##### 



EXHIBIT 3 Managements discussion and analysis
   FORWARD-LOOKING STATEMENTS
   NON-GAAP FINANCIAL MEASURES
   Cinram International Inc.




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Reconciliation of EBITA and EBIT to Net Earnings
 Year endedDecember 31(unaudited, in thousands of U.S. dollars)
    
    2005
    
    
    2004EBITA
    
    $
    390,883
    
    
    $
    382,134Amortization of capital assets
    
    
    153,871
    
    
    
    146,697Amortization of intangible assets and
deferred financing fees
    
    
    69,998
    
    
    
    73,038EBIT
    
    $
    167,014
    
    
    $
    162,399Interest expense
    
    
    51,148
    
    
    
    53,102Investment income
    
    
    (932
    )
    
    
    (2,436
    )Income taxes
    
    
    34,372
    
    
    
    35,909Net earnings
    
    $
    82,426
    
    
    $
    75,824
 1. ABOUT OUR BUSINESS
     Cinram International Inc.




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Managements discussion and analysis
   Three-year revenue by product
 (in thousands of U.S. dollars)
    
    
    
    
    
    2005
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    2003DVD
    
    $
    1,062,987
    
    
    
    51
    %
    
    $
    1,025,389
    
    
    
    51
    %
    
    $
    386,413
    
    
    
    47
    %VHS video cassette
    
    
    18,113
    
    
    
    1
    %
    
    
    65,154
    
    
    
    3
    %
    
    
    108,889
    
    
    
    13
    %Audio CD/CD-ROM
    
    
    321,955
    
    
    
    15
    %
    
    
    313,420
    
    
    
    15
    %
    
    
    162,362
    
    
    
    20
    %Audio cassette
    
    
    5,751
    
    
    
    0
    %
    
    
    10,906
    
    
    
    1
    %
    
    
    10,219
    
    
    
    1
    %Printing
    
    
    234,044
    
    
    
    11
    %
    
    
    225,388
    
    
    
    11
    %
    
    
    46,626
    
    
    
    6
    %Distribution
    
    
    290,273
    
    
    
    14
    %
    
    
    208,835
    
    
    
    10
    %
    
    
    71,302
    
    
    
    9
    %Merchandising
    
    
    132,195
    
    
    
    6
    %
    
    
    143,368
    
    
    
    7
    %
    
    
    20,320
    
    
    
    2
    %Other
    
    
    32,762
    
    
    
    2
    %
    
    
    34,178
    
    
    
    2
    %
    
    
    20,762
    
    
    
    2
    %$
    2,098,080
    
    
    
    100
    %
    
    $
    2,026,638
    
    
    
    100
    %
    
    $
    826,893
    
    
    
    100
    %
 1.1 The pre-recorded media industry
    Cinram International Inc.




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1.2 Our strategy
   
    
    Reinforcing our existing relationships with customers by maintaining or improving service;
    
    Increasing the integration between us and our customers;
    
    Managing our manufacturing capacity to meet customer demand with
minimal outsourcing; and,
    
    Maintaining strong communications with our customers.
    2. 2005 PERFORMANCE
 Key performance metrics
 (in thousands of U.S. dollars, except per share data)
    
    2005
    
    
    2004
    
    
    2003Revenue
    
    $
    2,098,080
    
    
    $
    2,026,638
    
    
    $
    826,893EBITA
    
    
    390,883
    
    
    
    382,134
    
    
    
    163,617EBIT
    
    
    167,014
    
    
    
    162,399
    
    
    
    88,461Net earnings
    
    $
    82,426
    
    
    $
    75,824
    
    
    $
    53,020Basic earnings per share
    
    $
    1.44
    
    
    $
    1.34
    
    
    $
    0.95Diluted earnings per share
    
    $
    1.43
    
    
    $
    1.32
    
    
    $
    0.94
 Cinram International Inc.




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Managements discussion and analysis
 General overview
       3. SEGMENTED RESULTS
 3.1 Industry segments  Revenue
 (in thousands of U.S. dollars)
    
    
    
    
    
    2005
    
    
    
    
    
    
    2004Home video
    
    $
    1,081,100
    
    
    
    52
    %
    
    $
    1,090,543
    
    
    
    54
    %Audio/ROM
    
    
    327,706
    
    
    
    15
    %
    
    
    324,326
    
    
    
    16
    %Printing
    
    
    234,044
    
    
    
    11
    %
    
    
    225,388
    
    
    
    11
    %Distribution
    
    
    290,273
    
    
    
    14
    %
    
    
    208,835
    
    
    
    10
    %Other
    
    
    164,957
    
    
    
    8
    %
    
    
    177,546
    
    
    
    9
    %Total
    
    $
    2,098,080
    
    
    
    100
    %
    
    $
    2,026,638
    
    
    
    100
    %
 Cinram International Inc.




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3.1.1. Home Video
     3.1.2. Audio/ROM
      3.1.3. Printing
  3.1.4. Distribution
  Cinram International Inc.




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Managements discussion and analysis
   3.1.5. Other
   3.2. Geographic segments
 (in thousands of U.S. dollars)
    
    
    
    
    
    2005
    
    
    
    
    
    
    2004North America
    
    $
    1,556,294
    
    
    
    74
    %
    
    $
    1,534,229
    
    
    
    76
    %Europe
    
    
    541,786
    
    
    
    26
    %
    
    
    492,409
    
    
    
    24
    %Total
    
    $
    2,098,080
    
    
    
    100
    %
    
    $
    2,026,638
    
    
    
    100
    %
 3.2.1. North America
    Cinram International Inc.




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3.2.2. Europe
       Cinram
International Inc.




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Managements discussion and analysis
 4. GROSS PROFIT
 Year
    
    Gross profit (%)2005
    
    
    20
    %2004
    
    
    20
    %2003
    
    
    21
    %2002
    
    
    18
    %2001
    
    
    15
    %
   Start-up costs
  
    
    Training and overtime;
    
    Relocation of customers finished goods and components;
    
    Equipment relocation;
    
    Incremental overtime costs to pick and process orders manually until
automation is up and running;
    
    Manual packaging at higher costs while operators are being trained;
    
    Freight and expediting costs; and
    
    Travel expenses.
   5. GOODWILL
  6. AMORTIZATION OF INTANGIBLE ASSETS AND DEFERRED FINANCING FEES
  Cinram International Inc.




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7. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
  8. INTEREST EXPENSE
   9. INTEREST INCOME
  10. UNUSUAL ITEMS
    11. INCOME TAXES
  Cinram International Inc.




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Managements discussion and analysis
 12. EARNINGS
  13. LIQUIDITY AND CAPITAL RESOURCES
  Sources and uses of cash
 (in thousands of U.S. dollars)
    
    2005
    
    
    2004Cash from operating activities
    
    $
    257,340
    
    
    $
    129,400Cash from financing activities
    
    
    (129,068
    )
    
    
    (183,025
    )Cash from investing activities
    
    
    (75,624
    )
    
    
    (155,102
    )
      13.1. Capital spending
   Cinram International Inc.




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13.2. Long-term debt
  Interest
    
    
    
    
    
    Interest(in thousands of U.S. dollars)
    
    2005
    
    
    rate
    
    2004
    
    
    rateCredit agreement:Term loan A
    
    $
    112,226
    
    
    LIBOR + 225
    
    $
    181,050
    
    
    LIBOR + 250Maturity: Sept. 30, 2007Term loan D
    
    
    612,758
    
    
    LIBOR + 225
    
    
    658,976
    
    
    LIBOR + 300Maturity: Sept. 30, 2009$
    724,984
    
    
    
    
    $
    840,026
  13.3. Debt covenants
   
    
    75% of excess cash flow (as defined in the credit agreement);
    
    100% of net cash proceeds of non-ordinary course asset sales;
    
    100% of net proceeds of debt issuance;
    
    100% of net cash proceeds of casualty events (in excess of $2.5 million); and
    
    75% of net proceeds of equity issuance.
   Cinram International Inc.




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Managements discussion and analysis
 13.4. Long-term obligations
  Contractual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2010obligations
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    & after
    
    
    TotalLong-term debt
    
    $
    62,136
    
    
    $
    116,842
    
    
    $
    36,975
    
    
    $
    520,320
    
    
    $
    
    
    
    $
    736,273Capital lease
obligations
    
    
    958
    
    
    
    768
    
    
    
    568
    
    
    
    528
    
    
    
    2,042
    
    
    
    4,864Operating leases
    
    
    25,475
    
    
    
    23,086
    
    
    
    20,627
    
    
    
    14,862
    
    
    
    18,650
    
    
    
    102,700Total
    
    $
    88,569
    
    
    $
    140,696
    
    
    $
    58,170
    
    
    $
    535,710
    
    
    $
    20,692
    
    
    $
    843,837
   13.5. Capital stock and dividends
     14. RELATED PARTY TRANSACTIONS
  
    
    Paid $0.6 million ($1.5 million in 2004) to a law firm where one of
our Directors and one of our Officers are partners;
    
    Paid $0.2 million in 2005 ($0.2 million in 2004) in consulting fees to one of our Directors.
 Cinram International Inc.




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15. SUMMARY OF QUARTERLY RESULTS
  Earnings per shareRevenue (000s)
    
    
    
    
    
    Net earnings (000s)
    
    
    
    
    
    
    
    
    
    Basic
    
    
    
    
    
    
    
    
    
    DilutedQuarter
    
    2005
    
    2004
    
    2003
    
    2005
    
    2004
    
    2003
    
    2005
    
    2004
    
    2003
    
    2005
    
    2004
    
    2003First
    
    $
    453,818
    
    
    $
    462,237
    
    
    $
    130,261
    
    
    $
    4,075
    
    
    $
    14,972
    
    
    $
    7,297
    
    
    $
    0.07
    
    
    $
    0.27
    
    
    $
    0.13
    
    
    $
    0.07
    
    
    $
    0.26
    
    
    $
    0.13Second
    
    
    449,586
    
    
    
    425,411
    
    
    
    137,812
    
    
    
    4,584
    
    
    
    8,477
    
    
    
    8,340
    
    
    
    0.08
    
    
    
    0.15
    
    
    
    0.15
    
    
    
    0.08
    
    
    
    0.15
    
    
    
    0.15Third
    
    
    544,651
    
    
    
    494,772
    
    
    
    147,229
    
    
    
    35,543
    
    
    
    17,822
    
    
    
    13,833
    
    
    
    0.62
    
    
    
    0.31
    
    
    
    0.25
    
    
    
    0.61
    
    
    
    0.31
    
    
    
    0.24Fourth
    
    
    650,025
    
    
    
    644,218
    
    
    
    411,591
    
    
    
    38,224
    
    
    
    34,553
    
    
    
    23,550
    
    
    
    0.67
    
    
    
    0.61
    
    
    
    0.42
    
    
    
    0.67
    
    
    
    0.60
    
    
    
    0.42Year
    
    $
    2,098,080
    
    
    $
    2,026,638
    
    
    $
    826,893
    
    
    $
    82,426
    
    
    $
    75,824
    
    
    $
    53,020
    
    
    $
    1.44
    
    
    $
    1.34
    
    
    $
    0.95
    
    
    $
    1.43
    
    
    $
    1.32
    
    
    $
    0.94
  16. RISKS AND UNCERTAINTIES RELATING TO OUR BUSINESS
 16.1. Our financial performance is sensitive to economic trends and consumer preferences
in our major markets.
  16.2. Events and conditions in the motion picture industry may affect sales
of our products.
  Cinram International Inc.




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Managements discussion and analysis
  16.3. Increased costs or shortages of raw materials or energy could
adversely affect our results of operations.
  16.4. Our dependence on a limited number of large customers with
substantial bargaining power creates potential risks to our revenue and
cash flows.
   16.5. Our business could be harmed if we are unable to manage the
successful production, supply or security of our products.
   16.6. Advances in technology and changes in our customers demands may
require us to incur significant capital expenditures to remain competitive.
  Cinram International Inc.




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16.7. Due to the nature of our business, our results of operations and cash
flows may fluctuate significantly from period to period.
  16.8. Fluctuations in our quarterly and annual operating results may
adversely affect the value of our stock.
   
    
    Fluctuations in demand for our products;
 
    
    Introduction or enhancement of products and technologies by us and our competitors,
and market acceptance of these new or enhanced products and technologies;
 
    
    Events and conditions in the motion picture industry that affect the number of movies
produced and distributed on home video, the popularity of motion pictures generally, and
work stoppages by motion picture industry participants;
 
    
    Consolidation by participants in the markets in which we compete, which could result,
among other things, in pricing pressure;
 
    
    The amount and timing of our operating costs and capital expenditures, including
those related to the expansion of our business, operations and infrastructure;
 
    
    Seasonal product purchasing patterns by consumers;
 
    
    The impact of, and our ability to react to, interruptions in the entertainment
distribution chain, including work stoppages at our facilities, our customers facilities
and other points throughout the entertainment distribution chain;
 
    
    The impact of, and our ability to react to, political instability, natural disasters,
war and/or events of terrorism;
 
    
    Adverse outcomes of litigation or governmental proceedings, including any foreign,
federal, state or local tax assessments or audits; and
 
    
    Costs of litigation.
 Cinram International Inc.




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Managements discussion and analysis
  16.9. Demand and pricing for our products could be materially
adversely affected by the development or proliferation of digital
distribution alternatives, including copying and distribution of music and
video files.
   16.10. Changes in interest rates may adversely affect our cash flows and
results of operations.
  16.11. We may experience adverse effects due to exchange rate fluctuations.
  16.12. Demand and pricing for our products generally decline as our products mature.
  Cinram International Inc.




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16.13. We face significant competitive and pricing pressures in the markets we serve.
   16.14. We rely on our key personnel to manage our business effectively and
we may not be able to retain those employees or recruit additional
qualified personnel.
  16.15. We are exposed to potential claims of intellectual property infringement.
   Cinram
International Inc.




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Managements discussion and analysis
   16.16. If we fail to maintain proper and effective internal controls, our
ability to produce accurate financial statements could be impaired, which
could adversely affect our operating results, our ability to operate our
business and investors views of us.
   16.17. We conduct business internationally, which exposes us to
uncertainties and risks that could negatively affect our operations and
sales.
   Cinram International Inc.




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16.18. Work stoppages or other labour disruptions affecting our key
customers could have an adverse effect on our profitability and financial
condition.
  16.19. Our manufacturing operations are subject to environmental laws and
requirements that may impose material liabilities.
  17. CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   17.1. Business combinations
  Cinram International Inc.




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Managements discussion and analysis
  17.2. Revenue recognition
  17.3. Intangible assets
   17.4. Goodwill
  17.5. Provisions for volume rebates
  Cinram International Inc.




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17.6. Royalty accruals
  17.7. Allowance for doubtful accounts
  17.8. Income tax valuation allowance
  17.9. Restructuring costs
  17.10. Long-lived assets
  Cinram
International Inc.




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Managements discussion and analysis
    17.11. Asset retirement obligations
  17.12. Recently issued accounting pronouncements  17.12.1. Liabilities and equity
   17.12.2. Consolidation of variable interest entities
  Cinram International Inc.




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17.12.3. Arrangements containing a lease
  17.12.4. Non-monetary transactions
  17.12.5. Financial instruments
  Cinram
International Inc.