is objective evidence that a financial asset is impaired. A significant or prolonged decline in the fair value of the security
below its cost is also evidence that the assets are impaired. If such evidence exists, the Company recognizes an impairment loss,
as follows:



| | · | Financial assets carried at amortized cost: The loss is the difference between the amortized cost of the loan or receivable
and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate.
The carrying amount of the asset is reduced by this amount either directly or indirectly through the use of an allowance account.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Available-for-Sale financial assets: The impairment loss is the difference between the original cost of the asset and its fair
value at the measurement date, less any impairment losses previously recognized in the statement of income. This amount represents
the cumulative loss in accumulated other comprehensive income that is reclassified to net income.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Impairment losses on financial assets carried at amortized
cost and available-for-sale financial assets are reversed in subsequent periods if the amount of the loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognized. Impairment losses on available-for-sale equity
instruments are not reversed.



Dividend distribution



Dividend distribution to the Company’s shareholders
is recognized as a liability in the financial statements in the period in which the dividends are approved by the Board of Directors.



(10)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Tangible benefit obligation



As part of the Canadian Radio-Television and Telecommunications
Commission (“CRTC”) decision approving the Company’s acquisition of 8504601 Canada Inc. (“DHX Television”)
(note 5 (iii)), the Company is required to contribute $17,313 to provide tangible benefits to the Canadian broadcasting system
over seven years from the date of acquisition. The tangible benefit obligation has been recorded in the statement of income at
the estimated fair value on the date of acquisition, being the sum of the discounted future net cash flows and the same amount
has been recorded as a liability as of the date of acquisition of DHX Television. The tangible benefit obligation is subsequently
adjusted for the incurrence of related expenditures, the passage of time and for revisions to the timing of the cash flows. Changes
in the obligation are recorded as accretion of long-term liabilities in the consolidated statement of income.



Cash and cash equivalents



Cash and cash equivalents consist of current operating
bank accounts, term deposits and fixed income securities with and original term to maturity of 90 days or less. Cash equivalents
are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.



New and amended standards adopted



Accounting standards issued but not yet applied



IFRS 9, Financial instruments



IFRS 9 “Financial instruments” (“IFRS
9”) introduces new requirements for the classification and measurement of financial assets. IFRS 9 requires all recognized
financial assets that are within the scope of IAS 39 “Financial



Instruments: Recognition and Measurement”
(“IAS 39”) to be measured at amortized cost or fair value in subsequent accounting periods following initial recognition.
Specifically, financial assets that are held within a business model whose objective is to collect the contractual cash flows,
and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally
measured at amortized cost at the end of subsequent accounting periods. All other financial assets including equity investments
are measured at their fair values at the end of subsequent accounting periods.



Requirements for classification and measurement of financial
liabilities were added in October 2010 and they

largely carried forward existing requirements in IAS
39, except that fair value changes due to credit risk for liabilities designated at fair value through profit and loss would generally
be recorded in other comprehensive income.



IFRS 9 was amended in November 2013, to (i) include guidance
on hedge accounting, and (ii) allow entities to early adopt the requirement to recognize changes in fair value attributable to
changes in an entity’s own credit risk, from financial liabilities designated under the fair value option, in OCI, without
having to adopt the remainder of IFRS 9. The final version of IFRS 9 was issued in July 2014 and included (i) a third measurement
category for financial assets - fair value through OCI; (ii) a single forward-looking expected loss impairment model; and (iii)
a mandatory effective date for adoption of annual periods beginning on or after January 1, 2018, with early adoption permitted.
The Company is evaluating the impact of the new standard on its financial statements.



(11)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Accounting standards issued but not yet applied
(continued)



IFRS 15, Revenue from Contracts and Customers



The IASB issued IFRS “Revenue from Contacts
and Customers” (“IFRS 15”) effective for annual periods beginning on or after January 1, 2018, although the
standard is available for early adoption. IFRS 15 replaces IAS 18, “Revenue” and IAS 11, “Construction
Contracts”, and some revenue related interpretations. The underlying principle is that an entity will recognize revenue
to depict the transfer of goods and services to customers at an amount the entity expects to be entitled to in exchange for those
goods and services. The Company is currently evaluating the impact of the new standard on its financial statements.



Amendment to IAS 38



In May 2014, the IASB issued an amendment to IAS 38,
stating that there is a rebuttable presumption that amortization methods based on the revenue generated by an activity that includes
the use of an intangible asset is inappropriate. The amendment states that the presumption can be overcome when the intangible
asset is expressed as a measure of revenue, or when it can be demonstrated that revenue and the consumption of the economic benefits
of the intangible asset are highly correlated. This amendment is effective for annual periods beginning on or after January 1,
2016, which will be July 1, 2016 for the Company, and is to be applied prospectively. The Company is currently reviewing the impact
of this amendment on its financial statements. Based on its preliminary evaluation, the Company does not believe the amendment
will have a material impact in its financial statements; however, the Company has not reached a final determination.



IFRS 16, Leases



In January 2016, the IASB issued IFRS 16, "Leases"
("IFRS 16") effective for annual periods beginning on or after January 1, 2019, with early adoption permitted for entities
that have also adopted IFRS 15. IFRS 16 provides a comprehensive model for the measurement, presentation and disclosure of leases
and supersedes IAS 17, "Leases". The adoption of IFRS 16 will result in substantially all lessee leases being recorded
on the balance sheet as an asset with a corresponding liability with both current and long-term portions. The Company is currently
reviewing the impact of IFRS 16 on its financial statements.



Significant accounting judgments and estimation uncertainty



The preparation of financial statements under IFRS requires
the Company to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgments
are continually evaluated and are based on historical experience and other factors including expectations of future events that
are believed to be reasonable. Actual results may differ materially from these estimates. The estimates and assumptions which have
a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:



| | (i) | Investment in film and television programs
| | --- | ------------------------------------------



The costs of acquiring and producing film and television
programs are capitalized, net of federal and provincial program contributions earned and amortized using the individual film forecast
method, whereby capitalized costs are charged to income and ultimate participation costs are accrued in the proportion that current
revenue bears to management’s estimate of ultimate revenue expected to be recognized from the exploitation, exhibition or
licensing of the film or television program. The estimate of ultimate revenue and ultimate costs depends on management judgment
and assumptions based on the pattern of historical experience and other factors. Fluctuations in ultimate revenues could have a
significant effect on net income.



(12)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Significant accounting judgments and estimation uncertainty
(continued)



| | (ii) | Income taxes and deferred income taxes
| | ---- | --------------------------------------



Deferred tax assets and liabilities require management’s
judgment in determining the amounts to be recognized. In particular, judgment is used when assessing the extent to which deferred
tax assets should be recognized with respect to the timing of deferred taxable income.



The current income tax provision for the year is requires
judgment in interpreting tax laws and regulations. Estimates are used in determining the provision for current income taxes which
are recognized in the financial statements. The Company considers the estimates, assumptions and judgments to be reasonable but
this can involve complex issues which may take an extended period to resolve. The final determination of the amounts to be paid
related to the current year’s tax provisions could be different from the estimates reflected in the financial statements.
The Company’s tax filings also are subject to audits, the outcome of which could change the amount of current and deferred
tax assets and liabilities.



| | (iii) | Business combinations
| | ----- | ---------------------



The purchase price allocation process requires management
to use significant estimates and assumptions, including fair value estimates including, but not limited to:



| | · | estimated fair values of tangible assets;
| | - | -----------------------------------------

| | · | estimated fair values of intangible assets;
| | - | -------------------------------------------

| | · | estimated fair values of deferred revenue;
| | - | ------------------------------------------

| | · | probability of required payment under contingent consideration provisions;
| | - | --------------------------------------------------------------------------

| | · | estimated income tax assets and liabilities; and
| | - | ------------------------------------------------

| | · | estimated fair value of pre-acquisition contingencies.
| | - | ------------------------------------------------------



While management uses its best estimates and assumptions
as a part of the purchase price allocation process to accurately value the assets acquired and liabilities assumed at the business
combination date, estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the measurement
period, which is the earlier of the date management receives the information it is looking for or one year from the business combination
date, adjustments are recorded to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.



Although management believes the assumptions and estimates
made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained
from the management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of
the assets and liabilities acquired include but are not limited to:



| | · | future expected cash flows from distribution, merchandising and licensing and other customer contracts;
| | - | -------------------------------------------------------------------------------------------------------

| | · | expected costs to complete film and television productions in-progress and the estimated cash flows from the productions when
completed;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

| | · | the acquired company’s brand, broadcaster relationships and customer and distribution relationships as well as assumptions
about the period of time these acquired intangibles will continue to benefit the combined company;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the fair value of deferred revenue, including future obligations to customers;
| | - | ------------------------------------------------------------------------------



(13)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial Statements                                                       
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 3 | Significant accounting policies, judgments and estimation uncertainty(continued)
| | - | --------------------------------------------------------------------------------



Significant accounting judgments and estimation uncertainty
(continued)



| | (iii) | Business combinations (continued)
| | ----- | ---------------------------------





| | · | uncertain tax positions assumed in connection with a business combination are initially estimated as of the acquisition date
and are re-evaluated quarterly, management continues to collect information in order to determine their estimated value, with any
adjustments to preliminary estimates recorded to goodwill during the measurement period; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | discount rates applied to future expected cash flows.
| | - | -----------------------------------------------------



Changes in any of the assumptions or estimates used in
determining the fair value of acquired assets and liabilities could impact the amounts assigned to assets, liabilities and goodwill
in the purchase price allocation, which could also impact net income as expenses and impairments could change. Unanticipated events
and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.



| | 4 | Compensation of key management
| | - | ------------------------------



Key management includes all directors, including both
executive and non-executive directors, as well as the Executive Chairman, Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer. The compensation earned by key management is as follows:



|                               |  | 2016 |       |  | 2015 | 
|------------------------------ |  | ---- | ----- |  | ---- | 
|                               |  | $    |       |  | $    | 
|                               |  |      |       |  |      | 
|Salaries and employee benefits |  |      | 2,604 |  |      | 
|Share-based compensation       |  |      | 3,251 |  |      | 
|                               |  |      |       |  |      | 
|                               |  |      | 5,855 |  |      | 



| | 5 | Acquisitions
| | - | ------------



| | i) | On December 23, 2014, the Company acquired all of
the outstanding shares of Nerd Corps Entertainment Inc. and its subsidiaries (“Nerd Corps”), which brings more than
200 half hours of proprietary children’s and family content, including the comedy adventure series Slugterra, and Nerd Corps’
creative team. The total consideration was approximately $59,265 and was comprised of cash of $33,190 and 2,693,748 common shares
of the Company valued at $26,075, being the fair value of the common shares on the date of acquisition. At closing, $27,690 was
paid in cash, funded through an addition to the Company’s Amended and Restated Senior Secured Credit Agreement (note 11),
and the common shares issued. The remainder of the consideration was subject to a working capital adjustment, $1,833 of which
was recorded in accounts payable and accrued liabilities at June 30, 2016.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Goodwill of $20,773 arising from the acquisition is attributable
to synergies related to the expanded library, the acquisition of key talent and the strength of combined operations, including
additional studio capacity. None of the goodwill is deductible for tax purposes. The fair value of amounts receivable at acquisition
was $23,811. The gross contractual amount for accounts receivable due is $24,617, of which $806 is expected to be uncollectible.



The acquisition was accounted for using the purchase method.
As such, the results of operations reflect revenue and expenses of Nerd Corps since December 23, 2014.



(14)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 5 | Acquisitions(continued)
| | - | -----------------------



The purchase price has been allocated to the assets acquired
and liabilities assumed based on their estimated fair value as follows:



|                                                   |  | $ |       
|-------------------------------------------------- |  | - | ------
|Assets                                             |  |   |       
|Cash                                               |  |   | 6,439 
|Trade receivables                                  |  |   | 4,162 
|Federal and provincial film tax credits receivable |  |   | 19,649
|Prepaid expenses and other                         |  |   | 117   
|Investment in film and television programs         |  |   | 14,200
|Property and equipment                             |  |   | 2,516 
|Intangible assets (note 9)                         |  |   | 25,280
|Goodwill                                           |  |   | 20,773
|                                                   |  |   |       
|                                                   |  |   | 93,136
|                                                   |  |   |       
|Liabilities                                        |  |   |       
|Accounts payable and accrued liabilities           |  |   | 4,260 
|Deferred revenue                                   |  |   | 4,595 
|Interim production financing                       |  |   | 14,840
|Capital lease obligations                          |  |   | 1,113 
|Deferred income taxes                              |  |   | 9,063 
|                                                   |  |   |       
|                                                   |  |   | 33,871
|                                                   |  |   |       
|Net assets acquired                                |  |   | 59,265



The Company finalized the purchase price allocation during
the year, resulting in a reduction of both accounts payable and accrued liabilities and goodwill of $5,000. There was no impact
to net income previously reported as a result of finalizing the purchase price allocation.



| | ii) | On November 13, 2014, the Company acquired a library of approximately 1,200 half hours, consisting of predominantly children's
and family programming, specifically the outright ownership of 117 titles and distribution rights for an additional 34 titles.
The library includes more than 35 television series and more than 35 feature films and television specials in the children's and
family programming space, including all international distribution rights to the Company’s Degrassi, Instant Star and The
L.A. Complex series, from Echo Bridge Entertainment LLC and Alliance Atlantis International Distribution, LLC, (collectively, “Echo
Bridge”) for US$11,640 in cash, which was funded through an addition to the Company’s Amended and Restated Senior Secured
Credit Agreement (note 11).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The acquisition was accounted for using the purchase method.
As such, the results of operations reflect revenue and expenses of the Echo Bridge assets since November 13, 2014. The Company
has finalized the purchase price, which has been allocated to the assets acquired based on their estimated fair values. The purchase
price has been allocated to investment in film and television programs in the amount of $10,127 and the remainder of $3,115 has
been allocated to goodwill, which is deductible for tax purposes and is attributable to the synergies associated with uniting the
global rights for certain of the Company's proprietary titles.



The Company finalized the purchase price allocation during
prior year. There was no impact to net income previously reported as a result of finalizing the purchase price allocation.



(15)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 5 | Acquisitions(continued)
| | - | -----------------------



| | iii) | On July 31, 2014, the Company acquired all of the
outstanding shares of 8504601 Canada Inc., a newly formed company, holding substantially all the assets and select liabilities
comprising the business of the Family Channel (“Family Channel Business”) for cash consideration of up to $177,253,
consisting of $170,000 for the initial purchase price, funded through an addition to the Company's Amended and Restated Senior
Secured Credit Agreement (note 11) and a working capital adjustment of $7,753, of which, $6,253 was paid during the prior year
and $1,500 of which was recorded in accounts payable and accrued liabilities at June 30, 2015. The acquired company was subsequently
renamed DHX Television Ltd. The principal assets of the Family Channel Business are the Canadian broadcast licenses for Family
Channel, Family Junior, Telemagino, and Family CHRGD.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The fair value of amounts receivable at acquisition was
$11,043. The gross contractual amount for accounts receivable due is $11,143, of which $100 is expected to be uncollectible.



The value of goodwill of $79,864 arising from the acquisition
of the Family Channel Business is attributable to benefits associated with becoming a full, vertically integrated content company.



The acquisition was accounted for using the purchase method.
As such, the results of operations reflect revenue and expenses of DHX Television since July 31, 2014.



The Company has finalized the purchase price, which has
been allocated to the assets acquired and liabilities assumed based on their estimated fair value as follows:



|                                         |  | $ |        
|---------------------------------------- |  | - | -------
|Assets                                   |  |   |        
|Cash                                     |  |   | 6,197  
|Amounts receivable                       |  |   | 11,043 
|Prepaid expenses and deposits            |  |   | 9,798  
|Program and film rights                  |  |   | 17,153 
|Property and equipment                   |  |   | 259    
|Broadcast licenses                       |  |   | 67,800 
|Other intangible assets (note 9)         |  |   | 5,800  
|Goodwill                                 |  |   | 79,864 
|                                         |  |   |        
|                                         |  |   | 197,914
|                                         |  |   |        
|Liabilities                              |  |   |        
|Accounts payable and accrued liabilities |  |   | 10,323 
|Deferred income tax liabilities          |  |   | 10,338 
|                                         |  |   |        
|                                         |  |   | 20,661 
|                                         |  |   |        
|Net assets acquired                      |  |   | 177,253



As disclosed in note 3, as part of the CRTC decision approving
the Company’s acquisition of the Family Channel Business, the Company is required to contribute $17,313 to provide tangible
benefits to the Canadian broadcasting system over seven years from the date of acquisition. The tangible benefit obligation was
initially recorded in the consolidated statement of income at the estimated fair value on the date of acquisition of $14,215 as
a liability. This has been recorded outside of the purchase price as a cost of the acquisition. Subsequent to the acquisition,
cumulative accretion charges of $1,654 have been recorded to increase the liability, while expenditures of $3,684 have been incurred
to reduce the liability which was $12,185 as of June 30, 2016 (2015 - $15,015). The Company expects to incur annual cash expenditures
of approximately $2,473 in each of the next five years to satisfy the tangible benefit obligation.



(16)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 5 | Acquisitions(continued)
| | - | -----------------------



The Company finalized the accounting for the purchase
during the prior year. There was no impact to net income previously reported as a result of finalizing the accounting for the purchase.



Had Nerd Corps, Echo Bridge and DHX Television been consolidated
from July 1, 2014, the pro-forma consolidated statement of income for the year ended June 30, 2015 would show proforma revenue
of $284,915 and proforma net income of $24,336.



| | 6 | Amounts receivable
| | - | ------------------



|                                                                            |  | June 30,  2016 |         |   | June 30,  2015 | 
|--------------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | 
|                                                                            |  | $              |         |   | $              | 
|                                                                            |  |                |         |   |                | 
|Trade receivables                                                           |  |                | 89,746  |   |                | 
|Less: Provision for impairment of trade receivables                         |  |                | (6,459  | ) |                | 
|                                                                            |  |                |         |   |                | 
|                                                                            |  |                | 83,287  |   |                | 
|                                                                            |  |                |         |   |                | 
|Goods and services tax recoverable (payable), net                           |  |                | 1,144   |   |                | 
|Federal and provincial film tax credits and other
    government assistance |  |                | 99,861  |   |                | 
|                                                                            |  |                |         |   |                | 
|Short-term amounts receivable                                               |  |                | 184,292 |   |                | 
|                                                                            |  |                |         |   |                | 
|Long-term amounts receivable                                                |  |                | 20,753  |   |                | 
|                                                                            |  |                |         |   |                | 
|Total amounts receivable                                                    |  |                | 205,045 |   |                | 



The aging of trade receivables not impaired is as follows:



|                       |  | June 30,  2016 |        |  | June 30,  2015 | 
|---------------------- |  | -------------- | ------ |  | -------------- | 
|                       |  |                | $      |  |                | 
|Less than 60 days      |  |                | 74,173 |  |                | 
|Between 60 and 90 days |  |                | 1,222  |  |                | 
|Over 90 days           |  |                | 7,892  |  |                | 
|                       |  |                |        |  |                | 
|                       |  |                | 83,287 |  |                | 



The Company does not have security over these balances.
All impaired trade receivables are older than 90 days.



Trade receivables, goods and services taxes recoverable
and federal and provincial film tax credits and other government assistance are provided for based on estimated recoverable amounts
as determined by using a combination of historical default experience, any changes to credit quality and management estimates.
Goods and services taxes recoverable and other government assistance do not contain any significant uncertainty.



(17)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 6 | Amounts receivable(continued)
| | - | -----------------------------



Provision for impairment of trade receivables:



|                                                  |  | June 30,  2016 |        |   | June 30,  2015 | 
|------------------------------------------------- |  | -------------- | ------ | - | -------------- | 
|                                                  |  | $              |        |   | $              | 
|Opening balance                                   |  |                | 5,798  |   |                | 
|Provision for receivables                         |  |                | 2,761  |   |                | 
|Receivables written off during the period         |  |                | (1,039 | ) |                | 
|Recoveries of receivables previously provided for |  |                | —      |   |                | 
|Exchange differences                              |  |                | (1,061 | ) |                | 
|                                                  |  |                |        |   |                | 
|Closing balance                                   |  |                | 6,459  |   |                | 



| | 7 | Investment in film and television programs
| | - | ------------------------------------------



|                                                                                 |  | June 30,  2016 |          |   | June 30,  2015 | 
|-------------------------------------------------------------------------------- |  | -------------- | -------- | - | -------------- | 
|                                                                                 |  | $              |          |   | $              | 
|                                                                                 |  |                |          |   |                | 
|Development costs                                                                |  |                | 1,440    |   |                | 
|                                                                                 |  |                |          |   |                | 
|Theatrical and non-theatrical productions in progress                            |  |                |          |   |                | 
|Cost, net of government and third party assistance and third party participation |  |                | 25,061   |   |                | 
|                                                                                 |  |                |          |   |                | 
|Non-theatrical productions completed and released                                |  |                |          |   |                | 
|Cost, net of government and third party assistance and third party participation |  |                | 429,234  |   |                | 
|Accumulated expense                                                              |  |                | (319,139 | ) |                | 
|Accumulated write-down of investment in film and television programs             |  |                | (9,954   | ) |                | 
|                                                                                 |  |                |          |   |                | 
|                                                                                 |  |                | 100,141  |   |                | 
|                                                                                 |  |                |          |   |                | 
|Acquired participation rights - theatrical and non-theatrical                    |  |                |          |   |                | 
|Cost                                                                             |  |                | 123,361  |   |                | 
|Accumulated expense                                                              |  |                | (53,926  | ) |                | 
|                                                                                 |  |                |          |   |                | 
|                                                                                 |  |                | 69,435   |   |                | 
|                                                                                 |  |                |          |   |                | 
|Program and film rights - broadcasting                                           |  |                |          |   |                | 
|Cost                                                                             |  |                | 104,816  |   |                | 
|Accumulated expense                                                              |  |                | (61,141  | ) |                | 
|                                                                                 |  |                |          |   |                | 
|                                                                                 |  |                | 43,675   |   |                | 
|                                                                                 |  |                |          |   |                | 
|                                                                                 |  |                | 239,752  |   |                | 



All program and film rights - broadcasting, noted above,
relate to DHX Television.



The Company expects that the remaining costs related
to investment in film and television programs, subsequent to the initial episodic delivery, will be cumulatively realized as follows:



|                                                              |  | Within |   |  | Within  |   |  | Within  |  
|------------------------------------------------------------- |  | ------ | - |  | ------- | - |  | ------- | -
|                                                              |  | 1 year |   |  | 3 years |   |  | 5 years |  
|                                                              |  |        |   |  |         |   |  |         |  
|Non-theatrical productions completed and released             |  | 18     | % |  | 42      | % |  | 64      | %
|Acquired participation rights - theatrical and non-theatrical |  | 13     | % |  | 35      | % |  | 56      | %
|Program and film rights - broadcasting                        |  | 36     | % |  | 81      | % |  | 97      | %



(18)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 7 | Investment in film and television programs(continued)
| | - | -----------------------------------------------------



Included in accounts payable and accrued liabilities,
as outlined in note 3, are accrued ultimate participation costs of $26,575, which are accrued in the proportion that current revenue
bears to management's estimate of ultimate revenue expected to be recognized from the exploitation, exhibition or licensing of
film and television programs.



The continuity of investment in film and television programs
is as follows:



|                                                                                                                                     |  | June 30,  2016 |         |   | June 30,  2015 | 
|------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | - | -------------- | 
|                                                                                                                                     |  | $              |         |   | $              | 
|                                                                                                                                     |  |                |         |   |                | 
|Net opening investment in film and television programs                                                                               |  |                | 194,226 |   |                | 
|Increase (decrease) in development costs                                                                                             |  |                | 150     |   |                | 
|Cost of productions (completed and released and productions in progress), net of government assistance and third party contributions |  |                | 91,366  |   |                | 
|Productions acquired                                                                                                                 |  |                | —       |   |                | 
|Expense of investment in film and television programs                                                                                |  |                | (75,184 | ) |                | 
|Write-down in value of certain investment in film and television programs                                                            |  |                | (1,750  | ) |                | 
|Program and film rights acquired - broadcasting                                                                                      |  |                | —       |   |                | 
|Increase of program and film rights - broadcasting                                                                                   |  |                | 58,810  |   |                | 
|Expense of program and film rights - broadcasting                                                                                    |  |                | (23,305 | ) |                | 
|Exchange differences                                                                                                                 |  |                | (4,561  | ) |                | 
|                                                                                                                                     |  |                |         |   |                | 
|                                                                                                                                     |  |                | 239,752 |   |                | 



During the year ended June 30, 2016 interest of $2,169
(2015 - $1,213) has been capitalized to investment in film and television programs.



Consolidated Structured Entities



To facilitate the production of two television series
(the “Productions”), the Company has entered into two production financing structures whereby entities, in which the
Company has no direct ownership interest, will complete the Productions. The Company, through contractual agreements, has creative
control of the Productions and must fund any overspend on the Productions. Therefore, the Company has the ability to direct the
relevant activities of the entities and can use its power to affect the amount of returns it obtains. Consequently, the Company
controls these entities and consolidates them. The underlying assets of the entities at June 30, 2016 were investment in film and
television programs, cash, amounts receivable and account payable and liabilities are included in the Company’s consolidated
results and totalled assets of $18,615 and liabilities of $18,615 (June 30, 2015 - $12,920 and $12,920 respectively).





(19)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 8 | Property and equipment
| | - | ----------------------



|                                          |  | Land |       |  | Building |  |       | Furniture, fixtures and equipment |  |  | Computer equipment |   |  | Post-
production equipment |        |   | Computer software |  |        | Leasehold improvements |  |  | Total  |  
|----------------------------------------- |  | ---- | ----- |  | -------- |  | ----- | --------------------------------- |  |  | ------------------ | - |  | -------------------------- | ------ | - | ----------------- |  | ------ | ---------------------- |  |  | ------ | -
|                                          |  | $    |       |  | $        |  |       | $                                 |  |  | $                  |   |  | $                          |        |   | $                 |  |        | $                      |  |  | $      |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|For the year ended June 30, 2015          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|Opening net book value                    |  |      | 4,276 |  |          |  | 1,873 |                                   |  |  | 983                |   |  |                            | 1,855  |   |                   |  | 230    |                        |  |  | 661    |  
|DHX Television acquisition (note 5 (iii)) |  |      | —     |  |          |  | —     |                                   |  |  | 9                  |   |  |                            | 47     |   |                   |  | —      |                        |  |  | 195    |  
|Nerd Corps acquisition (note 5 (i))       |  |      | —     |  |          |  | —     |                                   |  |  | 243                |   |  |                            | 1,652  |   |                   |  | 23     |                        |  |  | 407    |  
|Additions                                 |  |      | —     |  |          |  | —     |                                   |  |  | 644                |   |  |                            | 2,034  |   |                   |  | 1,556  |                        |  |  | 534    |  
|Amortization                              |  |      | —     |  |          |  | (75   | )                                 |  |  | (503               | ) |  |                            | (1,749 | ) |                   |  | (349   | )                      |  |  | (601   | )
|Disposals                                 |  |      | —     |  |          |  | —     |                                   |  |  | (1                 | ) |  |                            | (35    | ) |                   |  | —      |                        |  |  | —      |  
|Foreign exchange differences              |  |      | —     |  |          |  | —     |                                   |  |  | 2                  |   |  |                            | 63     |   |                   |  | —      |                        |  |  | 6      |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|Net book value                            |  |      | 4,276 |  |          |  | 1,798 |                                   |  |  | 1,377              |   |  |                            | 3,867  |   |                   |  | 1,460  |                        |  |  | 1,202  |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|At June 30, 2015                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|Cost                                      |  |      | 4,276 |  |          |  | 1,876 |                                   |  |  | 5,180              |   |  |                            | 10,865 |   |                   |  | 3,285  |                        |  |  | 3,981  |  
|Accumulated amortization                  |  |      | —     |  |          |  | (78   | )                                 |  |  | (3,810             | ) |  |                            | (7,208 | ) |                   |  | (1,825 | )                      |  |  | (2,833 | )
|Foreign exchange differences              |  |      | —     |  |          |  | —     |                                   |  |  | 7                  |   |  |                            | 210    |   |                   |  | —      |                        |  |  | 54     |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|Net book value                            |  |      | 4,276 |  |          |  | 1,798 |                                   |  |  | 1,377              |   |  |                            | 3,867  |   |                   |  | 1,460  |                        |  |  | 1,202  |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|For the year ended
    June 30, 2016      |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|Opening net book value                    |  |      | 4,276 |  |          |  | 1,798 |                                   |  |  | 1,377              |   |  |                            | 3,867  |   |                   |  | 1,460  |                        |  |  | 1,202  |  
|Additions                                 |  |      | —     |  |          |  | —     |                                   |  |  | 220                |   |  |                            | 727    |   |                   |  | 2,458  |                        |  |  | 595    |  
|Amortization                              |  |      | —     |  |          |  | (6    | )                                 |  |  | (244               | ) |  |                            | (1,813 | ) |                   |  | (1,001 | )                      |  |  | (759   | )
|Foreign exchange differences              |  |      | —     |  |          |  | —     |                                   |  |  | 1                  |   |  |                            | 30     |   |                   |  | —      |                        |  |  | 2      |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|                                          |  |      | 4,276 |  |          |  | 1,792 |                                   |  |  | 1,354              |   |  |                            | 2,811  |   |                   |  | 2,917  |                        |  |  | 1,040  |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|At June 30, 2016                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|Cost                                      |  |      | 4,276 |  |          |  | 1,876 |                                   |  |  | 5,400              |   |  |                            | 11,592 |   |                   |  | 5,743  |                        |  |  | 4,576  |  
|Accumulated amortization                  |  |      | —     |  |          |  | (84   | )                                 |  |  | (4,054             | ) |  |                            | (9,021 | ) |                   |  | (2,826 | )                      |  |  | (3,592 | )
|Foreign exchange differences              |  |      | —     |  |          |  | —     |                                   |  |  | 8                  |   |  |                            | 240    |   |                   |  | —      |                        |  |  | 56     |  
|                                          |  |      |       |  |          |  |       |                                   |  |  |                    |   |  |                            |        |   |                   |  |        |                        |  |  |        |  
|Net book value                            |  |      | 4,276 |  |          |  | 1,792 |                                   |  |  | 1,354              |   |  |                            | 2,811  |   |                   |  | 2,917  |                        |  |  | 1,040  |  



As at June 30, 2016, included in the property and equipment
net book value were leased computers equipment, post production equipment and computer software in the amount of $1,776, $2,498
and $293 respectively, (2015 - $2,101, $1,450 and $nil)



(20)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 9 | Intangible assets
| | - | -----------------



All broadcast licenses relate to the operations of DHX
Television.



|                                         |  | Broadcast
licenses |        |  | Broadcaster
 relationships |  |        | Customer
relationships |  |  | Brands |   |  | Production and
distribution rights

    (1) |         |   | Other (2) |  |        | Total | 
|---------------------------------------- |  | ------------------ | ------ |  | -------------------------- |  | ------ | ---------------------- |  |  | ------ | - |  | ------------------------------------------- | ------- | - | --------- |  | ------ | ----- | 
|                                         |  | $                  |        |  | $                          |  |        | $                      |  |  | $      |   |  | $                                           |         |   | $         |  |        | $     | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|For the year ended June 30, 2015         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|Opening book value                       |  |                    | —      |  |                            |  | 2,871  |                        |  |  | 11,612 |   |  |                                             | 18,622  |   |           |  | —      |       | 
|DHX Television acquisition (note 5(iii)) |  |                    | 67,800 |  |                            |  | —      |                        |  |  | —      |   |  |                                             | 5,800   |   |           |  | —      |       | 
|Nerd Corps acquisition (note 5 (i))      |  |                    | —      |  |                            |  | —      |                        |  |  | 16,100 |   |  |                                             | 5,600   |   |           |  | —      |       | 
|Amortization                             |  |                    | —      |  |                            |  | (819   | )                      |  |  | (2,055 | ) |  |                                             | (3,215  | ) |           |  | —      |       | 
|Additions                                |  |                    | —      |  |                            |  | —      |                        |  |  | —      |   |  |                                             | 669     |   |           |  | —      |       | 
|Foreign exchange differences             |  |                    | —      |  |                            |  | 23     |                        |  |  | 333    |   |  |                                             | 210     |   |           |  | —      |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|Net book value                           |  |                    | 67,800 |  |                            |  | 2,075  |                        |  |  | 25,990 |   |  |                                             | 27,686  |   |           |  | —      |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|At June 30, 2015                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|Cost                                     |  |                    | 67,800 |  |                            |  | 7,362  |                        |  |  | 27,920 |   |  |                                             | 33,920  |   |           |  | —      |       | 
|Accumulated amortization                 |  |                    | —      |  |                            |  | (5,324 | )                      |  |  | (4,102 | ) |  |                                             | (6,988  | ) |           |  | —      |       | 
|Foreign exchange differences             |  |                    | —      |  |                            |  | 37     |                        |  |  | 2,172  |   |  |                                             | 754     |   |           |  | —      |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|Net book value                           |  |                    | 67,800 |  |                            |  | 2,075  |                        |  |  | 25,990 |   |  |                                             | 27,686  |   |           |  | —      |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|For the year ended
    June 30, 2016     |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|Opening book value                       |  |                    | 67,800 |  |                            |  | 2,075  |                        |  |  | 25,990 |   |  |                                             | 27,686  |   |           |  | —      |       | 
|Amortization                             |  |                    | —      |  |                            |  | (819   | )                      |  |  | (2,831 | ) |  |                                             | (3,753  | ) |           |  | (1,164 | )     | 
|Additions                                |  |                    | —      |  |                            |  | —      |                        |  |  | —      |   |  |                                             | 1,359   |   |           |  | —      |       | 
|Additions acquired                       |  |                    | —      |  |                            |  | —      |                        |  |  | —      |   |  |                                             | —       |   |           |  | 30,946 |       | 
|Foreign exchange differences             |  |                    | —      |  |                            |  | 6      |                        |  |  | (1,506 | ) |  |                                             | (439    | ) |           |  | (3,939 | )     | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|Net book value                           |  |                    | 67,800 |  |                            |  | 1,262  |                        |  |  | 21,653 |   |  |                                             | 24,853  |   |           |  | 25,843 |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|At June 30, 2016                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|Cost                                     |  |                    | 67,800 |  |                            |  | 7,362  |                        |  |  | 27,920 |   |  |                                             | 35,279  |   |           |  | 30,946 |       | 
|Accumulated amortization                 |  |                    | —      |  |                            |  | (6,143 | )                      |  |  | (6,933 | ) |  |                                             | (10,741 | ) |           |  | (1,164 | )     | 
|Foreign exchange differences             |  |                    | —      |  |                            |  | 43     |                        |  |  | 666    |   |  |                                             | 315     |   |           |  | (3,939 | )     | 
|                                         |  |                    |        |  |                            |  |        |                        |  |  |        |   |  |                                             |         |   |           |  |        |       | 
|Net book value                           |  |                    | 67,800 |  |                            |  | 1,262  |                        |  |  | 21,653 |   |  |                                             | 24,853  |   |           |  | 25,843 |       | 



(1) Productions and distribution rights represent rights
acquired by the Company to produce and/or distribute television content where the Company does not own the underlying intellectual
properties.

(2) Comprised of production backlog, non-compete contracts
and production software.



(21)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 10 | Goodwill
| | -- | --------



The continuity of goodwill is as follows:



|                                                         |  | June 30,  2016 |         |   | June 30,  2015 | 
|-------------------------------------------------------- |  | -------------- | ------- | - | -------------- | 
|                                                         |  | $              |         |   | $              | 
|                                                         |  |                |         |   |                | 
|Opening net book value                                   |  |                | 213,941 |   |                | 
|Acquired on acquisition of Nerd Corps (note 5 (i))       |  |                | (5,000  | ) |                | 
|Acquired on acquisition of DHX Television (note 5 (iii)) |  |                | —       |   |                | 
|Acquired on acquisition of Epitome                       |  |                | —       |   |                | 
|Acquired on acquisition of Echo Bridge (note 5 (ii))     |  |                | —       |   |                | 
|Exchange differences                                     |  |                | (3,599  | ) |                | 
|                                                         |  |                |         |   |                | 
|                                                         |  |                | 205,342 |   |                | 



Impairment testing



Goodwill and indefinite life intangible assets, being
the broadcast licenses, are tested for impairment annually or more frequently if events or circumstances indicate that the asset
might be impaired. The Company tested goodwill for impairment at June 30, 2016 and 2015, in accordance with its policy described
in note 3. For the purposes of allocating goodwill, the Company has determined that it has three CGUs: its production, distribution
and licensing of film and television programs business, being the Content Business; CPLG, which manages copyrights, licensing and
brands for third parties and DHX Television. The CPLG CGU does not have any goodwill or indefinite life intangible assets, and
has not been tested for impairment.



In assessing the goodwill and indefinite life intangible
assets for impairment, the Company compares the carrying value of the CGU to the recoverable amount, where the recoverable amount
is the higher of fair value less costs of disposal and the value in use. An impairment charge is recognized to the extent that
the carrying value exceeds the recoverable amount.



Value-in-Use



The value in use for our CGUs is determined by discounting
five-year cash flow projections from business plans reviewed by senior management. The projections reflect management’s expectations
of revenue, segment profit, capital expenditures, working capital and operating cash flows, based on past experience and future
expectations of operating performance.



Cash flows beyond the five-year period are extrapolated
using perpetuity growth rates. None of the perpetuity growth rates exceed the long-term historical growth rates for the markets
in which we operate.



The discount rates are applied to the cash flow projections
and are derived from the weighted average cost of capital for each group of CGUs.



The following table shows the key assumptions used to
estimate the recoverable amounts of the groups of CGUs.



|                 |  | Assumptions used |      
|---------------- |  | ---------------- | -----
|                 |  | Perpetuity       |      
|CGU's            |  | growth rate      |      
|                 |  |                  |      
|Content Business |  |                  | 3.00 
|DHX Television   |  |                  | (1.50



(22)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 10 | Goodwill(continued)
| | -- | -------------------



As the recoverable amount of the CGU's to which goodwill
and indefinite life intangible assets has been allocated was greater than its carrying value, the Company determined there were
no impairments of goodwill or indefinite life intangible assets as at June 30, 2016 and 2015. We believe that any reasonable possible
change in the key assumptions on which the estimate of recoverable amounts of the DHX Television and Content Business CGUs is based
would not cause their carrying amounts to exceed their recoverable amounts.



The cash flows used in determining the recoverable amounts
for the CGU’s were based on the following key assumptions:



Cash flows from operations for each CGU were projected
for a period of five years based on a combination of past experience, actual operating results and forecasted future results.



For the Content Business, key revenue assumptions include
i) future production slates (both proprietary and production service), ii) future sources of distribution revenues (linear and
digital) and expected sales prices/revenue levels, and iii) merchandising and licensing revenue forecasts by brand. These key assumptions
represent Management’s assessment of future industry trends and are based on both historical results, future projections
and external sources. Gross margins for the Content Business were estimated using a combination of both forecast and historical
margins.



For DHX Television, the key revenue assumptions include
subscriber levels and rates per subscriber. Subscriber levels were estimated based on Management’s assessment of future industry
trends, while subscriber rates are based on existing agreements and Management’s estimates of future renewal rates. Advertising
and promotion revenues were based upon Management’s assessment of future industry trends, based on internal and external
sources. Gross margins for DHX Television were estimated using historical margins, while giving consideration to expected future
content costs.



Expenditure levels for all CGU’s were forecast
based on represent Management’s assessment of future industry trends.



Cash flow adjustments for capital expenditures for each
CGU were based upon Management’s sustaining capital expenditure estimates, adjusted for presently planned capital expenditures
required to achieve forecast operating levels.



The perpetual growth rates were estimated based upon
Management’s assessment of future industry trends for each specific CGU.



The discount rates were estimated based a combination
of weighted average cost of capital and other external sources.



| | 11 | Bank indebtedness, interim production financing, long-term
debt and obligations under finance leases
| | -- | ----------------------------------------------------------------------------------------------------



|                                                           |  | June 30,  2016 |          |   | June 30,  2015 | 
|---------------------------------------------------------- |  | -------------- | -------- | - | -------------- | 
|                                                           |  | $              |          |   | $              | 
|                                                           |  |                |          |   |                | 
|Bank indebtedness                                          |  |                | —        |   |                | 
|Interim production financing                               |  |                | 92,003   |   |                | 
|Long-term debt and obligations under finance leases        |  |                | 292,073  |   |                | 
|                                                           |  |                |          |   |                | 
|Interest bearing debt and obligations under finance leases |  |                | 384,076  |   |                | 
|                                                           |  |                |          |   |                | 
|Amount due within 12 months                                |  |                | (103,570 | ) |                | 
|                                                           |  |                |          |   |                | 
|Amount due beyond 12 months                                |  |                | 280,506  |   |                | 



(23)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 11 | Bank indebtedness, interim
production financing, long-term debt and obligations under finance leases(continued)
| | -- | ---------------------------------------------------------------------------------------------------------------



Effective July 31, 2014 and commensurate with the closing
of the Company’s acquisition of DHX Television, the Company entered into an amended and restated senior secured credit agreement
(the “Amended and Restated Senior Secured Credit Agreement”) with a syndicate of lenders, which amended the existing
terms of the Company’s senior secured credit facility. The Amended and Restated Senior Secured Credit Agreement was further
amended on October 31, 2014, November 30, 2014 and December 19, 2014 in conjunction with: i) The acquisition of the Echo Bridge
assets; ii) The issuance of the Senior Unsecured Notes (note 11 (c)); and iii) The acquisition of Nerd Corps, respectively. Additional
amendments were completed on June 30, 2015, September 30, 2015, December 31, 2015, and May 13, 2016.



All amounts borrowed pursuant to the Amended and Restated
Senior Secured Credit Agreement are guaranteed by the Company and certain of its subsidiaries (the “Guarantors”). A
first priority security interest in respect of all of the capital stock of certain of the subsidiaries of DHX Media Ltd. has been
provided in favour of the syndicate of lenders, as well as all present and after acquired real and personal property of the Guarantors.



| | a) | Bank indebtedness
| | -- | -----------------



The Amended and Restated Senior Secured Credit Agreement
provides for a revolving facility (the “Amended Revolving Facility”) and a term facility (the “Amended Term Facility”).
The Amended Revolving Facility is available to a maximum amount of $30,000, maturing on July 31, 2019. The Amended Revolving Facility
may be drawn down by way of either $CDN bankers acceptances, $CDN prime, $USD base rate, $USD, €EUR and/or £GBP LIBOR
advances (the “Drawdown Rate”) and bears interest at a floating rate ranging from the Drawdown Rate + 1.25% to the
Drawdown Rate + 4.50% of the outstanding Amended Revolving Facility.



As at June 30, 2016, the Company had undrawn bank indebtedness
of $30,000 available.



| | b) | Interim production financing
| | -- | ----------------------------



|                                                                                                                                                                                                                                                                                                                                 |  | June 30,  2016 |        |  | June 30,  2015 | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ |  | -------------- | 
|                                                                                                                                                                                                                                                                                                                                 |  | $              |        |  | $              | 
|                                                                                                                                                                                                                                                                                                                                 |  |                |        |  |                | 
|Interim production credit facilities with various institutions, bearing interest at bank prime plus 0.65% - 1.20%.  Assignment and direction of specific production financing, licensing contracts receivable and film tax credits receivable with a net book value of approximately $131,169 at June 30, 2016 (2015 - $78,617). |  |                | 92,003 |  |                | 



As of June 30, 2016, the Company had $8,477 (2015
- $16,604) in undrawn interim production financing pursuant to an agreement entered into on August 5, 2014 with CIBC Commercial
Banking to provide a $20,000 demand revolving loan, available by way of an unlimited number of individual loans (the “Segment
Loans”) made to finance production expenses related to eligible productions (the “Eligible Productions”). The
Segment Loans may be drawn down in either Canadian dollars or US dollars and bear interest of $CDN prime plus 0.75% or $USD base
rate plus 0.75%, respectively. Each Segment Loan is secured by the tangible and intangible assets of each Eligible Production,
assignment and direction of production financing contracts and tax credits and a subordinated, unsecured guarantee from DHX Media
Ltd.



During the year ended June 30, 2016, the $CDN bank prime
rate averaged 2.71% (year ended June 30, 2015 - 2.93%).



(24)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 11 | Bank indebtedness, interim
production financing, long-term debt and obligations under finance leases(continued)
| | -- | ---------------------------------------------------------------------------------------------------------------



Federal and provincial film tax credits receivable (see
note 6) are provided as security for the interim production financing. Upon collection of the film tax credits, the related interim
production financing is repaid, as required by the financing agreement.



| | c) | Long-term debt and obligations under capital leases
| | -- | ---------------------------------------------------



|                                                                                                                                                                                                         |  | June 30,  2016 |         |   | June 30,  2015 | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | 
|                                                                                                                                                                                                         |  | $              |         |   | $              | 
|                                                                                                                                                                                                         |  |                |         |   |                | 
|Amended Term Facility entered into pursuant to the Amended and Restated Senior Secured Credit Facility Agreement, (note 11 (c)(i)), net of unamortized issuance costs of $1,692 (June 30, 2015 - $2,476) |  |                | 67,578  |   |                | 
|Senior Unsecured Notes net of issuance costs, fair value of the Redemption Option and the unamortized premium of $5,180 (June 30, 2015 - $5,094) (note 11 (c)(ii))                                       |  |                | 219,928 |   |                | 
|Obligations under various finance leases, bearing interest at rates ranging from 4.0% to 9.8%, maturing on dates ranging from July 2016 to February 2019                                                 |  |                | 4,567   |   |                | 
|                                                                                                                                                                                                         |  |                |         |   |                | 
|                                                                                                                                                                                                         |  |                | 292,073 |   |                | 
|                                                                                                                                                                                                         |  |                |         |   |                | 
|Less: Current portion                                                                                                                                                                                    |  |                | (11,567 | ) |                | 
|                                                                                                                                                                                                         |  |                |         |   |                | 
|                                                                                                                                                                                                         |  |                | 280,506 |   |                | 



| | (i) | Amended Term Facility
| | --- | ---------------------



The Amended and Restated Senior Secured Credit Agreement
entered into on July 31, 2014, commensurate with the closing of the Company’s acquisition of DHX Television, provided for
an Amended Term Facility with an initial principal amount of up to $235,000, maturing on July 31, 2019.



Effective November 13, 2014, commensurate with the closing
of the Company’s acquisition of the Echo Bridge assets, the Amended Term Facility was amended to include an additional principal
amount of US$12,000, maturing on July 31, 2019.



During the year ended June 30, 2015, and in conjunction
with the initial issuance (the "Initial Issuance") of the senior unsecured notes ("Senior Unsecured Notes"
or "Notes") (note 11 (c) (ii)), the Company made a principal repayment on the Amended Term Facility of $151,760 and,
accordingly, recognized a debt extinguishment charge of $3,913 (note 15), being a portion of the previously unamortized debt issue
costs at the time of repayment.



Effective December 23, 2014, commensurate with the closing
of the Company’s acquisition of Nerd Corps, the Amended Term Facility was amended to include an additional principal amount
of $20,000, maturing on July 31, 2019.



Effective December 31, 2015, the Amended Term Facility
was amended to include additional principal amounts of $20,000 and US$20,000, maturing on July 31, 2019.



During the year ended June 30, 2016, and in conjunction
with the additional issuance (the "Additional Issuance") of the Senior Unsecured Notes, the Company made a principal
repayment on the Amended Term Facility of $47,016 and, accordingly recognized a debt extinguishment charge of $1,364 (note 15),
being a portion of the previously unamortized debt issue costs at the time of the principal repayment.



(25)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 11 | Bank indebtedness, interim production financing, long-term debt and obligations under finance
leases(continued)
| | -- | ---------------------------------------------------------------------------------------------------------------



| | c) | Long-term debt and obligations under capital leases(continued)
| | -- | --------------------------------------------------------------



The Amended Term Facility is repayable in annual amortization
payments (as a percentage of the principal amount of the Amended Term Facility) of 10% annually, payable in equal quarterly installments,
which commenced on December 31, 2014, with the remaining balance due on maturity, which is July 31, 2019.



The Amended Term Facility may be drawn down by way of
the Drawdown Rate and bears interest at a floating rate ranging from the Drawdown Rate + 1.25% to + 4.50%. All amounts borrowed
pursuant to the Senior Amended and Restated Senior Secured Credit Agreement are guaranteed by the Guarantors. A first priority
security interest in respect of all of the capital stock of certain of the subsidiaries of DHX Media Ltd. has been provided in
favour of the syndicate of lenders, as well as all present and after acquired real and personal property of the Guarantors of the
Amended Term Facility outstanding.



As at June 30, 2016, the Amended Term Facility is fully
drawn, and the amount payable in US dollars was US$30,998 (June 30, 2015 - US$19,846); the remainder of the Amended Term Facility
is payable in Canadian dollars.



The Senior Secured Credit Facilities require that the
Company comply with certain financial ratios, including but not limited to:



| | · | Leverage Ratio, defined as net funded debt (the total of all obligations for borrowed money which bear interest or imputed
interest, net of all non-production cash, excluding interim production financing, all capital lease obligations, and any contingent
liabilities (“Net Funded Debt”) to consolidated adjusted EBITDA (rolling consolidated adjusted EBITDA, pro-forma last
12 months) less foreign exchange gains or losses on intercompany debt, production-related EBITDA and certain acquisition costs),
which must be maintained at less than 3.50.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The Fixed Charge Ratio, defined as consolidated adjusted EBITDA less current income taxes and unfunded capital expenditures
to fixed charges (consolidated interest expense and scheduled principal payments on Funded Debt) which must be maintained at greater
than 1.5.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As at June 30, 2016, the Company is in compliance
with these ratios.



| | (ii) | Senior Unsecured Notes
| | ---- | ----------------------



On December 2, 2014, the Company completed the Initial
Issuance, via private placement, of Senior Unsecured Notes due on December 2, 2021, with an aggregate principal amount of $175,000,
at a price of $1,000 per $1,000 of principal. The Senior Unsecured Notes bear interest at a rate of 5.875% per annum, payable semi-annually
in arrears on June 2 and December 2 of each year until maturity. The first interest payment was paid on June 2, 2015. The Senior
Unsecured Notes are guaranteed by the Company and certain of its subsidiaries and are unsecured obligation. The net proceeds of
$169,760 from the Initial Issuance of the Senior Unsecured Notes were used to repay debt under the Company's Amended and Restated
Senior Secured Credit Agreement, with $18,000 being repaid on the Amended Revolving Facility and $151,760 being repaid on the Amended
Term Facility.



On May 13, 2016, the Company completed the Additional
Issuance, via private placement, of the Senior Unsecured Notes due on December 2, 2021, with an aggregate principal amount of $50,000
at a price of $975 per $1,000 of principal. The net proceeds of $47,016 from the Additional Issuance of the Senior Unsecured Notes
were used to pay debt under the Company's Amended Term Facility.



(26)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 11 | Bank indebtedness, interim
production financing, long-term debt and obligations under finance leases(continued)
| | -- | ---------------------------------------------------------------------------------------------------------------



| | c) | Long-term debt and obligations under finance leases(continued)
| | -- | --------------------------------------------------------------



As at June 30, 2016, the outstanding principal amount
due on the Senior Unsecured Notes was $225,000 (June 30, 2015 - $175,000)



The Senior Unsecured Notes contain embedded derivatives
(the “Embedded Derivatives”). The Senior Unsecured Notes contain a redemption option (the "Redemption Option")
whereby the Company can redeem all or part of the Senior Unsecured Notes. The Senior Unsecured Notes also contain a put option
(the “Put Option”) whereby the lender can redeem all or part of the Senior Unsecured Notes upon a change of control
of the Company. The Embedded Derivatives are required to be accounted for as separate embedded derivative financial instruments.
On initial recognition, the Embedded Derivatives are recorded at their calculated fair values and grouped with the Senior Unsecured
Notes. The Embedded Derivatives are adjusted to their fair values at each reporting date and any change in fair value is recorded
within finance income/expense in the consolidated statement of income (note 15).



On initial recognition, the carrying value of the Senior
Unsecured Notes was reduced by the net fair value of the Embedded Derivatives, and is amortized over the term of the Senior Unsecured
Notes.



The Notes contain non-financial covenants and customary
events of default clauses. As of June 30, 2016, the Company was in compliance with all of its covenants under the Notes.



| | (iii) | Principal repayments and undrawn borrowing facilities
| | ----- | -----------------------------------------------------



The aggregate amount of principal repayments required
in each of the next five years is as follows:



|                         |  | $ |        
|------------------------ |  | - | -------
|                         |  |   |        
|Year ended June 30, 2017 |  |   | 11,904 
|2018                     |  |   | 10,734 
|2019                     |  |   | 9,869  
|2020                     |  |   | 41,456 
|2021 and beyond          |  |   | 225,000



| | 12 | Share capital and contributed surplus
| | -- | -------------------------------------



| | a) | Authorized
| | -- | ----------



100,000,000 Preferred Variable Voting
Shares (“PVVS”), redeemable at the option of the Company at any time at a millionth of a cent per share, no entitlement
to dividends, voting

Unlimited Common Voting Shares without nominal or par
value

Unlimited Variable Voting Shares without nominal or par
value

Unlimited Non-Voting Shares without nominal or par value



(27)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 12 | Share capital and contributed surplus (continued)
| | -- | -------------------------------------------------



| | a) | Authorized(continued)
| | -- | ---------------------



Preferred Variable Voting Shares



On November 12, 2014, the PVVS were transferred by the
Company’s Executive Chairman, to the Company’s Chief Executive Officer, in accordance with the terms of a shareholders
agreement among the Company and holder of the PVVS (the “PVVS Shareholder Agreement”). On the date of such transfer,
the Company’s Chief Executive Officer entered into the PVVS Shareholder Agreement with the Company, pursuant to which the
Company’s Chief Executive Officer: (i) agreed not to transfer the PVVS, in whole or in part, except with the prior written
approval of the Board; (ii) granted to the Company the unilateral right to compel the transfer of the PVVS, at any time and
from time to time, in whole or in part, to a person designated by the Board; and (iii) granted to the Company a power of attorney
to effect any transfers contemplated by the PVVS Shareholder Agreement.  The Board will not approve or compel a transfer without
first obtaining the approval of the TSX and the PVVS Shareholder Agreement cannot be amended, waived or terminated unless approved
by the TSX.



Common shares



On September 30, 2014, the Company’s shareholders
approved a reorganization of the Company’s share capital structure (the “Share Capital Reorganization”) to address
the Canadian ownership requirements of DHX Television. The Share Capital Reorganization was affected on October 9, 2014 and resulted
in, among other things, the creation of three new classes of shares: Common Voting Shares, Variable Voting Shares and Non-Voting
Shares.



On October 9, 2014, each outstanding Common Share of the
Company that was not owned and controlled by a Canadian for the purposes of the Broadcasting Act (Canada) (the “Broadcasting
Act”) was converted into one Variable Voting Share and each outstanding Common Share that was owned and controlled by a Canadian
for the purposes of the Broadcasting Act was converted into one Common Voting Share. Each Common Voting Share carries one vote
per share on all matters. Each Variable Voting Share carries one vote per share unless the number of Variable Voting Shares outstanding
exceeds 33 1/3% of the total number of Variable Voting Shares and Common Voting Shares outstanding, in which case the voting rights
per share of the Variable Voting Shares are reduced so that the total number of votes associated with the outstanding Variable
Voting Shares equals 33 1/3% of the total votes associated with the outstanding Variable Voting Shares and Common Voting Shares
combined. The economic rights of each Variable Voting Share, each Common Voting Share and each Non-Voting Share are the same. All
of the unissued Common Shares of the Company were cancelled on the completion of the Share Capital Reorganization. The Variable
Voting Shares and Common Voting Shares are listed on the TSX under the ticker symbols DHX.A and DHX.B, respectively. On June 23,
2015, the Variable Voting Shares were listed on the NASDAQ under the ticker symbol DHXM.



(28)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 12 | Share capital and contributed
surplus(continued)
| | -- | ------------------------------------------------



| | b) | Issued and outstanding
| | -- | ----------------------



|                                                           |  | June 30, 2016 |             |   | June 30, 2015 | 
|---------------------------------------------------------- |  | ------------- | ----------- | - | ------------- | 
|                                                           |  | Number        |             |   | Amount        | 
|                                                           |  |               |             |   | $             | 
|                                                           |  |               |             |   |               | 
|Preferred
    variable voting shares (note 12 (a))         |  |               | 100,000,000 |   |               | 
|                                                           |  |               |             |   |               | 
|Common shares (note
    12 (c))                            |  |               |             |   |               | 
|Opening balance                                            |  |               | 123,982,312 |   |               | 
|Issued on acquisition (note 5 (ii))                        |  |               | —           |   |               | 
|Share issue costs, net of tax                              |  |               | —           |   |               | 
|Issued for cash consideration, net of costs and tax effect |  |               | 8,667,000   |   |               | 
|Shares issued pursuant to the ESPP                         |  |               | 32,538      |   |               | 
|Dividend reinvestment                                      |  |               | 88,754      |   |               | 
|NCIB shares repurchased and cancelled                      |  |               | (659,000    | ) |               | 
|Options exercised                                          |  |               | 1,663,125   |   |               | 
|                                                           |  |               |             |   |               | 
|Ending balance                                             |  |               | 133,774,729 |   |               | 
|                                                           |  |               |             |   |               | 
|Contributed surplus and stock options
    (note 12 (d))    |  |               |             |   |               | 
|Opening balance                                            |  |               | 6,353,750   |   |               | 
|Issued to officers and employees                           |  |               | 2,446,500   |   |               | 
|Share based compensation                                   |  |               | —           |   |               | 
|Stock options exercised                                    |  |               | (1,663,125  | ) |               | 
|Options forfeited                                          |  |               | —           |   |               | 
|                                                           |  |               |             |   |               | 
|Ending balance                                             |  |               | 7,137,125   |   |               | 



| | c) | Common shares
| | -- | -------------



The common shares of the Company are inclusive of Common
Voting Shares, Variable Voting Shares and Non-Voting Shares. As at June 30, 2016, the Company had 104,714,707 Common Voting Shares,
29,060,022 Variable Voting Shares and nil Non-Voting Shares issued and outstanding (2015 - 83,882,439, 40,099,873 and nil respectively).



During the year ended June 30, 2016, the Company issued
32,538 common shares, at an average price of $8.11 as part of the Company’s employee share purchase plan (2015 - 19,981 at
$8.61).



During the year ended June 30, 2016, 1,663,125 common
shares were issued out of treasury at an average price of $1.65 upon exercise of stock options (2015 - 1,478,750 at $1.56).



During the year ended June 30, 2016, the Company issued
88,754 shares at an average price of $6.73, as part of the shareholder enrollment in the Company's dividend reinvestment program
(2015 - 13,928 at $8.81).



During the year ended June 30, 2016, the Company
repurchased and cancelled 659,000 Common Voting Shares at an average price of $7.64 for gross costs of $5,040 pursuant to a normal
course issuer bid.



On December 23, 2014, the Company issued 2,693,748 common
shares, valued at $9.68 per share in connection with the Company's acquisition of Nerd Corps (note 5 (i)).



On May 5, 2016, the Company issued 8,667,000 common shares
at $7.50 per common share for gross proceeds of $65,003, less cash costs of $3,657, net of tax effect of $1,134.



(29)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 12 | Share capital and contributed
surplus(continued)
| | -- | ------------------------------------------------



| | d) | Stock options
| | -- | -------------



As at June 30, 2016 and 2015, the Company had the following
stock options outstanding:



|                             |  |           |            |   | Weighted average | 
|---------------------------- |  | --------- | ---------- | - | ---------------- | 
|                             |  | Number of |            |   | exercise price   | 
|                             |  | options   |            |   | per stock option | 
|                             |  |           |            |   |                  | 
|Outstanding at June 30, 2014 |  |           | 4,787,500  |   |                  | 
|                             |  |           |            |   |                  | 
|Granted                      |  |           | 3,120,000  |   |                  | 
|Forfeited                    |  |           | (75,000    | ) |                  | 
|Exercised                    |  |           | (1,478,750 | ) |                  | 
|                             |  |           |            |   |                  | 
|Outstanding at June 30, 2015 |  |           | 6,353,750  |   |                  | 
|                             |  |           |            |   |                  | 
|Granted                      |  |           | 2,446,500  |   |                  | 
|Exercised                    |  |           | (1,663,125 | ) |                  | 
|                             |  |           |            |   |                  | 
|Outstanding at June 30, 2016 |  |           | 7,137,125  |   |                  | 
|                             |  |           |            |   |                  | 
|Exercisable at June 30, 2016 |  |           | 2,435,000  |   |                  | 



The total maximum number of common shares to be reserved
for issuance through the Company's option plan at June 30, 2016 is 8.5% (June 30, 2015 - 9%) of the total number of outstanding
common shares at any time. As at June 30, 2016, this amounted to 11,370,851 (June 30, 2015 - 11,158,408).



On August 6, 2014, 1,375,000 stock options were issued
at $7.13 per share, vesting over four years, expiring on August 5, 2019.



On October 2, 2014, 1,095,000 stock options were issued
at $8.27 per share, vesting over four years, expiring on October 1, 2019.



On November 18, 2014, 75,000 stock options were issued
at $9.44 per share, vesting over three and four years, expiring on November 17, 2019.



On December 23, 2014, 375,000 stock options were issued
at $9.78 per share, vesting over four years, expiring on December 22, 2019.



On February 20, 2015, 200,000 stock options were issued
at $9.29 per share, vesting over four years, expiring on February 19, 2020.



On October 1, 2015, 1,446,500 stock options were issued
at $8.40 per share, vesting over four years, expiring on September 30, 2022.



On November 19, 2015, 25,000 stock options were issued
at $8.03 per share, vesting over four years, expiring on November 18, 2022.



On December 18, 2015, 600,000 stock options were issued
at $8.32 per share, vesting over three and four years, expiring on December 17, 2022.



(30)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 12 | Share capital and contributed
surplus(continued)
| | -- | ------------------------------------------------



| | d) | Stock options(c0ntinued)
| | -- | ------------------------



On February 19, 2016, 350,000 stock options were issued
at $6.93 per share, vesting over four years, expiring on February 18, 2023.



On February 29, 2016, 25,000 stock options were issued
at $6.76 per share, vesting over four years, expiring on February 28, 2023.



During the year ended June 30, 2016, no stock options
were forfeited (2015 - 75,000)



During the year ended June 30, 2016, a total of $5,981
(2015 - $4,254) was recognized as share based compensation expense.



The weighted average grant date value of stock options
and assumptions using the Black-Scholes option pricing model for the years ended June 30, 2016 and 2015 are as follows:



|                                  |  | 2016 |         |   | 2015 |  
|--------------------------------- |  | ---- | ------- | - | ---- | -
|                                  |  |      |         |   |      |  
|Weighted average grant value date |  | $    | 2.75    |   |      | $
|Risk free interest rate           |  |      | 0.64    | % |      |  
|Expected option life              |  |      | 5 years |   |      |  
|Expected volatility               |  |      | 41      | % |      |  
|Expected dividend yield           |  |      | 0.75    | % |      |  



Changes in the assumptions can materially affect the
fair value of estimates and therefore, the existing models do not necessarily provide a reliable measure of the fair value of stock
options.



During the year ended June 30, 2016, 1,663,125 stock
options were exercised at an average price of $1.65 per share for total proceeds of $2,746 (2015 - 1,478,750 at $1.56 for total
proceeds of $2,311).



Information related to options outstanding at June 30,
2016 is presented below.



|                |  | Number         |           |  | Weighted         |  |      | Weighted |  |  | Number         |  |  | Weighted |          
|--------------- |  | -------------- | --------- |  | ---------------- |  | ---- | -------- |  |  | -------------- |  |  | -------- | ---------
|Range of        |  | outstanding at |           |  | average          |  |      | average  |  |  | exercisable at |  |  | average  |          
|exercise prices |  | Jun 30,        |           |  | remaining        |  |      | exercise |  |  | Jun 30,        |  |  | exercise |          
|                |  | 2016           |           |  | contractual life |  |      | price    |  |  | 2016           |  |  | price    |          
|                |  |                |           |  | years            |  |      | $        |  |  |                |  |  | $        |          
|                |  |                |           |  |                  |  |      |          |  |  |                |  |  |          |          
|$0.69 - $0.99   |  |                | 20,000    |  |                  |  | 0.25 |          |  |  | 0.83           |  |  |          | 20,000   
|$1.00 - $4.17   |  |                | 1,625,625 |  |                  |  | 1.99 |          |  |  | 3.12           |  |  |          | 1,625,625
|$4.18 - $9.78   |  |                | 5,491,500 |  |                  |  | 4.63 |          |  |  | 8.08           |  |  |          | 789,375  
|                |  |                |           |  |                  |  |      |          |  |  |                |  |  |          |          
|Total           |  |                | 7,137,125 |  |                  |  | 4.02 |          |  |  | 6.93           |  |  |          | 2,435,000



(31)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 13 | Government financing and assistance
| | -- | -----------------------------------



During the year ended June 30, 2016, investment in film
and television programs was reduced by $nil (2015 - $5,440) related to production financing from government agencies. This financing
is related to participation amounts by government agencies and is repayable from distribution revenue of the specific productions
for which the financing was made. In addition, during the year ended June 30, 2016, investment in film has also been reduced by
$2,005 (2015 - $4,327) related to non-repayable contributions from the Canadian Media Fund license fee program. During the year
ended June 30, 2016, investment in film and television programs has been reduced by $37,714 (2015 - $32,951) for tax credits relating
to production activities. Lastly, during the year ended June 30, 2016, the Company received $39,624, in government financing and
assistance (2015 - $34,490).



Amounts receivable from the Canadian federal government
and other government agencies in connection with production financing represents 49% of total amounts receivable at June 30,
2016 (2015 - 44%). Certain of these amounts are subject to audit by the government agency. Management believes that the net amounts
recorded are fully collectible. The Company adjusts amounts receivable from Canadian federal government and other government agencies
including federal and provincial tax credits receivable, in connection with production financing, quarterly and yearly, for any
known differences arising from internal or external audit of these balances.



| | 14 | Income taxes
| | -- | ------------



Significant components of the Company’s net deferred
income tax liability as at June 30, 2016 and 2015 are as follows:



|                                                                           |  | June 30,  2016 |         |   | June 30,  2015 | 
|-------------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | 
|                                                                           |  | $              |         |   | $              | 
|                                                                           |  |                |         |   |                | 
|Broadcast licenses                                                         |  |                | (8,984  | ) |                | 
|Tangible benefit obligation                                                |  |                | 3,133   |   |                | 
|Leasehold inducement                                                       |  |                | 123     |   |                | 
|Foreign tax credits                                                        |  |                | 85      |   |                | 
|Participation payables and finance lease obligations and other liabilities |  |                | 64      |   |                | 
|Property and equipment                                                     |  |                | (1,417  | ) |                | 
|Share issuance costs and deferred financing fees                           |  |                | 1,526   |   |                | 
|Investment in film and television programs                                 |  |                | (11,558 | ) |                | 
|Intangible assets                                                          |  |                | (7,161  | ) |                | 
|Non-capital losses and other                                               |  |                | 14,976  |   |                | 
|                                                                           |  |                |         |   |                | 
|Net deferred income tax liability                                          |  |                | (9,213  | ) |                | 



Deferred income tax liabilities have not been recognized
for the withholding tax and other taxes that would be payable on unremitted earnings of certain subsidiaries, as such amounts are
permanently reinvested. Unremitted earnings totalled $31,498 at June 30, 2016 (June 30, 2015 - $12,944).



(32)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 14 | Income taxes(continued)
| | -- | -----------------------



The reconciliation of income taxes computed at the statutory
tax rates to income tax expense (recovery) is as follows:



|                                                                                                   |  | June 30,  2016 |        |   | June 30,  2015 | 
|-------------------------------------------------------------------------------------------------- |  | -------------- | ------ | - | -------------- | 
|                                                                                                   |  | $              |        |   | $              | 
|                                                                                                   |  |                |        |   |                | 
|Income tax expense based on combined federal and provincial tax rates of 31% (June 30, 2015 - 31%) |  |                | 10,164 |   |                | 
|Income taxes increased (reduced) by:                                                               |  |                |        |   |                | 
|Share-based compensation                                                                           |  |                | 1,854  |   |                | 
|Non-deductible acquisition costs                                                                   |  |                | —      |   |                | 
|Tax rate differential                                                                              |  |                | (4,507 | ) |                | 
|Other                                                                                              |  |                | (2,390 | ) |                | 
|                                                                                                   |  |                |        |   |                | 
|Provision for income taxes                                                                         |  |                | 5,121  |   |                | 



The Company operates in multiple jurisdictions
with differing tax rates. The Company’s effective tax rates are dependent on the jurisdiction to which income relates.



| | 15 | Finance income and finance expense
| | -- | ----------------------------------



Finance income and finance expense are comprised of the
following:



|                                                                                           |  | June 30,  2016 |        |  | June 30,  2015 | 
|------------------------------------------------------------------------------------------ |  | -------------- | ------ |  | -------------- | 
|                                                                                           |  | $              |        |  | $              | 
|                                                                                           |  |                |        |  |                | 
|Finance income                                                                             |  |                |        |  |                | 
|Interest income                                                                            |  |                | 338    |  |                | 
|Net foreign exchange gain                                                                  |  |                | —      |  |                | 
|Movement in fair value of the Embedded Derivatives on the Senior Unsecured Notes (note 11) |  |                | —      |  |                | 
|                                                                                           |  |                |        |  |                | 
|                                                                                           |  |                | 338    |  |                | 
|                                                                                           |  |                |        |  |                | 
|Finance expense                                                                            |  |                |        |  |                | 
|Interest expense on bank indebtedness                                                      |  |                | 528    |  |                | 
|Accretion of tangible benefit obligation                                                   |  |                | 490    |  |                | 
|Interest on long-term debt, obligations under finance leases and other                     |  |                | 19,127 |  |                | 
|Movement in fair value of the Embedded Derivatives on the Senior Unsecured Notes (note 11) |  |                | 1,950  |  |                | 
|Debt extinguishment charge                                                                 |  |                | 1,364  |  |                | 
|Amortization of debt premium on Senior Unsecured Notes (note 11)                           |  |                | 72     |  |                | 
|Net foreign exchange loss                                                                  |  |                | 6,622  |  |                | 
|                                                                                           |  |                |        |  |                | 
|                                                                                           |  |                | 30,153 |  |                | 



(33)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 16 | Expenses by nature and employee benefit expense
| | -- | -----------------------------------------------



The following sets out the expenses by nature:



|                                                                    |  | June 30,  2016 |         |  | June 30,  2015 | 
|------------------------------------------------------------------- |  | -------------- | ------- |  | -------------- | 
|                                                                    |  | $              |         |  | $              | 
|                                                                    |  |                |         |  |                | 
|Investment in film and television programs                          |  |                |         |  |                | 
|Direct production and new media costs                               |  |                | 45,888  |  |                | 
|Expense of film and television programs                             |  |                | 57,792  |  |                | 
|Expense of film and broadcast rights for broadcasting               |  |                | 23,305  |  |                | 
|Expense of acquired library                                         |  |                | 17,391  |  |                | 
|Write-down of investment in film and television programs            |  |                | 1,750   |  |                | 
|Development expenses and other                                      |  |                | 5,950   |  |                | 
|Office and administrative                                           |  |                | 23,087  |  |                | 
|Tangible benefit obligation expense                                 |  |                | —       |  |                | 
|Finance expense, net                                                |  |                | 29,815  |  |                | 
|Investor relations and marketing                                    |  |                | 700     |  |                | 
|Professional and regulatory                                         |  |                | 4,959   |  |                | 
|Amortization of property and equipment and intangible assets        |  |                | 14,523  |  |                | 
|                                                                    |  |                |         |  |                | 
|                                                                    |  |                | 225,160 |  |                | 
|                                                                    |  |                |         |  |                | 
|The following sets out the components of employee benefits expense: |  |                |         |  |                | 
|Salaries and employee benefits                                      |  |                | 40,887  |  |                | 
|Share-based compensation                                            |  |                | 5,981   |  |                | 
|                                                                    |  |                |         |  |                | 
|                                                                    |  |                | 46,868  |  |                | 
|                                                                    |  |                |         |  |                | 
|                                                                    |  |                | 272,028 |  |                | 



| | 17 | Financial instruments
| | -- | ---------------------



| | a) | Credit risk
| | -- | -----------



Credit risk arises from cash and cash equivalents, as
well as credit exposure to customers, including outstanding trade receivables. The Company manages credit risk on cash and cash
equivalents by ensuring that the counterparties are banks, governments and government agencies with high credit ratings.



The maximum exposure to credit risk for cash and cash
equivalents and trade receivables approximate the amount recorded on the consolidated balance sheet of $190,945 at June 30, 2016
(2015 - 148,487).



The balance of trade amounts receivable are mainly with
Canadian broadcasters and large international distribution companies. Management manages credit risk by regularly reviewing aged
accounts receivables and appropriate credit analysis. The Company has booked an allowance for doubtful accounts of approximately
5% against the gross amounts for certain trade amounts receivable and management believes that the net amount of trade amounts
receivable is fully collectible. In assessing credit risk, management includes in its assessment the long-term receivables and
considers what impact the long-term nature of the receivable has on credit risk. For certain arrangements with licensees, the Company
is considered the agent, and only reports the revenue net of the licensor’s share. When the Company bills a third party in
full where it is an agent for the licensor, the Company records an offsetting amount in accounts payable that is only payable to
a licensee when the amount is collected from the third party. This reduces the risk, as the Company is only exposed to the amounts
receivable related to the revenue it records.



(34)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 17 | Financial instruments(continued)
| | -- | --------------------------------



| | b) | Interest rate risk
| | -- | ------------------



The Company is exposed to interest rate risk arising from
fluctuations in interest rates as its interim production financing, certain long-term debt and a portion of cash bear interest
at floating rates. A 1% fluctuation would have an approximate $1,000 to $2,000 effect on net income before income taxes.



| | c) | Liquidity risk
| | -- | --------------



The Company manages liquidity by forecasting and monitoring
operating cash flows and through the use of finance leases, interim production financing and maintaining revolving credit facilities
(note 11). As at June 30, 2016, the Company had cash on hand of $80,446 (June 30, 2015 - $42,907).



Results of operations for any period are dependent on
the number and timing of film and television programs delivered, which cannot be predicted with certainty. Consequently, the Company’s
results from operations may fluctuate materially from period-to-period and the results of any one period are not necessarily indicative
of results for future periods. Cash flows may also fluctuate and are not necessarily closely correlated with revenue recognition.
During the initial broadcast of the rights, the Company is somewhat reliant on the broadcaster’s budget and financing cycles
and at times the license period gets delayed and commences at a later date than originally projected.



The Company’s film and television revenues vary
significantly from quarter to quarter driven by contracted deliveries with the primary broadcasters. Although with the Company’s
recent diversification of its revenue mix, particularly in the strengthening of the distribution revenue stream and addition of
the broadcasting revenue stream, some of the quarterly unevenness is improving slightly and becoming more predictable. Distribution
revenues are contract and demand driven and can fluctuate significantly from year-to-year. The Company maintains appropriate cash
balances and has access to financing facilities to manage fluctuating cash flows.



The Company obtains interim production financing (note
11) to provide funds until such time as the federal and provincial film tax credits (note 6) are collected. Upon collection of
the film tax credits, the related interim production financing is repaid.



| | d) | Currency risk
| | -- | -------------



The Company’s activities involve holding foreign
currencies and incurring production costs and earning revenues denominated in foreign currencies. These activities result in exposure
to fluctuations in foreign currency exchange rates. The Company periodically enters into foreign exchange purchases contracts to
manage its foreign exchange risk on USD, GBP and Euro denominate contracts. At June 30, 2016, the Company revalued its financial
instruments denominated in a foreign currency at the prevailing exchange rates. A 1% change in the USD, GBP or Euro exchange rate
would have an approximate $500 to $1,000 effect on net income and comprehensive income.



(35)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 17 | Financial instruments(continued)
| | -- | --------------------------------



| | e) | Contractual maturity analysis for financial liabilities
| | -- | -------------------------------------------------------



|                                         |  |       |         |  | Less than |  |         | 1 to 3 |  |  | 4 to 5 |  |  | After 5 |       
|---------------------------------------- |  | ----- | ------- |  | --------- |  | ------- | ------ |  |  | ------ |  |  | ------- | ------
|                                         |  | Total |         |  | 1 year    |  |         | years  |  |  | years  |  |  | years   |       
|                                         |  | $     |         |  | $         |  |         | $      |  |  | $      |  |  | $       |       
|                                         |  |       |         |  |           |  |         |        |  |  |        |  |  |         |       
|Accounts payable and accrued liabilities |  |       | 128,444 |  |           |  | 128,444 |        |  |  | —      |  |  |         | —     
|Interim production financing             |  |       | 92,003  |  |           |  | 92,003  |        |  |  | —      |  |  |         | —     
|Other liabilities                        |  |       | 17,644  |  |           |  | —       |        |  |  | 12,697 |  |  |         | 4,947 
|Long-term debt                           |  |       | 294,396 |  |           |  | 9,355   |        |  |  | 18,739 |  |  |         | 41,302
|Finance lease obligations                |  |       | 4,567   |  |           |  | 2,549   |        |  |  | 1,864  |  |  |         | 154   
|                                         |  |       |         |  |           |  |         |        |  |  |        |  |  |         |       
|                                         |  |       | 537,054 |  |           |  | 232,351 |        |  |  | 33,300 |  |  |         | 46,403



Payments noted above do not include interest and are not
discounted.



| | f) | Fair values
| | -- | -----------



Financial instruments recorded at fair value on the consolidated
balance sheet are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
The value hierarchy has the following levels:



| | Level 1 - | valuation based on quoted prices observed in active markets
for identical assets and liabilities.
| | --------- | -------------------------------------------------------------------------------------------------

| | Level 2 - | valuation techniques based on inputs that are quoted prices
of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs
other than quoted prices used in a valuation model that are observable for that instrument, and inputs that are derived principally
from or corroborated by observable market data by correlation or other means.
| | --------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level 3 - | valuation techniques with significant unobservable market
inputs.
| | --------- | -----------------------------------------------------------------



A financial instrument is classified to the lowest of
the hierarchy for which a significant input has been considered in measuring fair value.



Fair value estimates are made at a specific point in time
based on relevant market information. These are estimates and involve uncertainties and matters of significant judgment and cannot
be determined with precision. Change in assumptions and estimates could significantly affect fair values.



Financial assets and liabilities measured at fair value



|                              |  | As at                |        
|----------------------------- |  | -------------------- | -------
|                              |  |                      |        
|                              |  | June 30, 2016        |        
|                              |  | Fair value hierarchy |        
|Derivatives                   |  |                      |        
|Embedded derivatives (2)      |  |                      | Level 2
|Foreign currency forwards (3) |  |                      | Level 2



| | (1) | The Company values its derivatives using valuations that
are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs to the valuation model.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The fair values of Embedded derivatives are determined
using valuation models.
| | --- | ------------------------------------------------------------------------------

| | (3) | The fair value of forward currency contracts is determined
using prevailing exchange rates.
| | --- | -------------------------------------------------------------------------------------------



(36)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 17 | Financial instruments(continued)
| | -- | --------------------------------



| | f) | Fair values(continued)
| | -- | ----------------------



Financial assets and liabilities not measured at fair
value



The carrying amounts reported on the financial statements
for cash and cash equivalents, restricted cash, trade receivables and accounts payable and accrued liabilities all approximate
their fair values due to their immediate or short-term nature. Bank indebtedness was renegotiated during the previous year to reflect
current interest rates; therefore, management believes the carrying amounts also approximate their fair values.



The following table summarizes the fair value and carrying
value of other financial assets and liabilities that are not recognized at fair value on a recurring basis on the consolidated
balance sheets:



|                                    |  | As
    at                         |                                                 
|----------------------------------- |  | --------------------------------- | ------------------------------------------------
|                                    |  |                                   |                                                 
|                                    |  | June
    30, 2016                 |                                                 
|                                    |  | Fair
    
    value
    hierarchy |                                                 
|                                    |  |                                   |                                                 
|Amended Term Facility(1)            |  |                                   | Level
                                         2
|Senior Secured Notes(2)             |  |                                   | Level
                                         2
|Obligations under finance leases(3) |  |                                   | Level
                                         2
|Interim production financing(4)     |  |                                   | Level
                                         2
|Other liabilities(5)                |  |                                   | Level
                                         3
|                                    |  |                                   |                                                 



| | (1) | The interest rates on the Amended Term Facility resets
every 90 day; therefore, the fair value, using a market approach approximates the carrying value.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Management estimates the fair value using a market
approach, based on publicly disclosed trades between arm's length parties.
| | --- | -----------------------------------------------------------------------------------------------------------------------------

| | (3) | Management estimates the fair value using a discounted
cash flow analysis, based on discount rates that reflect current conditions.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------

| | (4) | Interim production financing bears interest at variable
rates, therefore management believes the fair value approximates the carrying value .
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | The fair value of other liabilities, which includes
the tangible benefit obligation and the long-term portion of certain other contractual liabilities, was estimated based on discounting
the expected future cash flow at 6%. The key unobservable assumptions in calculating the fair value are the timing of the payments
over the next six years related to the tangible benefit obligation included in other liabilities, and the discount rate used for
discounting the other liabilities.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g) | Foreign currency contracts
| | -- | --------------------------



At June 30, 2016, the Company had notional principal
of $5,313US (2015 - $nil) in contracts to sell US dollars.



(37)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 18 | Commitments and contingencies
| | -- | -----------------------------



Commitments



The Company has entered into various operating leases
for operating premises and equipment. The future aggregate minimum payments are as follows:



|                         |  | $ |       
|------------------------ |  | - | ------
|                         |  |   |       
|Year ended June 30, 2017 |  |   | 7,486 
|2018                     |  |   | 7,409 
|2019                     |  |   | 6,158 
|2020                     |  |   | 5,001 
|Beyond 2020              |  |   | 27,881



The Company has entered into various contracts to buy
broadcast rights with future commitments totalling $22,880.



Contingencies



The Company is, from time-to-time, involved in various
claims, legal proceedings and complaints arising in the normal course of business and as such, provisions have been recorded where
appropriate. Management does not believe that the final determination of these claims will have a material adverse effect on the
financial position or results of operations of the Company. The maximum exposure at June 30, 2016, related to the above matters
is estimated at $400.



| | 19 | Capital disclosures
| | -- | -------------------



The Company’s objectives when managing capital
are to provide an adequate return to shareholders, safeguard its assets, maintain a competitive cost structure and continue as
a going concern in order to pursue the development, production, distribution and licensing of its film and television properties
and broadcast operations. During the year ended June 30, 2016, the Company declared dividends totalling $7,884 (2015 - $6,576).
The balance of the Company’s cash is being used to maximize ongoing development and growth effort.



The Company’s capital is summarized in
the table below:



|                                                                             |  | June 30,  2016 |         |   | June 30,  2015 | 
|---------------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | 
|                                                                             |  | $              |         |   | $              | 
|                                                                             |  |                |         |   |                | 
|Total bank indebtedness, long-term debt and obligations under capital leases |  |                | 292,073 |   |                | 
|Less: Cash                                                                   |  |                | (80,446 | ) |                | 
|                                                                             |  |                |         |   |                | 
|Net debt                                                                     |  |                | 211,627 |   |                | 
|                                                                             |  |                |         |   |                | 
|Total Shareholders’ equity                                                   |  |                | 336,835 |   |                | 
|                                                                             |  |                |         |   |                | 
|                                                                             |  |                | 548,462 |   |                | 



To facilitate the management of its capital structure,
the Company prepares annual expenditure operating budgets that are updated as necessary depending on various factors including
industry conditions and operating cash flow. The annual and updated budgets are reviewed by the Board of Directors.



(38)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 20 | Earnings per common share
| | -- | -------------------------



| | a) | Basic
| | -- | -----



Basic earnings per share is calculated by dividing the
net income by the weighted average number of common shares in issue during the period.



|                                         |  | June 30,  2016 |             |  | June 30,  2015 | 
|---------------------------------------- |  | -------------- | ----------- |  | -------------- | 
|                                         |  | $              |             |  | $              | 
|                                         |  |                |             |  |                | 
|Net income                               |  |                | 27,668      |  |                | 
|Weighted average number of common shares |  |                | 126,146,233 |  |                | 
|Basic earnings per share                 |  |                | 0.22        |  |                | 



| | b) | Diluted
| | -- | -------



Diluted earnings per common share is calculated by adjusting
the weighted average number of common shares outstanding to assume conversion of all potentially dilutive instruments which are
convertible into common shares. The Company has two categories of potentially dilutive instruments which are convertible into common
shares: stock options and warrants. For both the stock options and the warrants, a calculation is completed to determine the number
of common shares that could have been acquired at fair value (determined as the average market price of the Company’s outstanding
common shares for the period), based on the monetary value of the subscription rights attached to the stock options and warrants.
The number of shares calculated above is compared with the number of shares that would have been issued assuming exercises of the
warrants and stock options.



For the year ended June 30, 2016 the weighted average number
of potentially dilutive instruments, comprised of shares issuable in respect of warrants and stock options, was 1,536,146 respectively
(2015 - 3,005,041).



|                                         |  | June 30,  2016 |             |  | June 30,  2015 | 
|---------------------------------------- |  | -------------- | ----------- |  | -------------- | 
|                                         |  | $              |             |  | $              | 
|                                         |  |                |             |  |                | 
|Net income                               |  |                | 27,668      |  |                | 
|Weighted average number of common shares |  |                | 127,682,379 |  |                | 
|Diluted earnings per share               |  |                | 0.22        |  |                | 



(39)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 21 | Net change in non-cash balances related to operations
| | -- | -----------------------------------------------------



|                                                                |  | June 30, |         |   | June 30, | 
|--------------------------------------------------------------- |  | -------- | ------- | - | -------- | 
|                                                                |  | 2016     |         |   | 2015     | 
|                                                                |  | $        |         |   | $        | 
|                                                                |  |          |         |   |          | 
|Decrease (increase) in amounts receivable                       |  |          | (17,034 | ) |          | 
|Decrease (increase) in prepaid expenses and deposits            |  |          | 14,299  |   |          | 
|Decrease (increase) in long-term amounts receivable             |  |          | (9,662  | ) |          | 
|Increase (decrease) in accounts payable and accrued liabilities |  |          | 13,839  |   |          | 
|Increase (decrease) in deferred revenue                         |  |          | (23,404 | ) |          | 
|Tangible benefit obligation payments                            |  |          | (3,684  | ) |          | 
|                                                                |  |          | (25,646 | ) |          | 



During
the period, the Company paid and received the following:



|                  |  | $ |        |  | $ | 
|----------------- |  | - | ------ |  | - | 
|                  |  |   |        |  |   | 
|Interest paid     |  |   | 17,739 |  |   | 
|Interest received |  |   | 338    |  |   | 
|Taxes paid        |  |   | 12,943 |  |   | 



Net investment in film and television programs



|                                                                         |  | June 30, |         |   | June 30, | 
|------------------------------------------------------------------------ |  | -------- | ------- | - | -------- | 
|                                                                         |  | 2016     |         |   | 2015     | 
|                                                                         |  | $        |         |   | $        | 
|                                                                         |  |          |         |   |          | 
|Decrease (increase) in development                                       |  |          | (150    | ) |          | 
|Decrease (increase) in theatrical productions in progress                |  |          | (1,834  | ) |          | 
|Decrease (increase) in non-theatrical productions completed and released |  |          | (89,531 | ) |          | 
|Expense of film and television programs                                  |  |          | 57,792  |   |          | 
|Expense of acquired library                                              |  |          | 17,392  |   |          | 
|Decrease (increase) in program and film rights - broadcasting            |  |          | (58,810 | ) |          | 
|Expense of film and broadcast rights for broadcasting                    |  |          | 23,305  |   |          | 
|                                                                         |  |          | (51,836 | ) |          | 



Cash and cash equivalents



|                 |  | June 30, |        |  | June 30, | 
|---------------- |  | -------- | ------ |  | -------- | 
|                 |  | 2016     |        |  | 2015     | 
|                 |  | $        |        |  | $        | 
|                 |  |          |        |  |          | 
|Cash             |  |          | 69,725 |  |          | 
|Cash equivalents |  |          | 10,721 |  |          | 
|                 |  |          | 80,446 |  |          | 



(40)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 22 | Revenues and segmented information
| | -- | ----------------------------------



The Company operates production entities and offices
throughout Canada, the United States and Europe. In measuring performance, the Company does not distinguish or group its production,
distribution and merchandising operations ("Content Business") on a geographic basis. The Company has determined that
it has three reportable segments being the Content Business, CPLG, which manages copyrights, licensing and brands for third parties
and DHX Television.



|                                                                         |  | Year ended June 30, 2016 |       
|------------------------------------------------------------------------ |  | ------------------------ | ------
|                                                                         |  |                          | CPLG  
|                                                                         |  |                          | $     
|                                                                         |  |                          |       
|Revenues                                                                 |  |                          | 28,765
|Direct production cost and expenses, general and administrative expenses |  |                          | 18,116
|Segment profit                                                           |  |                          | 10,649
|Amortization                                                             |  |                          |       
|Finance expense, net                                                     |  |                          |       
|Other expense, net                                                       |  |                          |       
|Income before income taxes                                               |  |                          |       



|                             |  | As at June 30, 2016 |      
|---------------------------- |  | ------------------- | -----
|Non-current assets           |  |                     |      
|Long-term amounts receivable |  |                     | —    
|Deferred financing fees      |  |                     | —    
|Property and equipment       |  |                     | 323  
|Intangible assets            |  |                     | 8,055
|Goodwill                     |  |                     | —    
|                             |  |                     | 8,378



|                                                                       |  | As at June 30, 2016 |       
|---------------------------------------------------------------------- |  | ------------------- | ------
|Current liabilities                                                    |  |                     |       
|Accounts payable and accrued liabilities                               |  |                     | 10,778
|Deferred revenue                                                       |  |                     | 2,696 
|Interim production financing                                           |  |                     | —     
|Current portion of long-term debt and obligations under finance leases |  |                     | —     
|                                                                       |  |                     | 13,474



(41)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 22 | Revenues and segmented
information(continued)
| | -- | ---------------------------------------------



|                                                                         |  | Year ended June 30, 2015 |       
|------------------------------------------------------------------------ |  | ------------------------ | ------
|                                                                         |  |                          | CPLG  
|                                                                         |  |                          | $     
|                                                                         |  |                          |       
|Revenues                                                                 |  |                          | 14,345
|Direct production cost and expenses, general and administrative expenses |  |                          | 12,209
|Segment profit                                                           |  |                          | 2,136 
|Amortization                                                             |  |                          |       
|Finance expense, net                                                     |  |                          |       
|Acquisition costs                                                        |  |                          |       
|Other expense, net                                                       |  |                          |       
|Income before income taxes                                               |  |                          |       



|                             |  | As at June 30, 2015 |       
|---------------------------- |  | ------------------- | ------
|Non-current assets           |  |                     |       
|Long-term amounts receivable |  |                     | —     
|Deferred financing fees      |  |                     | —     
|Property and equipment       |  |                     | 549   
|Intangible assets            |  |                     | 10,743
|Goodwill                     |  |                     | —     
|                             |  |                     | 11,292



|                                                                       |  | As at June 30, 2015 |       
|---------------------------------------------------------------------- |  | ------------------- | ------
|Current liabilities                                                    |  |                     |       
|Accounts payable and accrued liabilities                               |  |                     | 12,458
|Deferred revenue                                                       |  |                     | 2,690 
|Interim production financing                                           |  |                     | —     
|Current portion of long-term debt and obligations under finance leases |  |                     | —     
|                                                                       |  |                     | 15,148



(42)







|DHX Media Ltd.                                                                                   
|-------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                   
|For the years ended June 30, 2016 and 2015                                                       
|(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)



| | 22 | Revenues and segmented
information(continued)
| | -- | ---------------------------------------------



The following table presents further components of revenue
derived from the following areas:



|                                              |  | June 30, 2016 |         |  | June 30, 2015 | 
|--------------------------------------------- |  | ------------- | ------- |  | ------------- | 
|                                              |  | $             |         |  | $             | 
|                                              |  |               |         |  |               | 
|Content Business                              |  |               |         |  |               | 
|Production revenue                            |  |               | 43,304  |  |               | 
|Distribution revenue                          |  |               | 86,517  |  |               | 
|Producer and service fee revenue              |  |               | 48,950  |  |               | 
|Merchandising and licensing and other revenue |  |               | 28,150  |  |               | 
|                                              |  |               | 206,921 |  |               | 
|                                              |  |               |         |  |               | 
|DHX Television revenue                        |  |               |         |  |               | 
|Subscriber revenue                            |  |               | 61,217  |  |               | 
|Promotion and advertising revenue             |  |               | 7,914   |  |               | 
|                                              |  |               | 69,131  |  |               | 
|                                              |  |               |         |  |               | 
|CPLG                                          |  |               |         |  |               | 
|Third party brand representation revenue      |  |               | 28,765  |  |               | 
|                                              |  |               | 304,817 |  |               | 



Of the Company’s $304,817 in revenues for the year
ended June 30, 2016, (June 30, 2015 - $264,039), $171,596 was attributable to the Company’s entities based in Canada
(2015 - $190,328), $4,998 (2015 -$15,579) was attributable to the Company’s entities based in the USA and $128,223 (2015
-$58,132) was attributable to the Companies entities based outside of Canada and the USA.



As at June 30, 2016, the following non-current assets
were attributable to the Company’s entities based in the USA: $101 of property and equipment, $209 of intangible assets,
and $896 of goodwill (June 30, 2015 - $180, $266, $867, respectively). As at June 30, 2016, the following non-current
assets were attributable to the Company’s entities based outside of Canada and the USA: $431 of property and equipment, $37,755
of intangible assets and $3,846 of goodwill (June 30, 2015 - $549, $14,364, and $4,615 respectively). All other non-current
assets were attributable to the Company’s entities based in Canada.



| | 23 | Accumulated other comprehensive loss
| | -- | ------------------------------------



As at June 30, 2016, accumulated other comprehensive
loss was comprised of cumulative translation adjustments of $20,286 (2015 - $8,355).



| | 24 | Subsequent events
| | -- | -----------------



Subsequent to June 30, 2016, 10,000 options were exercised
by employees to acquire common shares for proceeds of $33.



(43)