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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
OF 1934
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 Date of event requiring this shell company report
 For the transition period from  to
 Commission file number: 333-13792
 QUEBECOR MEDIA INC.
 Province of Quebec, Canada    612 St-Jacques Street
Montreal, Quebec, Canada H3C 4M8
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  None
  73/4% Senior Notes due March 2016 (issued January 17, 2006)
73/4% Senior Notes due March 2016 (issued October 5, 2007)
  123,602,807 Common Shares
2,055,000 Cumulative First Preferred Shares, Series G
  o þ
  o þ
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
  o o þ
  þ o
  o þ




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##### 



TABLE OF CONTENTS
 PageExplanatory Notes
    
    iiIndustry and Market Data
    
    iiPresentation of Financial Information
    
    iiExchange Rate Information
    
    iiiCautionary Statement Regarding Forward-Looking Statements
    
    ivPART IITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    1ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    1ITEM 3  KEY INFORMATION
    
    
    1ITEM 4  INFORMATION ON THE COMPANY
    
    
    25ITEM 4A  UNRESOLVED STAFF COMMENTS
    
    
    79ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    80ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    135ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    146ITEM 8  FINANCIAL INFORMATION
    
    
    150ITEM 9  THE OFFER AND LISTING
    
    
    152ITEM 10  ADDITIONAL INFORMATION
    
    
    153ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    174ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    175PART IIITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    176ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    176ITEM 15  CONTROLS AND PROCEDURES
    
    
    176ITEM 16  [RESERVED]
    
    
    177ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    177ITEM 16B  CODE OF ETHICS
    
    
    177ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    177ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    178ITEM 16E  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    178ITEM 16F  CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    178ITEM 16G  CORPORATE GOVERNANCE
    
    
    179PART IIIITEM 17  FINANCIAL STATEMENTS
    
    
    179ITEM 18  FINANCIAL STATEMENTS
    
    
    180ITEM 19  EXHIBITS
    
    
    180Signature
    
    
    186Index to Consolidated Financial Statements
    
    
    187EX-1.15EX-4.18EX-7.1EX-8.1EX-11.1EX-12.1EX-12.2EX-13.1EX-13.2EX-99.1




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EXPLANATORY NOTES
 Companies Act
  3 4 3 4
 
 INDUSTRY AND MARKET DATA
 ®
  
 PRESENTATION OF FINANCIAL INFORMATION




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EXCHANGE RATE INFORMATION
  Year Ended:
    
    Average (1)
    
    High
    
    Low
    
    Period EndDecember 31, 2008
    
    
    0.9381
    
    
    
    1.0289
    
    
    
    0.7711
    
    
    
    0.8166December 31, 2007
    
    
    0.9304
    
    
    
    1.0905
    
    
    
    0.8437
    
    
    
    1.0120December 31, 2006
    
    
    0.8818
    
    
    
    0.9099
    
    
    
    0.8528
    
    
    
    0.8581December 31, 2005
    
    
    0.8253
    
    
    
    0.8690
    
    
    
    0.7872
    
    
    
    0.8577December 31, 2004
    
    
    0.7683
    
    
    
    0.8493
    
    
    
    0.7159
    
    
    
    0.8308Month Ended:
    
    Average (2)
    
    
    High
    
    
    Low
    
    
    Period EndMarch 2009 (through March 11, 2009)
    
    
    0.7772
    
    
    
    0.7834
    
    
    
    0.7692
    
    
    
    0.7808February 28, 2009
    
    
    0.8031
    
    
    
    0.8202
    
    
    
    0.7870
    
    
    
    0.7870January 31, 2009
    
    
    0.8155
    
    
    
    0.8458
    
    
    
    0.7849
    
    
    
    0.8088December 31, 2008
    
    
    0.8100
    
    
    
    0.8358
    
    
    
    0.7711
    
    
    
    0.8166November 30, 2008
    
    
    0.8209
    
    
    
    0.8696
    
    
    
    0.7779
    
    
    
    0.8083October 31, 2008
    
    
    0.8441
    
    
    
    0.9426
    
    
    
    0.7726
    
    
    
    0.8220September 30, 2008
    
    
    0.9449
    
    
    
    0.9673
    
    
    
    0.9263
    
    
    
    0.9435
 
 (1)
    
    The average of the exchange rates for all days during the applicable year.(2)
    
    The average of the exchange rates for all days during the applicable month.




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our ability to successfully build and deploy our new wireless services
network on the timeline that we are targeting, and to implement successfully
our strategy of becoming a facilities-based wireless provider;
    
    general economic, financial or market conditions and variations in the
businesses of our local, regional or national newspapers and broadcasting
advertisers;
    
    the intensity of competitive activity in the industries in which we
operate, including competition from other communications and advertising media
and platforms;
    
    fragmentation of the media landscape;
    
    unanticipated higher capital spending required to address continued
development of competitive alternative technologies or the inability to obtain
additional capital to continue the development of our business;
    
    our ability to implement successfully our business and operating strategies
and manage our growth and expansion;
    
    our ability to successfully restructure our newspapers operations to
optimize their efficiency in the context of the changing newspapers industry;
    
    disruptions to the network through which we provide our digital television,
Internet access and telephony services, and our ability to protect such
services from piracy;
    
    labour disputes or strikes, including the current labour dispute affecting
our Journal de Montrealnewspaper;
    
    changes in our ability to obtain services and equipment critical to our
operations;
    
    changes in laws and regulations, or in their interpretations, which could
result in, among other things, the loss (or reduction in value) of our
licenses or markets or in an increase in competition, compliance costs or
capital expenditures;
    
    our substantial indebtedness, the tightening of credit markets, and the
restrictions on our business imposed by the terms of our debt; and
    
    interest rate fluctuations that affect a portion of our interest payment
requirements on long-term debt.




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v




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PART I
 
 ITEM 1   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2   OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3   KEY INFORMATION
 A  Selected Financial Data
   1




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CANADIAN GAAP DATA
 Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions, except ratio)STATEMENT OF INCOME DATA:RevenuesCable
    
    $
    1,804.2
    
    
    $
    1,552.6
    
    
    $
    1,309.5
    
    
    $
    1,080.3
    
    
    $
    937.6Newspapers
    
    
    1,181.4
    
    
    
    1,073.9
    
    
    
    966.0
    
    
    
    948.2
    
    
    
    913.4Broadcasting
    
    
    436.7
    
    
    
    415.5
    
    
    
    393.3
    
    
    
    401.4
    
    
    
    358.0Leisure and Entertainment
    
    
    301.9
    
    
    
    329.8
    
    
    
    315.8
    
    
    
    255.4
    
    
    
    241.7Interactive Technologies and
Communications
    
    
    89.6
    
    
    
    82.0
    
    
    
    73.9
    
    
    
    65.1
    
    
    
    51.9Inter-segment
    
    
    (83.7
    )
    
    
    (87.9
    )
    
    
    (59.9
    )
    
    
    (55.0
    )
    
    
    (45.7
    )3,730.1
    
    
    
    3,365.9
    
    
    
    2,998.6
    
    
    
    2,695.4
    
    
    
    2,456.9Cost of sales, selling and administrative
expenses
    
    
    (2,610.6
    )
    
    
    (2,402.0
    )
    
    
    (2,199.0
    )
    
    
    (1,963.3
    )
    
    
    (1,759.7
    )Amortization
    
    
    (318.5
    )
    
    
    (290.4
    )
    
    
    (260.7
    )
    
    
    (231.9
    )
    
    
    (225.9
    )Financial expenses
    
    
    (276.0
    )
    
    
    (230.1
    )
    
    
    (212.9
    )
    
    
    (270.8
    )
    
    
    (279.7
    )Loss on valuation and translation of
financial instruments
    
    
    (3.7
    )
    
    
    (9.9
    )
    
    
    (11.7
    )
    
    
    (14.5
    )
    
    
    (34.9
    )Restructuring of operations, impairment of
assets and other special items
    
    
    (54.6
    )
    
    
    (11.2
    )
    
    
    (16.7
    )
    
    
    0.3
    
    
    
    6.5Loss on debt refinancing
    
    
    
    
    
    
    (1.0
    )
    
    
    (342.6
    )
    
    
    (60.0
    )
    
    
    (4.8
    )Impairment of goodwill and intangible assets
    
    
    (671.2
    )
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    Income taxes
    
    
    (154.7
    )
    
    
    (74.8
    )
    
    
    53.7
    
    
    
    (43.5
    )
    
    
    (37.4
    )Non-controlling interest
    
    
    (23.1
    )
    
    
    (19.2
    )
    
    
    (0.4
    )
    
    
    (16.2
    )
    
    
    (31.7
    )Income (loss) from discontinued operations
    
    
    2.3
    
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (1.1
    )Net (loss) income
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2OTHER FINANCIAL DATA AND RATIO:Operating income (1)
    
    $
    1,119.5
    
    
    $
    963.9
    
    
    $
    799.6
    
    
    $
    732.1
    
    
    $
    697.2Additions to property, plant and equipment
    
    
    527.3
    
    
    
    468.7
    
    
    
    435.5
    
    
    
    319.8
    
    
    
    181.1Comprehensive (loss) income
    
    
    (439.6
    )
    
    
    373.1
    
    
    
    (168.5
    )
    
    
    95.2
    
    
    
    88.7Ratio of earnings to fixed charges or
coverage deficiency (2)(3) (unaudited)
    
    $
    214.3
    
    
    
    2.7
    x
    
    $
    231.1
    
    
    
    1.5
    x
    
    
    1.5
    x
 At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions)BALANCE SHEET DATA:Cash and cash equivalents
    
    $
    22.5
    
    
    $
    26.1
    
    
    $
    34.1
    
    
    $
    97.4
    
    
    $
    108.8Total assets
    
    
    7,996.2
    
    
    
    7,560.9
    
    
    
    6,583.9
    
    
    
    6,675.5
    
    
    
    6,509.2Total debt (current and long-term portions)
    
    
    4,335.8
    
    
    
    3,027.5
    
    
    
    2,796.1
    
    
    
    2,533.2
    
    
    
    2,548.8Capital stock
    
    
    1,752.4
    
    
    
    1,752.4
    
    
    
    1,752.4
    
    
    
    1,773.7
    
    
    
    1,773.7Shareholders equity
    
    
    1,943.0
    
    
    
    2,450.3
    
    
    
    2,237.0
    
    
    
    2,450.1
    
    
    
    2,459.9Cash dividends declared
    
    
    65.0
    
    
    
    110.0
    
    
    
    23.7
    
    
    
    105.0
    
    
    
    20.0Number of common shares outstanding
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
 2




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U.S. GAAP DATA
 Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions, except ratio)STATEMENT OF INCOME DATA:RevenuesCable
    
    $
    1,804.7
    
    
    $
    1,552.0
    
    
    $
    1,312.2
    
    
    $
    1,086.5
    
    
    $
    946.9Newspapers
    
    
    1,181.4
    
    
    
    1,073.9
    
    
    
    966.0
    
    
    
    948.2
    
    
    
    913.4Broadcasting
    
    
    436.7
    
    
    
    415.5
    
    
    
    393.3
    
    
    
    401.4
    
    
    
    358.0Leisure and Entertainment
    
    
    301.9
    
    
    
    329.8
    
    
    
    315.8
    
    
    
    255.4
    
    
    
    241.7Interactive Technologies and
Communications
    
    
    89.6
    
    
    
    82.0
    
    
    
    73.9
    
    
    
    65.1
    
    
    
    51.9Inter-segment
    
    
    (83.7
    )
    
    
    (87.9
    )
    
    
    (59.9
    )
    
    
    (55.0
    )
    
    
    (45.7
    )3,730.6
    
    
    
    3,365.3
    
    
    
    3,001.3
    
    
    
    2,701.6
    
    
    
    2,466.2Cost of sales, selling and administrative
expenses
    
    
    (2,605.3
    )
    
    
    (2,406.5
    )
    
    
    (2,207.8
    )
    
    
    (1,967.5
    )
    
    
    (1,758.8
    )Amortization
    
    
    (316.5
    )
    
    
    (287.7
    )
    
    
    (257.9
    )
    
    
    (229.6
    )
    
    
    (225.7
    )Financial expenses
    
    
    (276.0
    )
    
    
    (230.1
    )
    
    
    (212.9
    )
    
    
    (270.8
    )
    
    
    (279.7
    )Gain (loss) on valuation and translation of
financial instruments
    
    
    0.1
    
    
    
    1.0
    
    
    
    (7.1
    )
    
    
    (33.2
    )
    
    
    (42.5
    )Restructuring of operations, impairment of
assets and other special items
    
    
    (54.6
    )
    
    
    (11.2
    )
    
    
    (16.7
    )
    
    
    1.8
    
    
    
    6.5Loss on debt refinancing
    
    
    
    
    
    
    (1.0
    )
    
    
    (275.7
    )
    
    
    (48.5
    )
    
    
    (4.8
    )Impairment of goodwill and intangible assets
    
    
    (667.4
    )
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    Income taxes
    
    
    (165.1
    )
    
    
    (99.7
    )
    
    
    13.3
    
    
    
    (7.6
    )
    
    
    (43.4
    )Non-controlling interest
    
    
    (24.8
    )
    
    
    (17.0
    )
    
    
    (1.3
    )
    
    
    (18.4
    )
    
    
    (35.1
    )Income (loss) from discontinued operations
    
    
    2.3
    
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (0.8
    )Net (loss) income
    
    $
    (376.7
    )
    
    $
    312.9
    
    
    $
    (142.8
    )
    
    $
    128.8
    
    
    $
    81.9OTHER FINANCIAL DATA AND RATIO:Operating income (1)
    
    $
    1,125.3
    
    
    $
    958.8
    
    
    $
    793.5
    
    
    $
    734.1
    
    
    $
    707.4Additions to property, plant and equipment
    
    
    527.3
    
    
    
    468.7
    
    
    
    435.5
    
    
    
    319.8
    
    
    
    181.1Comprehensive (loss) income
    
    
    (401.2
    )
    
    
    356.9
    
    
    
    (56.4
    )
    
    
    160.0
    
    
    
    (25.5
    )Ratio of earnings to fixed charges or
coverage deficiency (2)(3) (unaudited)
    
    $
    198.9
    
    
    
    2.7
    x
    
    $
    162.9
    
    
    
    1.5
    x
    
    
    1.5
    x
 At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in millions)BALANCE SHEET DATA:Cash and cash equivalents
    
    $
    22.5
    
    
    $
    26.1
    
    
    $
    34.1
    
    
    $
    97.4
    
    
    $
    108.8Total assets
    
    
    7,967.6
    
    
    
    7,523.4
    
    
    
    6,533.4
    
    
    
    6,664.1
    
    
    
    6,480.1Total debt (current and long-term portion)
    
    
    4,318.6
    
    
    
    3,016.1
    
    
    
    2,766.3
    
    
    
    2,501.1
    
    
    
    2,529.0Capital stock
    
    
    1,752.4
    
    
    
    1,752.4
    
    
    
    1,752.4
    
    
    
    1,773.7
    
    
    
    1,773.7Shareholders equity
    
    
    1,953.1
    
    
    
    2,407.9
    
    
    
    2,155.3
    
    
    
    2,275.2
    
    
    
    2,204.3Cash dividends declared
    
    
    65.0
    
    
    
    110.0
    
    
    
    23.7
    
    
    
    105.0
    
    
    
    20.0Number of common shares outstanding
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
 
 (1)
    
    Quebecor Media defines operating income, reconciled to net (loss) income under Canadian GAAP,
as net (loss) income before amortization, financial expenses, loss on valuation and
translation of financial instruments, restructuring of operations, impairment of assets and
other special items, loss on debt refinancing, impairment of goodwill and intangible assets,
income taxes, non-controlling interest and income (loss) from  discontinued operations. Quebecor Media defines operating income, reconciled to net (loss) income under U.S. GAAP, as
net (loss) income before amortization, financial expenses, gain (loss) on valuation and
translation of financial instruments, restructuring of operations, impairment of assets
and other special items, loss on debt refinancing, impairment of goodwill and intangible
assets, income taxes, non-controlling interest, and income (loss) from 3




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discontinued
operations. Operating income as defined above is not a measure of results that is consistent
with Canadian GAAP or U.S. GAAP. It is not intended to be regarded as an alternative to other
financial operating performance measures or to the statement of cash flows as a measure of
liquidity and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with Canadian GAAP or U.S. GAAP. Our parent company,
Quebecor, considers the media segment as a whole and uses operating income in order to assess
the performance of its investment in Quebecor Media. Our management and Board of Directors
use this measure in evaluating Quebecor Medias consolidated results as well as results of
Quebecor Medias operating segments. As such, this measure eliminates the significant level
of non-cash depreciation of tangible assets and amortization of certain intangible assets,
and it is unaffected by the capital structure or investment activities of Quebecor Media and
of its segments. Operating income is also relevant because it is a significant component of
Quebecor Medias annual incentive compensation programs. A limitation of this measure,
however, is that it does not reflect the periodic costs of capitalized tangible and
intangible assets used in generating revenues in Quebecor Medias segments. Quebecor Media
uses other measures that do reflect such costs, such as cash flows from segment operations
and free cash flows from continuing operations. In addition, measures like operating income
are commonly used by the investment community to analyze and compare the performance of
companies in the industries in which we are engaged. Our definition of operating income may
not be the same as similarly titled measures reported by other companies. The following
table provides a reconciliation under Canadian GAAP of operating income to net (loss) income
as presented in our consolidated financial statements: Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Reconciliation of operating income to net (loss)  income 

(Canadian GAAP) (in millions of Canadian
dollars)Operating incomeCable
    
    $
    797.2
    
    
    $
    642.7
    
    
    $
    512.5
    
    
    $
    413.3
    
    
    $
    363.8Newspapers
    
    
    227.1
    
    
    
    232.8
    
    
    
    217.7
    
    
    
    231.2
    
    
    
    232.3Broadcasting
    
    
    66.3
    
    
    
    59.4
    
    
    
    42.1
    
    
    
    53.0
    
    
    
    80.5Leisure and Entertainment
    
    
    20.5
    
    
    
    27.0
    
    
    
    19.3
    
    
    
    27.0
    
    
    
    22.7Interactive Technologies and Communications
    
    
    5.1
    
    
    
    2.8
    
    
    
    7.5
    
    
    
    3.9
    
    
    
    2.3Head office
    
    
    3.3
    
    
    
    (0.8
    )
    
    
    0.5
    
    
    
    3.7
    
    
    
    (4.4
    )1,119.5
    
    
    
    963.9
    
    
    
    799.6
    
    
    
    732.1
    
    
    
    697.2Amortization
    
    
    (318.5
    )
    
    
    (290.4
    )
    
    
    (260.7
    )
    
    
    (231.9
    )
    
    
    (225.9
    )Financial expenses
    
    
    (276.0
    )
    
    
    (230.1
    )
    
    
    (212.9
    )
    
    
    (270.8
    )
    
    
    (279.7
    )Loss on valuation and translation of
financial instruments
    
    
    (3.7
    )
    
    
    (9.9
    )
    
    
    (11.7
    )
    
    
    (14.5
    )
    
    
    (34.9
    )Restructuring of operations, impairment of
assets and other special items
    
    
    (54.6
    )
    
    
    (11.2
    )
    
    
    (16.7
    )
    
    
    0.3
    
    
    
    6.5Loss on debt refinancing
    
    
    
    
    
    
    (1.0
    )
    
    
    (342.6
    )
    
    
    (60.0
    )
    
    
    (4.8
    )Impairment of goodwill and intangible assets
    
    
    (671.2
    )
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    Income taxes
    
    
    (154.7
    )
    
    
    (74.8
    )
    
    
    53.7
    
    
    
    (43.5
    )
    
    
    (37.4
    )Non-controlling interest
    
    
    (23.1
    )
    
    
    (19.2
    )
    
    
    (0.4
    )
    
    
    (16.2
    )
    
    
    (31.7
    )Income (loss) from discontinued operations
    
    
    2.3
    
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (1.1
    )Net (loss) income
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
 4




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Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Reconciliation of
operating income to
net (loss) income

(U.S. GAAP) (in
millions of Canadian
dollars)Operating IncomeCable
    
    $
    799.0
    
    
    $
    640.4
    
    
    $
    508.8
    
    
    $
    411.4
    
    
    $
    362.2Newspapers
    
    
    228.0
    
    
    
    231.7
    
    
    
    217.0
    
    
    
    230.6
    
    
    
    236.9Broadcasting
    
    
    67.1
    
    
    
    62.1
    
    
    
    43.4
    
    
    
    58.3
    
    
    
    87.5Leisure and Entertainment
    
    
    20.5
    
    
    
    26.9
    
    
    
    19.3
    
    
    
    26.2
    
    
    
    22.9Interactive Technologies and Communications
    
    
    5.1
    
    
    
    2.8
    
    
    
    7.5
    
    
    
    3.9
    
    
    
    2.3Head office
    
    
    5.6
    
    
    
    (5.1
    )
    
    
    (2.5
    )
    
    
    3.7
    
    
    
    (4.4
    )1,125.3
    
    
    
    958.8
    
    
    
    793.5
    
    
    
    734.1
    
    
    
    707.4Amortization
    
    
    (316.5
    )
    
    
    (287.7
    )
    
    
    (257.9
    )
    
    
    (229.6
    )
    
    
    (225.7
    )Financial expenses
    
    
    (276.0
    )
    
    
    (230.1
    )
    
    
    (212.9
    )
    
    
    (270.8
    )
    
    
    (279.7
    )Gain (loss) on valuation and translation of
financial instrument
    
    
    0.1
    
    
    
    1.0
    
    
    
    (7.1
    )
    
    
    (33.2
    )
    
    
    (42.5
    )Restructuring of operations, impairment of assets
and other special items
    
    
    (54.6
    )
    
    
    (11.2
    )
    
    
    (16.7
    )
    
    
    1.8
    
    
    
    6.5Loss on debt refinancing
    
    
    
    
    
    
    (1.0
    )
    
    
    (275.7
    )
    
    
    (48.5
    )
    
    
    (4.8
    )Impairment of goodwill and intangible assets
    
    
    (667.4
    )
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    Income taxes
    
    
    (165.1
    )
    
    
    (99.7
    )
    
    
    13.3
    
    
    
    (7.6
    )
    
    
    (43.4
    )Non-controlling interest
    
    
    (24.8
    )
    
    
    (17.0
    )
    
    
    (1.3
    )
    
    
    (18.4
    )
    
    
    (35.1
    )Income (loss) from discontinued operations
    
    
    2.3
    
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (0.8
    )Net (loss) income
    
    $
    (376.7
    )
    
    $
    312.9
    
    
    $
    (142.8
    )
    
    $
    128.8
    
    
    $
    81.9
 (2)
    
    For the purpose of calculating the ratio of earnings to fixed charges, (i) earnings consist
of net (loss) income plus non-controlling interest in subsidiary, income taxes, fixed charges,
amortized capitalized interest, less interest capitalized and (ii) fixed charges consist of
interest expensed and capitalized, plus amortized premiums, discounts and capitalized expenses
relating to indebtedness and an estimate of the interest within rental expense.
 (3)
    
    Our 2008 coverage deficiency was significant due to the non-cash charge related to an
impairment of goodwill and intangible assets in the amount of $671.2 million pursuant to
Canadian GAAP ($667.4 million pursuant to U.S. GAAP). Our 2006 coverage deficiency was
significant due to the non-cash charge related to an impairment of goodwill and intangible
assets in the amount of $180.0 million and to our loss on debt refinancing in the amount of
$342.6 million pursuant to Canadian GAAP ($275.7 million pursuant to U.S. GAAP). We believe
cash flows from continuing operating activities and available sources of financing will be
sufficient to cover our operating, investing and financing needs during the twelve months
following December 31, 2008.
 B   Capitalization and Indebtedness
  C   Reasons for the Offer and Use of Proceeds
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D   Risk Factors
 This section describes some of the risks that could materially affect our business, revenues,
results of operations and financial condition, as well as the market value of our issued and
outstanding Senior Notes. The risks below are not the only ones that we face. Some risks may not
yet be known to us and some that we do not currently believe to be material could later turn out to
be material. The factors below should be considered in connection with any forward-looking
statements in this document and with the cautionary statements contained in the section Cautionary
Statement Regarding Forward-Looking Statements at the forepart of this annual report.
 Risks Relating to Our Business
 Our cable and telecommunications businesses operate in highly competitive industries with emerging
technological developments, and our inability to compete successfully could have a material adverse
effect on our business, prospects, revenues, financial condition and results of operations.
     6




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Delays in the launch of our facilities-based wireless services, including due to issues relating to
infrastructure buildout and tower-sharing requirements, could impair our ability to gain market
share and could adversely affect our ability to deploy and operate our wireless operations
successfully and profitably.
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We may encounter difficulties in reaching out-of-territory and in-territory roaming agreements with
incumbent wireless operators.
   Videotron is using a new technology for which only a limited number of handsets might be available
at the time of commercial launch.
  We are regularly required to make capital expenditures to remain technologically and economically
competitive. We may not be able to obtain additional capital to implement our business strategies
and make certain capital expenditures.
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We compete, and will continue to compete, with alternative technologies, and we may be required to
invest a significant amount of capital to address continuing technological evolution and
development.
  We may not successfully implement our business and operating strategies.
  We have grown rapidly and are seeking to continue our growth. This rapid growth presents
significant strains on our management. If we do not effectively manage our growth, our business,
results of operations and financial condition could be adversely affected.
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We depend on key personnel.
  Our newspapers and broadcasting businesses face substantial competition for advertising. In
addition, advertising spend is being affected by the recent deterioration in certain economic
conditions as well as the continuing fragmentation of the media landscape.
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Our newspapers business and our broadcasting business each face substantial competition for
readership and audience share, respectively. Our newspapers circulation levels and broadcasting
audience share may continue to decline as consumers migrate to other media alternatives, which
could have a material adverse effect on our revenues, results of operations, financial condition,
business and prospects.
   Our content may not attract a large audiences/readership, which may limit our ability to generate
advertising and circulation revenue.
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Our financial performance could be materially adversely affected if we cannot continue to
distribute a wide range of television programming on reasonable terms.
    We may be adversely affected by variations in our costs, quality and variety of our television
programming.
   We may be adversely affected by variations in the cost of newsprint. In addition, our newspaper
operations are labour-intensive, resulting in a relatively high fixed-cost structure.
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We provide our digital television, Internet access and telephony services through a single
clustered network, which may be more vulnerable to widespread disruption.
  We may not be able to protect our services from piracy, which may have an adverse effect on our
customer base and lead to a possible decline in revenues.
  Malicious and abusive Internet practices could impair our cable data services.
  We depend on third-party suppliers and providers for services and other items critical to our
operations.
  13




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We are dependent upon our information technology systems and those of certain third-parties and the
inability to enhance our systems, or to protect them from a security breach or disaster, could have
an adverse impact on our financial results and operations.
  We may be adversely affected by strikes and other labour protests.
  
    
    Videotron is party to 5 collective bargaining agreements, representing
approximately 2,850 employees. Of these collective bargaining agreements, one
(representing approximately 40 employees) has expired, and negotiations are
ongoing. Two others, representing approximately 2,510 employees, or 88% of
Videotrons unionized employees, will expire in December 2009. The remaining
two collective bargaining agreements, representing approximately 300
employees, or 10% of Videotrons unionized workforce will expire between
December 31, 2010 and August 31, 2011;
    
    Sun Media (including Osprey Media) is  party to 84 collective bargaining agreements,
representing approximately 2,480 employees. One collective bargaining
agreement, representing 6 employees, is under negotiation. 8 collective
bargaining agreements, representing approximately 510 employees, or 20% of its
unionized workforce, have expired. Negotiations regarding these collective
bargaining agreements are either in progress or will be undertaken in 2009.
One collective agreement, representing approximately 40 employees, is under
arbitration. The other collective bargaining agreements are scheduled to
expire on various dates through April 2012;
    
    TVA Group is party to 15 collective bargaining agreements, representing
approximately 810 employees. Of this number, 5 collective bargaining
agreements, representing approximately 120 employees, or 15% of its unionized
workforce, have expired. Negotiations regarding these collective bargaining
agreements are either in progress or will be undertaken in 2009. 3 collective
bargaining agreements, representing approximately 550 employees, or 68% of its
unionized workforce, will expire at the end of 2009. The others are scheduled
to expire at various dates between April 20, 2011 and October 31, 2013; and
    
    The other 8 collective bargaining agreements, representing approximately
520 employees or 8% of our unionized employees, will expire between the end of
April 2009 and June 2010.
 Journal de Montreal Journal de Montreal
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Two of our publications represent a significant portion of the revenues generated by our newspapers
business.
 Journal de Montreal Toronto Sun Journal de Montreal Toronto Sun Journal de Montreal Toronto Sun Journal de Montreal
 We may be adversely affected by litigation and other claims.
  Our auditors are not required to issue a report on our internal control over financial reporting in
this annual report.
   We will adopt new accounting standards in 2011, and this adoption may have a material impact on our
financial statements.
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Risks Relating to Our Industry
 We are subject to extensive government regulation. Changes in government regulation could adversely
affect our business, financial condition, prospects and results of operations.
  Broadcasting Act Telecommunications Act Broadcasting Act Telecommunications Act Broadcasting Act Telecommunications Act Radiocommunication Act Competition Act
 Radiocommunication Act
  16




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Diversity of Voices
 Broadcasting Act Regulatory frameworks for broadcasting distribution
undertakings and discretionary programming services Broadcasting Distribution Regulations
 Telecommunications
Act
   17




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The CRTC may not renew our existing distribution licenses or grant us new licenses on acceptable
terms, or at all.
    Industry Canada may not renew Videotrons AWS licenses on acceptable terms, or at all.
  We are required to provide third-party Internet service providers with access to our cable systems,
which may result in increased competition.
     We may need to support increasing costs in securing access to support structures needed for our
cable network.
 Telecommunications Act
  18




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Long-Distance Equal Access could adversely affect our revenues.
  We are subject to a variety of environmental laws and regulations.
  Risks Relating to our Senior Notes and our Capital Structure
 Our indebtedness and significant interest payment requirements could adversely affect our financial
condition and therefore make it more difficult for us to fulfill our obligations, including our
obligations under our Senior Notes.
  
    
    increase our vulnerability to general adverse economic and industry
conditions;
    
    require us to dedicate a substantial portion of our cash flow from
operations to making interest and principal payments on our indebtedness,
thereby reducing the availability of our cash flow to fund capital
expenditures, working capital and other general corporate purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our
businesses and the industries in which we operate;
    
    place us at a competitive disadvantage compared to our competitors that
have less debt or greater financial resources; and
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##### Table of Contents




    
    limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds on
commercially reasonable terms, if at all.
  Restrictive covenants in our outstanding debt instruments may reduce our operating and financial
flexibility, which may prevent us from capitalizing on certain business opportunities.
  
    
    borrow money or sell preferred stock;
    
    issue guarantees of debt;
    
    make certain types of investments;
    
    pay dividends and make other restricted payments;
    
    create or permit certain liens;
    
    use the proceeds from sales of assets and subsidiary stock;
    
    enter into asset sales;
    
    create or permit restrictions on the ability of our restricted
subsidiaries, if any, to pay dividends or make other distributions;
    
    engage in certain transactions with affiliates; and
    
    enter into mergers, consolidations and transfers of all or substantially
all of our assets.
  We are a holding company and depend on our subsidiaries to generate sufficient cash flow to meet
our debt service obligations, including payments on our Senior Notes.
  20




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##### Table of Contents



We or our subsidiaries may need to refinance certain of our indebtedness. The inability to do so
on favourable terms, or at all, could have a material adverse effect on us.
  If the world-wide financial crisis continues, the volatility and disruptions in the capital and
credit markets could adversely affect our business, including affecting the cost of new capital,
our ability to refinance our scheduled debt maturities and meet our other obligations as they come
due.
     21




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We may be adversely affected by exchange rate fluctuations.
     There is no public market for our Senior Notes.
   22




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##### Table of Contents



Non-U.S. holders of our Senior Notes are subject to restrictions on the transfer or resale of our
notes.
  We may not be able to finance an offer to purchase our Senior Notes following a change of control
as required by the respective indentures governing our notes because we may not have sufficient
funds at the time of the change of control or our Senior Secured Credit Facilities may not allow
the repurchases.
   Canadian bankruptcy and insolvency laws may impair the trustees ability to enforce remedies under
our Senior Notes.
 Bankruptcy and Insolvency Act Companies
Creditors Arrangement Act
 Bankruptcy and Insolvency Act Companies Creditors Arrangement Act
 U.S. investors in our Senior Notes may have difficulties enforcing civil liabilities.
  23




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24




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ITEM 4  INFORMATION ON THE COMPANY
 A  History and Development of Quebecor Media
 CT Corporation System
 Companies Act
   
    
    On March 5, 2009, Videotron issued US$260.0 million aggregate principal
amount of its
91/8%
Senior Notes due 2018 for net proceeds of $332.4 million
(including accrued interest and net of financing expenses).
Videotron used the proceeds to repay drawings on its senior secured credit
facility and for general corporate purposes.
    
    In October 2008, we and Videotron announced our intention to invest between
$800.0 million and $1.0 billion over the next four years to roll out our own AWS
network. This amount includes the cost of the acquired spectrum and operating
licenses (which has already been paid), the cost of network buildout and
initial operating costs (but excludes any capitalized interest). We plan to
fund future investments in AWS through cash flow generation and available
credit facilities. We currently anticipate that our new High Speed Packet
Access (HSPA) network will be operational in 9 to 15 months.
    
    In July 2008, in the context of Canadas spectrum auction for third
generation AWS, we acquired spectrum licenses for AWS covering all regions of
the province of Quebec and certain areas of Ontario. We were the successful
bidder for 40 MHz spectrum licenses in all parts of the Province of Quebec,
except the Outaouais region where we obtained 20 MHz spectrum licenses and
certain regions of Quebec where we obtained 50 MHz spectrum licenses. We also
acquired 20 MHz spectrum licenses in Eastern Ontario and 10 MHz spectrum
licenses in the city of Toronto. These licenses, the control of which was
transferred from Quebecor Media to Videotron subsequent to the completion of
the auction, were issued by Industry Canada on December 23, 2008. The spectrum
enables Videotron to pursue the buildout of an AWS network infrastructure and
become a facilities-based provider offering advanced wireless services,
including high-speed Internet, mobile television
 25




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##### Table of Contents



and a variety of other advanced functions that can be accessed through mobile devices referred to as
smartphones.
    
    On June 2, 2008, TVA Group repurchased 3,000,642 Class B shares under the
Substantial Issuer Bid filed on March 31, 2008 and amended on May 14, 2008,
for aggregate cash consideration of $51.4 million. During the financial year
ended December 31, 2006, Quebecor Medias interest in TVA Group increased as a
result of various Normal
Course Issuer Bids. In 2006, 9,800 Class B shares were repurchased under
Normal Course Issuer Bids for cash
consideration of $0.2 million. As a result of these repurchases, Quebecor
Medias interest in TVA Group increased by 5.7%, from 45.2% on January 1, 2006
to 50.9% as of December 31, 2008.
    
    On April 15, 2008, Videotron issued US$455.0 million aggregate principal
amount of its 91/8% Senior Notes due 2018 for net proceeds of $447.8 million.
Videotron used the proceeds to repay drawings on its senior secured credit
facility and for general corporate purposes.
    
    On April 7, 2008, Videotron amended its Senior Secured Credit Facility to
increase its commitments under the facility from $450.0 million to $575.0
million and extend the maturity date to April 2012. Pursuant to these
amendments, Videotron may, subject to certain conditions, increase the
commitments under its Senior Secured Credit Facility by an additional $75.0
million (for aggregate commitments of $650.0 million).
    
    On February 26, 2008, Quebecor Media, through a wholly-owned subsidiary,
completed its acquisition, pursuant to a public offer and subsequent
compulsory acquisition procedure, of all of the issued and outstanding common
 shares of Nurun (including common shares issuable upon the exercise of
outstanding options, conversion or exchange rights) not already held by
Quebecor Media and its affiliates, at a price of $4.75 per common share. The
Nurun common shares were delisted from the Toronto Stock Exchange on February
27, 2008. The aggregate cash consideration paid by Quebecor Media pursuant to
this public offer was approximately $75.2 million.
    
    On October 31, 2007, Sun Media entered into a Fifth Amending Agreement to
its credit agreement. The agreement extends the term to October 31, 2012 and
modifies covenants related to leverage and interest coverage ratios, removes
the fixed charge ratio and modifies certain definitions.
    
    On October 5, 2007, Quebecor Media completed a placement of US$700.0
million aggregate principal amount of its 7 3/4% senior notes due 2016. Quebecor
Media used the net proceeds of $672.2 million (including accrued interest of
$16.6 million and before financing costs of $9.8 million) from the placement,
as well as its cash and cash equivalents, to repay in full the $420.0 million
drawn on the senior bridge credit facility entered into to finance the
acquisition of Osprey Media (which facility was then terminated), to repay
US$179.7 million outstanding under Sun Media Corporations Term Loan B, and to
settle the $106.0 million liability related to derivative financial
instruments connected to the Sun Media Corporation Term Loan B.
    
    In early August 2007, Quebecor Media completed its acquisition of Osprey
Media for an aggregate purchase price of approximately $414.4 million
(excluding assumed Osprey Media debt of $161.8 million). The purchase price
was financed through a senior bridge credit facility that Quebecor Media fully
repaid with a portion of the proceeds of the offering of its Senior Notes in
October 2007. Osprey Media is one of Canadas leading publishers of daily and
non-daily newspapers, magazines and specialty publications.
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
    
    On January 17, 2006, Quebecor Media issued US$525.0 million aggregate
principal amount of its 7 3/4% Senior Notes due March 2016. Quebecor Media also
established new credit facilities consisting of a Term Loan A credit facility
in the amount of $125.0 million, maturing in 2011, a Term Loan B
credit facility in the amount of US$350.0 million, maturing in 2013, and a
five-year revolving credit facility in the amount of $100.0 million, expiring
in 2011.
    
    Also on January 17, 2006, Quebecor Media repurchased US$561.6 million in
aggregate principal amount of its Senior Notes due 2011 (representing 95.7% of
the Senior Notes due 2011 outstanding) and US$275.6 million in aggregate
principal amount at maturity of our Senior Discount Notes due 2011
(representing 97.4% of the Senior Discount Notes due 2011 outstanding). On
July 15, 2006, Quebecor Media purchased the balance of its then-outstanding
Senior Notes due 2011 and Senior Discount Notes due 2011. Quebecor Media paid
total cash consideration of US$1.4 billion to purchase the notes, including
the premium and the cost of settlement of cross-currency swap agreements. The
refinancing entailed disbursements exceeding the book value of the repurchased
notes, including repayment of liabilities related to cross-currency swap
agreements and disbursements related to the loss on debt refinancing and on
swap agreements, by $380.0 million, which was financed by issuing long-term
debt. In respect of these repurchases, Quebecor Media recognized a $342.1
million loss on debt refinancing ($218.7 million net of income tax) in 2006.
 B  Business Overview
 Overview
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Competitive Strengths
  
    
    cross-promote our brands, programs and other content across multiple media
platforms;
    
    provide advertisers with an integrated solution for local, regional and
national multi-platform advertising;
    
    offer a differentiated, bundled suite of entertainment, information and
communication services and products, including digital television, cable
Internet access, video-on-demand and other interactive television services, as
well as residential and commercial cable telephony services using VoIP
technology, and mobile wireless telephony services, which we currently offer
on an MVNO-basis (utilizing wireless voice and data services provided by
Rogers Wireless Inc. (Rogers Wireless), a subsidiary of Rogers
Communications Inc.), but will offer as a facilities-based wireless provider
when our AWS wireless network is operational;
    
    deliver high-quality services and products, including, for example, our
standard cable Internet access service that enables our customers to download
data at a higher speed than that currently offered by standard digital
subscriber line, or DSL, technology, and the widest range of French-language
programming in Canada;
    
    leverage our content, management, sales and marketing and production
resources to provide superior information and entertainment services to our
customers;
    
    extend our market reach by leveraging our multimedia platform and
cross-marketing expertise and experience to enhance our national media
platform;
    
    leverage our single, highly contiguous network that covers approximately
80% of Quebecs total addressable market and five of the provinces top six
urban areas. We believe that our single cluster and network architecture
provides many benefits, including a higher quality and more reliable network,
the ability to rapidly and efficiently launch and deploy new products and
services, and a lower cost structure through reduced maintenance and technical
support costs; and
    
    leverage our advanced broadband network, 99% of which is bi-directional
which allows us to offer a wide range of advanced services on the same media,
such as analog and digital television, video-on-demand, cable Internet access
and cable telephony services. We are committed to maintaining and upgrading
our network capacity and, to that end, we currently anticipate that future
capital expenditures over the next five years will be required to accommodate
the evolution of our products and services and to meet the demand for
increased capacity resulting from the launch of our telephony service and the
offering of our other advanced products and services.
  Our Strategy
  
    
    Strengthen our position as a telecommunications leader with our new AWS
wireless services. With our newly-obtained AWS licenses, Videotron plans to
bring consumers and small businesses an
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offering of advanced wireless
telecommunications services that is unprecedented in Quebec, based on
effective, reliable technology, diverse and convergent content and unambiguous
business policies. We currently anticipate that our new High Speed Packet
Access (HSPA) network will be operational in 9 to 15 months.
    
    Introduce new and enhanced products and services.We expect a significant
portion of our growth in our Cable segment revenues to be driven by the
introduction of new products and services (such as Wideband internet
technology) and by the continuing penetration of our existing suite of
products and services such as digital cable services, cable Internet access,
cable telephony services, high-definition television, video-on-demand and
interactive television. Our objective is also to increase our revenue per
subscriber by focusing sales and marketing efforts on the bundling of these
value-added products and services.
    
    Leverage growth opportunities and convergence opportunities.We are the
largest private-sector French-language programming broadcaster, a leading
producer of French-language programming, the largest newspaper publisher based
on total paid and unpaid circulation, and a leading English- and
French-language Internet news and information portal in Canada. As a result,
we are able to generate and distribute content across a spectrum of media
properties and platforms. In addition, these multi-platform media assets
enable us to provide advertisers with integrated advertising solutions. We
are able to provide flexible, bundled advertising packages that allow
advertisers to reach local, regional and national markets, as well as special
interest and specific demographic groups. We continue to explore and
implement initiatives to leverage growth and convergence opportunities,
including efforts to accelerate the migration of content generated by our
various publications and broadcasters to our other media platforms, and the
integration of our newspapers operations and internet/portal operations under
a single executive leadership.
    
    Cross-promote brands, programs and other content.The geographic overlap
of our cable, television, newspaper and magazine publishing, music and video
store chains, and Internet platforms enables us to cost effectively promote
and co-brand media properties. We will continue to promote initiatives to
advance these cross-promotional activities, including the cross-promotion of
various businesses, cross-divisional advertising and shared infrastructures.
    
    Leverage geographic clustering.Our Videotron subsidiary holds cable
licenses that cover approximately 80% of Quebecs approximately 3.1 million
homes and commercial premises passed by cable. Geographic clusters facilitate
bundled service offerings and, in addition, allow us to tailor our offerings
to certain demographic markets. We aim to leverage the highly clustered nature
of our systems to enable us to use marketing dollars more efficiently and to
enhance customer awareness, increase use of products and services and build
brand support.
    
    Maximize customer satisfaction and build customer loyalty.Across our media
platform, we believe that maintaining a high level of customer satisfaction is
critical to future growth and profitability. An important factor in our
historical growth and profitability has been our ability to attract and
satisfy customers with high quality products and services and we will continue
our efforts to maximize customer satisfaction and build customer loyalty.
    
    Manage expenses through success-driven capital spending and technology
improvements.In our Cable segment, we aim to support the growth in our
customer base and bandwidth requirements through strategic success-driven
modernizations of our network and increases in network capacity. In our
Newspaper segment, we have undertaken restructurings of certain printing
facilities and news production operations, and invested in certain technology
improvements with a view to modernizing our operations and cost structure. In
addition, we continuously seek to manage our salaries and benefits expenses,
which comprise a significant portion of our costs.
 Cable
  29




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Cable Television Industry Overview
  Twelve Months Ended August 31,2007
    
    2006
    
    2005
    
    2004
    
    2003
    
    CAGR(1)(Homes passed and basic cable customers in millions, dollars in billions)CanadaIndustry Revenue
    
    $
    7.1
    
    
    $
    6.1
    
    
    $
    5.0
    
    
    $
    4.7
    
    
    $
    4.4
    
    
    
    12.7
    %Homes Passed(2)
    
    
    13.6
    
    
    
    13.0
    
    
    
    11.2
    
    
    
    10.5
    
    
    
    10.9
    
    
    
    5.7
    %Basic Cable Customers
    
    
    7.6
    
    
    
    7.5
    
    
    
    6.9
    
    
    
    6.9
    
    
    
    7.1
    
    
    
    1.7
    %Basic Penetration
    
    
    55.9
    %
    
    
    57.7
    %
    
    
    61.6
    %
    
    
    65.7
    %
    
    
    65.1
    %
    
    
    (3.8
    %)Twelve Months Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004
    
    CAGR(3)(Homes passed and basic cable customers in millions, US dollars in billions)U.S.Industry Revenue
    
    US$
    81.3
    
    
    US$
    74.7
    
    
    US$
    68.2
    
    
    US$
    62.3
    
    
    US$
    57.6
    
    
    
    7.1
    %Homes Passed(2)
    
    
    124.2
    
    
    
    123.0
    
    
    
    111.6
    
    
    
    110.8
    
    
    
    108.2
    
    
    
    2.8
    %Basic Cable Customers
    
    
    64.7
    
    
    
    65.1
    
    
    
    65.6
    
    
    
    65.4
    
    
    
    65.4
    
    
    
    (0.2
    %)Basic Penetration
    
    
    52.1
    %
    
    
    52.9
    %
    
    
    58.8
    %
    
    
    59.0
    %
    
    
    60.4
    %
    
    
    (2.9
    %)
 
 Source of Canadian data: CRTC.Source of U.S. data: NCTA, A.C. Nielsen Media Research and SNL Kagan.(1)
    
    Compounded annual growth rate from 2003 through 2007.(2)
    
    Homes passed means the number of residential premises, such as single dwelling units or
multiple dwelling units, and commercial premises passed by the cable television distribution
network in a given cable system service area in which the programming services are offered.(3)
    
    Compounded annual growth rate from 2004 through 2008.   31




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Expansion of Digital Distribution and Programming
      Products and Services
   Traditional Cable Television Services
  32




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
    
    Basic Service.All of our customers receive a package of basic
programming, consisting of local broadcast television stations, the four U.S.
commercial networks and PBS, selected Canadian
specialty programming services, and local and regional community programming.
Our basic service customers generally receive 26 channels on basic cable.
    
    Extended Basic Service.This expanded programming level of services, which
is generally comprised of approximately 18 channels, includes a package of
French- and English-language specialty television programming and U.S. cable
channels in addition to the basic service channel line-up described above.
Branded as Telemax, this service was introduced in almost all of our markets
largely to satisfy customer demand for greater flexibility and choice.
 Advanced Cable-Based Products and Services
  
    
    Cable Internet Access.Leveraging our advanced cable infrastructure, we
offer cable Internet access to our residential customers primarily via cable
modems attached to personal computers. We provide this service at speeds of up
to 360 times the speed of a conventional telephone modem. In 2008, we also
launched and effected a gradual roll-out of our Wideband services, which offer
speeds of up to 900 times the speed of a conventional telephone modem. We
currently plan to continue extending the coverage of this service in 2009. As
of December 31, 2008, we had 1,063,847 cable Internet access customers,
representing 62.0% of our basic customers and 41.8% of our total homes passed.
Based on internal estimates, we are the largest provider of Internet access
services in the areas we serve with an estimated market share of 53.9% as of
September 30, 2008.
    
    Digital Television.We have installed headend equipment capable of
delivering digitally encoded transmissions to a two-way digital-capable
set-top box in the customers home. This digital connection provides
significant advantages. In particular, it increases channel capacity, which
allows us to increase both programming and service offerings while providing
increased flexibility in packaging our services. Our basic digital package
includes 25 television channels, 45 audio services providing CD-quality music,
16 AM/FM radio channels, an interactive programming guide as well as
television-based e-mail capability. Our extended digital basic television
offering, branded as à la carte (i.e., individual channel selections),
offers customers the ability to select more than 200 additional channels of
their choice, including U.S. super-stations and other special entertainment
programs, allowing them to customize their choices. This also offers customers
significant programming flexibility including the option of French-language
only, English-language only or a combination of French- and English-language
programming, as well as many foreign-language channels. We also offer
pre-packaged themed service tiers in the areas of news, sports and discovery.
Customers who purchase basic service and one customized package can also
purchase channels on an à la cartebasis at a specified cost per channel per
month. As part of our digital service offering, customers can also purchase
near-video-on-demand services on a per-event basis. As of December 31, 2008,
we had 927,322 customers for our digital television service, representing
54.1% of our basic customers and 36.5% of our total homes passed. Our
customers currently have the option to purchase or lease the digital set-top
boxes required for digital service. We believe that the sale of equipment to
customers improves customer retention, and, as of December 31, 2008, we had
1,209,595 set-top boxes deployed, of which approximately 97% were owned by
customers and 3% were leased.
    
    Cable Telephony. In January 2005, we launched our cable telephony service
using VoIP technology in selected areas of the Province of Quebec, and since
then we have been progressively rolling-out
 33




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##### Table of Contents



this offering among our other
residential and commercial customers in the Province of Quebec. As of December
31, 2008, our cable telephony service is available to 99% of our homes passed.
Our cable telephony service includes both local and long-distance calling, and
permits all of our telephony customers, both residential and commercial, to
access all service features mandated by CRTC
Decision 97-8 and other regulatory decisions and orders, including: enhanced
911 Emergency service; number portability from and to any local exchange
carrier; a message relay service allowing subscribers to communicate with the
hearing impaired; and a variety of personal privacy features including
universal call tracing. We also offer free basic listings in local telephone
directories, as well as full operator assistance, including: operator-assisted
calls; collect and third-party calls; local, national and international
directory assistance; person-to-person calls; and busy-line verification.
Finally, we offer as part of our telephony service a host of convenient,
optional features, including: name and number caller ID; call waiting with
long-distance distinctive ring and audible indicator tone; name and number
caller ID on call waiting; visual indicator of a full voice mail box and
audible message waiting indicators; automatic call forwarding; three-way
conference calling; automatic recalling; and last incoming call identification
and recall. VoIP allows us to deliver new cutting-edge features, such as
voice-mail to e-mail functionality, which allows customers to access their
voice-mail via e-mail in the form of audio-file attachments. In keeping with
our competitive strength of providing differentiated, bundled service
offerings, we offer free installation of our telephony service to existing
cable television and/or Internet customers and to new bundled customers. We
also offer discounts to our bundled customers, when compared to the sum of the
prices of the individual services provided to these customers. In addition, we
offer discounts for a second telephone line subscription. On October 24, 2007,
we launched our Softphone service, our new computer-based service providing
users with more flexibility when traveling, the ability to make local calls
anywhere in the world, and new communications management capabilities. As of
December 31, 2008, we had 851,987 subscribers to our cable telephony service,
representing a penetration rate of 49.7% of our basic cable subscribers and
33.5% of our homes passed.
    
    Video-On-Demand.Video-on-demand service enables digital cable customers
to rent from a library of movies, documentaries and other programming through
their digital set-top box. Our digital cable customers are able to rent their
video-on-demand selections for a period of 24 hours, which they are then able
to watch at their convenience with full stop, rewind, fast forward, pause and
replay functionality during that period. Our video-on-demand service is
available to 99% of the homes passed by us. We sometimes group movies, events
or TV programs available on video-on-demand and offer them on a weekly basis.
Regulations prevent from offering such blocks of programs for a longer period.
We also offer pay television channels on a subscription basis that permits our
customers to access and watch most of the movies available on the linear Pay
TV channels these clients subscribe to.
    
    Other Products and Services.To maintain and enhance our market position,
we are focused on increasing penetration of high-definition television and
personal video recorders, as well as other high-value products and services.
 Wireless Telephony
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Customer Statistics Summary
  As of December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004Homes passed(1)
    
    
    2,542,859
    
    
    
    2,497,403
    
    
    
    2,457,213
    
    
    
    2,419,335
    
    
    
    2,383,443CableBasic customers(2)
    
    
    1,715,616
    
    
    
    1,638,097
    
    
    
    1,572,411
    
    
    
    1,506,113
    
    
    
    1,452,554Penetration(3)
    
    
    67.5
    %
    
    
    65.6
    %
    
    
    64.0
    %
    
    
    62.3
    %
    
    
    60.9
    %Digital customers
    
    
    927,322
    
    
    
    768,211
    
    
    
    623,646
    
    
    
    474,629
    
    
    
    333,664Penetration(4)
    
    
    54.1
    %
    
    
    46.9
    %
    
    
    39.7
    %
    
    
    31.5
    %
    
    
    23.0
    %Number of digital set-top boxes
    
    
    1,209,595
    
    
    
    953,393
    
    
    
    738,530
    
    
    
    537,364
    
    
    
    362,053Dial-up Internet AccessDial-up customers
    
    
    6,533
    
    
    
    9,052
    
    
    
    13,426
    
    
    
    18,034
    
    
    
    23,973Cable Internet AccessCable modem customers
    
    
    1,063,847
    
    
    
    932,989
    
    
    
    791,966
    
    
    
    637,971
    
    
    
    502,630Penetration(3)
    
    
    41.8
    %
    
    
    37.4
    %
    
    
    32.2
    %
    
    
    26.4
    %
    
    
    21.1
    %Telephony ServicesCable telephony customers
    
    
    851,987
    
    
    
    636,352
    
    
    
    397,860
    
    
    
    162,979
    
    
    
    2,135Penetration(3)
    
    
    33.5
    %
    
    
    25.5
    %
    
    
    16.2
    %
    
    
    6.7
    %
    
    
    0.1
    %Wireless telephony lines
    
    
    63,402
    
    
    
    45,077
    
    
    
    11,826
    
    
    
    
    
    
    
    
 
 (1)
    
    Homes passed means the number of residential premises, such as single dwelling units or
multiple dwelling units, and commercial premises passed by the cable television distribution
network in a given cable system service area in which the programming services are offered.(2)
    
    Basic customers are customers who receive basic cable service in either the analog or digital
mode.(3)
    
    Represents customers as a percentage of total homes passed.(4)
    
    Represents customers for the digital service as a percentage of basic customers.  Business Telecommunications Services
  Video Stores
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##### Table of Contents



Pricing of our Products and Services
    Service
    
    Price RangeBasic analog cable
    
    $15.07  $29.88Extended basic analog cable
    
    $28.50  $42.19Basic digital cable
    
    $13.98  $15.98Extended basic digital cable
    
    $27.98  $76.98Pay-television
    
    $  3.99  $29.99Pay-per-view (per movie or event)
    
    $  3.99  $54.99Video-on-demand (per movie or event)
    
    $  4.49  $64.99Dial-up Internet access
    
    $  9.95  $19.95Cable Internet access
    
    $27.95  $89.95Cable telephony
    
    $16.95  $22.95Mobile wireless telephony
    
    $22.65  $78.35
 Our Network Technology
   450 MHz
    
    480 to
    
    750 to
    
    Two-Wayand Under
    
    625 MHz
    

860 MHz
    
    CapabilityDecember 31, 2004
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2005
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %December 31, 2006
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %December 31, 2007
    
    
    1
    %
    
    
    2
    %
    
    
    97
    %
    
    
    99
    %December 31, 2008
    
    
    1
    %
    
    
    0
    %
    
    
    99
    %
    
    
    99
    %
 36




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Marketing and Customer Care
  37




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
    
    continue to rapidly deploy advanced products and services such as cable
Internet access, digital television, cable telephony and mobile wireless
telephony services;
    
    design product offerings that provide greater opportunity for customer
entertainment and information choices;
    
    target marketing opportunities based on demographic data and past
purchasing behavior;
    
    develop targeted marketing programs to attract former customers, households
that have never subscribed to our services and customers of alternative or
competitive services;
    
    enhance the relationship between customer service representatives and our
customers by training and motivating customer service representatives to
promote advanced products and services;
    
    leverage the retail presence of Le SuperClub Videotron and third-party
commercial retailers;
    
    cross-promote the wide variety of content and services offered within the
Quebecor Media group (including, for example, the content of TVA Group
productions and the 1-900service for audience voting during reality
television shows popular in Quebec) in order to distribute our cable, data
transmission, cable telephony and mobile wireless telephony services to our
existing and future customers;
    
    introduce new value-added packages of products and services, which we
believe increases average revenue per user, or ARPU, and improves customer
retention; and
    
    leverage our business market, using the Videotron Telecom network and
expertise with our commercial customer base, which should enable us to offer
additional bundled services to our customers and may result in new business
opportunities.
   Programming
   38




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##### Table of Contents



Competition
  
    
    Over-the-air Television and Providers of Other Entertainment.Cable
television has long competed with broadcast television, which consists of
television signals that the viewer is able to receive without charge using an
over-the air antenna. The extent of such competition is dependent upon the
quality and quantity of broadcast signals available through over-the-air
reception compared to the services provided by the local cable system. Cable
systems also face competition from alternative methods of distributing and
receiving television signals and from other sources of entertainment such as
live sporting events, movie theatres and home video products, including
videotape recorders, DVD players and video games. The extent to which a cable
television service is competitive depends in significant part upon the cable
systems ability to provide a greater variety of programming, superior
technical performance and superior customer service than are available over
the air or through competitive alternative delivery sources.
    
    Direct Broadcast Satellite.Direct broadcast satellite, or DBS, is a
significant competitor to cable systems. DBS delivers programming via signals
sent directly to receiving dishes from medium- and high-powered satellites, as
opposed to cable delivery transmissions. This form of distribution generally
provides more channels than some of our television systems and is fully
digital. DBS service can be received virtually anywhere in Canada through the
installation of a small rooftop or side-mounted antenna. Like digital cable
distribution, DBS systems use video compression technology to increase channel
capacity and digital technology to improve the quality of the signals
transmitted to their customers.
    
    DSL.The deployment of digital subscriber line technology, known as DSL,
provides customers with Internet access at data transmission speeds greater
than that available over conventional telephone lines. DSL service is
comparable to cable-modem Internet access over cable systems. We also face
competition from other providers of DSL service.
    
    VDSL.The CRTC and Industry Canada have authorized video digital
subscriber line, or VDSL, services. VDSL technology increases the capacity of
DSL lines available, which permits the distribution of digital video. We
expect that we will soon face competition from incumbent local exchange
carriers, which have been granted licenses to launch video distribution
services using this technology. ILECs are currently installing this new
technology, which operates over the copper lines in phone lines, in our
markets. This technology can achieve speeds as high as 52 Mbps upstream, but
VDSL can only operate over a short distance of about 4,000 feet (1,200
metres). As a result, telephone companies are replacing many of their main
feeds with fibre-optic cable. By placing a VDSL transceiver, a VDSL gateway,
in larger multiple dwelling units, the distance limitation is overcome.
Further, as a result of such improvements in broadband speeds over DSL and the
evolution of compression technology, incumbent telephone carriers in our
service areas may be in a position to enable delivery of digital television
over their cable Internet connections (IPTV) in the coming years. Advanced
trials are underway in Canada and in other countries. Tests in our service
markets are still being performed. If successful, IPTV may provide
telecommunications carriers with a way to offer services similar to those
offered by cable operators in the consumer market.
 39




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##### Table of Contents




    
    Private Cable.Additional competition is posed by satellite master antenna
television systems known as SMATV systems serving multi-dwelling units, such
as condominiums, apartment complexes, and private residential communities.
    
    Other Cable Distribution.Currently, a cable operator offering television
distribution and providing cable-modem Internet access service is serving the
greater Montreal area. This cable operator is owned by the regional ILEC.
    
    Wireless Distribution.Cable television systems also compete with wireless
program distribution services such as multi-channel multipoint distribution
systems, or MDS. This technology uses microwave links to transmit signals from
multiple transmission sites to line-of-sight antennas located within the
customers premises.
    
    Grey and Black Market DBS Providers.Cable and other distributors of
television signals continue to face competition from the use of access codes
and equipment that enable the unauthorized decoding of encrypted satellite
signals, from unauthorized access to our analog and digital cable
signals (black market) and from the reception of foreign signals through
subscriptions to foreign satellite television providers that are not lawful
distributors in Canada (grey market).
    
    Telephony Service.Our cable telephony service competes against other
telephone companies, including both the incumbent telephone service provider
in Quebec, which controls a significant portion of the telephony market in
Quebec, as well as other VoIP telephony service providers and mobile wireless
telephone service providers.
    
    Mobile wireless telephony services. Our current MVNO-based mobile wireless
telephony service competes against a mix of competitors, some of them being
active in all the products we offer, while others only offer mobile wireless
telephony services in our market. As a facilities-based wireless provider, we
will compete primarily with established incumbent wireless service providers
and MVNOs, and could in the future compete with other new entrant companies,
including other MVNOs. In addition, users of wireless voice and data systems
may find their communications needs satisfied by other current or developing
technologies, such as Wi-Fi, WiMax, hotspots or trunk radio systems, which
have the technical capability to handle wireless data communication and mobile
telephone calls. Our wireless business will also compete with rivals for
dealers and retail distribution outlets.
    
    Other Internet Service Providers.In the Internet access business, cable
operators compete against other Internet service providers offering
residential and commercial Internet access services. The CRTC requires the
large Canadian incumbent cable operators to offer access to their high speed
Internet system to competitive Internet service providers at mandated rates.
 Newspapers
  ®
 40




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##### Table of Contents



24 Hours 24 Heures
  canoe.ca canoe.qc.ca toile.com tva.canoe.com lcn.canoe.com. jobboom.com micasa.ca autonet.ca reseaucontact.com space.canoe.ca espace.canoe.ca classifieds.canoe.ca classees.canoe.ca canoeklix.com
    Canadian Newspaper Publishing Industry Overview
 ,
 London Free Press
 41




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##### Table of Contents



Advertising and Circulation
      42




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##### Table of Contents



Newspaper Operations
  
    
    the Urban Daily Group; and
    
    the Community Newspaper Group.
  24 Hours Toronto Sun Journal de Montreal 24 Heures
 The Urban Daily Group
  Paid daily newspapers
 London Free Press
 ®
 ® ®
 43




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##### Table of Contents



2007 Average Readership
    
    
    Market Position byNewspaper
    
    Saturday
    
    
    Sunday
    
    
    Mon-Fri
    
    

readership(1)Journal de Montreal
    
    
    611,600
    
    
    
    397,500
    
    
    
    588,000
    
    
    
    1Journal de Quebec
    
    
    199,500
    
    
    
    119,900
    
    
    
    165,700
    
    
    
    1Toronto Sun
    
    
    515,200
    
    
    
    731,100
    
    
    
    638,000
    
    
    
    2London Free Press
    
    
    170,700
    
    
    
    111,600
    
    
    
    167,000
    
    
    
    1Ottawa Sun
    
    
    106,400
    
    
    
    98,000
    
    
    
    123,100
    
    
    
    2Winnipeg Sun
    
    
    97,500
    
    
    
    92,200
    
    
    
    115,700
    
    
    
    2Edmonton Sun
    
    
    131,300
    
    
    
    158,100
    
    
    
    168,100
    
    
    
    2Calgary Sun
    
    
    121,400
    
    
    
    148,100
    
    
    
    155,600
    
    
    
    2Total Average Readership
    
    
    1,953,600
    
    
    
    1,856,500
    
    
    
    2,121,200
 
 (1)
    
    Based on paid weekly readership data published by by the NADbank® Study. Journal de Montreal. Journal de Montreal Messageries Dynamiques Journal de Montreal Journal de Montreal ® Journal de Montreal La Presse The Montreal Gazette
 Journal de Montreal
 Year Ended December 312008
    
    2007
    
    2006Journal de MontrealSaturday
    
    
    302,500
    
    
    
    303,700
    
    
    
    309,300Sunday
    
    
    257,600
    
    
    
    260,600
    
    
    
    263,700Monday to Friday
    
    
    260,700
    
    
    
    262,900
    
    
    
    263,400
 
 Source: Internal Statistics Journal de Quebec. Journal de Quebec Journal de Quebec ® Journal de Quebec Le Soleil
 Journal de Quebec
 Year Ended December 312008
    
    2007
    
    2006Journal de QuebecSaturday
    
    
    124,300
    
    
    
    125,200
    
    
    
    127,400Sunday
    
    
    104,100
    
    
    
    107,000
    
    
    
    107,300Monday to Friday
    
    
    103,100
    
    
    
    104,300
    
    
    
    104,500
 
 Source: Internal Statistics 44




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##### Table of Contents



Toronto Sun. Toronto Sun Toronto Sun
 Toronto Sun Toronto Star Globe & Mail National
Post Toronto Sun
 Toronto Sun
 Year Ended December 312008
    
    2007
    
    2006Toronto SunSaturday
    
    
    159,200
    
    
    
    160,800
    
    
    
    149,000Sunday
    
    
    322,300
    
    
    
    332,500
    
    
    
    328,500Monday to Friday
    
    
    187,200
    
    
    
    188,900
    
    
    
    189,900
 
 Source: Internal Statistics London Free Press. London Free Press
 London Free Press
 Year Ended December 312008
    
    2007
    
    2006London Free PressSaturday
    
    
    92,000
    
    
    
    96,400
    
    
    
    100,400Sunday
    
    
    60,300
    
    
    
    61,900
    
    
    
    62,800Monday to Friday
    
    
    79,100
    
    
    
    81,600
    
    
    
    84,200
 
 Source: Internal Statistics London Free Press London Pennysaver
 Ottawa Sun. Ottawa Sun Ottawa Sun ® Ottawa Citizen Le Droit
 Ottawa Sun
 Year Ended December 312008
    
    2007
    
    2006Ottawa SunSaturday
    
    
    40,700
    
    
    
    42,900
    
    
    
    44,100Sunday
    
    
    45,500
    
    
    
    49,700
    
    
    
    51,200Monday to Friday
    
    
    48,400
    
    
    
    49,800
    
    
    
    50,500
 
 Source: Internal Statistics 45




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##### Table of Contents



Ottawa Sun Ottawa Pennysaver
 Winnipeg Sun. Winnipeg Sun Winnipeg Sun ® Winnipeg Free Press
 Winnipeg Sun
 Year Ended December 312008
    
    2007
    
    2006Winnipeg SunSaturday
    
    
    37,000
    
    
    
    38,000
    
    
    
    38,200Sunday
    
    
    44,300
    
    
    
    46,000
    
    
    
    47,100Monday to Friday
    
    
    38,500
    
    
    
    39,000
    
    
    
    39,500
 
 Source: Internal Statistics Edmonton Sun. Edmonton Sun Edmonton Sun ® Edmonton Journal
 Edmonton Sun
 Year Ended December 312008
    
    2007
    
    2006Edmonton SunSaturday
    
    
    58,000
    
    
    
    59,100
    
    
    
    64,700Sunday
    
    
    77,800
    
    
    
    83,100
    
    
    
    90,500Monday to Friday
    
    
    62,300
    
    
    
    63,900
    
    
    
    68,000
 
 Source: Internal Statistics Calgary Sun. Calgary Sun Calgary Sun ® Calgary Herald
 Calgary Sun
 Year ended December 312008
    
    2007
    
    2006Calgary SunSaturday
    
    
    51,600
    
    
    
    55,400
    
    
    
    59,000Sunday
    
    
    74,900
    
    
    
    82,100
    
    
    
    90,000Monday to Friday
    
    
    55,700
    
    
    
    57,000
    
    
    
    60,600
 
 Source: Internal Statistics Free daily newspapers
 24 Heures in Montreal . 24 Heures
 46




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##### Table of Contents



24 Hours in Toronto . 24 Hours 24 Hours Find-A-Rental 24 Hours
 24 Hours in Vancouver . Vancouver 24 Hours Vancouver 24 Hours
 24 Hours in Ottawa . 24 Hours
 24 Hours in Calgary and 24 Hours in Edmonton. 24 Hours 24 Hours
 Competition
   Journal de Montreal Journal de Quebec Journal de
Montreal Toronto Star Journal de Montreal
 London Free Press
 Toronto Sun Toronto Sun 24 Hours Metro Toronto Sun
 47




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##### Table of Contents



The Community Newspaper Group
  Average DailyNewspaper
    
    Location
    
    Paid CirculationRecorder and Times
    
    Brockville, Ontario
    
    11,700Beacon Herald
    
    Stratford, Ontario
    
    9,200Daily Herald Tribune
    
    Grande Prairie, Alberta
    
    7,600Simcoe Reformer
    
    Simcoe, Ontario
    
    6,500Sentinel-Review
    
    Woodstock, Ontario
    
    6,300St. Thomas Time-Journal
    
    St. Thomas, Ontario
    
    5,500Fort McMurray Today
    
    Fort McMurray, Alberta
    
    3,200Miner & News
    
    Kenora, Ontario
    
    3,000The Daily Graphic
    
    Portage La Prairie, Manitoba
    
    2,400Total Average Daily Paid Circulation
    
    
    
    55,400
 
 Source: Internal Statistics  48




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##### Table of Contents



Average DailyNewspaper
    
    Location
    
    Paid Circulation(all in Ontario)St. Catharines Standard
    
    St. Catharines
    
    
    34,400Kingston Whig-Standard
    
    Kingston
    
    
    24,300Peterborough Examiner
    
    Peterborough
    
    
    23,200Sault Star
    
    Sault Ste Marie
    
    
    23,200Barrie Examiner
    
    Barrie
    
    
    21,800Brantford Expositor
    
    Brantford
    
    
    21,100Sudbury Star
    
    Sudbury
    
    
    20,900Niagara Falls Review
    
    Niagara Falls
    
    
    19,500Sarnia Observer
    
    Sarnia
    
    
    17,800Cornwall Standard-Freeholder
    
    Cornwall
    
    
    16,500Welland Tribune
    
    Welland
    
    
    16,400Owen Sound Sun Times
    
    Owen Sound
    
    
    15,200North Bay Nuggett
    
    North Bay
    
    
    14,100Belleville Intelligencer
    
    Belleville
    
    
    12,700Chatham Daily News
    
    Chatham
    
    
    12,100Orillia Packet & Times
    
    Orillia
    
    
    11,700Timmins, The Daily Press
    
    Timmins
    
    
    9,900Pembrooke, The Daily Observer
    
    Pembrooke
    
    
    6,000Cobourg Daily Star
    
    Cobourg
    
    
    7,600Port Hope Evening Guide
    
    Port Hope
    
    
    2,200Total Average Daily Paid Circulation
    
    
    
    
    330,600
  Number ofProvince
    
    PublicationsOntario
    
    
    81Quebec
    
    
    52Alberta
    
    
    43Manitoba
    
    
    12Saskatchewan
    
    
    5New Brunswick
    
    
    1Total Publications
    
    
    194
  Competition
  49




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##### Table of Contents



Other Operations
 Commercial Printing and Distribution
    Television Station
  Internet/Portals
   Media Properties
  
    
    Canoe (canoe.ca), a bilingual, integrated media and Internet services
network and one of Canadas leading Internet portals with more than 345
million page views in November 2008, according to Canoe internal statistics;
    
    TVA Group and LCN (tva.canoe.comand lcn.canoe.com) dedicated websites for
the TVA television network and the LCN all-news channel (both owned by our
subsidiary TVA Group), which has
begun
 50




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##### Table of Contents



streaming TVA and LCN programming live on the websites; in addition,
Canoe has developed and operates several websites for popular TVA Group
programs, such as Occupation Double(occupationdouble.com) and Star Académie
(staracademie.ca);
 
    
    Sun Media dedicated websites for the weeklies and dailies newspapers (such
as torontosun.com, edmontonsun.com, journaldequebec.comand
canoe.com/journaldemontreal), which provide local and national news;
    
    Canoe.tv, the first Canadian web broadcaster with unique content
commissioned by Canoe.tv in addition to content from traditional sources;
    
    Canoe Video (video.canoe.ca), launched in June 2007, offers easy access to
a range of content from sources including Quebecor Media, the Sun Media
network of newspapers and various external partners;
    
    Argent and Canoe Money (argent.canoe.caand money.canoe.ca), a financial
website which offers, among other things, a variety of services ranging from
financial information to portfolio management tools (the Argent website
(formerly Webfin) was redesigned in early 2005 in partnership with TVAs
financial channel, Canal Argent);
    
    Petitmonde (petitmonde.com), a website that Canoe acquired in September
2007 dedicated to children and families; and
    
    CanoeKlix (canoeklix.com), a pay-per-click advertising solution developed
by Canoe and launched in 2006.
 E-commerce Properties
  
    
    Jobboom.com, a unique Web-based employment site with over 2.4 million
members at December 31, 2008, which also includes Édition Jobboom (careers
book editors) and Jobboom Formation (an Internet directory of continuing
education services);
    
    Autonet.ca, one of Canadas leading Internet sites devoted entirely to
automobiles;
    
    Canoeclassifieds.caand Vitevitevite.ca(formerly canoeclassees.ca),
classified ad sites through which visitors can view more than 100,000
classified ads, reaching potential purchasers across the country by
integrating more than 200 dailies and community newspapers. Since June 2007,
classifiedextra.ca (vitevitevite.cain French) operates in partnership with
Sympatico.MSN.ca, which uses the classifiedextra.cabanner for all classified
advertisements, allowing it to reach more than 20 million users;
    
    Micasa.ca, one of the leading real-estate listing sites in Quebec,
providing comprehensive property listing services available to all real estate
brokers as well as individual homeowners;
    
    ReseauContact.com, a French dating and friendship site with approximately
356,000 unique visitors per month, as of November 2008, according to ComScore
Media Metrix; and
    
    EspaceCanoe.ca,an advanced technology platform for social communities that
supports the sharing of videos, photos and opinions by users in an innovative
Web 2.0-type environment.
 Seasonality and Cyclicality
   51




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##### Table of Contents



Raw Materials
   Broadcasting
  Occupation Double, Le Banquier th
 LCN Canal Évasion Canal Indigo illico sur Demande Télé Achats Argent Mystery Mystère Prise 2 MenTV Les idées de ma maison
 52




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##### Table of Contents



Canadian Television Industry Overview
     Share of ProvinceNetwork
    
    of Quebec TelevisionTVA Network
    
    
    26.7
    %Societé Radio-Canada
    
    
    14.1
    %Réseau TQS
    
    
    7.3
    %Various French-language specialty cable channels
    
    
    45.3
    %Others
    
    
    6.6
    %
 53




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##### Table of Contents



Source: BBM People Meters 2008 for the period between January 1, 2008 and December 31, 2008. Transition of Over-the-air Television Broadcasting from Analog to Digital
  Television Broadcasting
 French-language Market
   English-language Market
 60 Minutes
 Advertising Sales and Revenue
  54




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##### Table of Contents



Programming
    Specialty Broadcasting
  Type
of Service
    
    Language
    
    Voting InterestAnalog Specialty Services: LCN  Le Canal Nouvelles
    
    French
    
    TVA1  99.9% Canal Évasion
    
    French
    
    TVA1  8.3% CPAC
    
    French and English
    
    
    V2  21.7
    %Category One Digital Specialty Services: MenTV
    
    English
    
    TVA1  51.0% Mystery
    
    English
    
    TVA1  50.0% Mystère
    
    French
    
    TVA1  99.9% Argent (LCN  Affaires)
    
    French
    
    TVA1  99.9%Category Two Digital Specialty Services: Prise 2
    
    French
    
    TVA1  99.9% Les idées de ma maison
    
    French
    
    TVA1  99.9%Pay Per View Services (terrestrial & direct broadcasting satellite): Canal Indigo
    
    French
    
    TVA1  99.9%Video-on Demand Services: illico sur Demande
    
    French and English
    
    
    V2  100
    %Exempted Programming Service: Canal Shopping TVA
    
    French
    
    TVA1  99.9%
 
 (1)
    
    TVA Group (TVA) controls the programming services. Quebecor Media controls TVA Group.(2)
    
    Videotron (V) controls the programming services. Quebecor Media controls Videotron. Le Canal Nouvelles LCN
 Le Canal Nouvelles LCN LCN LCNs
 Argent
 Argent Argent Argent Argent
 55




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##### Table of Contents



Canal Évasion
 Canal Évasion Canal Évasion
 MenTV
 MenTV MenTV
 Mystery
 Mystery Mystery
 Mystère
 Mystère Mystery Mystère
 Prise 2
 Prise 2 Prise 2
 Les idées de ma maison
 Les idées de ma maison Les idées de ma maison
 Canal Indigo
 Canal Indigo Canal Indigo Canal Indigo
 Canal Shopping TVA; Home Shopping Service; Infomercials
 Shopping TVA Shopping TVA
 Canadian Public Affairs Channel (CPAC)
  56




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##### Table of Contents



Authorized Digital Specialty Services
 Humour
 Star Système.
 Première Loge.
  Magazine Publishing
 Les idées de
ma maison Décoration Chez-Soi Rénovation-Bricolage Clin doeil Filles daujourdhui Femmes
Plus
 Leisure and Entertainment
 archambault.ca ik.ca
   Cultural Products Production, Distribution and Retailing
  57




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##### Table of Contents



archambault.ca ik.ca
  Book Publishing and Distribution
   Ownership
  Interactive Technologies and Communications
     Ownership
  58




---



##### Table of Contents



Intellectual Property
    Insurance
  Environment
   C  Organizational Structure
  59




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##### Table of Contents



Caisse de dépôt et placement du Québec Caisse de dépôt
et placement du Québec
 D  Property, Plants and Equipment
  Cable
   60




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##### Table of Contents



Newspapers
   Floor SpaceAddress
    
    Use of Property
    
    Press Capacity(1)
    
    Occupied (sq. ft.)Islington, Ontario
    
    Operations building,
    
    3 Colorman presses
    
    531,4002250 Islington Avenue (2)
    
    including printing plant 
    
    (36 units)Toronto Sun24 Hours(Toronto)Mirabel, Quebec
    
    Operations building,
    
    3 Colorman presses
    
    235,0001280 Brault Street
    
    including printing plant 
    
    (52 units)Journal de Montreal24 Heures(Montreal)London, Ontario
    
    Operations building,
    
    2 Headliner presses
    
    147,600369 York Street
    
    including printing plant 
    
    (12 units) andLondon Free Press
    
    1 Urbanite press(9 units)Toronto, Ontario
    
    Operations building 
    
    N/A(2)
    
    140,000333 King Street East
    
    Toronto SunCalgary, Alberta
    
    Operations building,
    
    1 Headliner press
    
    90,0002615-12 Street NE
    
    including printing plant 
    
    (7 units)Calgary SunMontreal, Quebec
    
    Operations building 
    
    N/A(3)
    
    81,0004545 Frontenac Street
    
    Journal de MontrealSt. Catharines, Ontario
    
    Operations building 
    
    N/A
    
    75,00017 Queen Street
    
    St. Catharines StandardVanier, Quebec
    
    Operations building,
    
    2 Urbanite presses
    
    74,000450 Bechard Avenue
    
    including printing plant 
    
    (24 units)Journal de QuebecPeterborough, Ontario
    
    Operations building,
    
    1 Urbanite press
    
    63,500730 Kingsway
    
    including printing plant 
    
    (12 units)Peterborough ExaminerWinnipeg, Manitoba
    
    Operations building,
    
    1 Urbanite press
    
    63,0001700 Church Avenue
    
    including printing plant 
    
    (14 units)Winnipeg SunBrantford, Ontario
    
    Operations building 
    
    N/A
    
    57,30053 Dalhousie Street
    
    Brantford ExpositorEdmonton, Alberta
    
    Printing plant 
    
    1 Metro press
    
    50,7009300-47 Street
    
    Edmonton Sun
    
    (8 units)
 61




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Floor SpaceAddress
    
    Use of Property
    
    Press Capacity(1)
    
    Occupied (sq. ft.)Edmonton, Alberta
    
    Operations building 
    
    N/A
    
    45,2004990-92 Avenue
    
    Edmonton Sun(leased until December 2013)Gloucester, Ontario
    
    Printing plant 
    
    1 Urbanite press
    
    23,0004080 Belgreen Drive(4)
    
    Ottawa Sun
    
    (14 units)Ottawa, Ontario
    
    Operations building
    
    N/A
    
    19,3006 Antares Drive
    
    (leased until October 2013) Ottawa Sun
 
 (1)
    
    A unit is the critical component of a press that determines color and page count
capacity. All presses listed have between 6 and 14 units.(2)
    
    In 2008, printing of the Toronto Sunwas fully transferred to a printing facility owned
by Quebecor Media in Islington, Ontario.(3)
    
    In 2008, printing of the Journal de Montrealwas fully transferred to a printing facility
owned by Quebecor Media in Mirabel, Quebec.(4)
    
    In 2008, the press facilities of the Ottawa Sunwere re-opened.   24 Hours Toronto Sun Journal de Montreal 24 Heures
 Television Broadcasting
  Leisure and Entertainment segment and Interactive Technologies and Communications segment
  Liens and charges
  62




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E  Regulation
 Foreign Ownership Restrictions Applicable Under the Telecommunications Act (Canada) and the Broadcasting Act (Canada)
  Afterword Broadcasting Act
 
    
    In the first phase, the Telecommunications Actshould be amended to give
the federal Cabinet authority to waive the foreign ownership and control
restrictions on Canadian telecommunications common carriers when it deems a
foreign investment or class of investments to be in the public interest.
During the first phase, there should be a presumption that investments in any
new start-up telecommunications investment or in any telecommunications common
carrier with less than 10% of the revenues in any telecommunications service
market are in the public interest. This presumption could be rebutted by
evidence related to a particular investor or investment. The presumption
should apply to all investments in fixed or mobile wireless telephony markets
as well as to investments in new entrants and smaller players (i.e.,those
below the 10% limit). To encourage longer-term investment, foreign investors
should remain exempt from the foreign investment restrictions if they are
successful in growing the market share of their businesses beyond 10%.
    
    The second phase of liberalization should be undertaken after completion of
the review of broadcasting policy proposed by the Panel. At that time, there
should be a broader liberalization of the foreign investment rules in a manner
that treats all telecommunications common carriers including the cable
telecommunications industry in a fair and competitively neutral manner. The
proposed liberalization should apply to the carriage business of BDUs, and
new broadcasting policies should focus any necessary Canadian ownership
restrictions on broadcasting content businesses. The Cabinet should retain
the authority to screen significant investments in the Canadian
telecommunications carriage business to ensure that they are consistent with
the public interest.
 Telecommunications Act
 63




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##### Table of Contents



Ownership and Control of Canadian Broadcast Undertakings
  Ineligibility of Non-Canadians
 Broadcasting Act
 Diversity of Voices
  64




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Jurisdiction Over Canadian Broadcast Undertakings
 Broadcasting Act Broadcasting Act Radiocommunication Act
 Broadcasting Act
 Canadian Broadcasting Distribution (Cable Television)
 Licensing of Canadian Broadcasting Distribution Undertakings
   65




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##### Table of Contents



Le Réseau de linformation Avis de Recherche Avis de Recherche Broadcasting
Act
   66




---



##### Table of Contents



Distribution of Canadian Content
 Broadcasting Distribution Regulations Broadcasting Act
    67




---



##### Table of Contents



Broadcasting Distribution Regulations
  
    
    Competition and Carriage Rules.The 1998 Regulations provide equitable
opportunities for all distributors of broadcasting services. Similar to the
signal carriage and substitution requirements that
are imposed on existing cable television systems, under the 1998 Regulations,
new broadcasting distribution undertakings are also subject to carriage and
substitution requirements. The 1998 Regulations prohibit a distributor from
giving an undue preference to any person, including itself, or subjecting any
person to an undue disadvantage. This gives the CRTC the ability to address
complaints of anti-competitive behavior on the part of certain distributors.
    
    Signal Substitution. A significant aspect of television broadcasting in
Canada is simultaneous program substitution, or simulcasting, a regulatory
requirement under which Canadian distribution undertakings, such as cable
television systems with over 6,000 customers, are required to substitute the
foreign programming service, with local Canadian signal, including Canadian
commercials, for broadcasts of identical programs by a U.S. station when both
programs are exhibited at the same time. These requirements are designed to
protect the program rights that Canadian broadcasters acquire for their
respective local markets. The CRTC, however, has suspended the application of
these requirements to DTH satellite operators for a period of time, so long as
they undertake certain alternative measures, including monetary compensation
to a fund designed to help finance regional television productions.
    
    Canadian Programming and Community Expression Financing Rules. All
distributors, except systems with fewer than 2,000 customers, are required to
contribute at least 5% of their gross annual broadcast revenues to the
creation and presentation of Canadian programming including community
programming. However, the allocation of these contributions between broadcast
and community programming can vary depending on the type and size of the
distribution system involved. On October 30, 2008, the CRTC issued a new
distribution regulatory framework in which it announced that a further 1% will
be added to the 5% contribution in order to finance a new national programming
fund. Depending on the final terms of this regulatory framework, Videotron may
institute proceedings challenging its validity.
    
    Inside Wiring Rules.The CRTC determined that the inside wiring portion of
cable networks creates a bottleneck facility that could affect competition if
open access is not provided to other distributors. Incumbent cable companies
may retain the ownership of the inside wiring but must allow usage by
competitive undertakings to which the cable company may charge a just and
reasonable fee for the use of the inside wire. On September 3, 2002, the CRTC
established a fee of $0.52 per customer per month for the use of cable inside
wire in MDUs.
 Broadcasting Act
 68




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##### Table of Contents



Regulatory frameworks for broadcasting distribution undertakings and
discretionary programming services. Distribution of
Canadian Content"
  Rates
   (1)
    
    30% or more of the households in the licensed service area have access to the
services of another broadcasting distribution undertaking. The CRTC has advised that as
of August 31, 1997, the 30% availability criterion was satisfied for all licensed cable
areas; and(2)
    
    the number of customers for basic cable service has decreased by at least 5%
since the date on which a competitor started offering its basic cable service in the
particular area.
    69




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##### Table of Contents



Other recent changes to regulations which have been announced
 _ th
   Copyright Board Proceedings
  Royalties for the Retransmission of Distant Signals
 Copyright
Act
 Copyright Act
 70




---



##### Table of Contents



Royalties for the Transmission of Pay and Specialty Services
 Copyright Act
  Royalties for Commercial Television
     Royalties for Pay Audio Services
  71




---



##### Table of Contents



Royalties by Online Music Services
 Société du droit de reproduction des auteurs,
compositeurs et éditeurs du Canada Inc
  Royalties for Online Music
  72




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##### Table of Contents



Royalties for Ringtones
  Internet Service Provider Liability
 Copyright Act Copyright Act
 Canadian Broadcast Programming (Off the Air and Thematic Television)
 Programming of Canadian Content
   Advertising
 Determinations regarding certain aspects of the regulatory framework for
over-the-air television
 73




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##### Table of Contents



Regulatory frameworks for broadcasting distribution undertakings and
discretionary programming services
 Broadcasting License Fees
   Determinations regarding certain aspects of the
regulatory framework for over-the-air television
 Regulatory frameworks for broadcasting distribution undertakings and discretionary
programming services
  
    
    a common and standard nature of service definition;
    
    common Canadian programming exhibition and spending obligations;
 74




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##### Table of Contents




    
    no access rights; and
    
    no regulated wholesale fee.
 LCN
 Disclosure of financial results
 st
 Acquisition of a pay-per-view service
 Canal
Indigo
 Canadian Telecommunications Services
 Jurisdiction
 Telecommunications Act Act
 Telecommunications Act Telecommunications Act Telecommunications Act
  Radiocommunication Act
 75




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##### Table of Contents



Overview of the Telecommunications Competition Framework
 Review of Regulatory Framework Local Competition
 Application of Canadian Telecommunications Regulation
 Telecommunications Act
 i.e.,
 i.e.
   76




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##### Table of Contents



Right to Access to Telecommunications and Support Structures
 Telecommunications Act Telecommunications Act
   77




---



##### Table of Contents



Access by Third Parties to Cable Networks
     Telemarketing
  Internet Traffic Management Practices
  Regulatory Framework for Mobile Wireless Services
   78




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##### Table of Contents



Telecommunications Act Telecommunications Act
  Canadian Publishing
 General
 Income Tax Act
 Broadcasting
Undertakings  Diversity of Voices
  
 ITEM 4A  UNRESOLVED STAFF COMMENTS
  79




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##### Table of Contents



ITEM
5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion and analysis provides information concerning our operating results
and financial condition. This discussion should be read in conjunction with our consolidated
financial statements and accompanying notes. Our consolidated financial statements have been
prepared in accordance with Canadian GAAP, which differs from U.S. GAAP in certain respects. For a
discussion of the principal differences between Canadian GAAP and U.S. GAAP as they relate to our
financial statements, and the extent to which these differences affect our consolidated financial
statements, see Note 27 to our audited consolidated financial statements for the years ended
December 31 2008, 2007 and 2006. This discussion contains forward-looking statements, which are
subject to a variety of factors that could cause actual results to differ materially from those
contemplated by these statements. Factors that could cause or contribute to these differences
include, but are not limited to, those discussed under Cautionary Statement Regarding
Forward-Looking Statements and in Item 3. Key Information  Risk Factors.
 Overview
    Trend Information
   80




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##### Table of Contents



Our Segments
   Quebecor Medias Interest in Subsidiaries
  81




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##### Table of Contents



Table 1  Quebecor Medias interest in its main subsidiaries  as of December 31, 2008
 Percentage
    
    Percentageof equity
    
    of votesVideotron Ltd.
    
    
    100
    %
    
    
    100
    %Sun Media Corporation
    
    
    100
    %
    
    
    100
    %Osprey Media Publishing Inc.
    
    
    100
    %
    
    
    100
    %Canoe Inc.
    
    
    93.2
    %
    
    
    99.9
    %TVA Group Inc.
    
    
    50.9
    %
    
    
    99.9
    %Archambault Group Inc.
    
    
    100
    %
    
    
    100
    %Sogides Group Inc.
    
    
    100
    %
    
    
    100
    %CEC Publishing Inc.
    
    
    100
    %
    
    
    100
    %Nurun Inc.
    
    
    100
    %
    
    
    100
    %
  2008 Highlights and Recent Developments
 
    
    Quebecor Media acquired, for a cash consideration of $554.6 million, 17 operating
licences for an AWS network with a bandwidth of 40 MHz throughout Quebec, except the
Ottawa Valley and certain other regions of Quebec, where the acquired bandwidth is 20
MHz and 50 MHz, respectively, 20 MHz of bandwidth in eastern Ontario and 10 MHz in
Toronto.
 o
    
    October 2008: Quebecor Media and Videotron confirmed their intention to
invest between $800.0 million and $1.0 billion in Videotrons AWS network over the
next four years. This amount includes the cost of the 17 acquired spectrum and
operating licenses (which has already been paid), the cost of network buildout and
initial operating costs (but excludes any capitalized interest).o
    
    Quebecor Media and Videotron plan to fund future investments in its AWS
network through cash flow generation and available credit facilities. Quebecor Media
therefore does not currently anticipate that the challenging recent financial and
capital markets will have a significant negative impact on the implementation of this
business plan. Quebecor Media and Videotron currently anticipate that the new High
Speed Packet Access (HSPA) network will be operational in 9 to 15 months.o
    
    The spectrum will enable Videotron to offer, on its own network, advanced
wireless services, including high-speed Internet access, mobile television and many
other advanced functionalities supported by smartphones.
 
    
    March 2009: Videotron issued US$260.0 million
aggregate principal amount of its
91/8%
Senior Notes due 2018 for net proceeds of $332.4 million (including accrued interest and
net of financing expenses). These notes were sold at a price of 98
5/8% of par, bear interest at
91/8% per year (for an effective rate of 9.35%) and mature on April 15, 2018. The net
proceeds of this offering were used to repay all drawings on Videotrons revolving
credit facilities and for general corporate purposes. In the context of the current
instability in the financial markets, Videotron seized an opportunity to optimize its
liquidity position through this issuance. These notes form part of a single series with
Videotrons existing
91/8% Senior Notes due 2018 that were issued in 2008, were issued
under the same indenture and have the same terms as these existing notes.
 82




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
    
    In the fourth quarter of 2008, the combined customer base for cable television
services registered its 14th consecutive quarter of growth since the third quarter of
2005. Since that quarter, the number of customers has increased by 272,500 (18.9%) from
1,443,100 to 1,715,600.
    
    November 7, 2008: Pierre Karl Péladeau, President and Chief Executive Officer of
Quebecor Media, was appointed President and Chief Executive Officer of Sun Media
Corporation. He will oversee the integration of Sun Media Corporation and Canoe in order
to capitalize on opportunities for growth, capture synergies and accelerate the
migration of the information and content generated by Quebecor Medias various
publications to multiplatform media.
    
    The difficult financial and economic environment for some of the Companys lines of
business at the end of the fourth quarter of 2008 triggered goodwill and masthead
impairment tests in the Newspapers, Leisure and Entertainment, and Interactive
Technologies and Communications segments. Based on preliminary results, a non-cash
goodwill impairment charge of $631.0 million, without any tax consequences, was
recorded, primarily in the Newspapers segment.
    
    Céline Dions special concert for Quebec Citys 400th anniversary celebrations on
August 22, 2008 was seen by approximately 130,000 television viewers, who ordered the
uncut version of the show live (pay-per-view) or the taped version (video on demand). It
was one of the biggest successes in the history of pay-per-view and video on demand in
Canada.
    
    July 18, 2008: The number of subscribers to the cable Internet service provided by
Quebecor Medias Cable segment passed the 1 million mark. In the fourth quarter of 2008,
the subscriber base for the Cable segments illico Digital TV increased by 50,600, the
largest quarterly customer growth in absolute terms since the service was introduced
in 1999.
    
    June 2, 2008: TVA Group repurchased 3,000,642 Class B shares under the Substantial
Issuer Bid filed on March 31, 2008 and amended on May 14, 2008, for a total cash
consideration of $51.4 million. The transaction had the effect of increasing Quebecor
Medias interest in TVA Group from 45.24% to 50.90% as of December 31, 2008.
    
    April 15, 2008: Videotron issued US$455.0 million aggregate principal amount of
Senior Notes for net proceeds of $447.8 million. The Notes bear
interest at 9 1/8% (for an
effective rate of 9
3/8%) and mature on April 15, 2018.
    
    April 7, 2008: Videotron amended its senior secured credit facility to increase
commitments under the facility from $450.0 million to $575.0 million and extend the
maturity date to April 2012. Videotron may further increase commitments under the
facility by an additional $75.0 million, subject to certain conditions, bringing the
total to $650.0 million.
    
    February 26, 2008: Quebecor Media acquired all outstanding Common Shares of Nurun it
did not already hold for a total cash consideration of $75.2 million. Following this
transaction, Nurun became a wholly-owned subsidiary of Quebecor Media and its shares
were delisted from the Toronto Stock Exchange.
 Non-GAAP Financial Measures
  83




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Operating Income
  Table 2  Reconciliation of the operating income measure used in this annual report and the net
(loss) income as presented in our consolidated financial statements  (in millions of Canadian dollars)
 Three months endedYear Ended December 31
    
    
    December 312008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2008
    
    
    2007Operating IncomeCable
    
    $
    797.2
    
    
    $
    642.7
    
    
    $
    512.5
    
    
    $
    413.3
    
    
    $
    363.8
    
    
    $
    218.1
    
    
    $
    175.7Newspapers
    
    
    227.1
    
    
    
    232.8
    
    
    
    217.7
    
    
    
    231.2
    
    
    
    232.3
    
    
    
    54.8
    
    
    
    79.4Broadcasting
    
    
    66.3
    
    
    
    59.4
    
    
    
    42.1
    
    
    
    53.0
    
    
    
    80.5
    
    
    
    22.4
    
    
    
    22.8Leisure and Entertainment
    
    
    20.5
    
    
    
    27.0
    
    
    
    19.3
    
    
    
    27.0
    
    
    
    22.7
    
    
    
    11.1
    
    
    
    10.3Interactive Technologies and
Communications
    
    
    5.1
    
    
    
    2.8
    
    
    
    7.5
    
    
    
    3.9
    
    
    
    2.3
    
    
    
    3.0
    
    
    
    Head Office
    
    
    3.3
    
    
    
    (0.8
    )
    
    
    0.5
    
    
    
    3.7
    
    
    
    (4.4
    )
    
    
    1.0
    
    
    
    (1.0
    )1,119.5
    
    
    
    963.9
    
    
    
    799.6
    
    
    
    732.1
    
    
    
    697.2
    
    
    
    310.4
    
    
    
    287.2Amortization
    
    
    (318.5
    )
    
    
    (290.4
    )
    
    
    (260.7
    )
    
    
    (231.9
    )
    
    
    (225.9
    )
    
    
    (83.1
    )
    
    
    (75.9
    )Financial Expenses
    
    
    (276.0
    )
    
    
    (230.1
    )
    
    
    (212.9
    )
    
    
    (270.8
    )
    
    
    (279.7
    )
    
    
    (66.2
    )
    
    
    (70.1
    )(Loss) on valuation and translation of
financial instruments
    
    
    (3.7
    )
    
    
    (9.9
    )
    
    
    (11.7
    )
    
    
    (14.5
    )
    
    
    (34.9
    )
    
    
    (26.7
    )
    
    
    (2.1
    )Restructuring of operations, impairment of
assets and other special items
    
    
    (54.6
    )
    
    
    (11.2
    )
    
    
    (16.7
    )
    
    
    0.3
    
    
    
    6.5
    
    
    
    (50.3
    )
    
    
    3.5Loss on debt refinancing
    
    
    
    
    
    
    (1.0
    )
    
    
    (342.6
    )
    
    
    (60.0
    )
    
    
    (4.8
    )
    
    
    
    
    
    
    (1.0
    )Impairment of goodwill and intangible assets
    
    
    (671.2
    )
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    
    
    
    
    (671.2
    )
    
    
    (5.4
    )Income taxes
    
    
    (154.7
    )
    
    
    (74.8
    )
    
    
    53.7
    
    
    
    (43.5
    )
    
    
    (37.4
    )
    
    
    (41.3
    )
    
    
    (15.6
    )Non-controlling interest
    
    
    (23.1
    )
    
    
    (19.2
    )
    
    
    (0.4
    )
    
    
    (16.2
    )
    
    
    (31.7
    )
    
    
    (7.2
    )
    
    
    (8.2
    )Income (loss) from discontinued operations
    
    
    2.3
    
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (1.1
    )
    
    
    
    
    
    
    Net (loss) income
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
    
    
    $
    (635.6
    )
    
    $
    112.4
 84




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Cash Flows from Segment Operations
  Free Cash Flows from Continuing Operations
  Table 3  Reconciliation between free cash flows from continuing operating activities and the cash flows
provided by continuing operating activities measure reported in the financial statements  (in millions of Canadian dollars)
 2008
    
    
    2007
    
    
    2006Free cash flows from continuing operations (see Table 4)
    
    $
    264.4
    
    
    $
    289.5
    
    
    $
    (73.8
    )Additions to property, plant and equipment
    
    
    527.3
    
    
    
    468.7
    
    
    
    435.5Proceeds from disposal of assets
    
    
    (5.7
    )
    
    
    (6.1
    )
    
    
    (9.4
    )Cash flows provided by continuing operating activities
    
    $
    786.0
    
    
    $
    752.1
    
    
    $
    352.3
 Average Monthly Revenue per User
  2008/2007 Financial Year Comparison
 Revenues:
 
    
    Revenues increased in: Cable (by $251.6 million or 16.2% of segment revenues),
reflecting customer growth for all services; Newspapers ($107.5 million or 10.0%), due
primarily to the impact of the acquisition of
 85




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Osprey Media; Broadcasting ($21.2 million or 5.1%); and Interactive Technologies and
Communications ($7.6 million or 9.3%).
    
    Revenues decreased in Leisure and Entertainment ($27.9 million or -8.5%).
 Operating income:
 
    
    Operating income increased in: Cable (by $154.5 million or 24.0% of segment operating
income), Broadcasting ($6.9 million or 11.6%) and Interactive Technologies and
Communications ($2.3 million or 82.1%).
    
    Operating income decreased in Leisure and Entertainment ($6.5 million or -24.1%) and
Newspapers ($5.7 million or -2.4%).
    
    An unfavourable variance of $37.4 million (including $29.0 million in the Cable
segment and $8.4 million in the Broadcasting segment) related to recognition in 2008 of
a provision for CRTC Part II licence fees following the Federal Court of Appeal decision
of April 29, 2008 overturning the Federal Court decision on these fees. The Federal
Court judgement had been favourable to Quebecor Media and had led to the reversal, in
the third quarter of 2007, of current Part II licence fee accruals (see also Part II
licence fees in the sections on the results of the Cable and Broadcasting segments
below).
    
    Despite the increase in operating income for 2008, the fair value of Quebecor Media,
based on market comparables, decreased in 2008, compared with an increase in 2007,
resulting in a $59.1 million decrease in the consolidated stock option expense,
including $40.6 million in the Cable segment and $14.7 million in the Newspapers
segment.
    
    Excluding the operating income of Osprey Media and the impact of the consolidated
stock option expense, and if the figures for prior periods were restated to reflect the
Part II licence fee adjustment, the increase in operating income in 2008 would have been
11.6%, compared with 17.8% in 2007.
 Net loss:
 
    
    The unfavourable variance of $707.1 million was mainly due to:
 o
    
    recognition of a $671.2 million non-cash charge for impairment of goodwill
and intangible assets in the fourth quarter of 2008, primarily in the Newspapers
segment, including $631.0 million without any tax consequences;o
    
    $79.9 million increase in income tax expense;o
    
    $45.9 million increase in financial expenses;o
    
    $43.4 million increase in reserves for restructuring of operating
activities, impairment of assets and other special charges;o
    
    $28.1 million increase in the amortization charge.
  o
    
    $155.6 million increase in operating income.
 Amortization charge:
 86




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
    
    The increase was mainly due to significant capital expenditures in 2007 and 2008,
largely in the Cable and Newspapers segments, and the acquisition of Osprey Media.
 Financial expenses:
 
    
    The increase was mainly due to the impact of higher average indebtedness, which
resulted in a $50.4 million increase in interest expense, which was offset by an
increase in interest capitalized to the cost of additions to property, plant and
equipment, and of intangible assets.
    
    The increase in Quebecor Medias average indebtedness in 2008 was mainly due to:
 o
    
    additional financing (through Videotron) in April 2008 in an aggregate
principal amount of US$455.0 million in connection with the acquisition of AWS
licences for aggregate cash consideration of $554.6 million;o
    
    financing, beginning in August 2007, of the acquisition of Osprey Media for
a total consideration of $414.4 million (excluding assumed liabilities as described
below);o
    
    assumption of debt totalling $161.8 million as part of the acquisition of
Osprey Media in August 2007;o
    
    financing of the settlement in October 2007 of a $106.0 million liability
in connection with derivative financial instruments related to Sun Media
Corporations term loan B;o
    
    financing of the payment in July 2007 of the Additional Amount payable, for
a total consideration of $127.2 million.
 Loss on valuation and translation of financial instruments:
 Charge for restructuring of operations, impairment of assets and other special items
 
    
    The Newspapers segment recognized a $33.3 million charge for restructuring of
operations in 2008. The Newspapers segment is contending with the fundamental
industry-wide changes of the past several years, combined with a difficult economic
environment that is impacting its advertising revenues. Therefore, in December 2008,
Quebecor Media introduced a staff-reduction program as part of a major restructuring of
the operations of its Newspapers segment across Canada. The charges for restructuring in
2008 and 2007 also relate to the project to acquire new presses, voluntary
workforce-reduction programs, and the project to streamline newsgathering in the
Newspapers segment. Quebecor Media also recognized charges for restructuring totalling
$2.3 million in other segments in 2008.
    
    In the fourth quarter of 2008, Quebecor Media concluded that the restructuring
initiatives and the loss of a major printing contract were a triggering event for
impairment tests and that write-downs of some long-lived assets would be necessary. As a
result, a non-cash impairment charge totalling $19.1 million was recorded against
buildings, machinery and equipment
 Non-cash charge for impairment of goodwill and intangible assets:
 
    
    The difficult financial and economic environment for some of the Companys lines of
business at the end of the fourth quarter of 2008 triggered a goodwill and masthead
impairment test in the Newspapers, Leisure and Entertainment, and Interactive
Technologies and Communications segments. Based on preliminary results of this test, a
$631.0 million non-cash charge for goodwill impairment, without any tax consequences,
was
 87




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recorded, including $595.0 million in the Newspapers segment, $10.0 million in the
Leisure and Entertainment segment, and $26.0 million in the Interactive Technologies and
Communications segment. Quebecor Media also recorded a masthead impairment charge of
$40.2 million ($28.9 million net of income tax).
    
    When performing the second step of the goodwill impairment test, the fair value of
goodwill is determined in the same manner as for a business combination. The Company
allocates the fair value of a reporting unit to all of the identifiable assets and
liabilities of the reporting unit, whether or not recognized separately, and the excess
of the fair value over the amounts assigned to the reporting units identifiable assets
and liabilities is the fair value of goodwill. In the process of performing the second
step of the test, an estimated fair value of $675.0 million was attributed to intangible
assets such as mastheads and customer relationships without recognition in the books,
representing an estimated excess of $340.0 million, net of future income tax, over the
carrying value of these related intangibles assets. Therefore, a lesser portion of the
reporting units fair value was attributed to goodwill. As a result, the magnitude of
the estimated goodwill impairment exceeded significantly the reporting units overall
carrying value impairment.
 Income tax expense:
 
    
    The $79.9 million increase was mainly due to:
 o
    
    unfavourable tax rate mix in 2008 in the various components of the gains
and losses on valuation and translation of financial instruments, including
derivative financial instruments, which accounted for an unfavourable variance of
$39.3 million. The rate mix was relatively favourable in 2007;o
    
    recognition in 2007 of the estimated $25.4 million favourable impact of
lower tax rates introduced by the Canadian federal government;o
    
    recognition in 2007 of tax benefits totalling $10.5 million following the
adoption on third reading by the federal government of Canada of a higher non-capital
loss conversion rate for tax benefits related to Part VI.1 tax. These tax benefits,
which were acquired from Quebecor World Inc. (Quebecor World), related to tax that
corporations must pay on preferred dividends paid during a financial year.
 Free cash flows from continuing operating activities
 Free cash flows from continuing operating activities:
 
    
    The $25.1 million decrease was mainly due to:
 o
    
    $51.0 million increase in use of funds for non-cash balances related to
operations, due primarily to disbursements of $94.1 million in connection with the
exercise of stock options (the Quebecor Media stock option plan did not allow the
exercise of any option before 2008, at which time it covered a six year compensation
value), partially offset by a decrease in accounts receivable and an increase in
accounts payable and accrued charges;o
    
    $58.6 million increase in additions to property, plant and equipment,
mainly because of network investments by the Cable segment and phase two of the
project to acquire new presses;o
    
    $41.4 million increase in the cash interest expense, mainly as a result of
the impact of higher indebtedness; ando
    
    $24.3 million increase in cash reserve for restructuring of operations and other special charges.
 88




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o
    
    $155.6 million increase in operating income.
 Table 4: Quebecor Media Inc.  Free cash flows from continuing operating activities  (in millions of Canadian dollars)
 2008
    
    
    2007
    
    
    2006Cash flows from segment operationsCable
    
    $
    396.3
    
    
    $
    314.7
    
    
    $
    210.5Newspapers
    
    
    142.0
    
    
    
    118.3
    
    
    
    100.0Broadcasting
    
    
    44.5
    
    
    
    43.2
    
    
    
    33.4Leisure and Entertainment
    
    
    13.1
    
    
    
    24.2
    
    
    
    16.1Interactive Technologies and Communications
    
    
    1.5
    
    
    
    (0.5
    )
    
    
    5.7Head Office and other
    
    
    0.5
    
    
    
    1.4
    
    
    
    7.8$
    597.9
    
    
    $
    501.3
    
    
    $
    373.5Cash interest expense1
    
    $
    (266.7
    )
    
    $
    (225.3
    )
    
    $
    (402.9
    )Cash portion of charge for restructuring of
operations, impairment of assets and other special
items
    
    
    (35.5
    )
    
    
    (11.2
    )
    
    
    (16.7
    )Current income taxes
    
    
    (12.7
    )
    
    
    (11.3
    )
    
    
    (5.4
    )Other
    
    
    (0.3
    )
    
    
    3.3
    
    
    
    (0.1
    )Net change in non cash balances related to operations
    
    
    (18.3
    )
    
    
    32.7
    
    
    
    (22.2
    )Free cash flows from continuing operating activities
    
    $
    264.4
    
    
    $
    289.5
    
    
    $
    (73.8
    )
 
 1
    
    Interest on long-term debt and other interest, less interest capitalized to cost of
property, plant and equipment and other assets (see Note 2 to the consolidated financial
statements). Table 5
Cash flows from segment operations
(in millions of Canadian dollars)
 2008
    
    
    2007
    
    
    2006Operating income
    
    $
    1,119.5
    
    
    $
    963.9
    
    
    $
    799.6Additions to property, plant and equipment
    
    
    (527.3
    )
    
    
    (468.7
    )
    
    
    (435.5
    )Proceeds from disposal of assets
    
    
    5.7
    
    
    
    6.1
    
    
    
    9.4Cash flows from segment operations
    
    $
    597.9
    
    
    $
    501.3
    
    
    $
    373.5
 Segmented Analysis
 Cable segment
  89




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##### Table of Contents



2008 operating results
 Revenues:
 
    
    Combined revenues from all cable television services increased $74.1 million (10.1%)
to $809.9 million, due primarily to customer base growth, migration from analog to
digital service, increased video on demand orders, the success of high definition (HD)
packages, and increases in some rates.
    
    Revenues from Internet access services increased $77.2 million (18.3%) to $499.6
million. The improvement was due to customer growth, as well as customer migration to
higher speed services.
    
    Revenues from cable telephone service increased $90.6 million (46.3%) to $286.1
million, almost entirely due to customer growth. The increase would have been greater
had there not been a decrease in average per-customer long-distance revenues.
    
    Revenues from wireless telephone service increased $13.9 million (78.5%) to $31.6
million, mainly due to customer growth.
    
    Revenues of Le SuperClub Videotron ltée decreased $2.9 million (-4.9%) to $57.0
million. The decrease was mainly due to the sale of StarStruck stores in Ontario and the
franchising or closing of some locations, partially offset by an increase in revenues
from rentals and retail sales on a comparable basis, as well as by increased royalty
revenues.
 Monthly ARPU:
 Customer statistics
 Cable television i.e
 
    
    The customer base for illico Digital TV stood at 927,300 at the end of 2008, an
increase of 159,100 (20.7%) during the year, compared with 144,600 and 149,000 in 2007
and 2006 respectively. During 2008, illico Digital TV passed the analog service in
number of subscribers for the first time. As of December 31, 2008, illico Digital TV had
a household penetration rate of 36.5% versus 30.8% a year earlier.
    
    Migration from analog to digital service was the main reason for the decrease of
81,600 (-9.4%) in the customer base for analog cable television services in 2008. By
comparison, the number of subscribers to analog cable services decreased by 78,900 and
82,700 in 2007 and 2006 respectively.
 Internet access
 Cable telephone service
 90




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##### Table of Contents



Wireless telephone service
 Table 6
Cable segment year-end customer numbers, 2004-2008
(in thousands of customers)
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Cable television:Analog
    
    
    788.3
    
    
    
    869.9
    
    
    
    948.8
    
    
    
    1,031.5
    
    
    
    1,118.9Digital
    
    
    927.3
    
    
    
    768.2
    
    
    
    623.6
    
    
    
    474.6
    
    
    
    333.7Total cable television
    
    
    1,715.6
    
    
    
    1,638.1
    
    
    
    1,572.4
    
    
    
    1,506.1
    
    
    
    1,452.6Cable Internet
    
    
    1,063.8
    
    
    
    933.0
    
    
    
    792.0
    
    
    
    638.0
    
    
    
    502.6Cable telephone
    
    
    852.0
    
    
    
    636.4
    
    
    
    397.8
    
    
    
    163.0
    
    
    
    Wireless telephone
(in thousands of
activated lines)
    
    
    63.4
    
    
    
    45.1
    
    
    
    11.8
    
    
    
    
    
    
    
    
 Operating income:
 
    
    The increase was due primarily to:
 o
    
    customer growth for all services;o
    
    increases in some rates, mainly for cable television and cable Internet service;o
    
    $40.6 million favourable variance in expenses related to Quebecor Medias
stock option plan that are charged to its operating segments as a direct charge to
reflect participation by segment managers in the plan, and management fees.
  o
    
    an unfavourable variance of $29.0 million related to the recognition in
2008 of a provision for CRTC Part II licence fees following the decision by the
Federal Court of Appeal on April 29, 2008 overturning the Federal Court ruling on the
matter. The Federal Court judgment had been favourable to Quebecor Media and had led
to the reversal of current CRTC Part II licence fee accruals in the third quarter of
2007 (see Part II licence fees below).
 
    
    Excluding the favourable variation in the stock option expense, and if the figures
for prior periods were restated to reflect the CRTC Part II licence fee adjustment,
operating income would have increased by 21.3% in 2008, compared with 26.0% in 2007.
 Operating costs
 
    
    the significant fixed component of costs, which does not fluctuate in proportion to
revenue growth;
    
    the marginal impact on costs of increases in some rates and in consumption;
    
    the favourable variance in the stock option expense, which was partially offset by
the increase in Part II licence fees.
 Cash flows from segment operations:
 91




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##### Table of Contents




    
    The $81.6 million increase was due to the $154.5 million increase in operating
income, partially offset by a $74.3 million increase in additions to property, plant and
equipment compared with 2007, mainly because of spending on the AWS network and network
modernization.
 Table 7: Cable segment
Cash flows from operations
(in millions of Canadian dollars)
 2008
    
    
    2007
    
    
    2006Operating income
    
    $
    797.2
    
    
    $
    642.7
    
    
    $
    512.5Additions to property, plant and equipment
    
    
    (404.4
    )
    
    
    (330.1
    )
    
    
    (302.6
    )Proceeds from disposal of assets
    
    
    3.5
    
    
    
    2.1
    
    
    
    0.6Cash flows from segment operations
    
    $
    396.3
    
    
    $
    314.7
    
    
    $
    210.5
 Other developments in 2008
  Part II licence fees
 Broadcasting Act (Canada).
  Newspapers segment
  92




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canoe.ca canoe.qc.ca toile.com tva.canoe.com lcn.canoe.com. jobboom.com micasa.ca autonet.ca reseaucontact.com space.canoe.ca espace.canoe.ca classifieds.canoe.ca classees.canoe.ca canoeklix.com
  2008 operating results
 Revenues:
 
    
    The increase mainly reflects a favourable variance related to the acquisition of
Osprey Media ($120.2 million), which closed in August 2007.
    
    Excluding the impact of that acquisition, total revenues decreased by $12.7 million
(-1.3%): advertising revenues decreased 3.1%, circulation revenues decreased 3.0%, and
combined revenues from commercial printing and other sources increased 28.9%. The
Newspapers segment is going through a period of dramatic transformation due to the
industry-wide changes of the past several years, combined with the impact of the
difficult economic environment on its advertising revenues.
    
    The revenues of the urban dailies decreased 2.9%; excluding the acquisition of Osprey
Media, the revenues of the community newspapers decreased 0.4%.
    
    At the urban dailies, revenues of the free dailies increased 12.6%, due to strong
results posted by the Vancouver, Montreal, Calgary and Edmonton dailies.
    
    15.1% increase in revenues at general-interest portals, due mainly to website
creation and maintenance, including the sites of affiliated companies, and 8.5% increase
in revenues at special-interest portals, primarily attributable to revenue growth at the
autonet.ca site resulting mainly from the acquisition of ASL Ltd. (ASL).
 Operating income:
 
    
    Osprey Media generated operating income of $45.6 million in 2008, compared with $25.3
million in August through December 2007, for an increase of $20.3 million in 2008
compared with 2007.
    
    Excluding the impact of Osprey Media, operating income decreased $26.1 million
(-12.6%) in the Newspapers segment.
    
    The decrease was due primarily to:
 o
    
    impact of the decrease in advertising and circulation revenues, on a comparable basis;o
    
    wage indexing and certain unusual payroll expenses, including charges
related to the transition plan for printing facilities in Ontario and Quebec;o
    
    expenditures related to the start-up of Quebecor MediaPages;
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o
    
    cost of introducing a new business development strategy for portals.
  o
    
    $14.7 million favourable impact related to the Quebecor Media stock option plan expense;o
    
    $3.1 million decrease in newsprint costs.
 Operating costs
 
    
    increase in the proportion of fixed costs, given the decrease in revenues on a
comparable basis;
    
    unfavourable net cost factors, described above in the discussion of operating income.
 Cash flows from segment operations:
 
    
    The $23.7 million increase was mainly due to a $29.2 million decrease in additions to
property, plant and equipment. The impact of increased equipment purchases due to
implementation in 2008 of phase two of the project to acquire new presses and investment
in portal development was outweighed by the favourable variance related to the
acquisition of a building from Quebecor World in 2007 for a cash consideration of $62.5
million.
 Table 8: Newspapers segment
Cash flows from operations
(in millions of Canadian dollars)
 2008
    
    
    2007
    
    
    2006Operating income
    
    $
    227.1
    
    
    $
    232.8
    
    
    $
    217.7Additions to property, plant and equipment
    
    
    (86.8
    )
    
    
    (116.0
    )
    
    
    (118.2
    )Proceeds from disposal of assets
    
    
    1.7
    
    
    
    1.5
    
    
    
    0.5Cash flows from segment operations
    
    $
    142.0
    
    
    $
    118.3
    
    
    $
    100.0
 Other developments since end of 2007
 Journal de Montreal Journal de Montreal Labour Code Journal de Montreal
 Companies Creditors Arrangement Act
 Le Journal de Quebec
 autonet.ca
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Broadcasting segment
 MenTV
 2008 operating results
 Revenues:
 
    
    Revenues from broadcasting operations increased $21.8 million, mainly because of:
 o
    
    higher advertising, video on demand and other revenues at the TVA Network;o
    
    higher advertising and subscription revenues at the specialty channels;o
    
    higher revenues from the Internet, commercial production and Canal Indigo
(100% of the revenues of Canal Indigo have been included since the buyout on August
31, 2008 of the interest TVA Group did not already hold).
 
    
    Revenues from distribution operations decreased by $0.6 million.
    
    Publishing revenues decreased $1.3 million, primarily as a result of decreases in
advertising and newsstand revenues, partially offset by an increase in custom publishing
operations.
 Operating income:
 
    
    Operating income from broadcasting operations increased $5.5 million, mainly because of:
 o
    
    impact of revenue growth at the TVA Network and the specialty channels;o
    
    decrease in selling and administrative expenses at the TVA Network;o
    
    $2.4 million favourable variance related to stock option expense.
  o
    
    unfavourable variance of $8.4 million related to the recognition in the
second quarter of 2008 of a provision for CRTC Part II licence fees following the
Federal Court of Appeal decision of April 29, 2008 overturning the Federal Court
decision on these fees. The Federal Court judgment had been favourable to Quebecor
Media and had led to the reversal of current Part II licence fee accruals in the
third quarter of 2007 (see Part II licence fees below);
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o
    
    higher content and production costs at the TVA Network.
 
    
    Operating income from distribution operations was flat.
    
    Operating income from publishing operations increased by $1.5 million, mainly as a
result of the decrease in advertising, marketing, distribution and printing expenses,
partially offset by the unfavourable impact of the decrease in revenues.
 Operating costs
 
    
    decrease in the proportion of fixed costs, given revenue growth, on a comparable
basis, partially offset by the unfavourable impact of the Part II licence fee expense.
 Cash flows from operations:
 
    
    The impact of the $6.9 million increase in operating income was offset by a $5.7
million increase in additions to property, plant and equipment, resulting mainly from
expenditures related to migration to HD television and computer equipment purchases.
 Table 9: Broadcasting segment
Cash flows from operations
(in millions of Canadian dollars)
 2008
    
    
    2007
    
    
    2006Operating income
    
    $
    66.3
    
    
    $
    59.4
    
    
    $
    42.1Additions to property, plant and equipment
    
    
    (21.9
    )
    
    
    (16.2
    )
    
    
    (9.0
    )Proceeds from disposal of assets
    
    
    0.1
    
    
    
    
    
    
    
    0.3Cash flows from segment operations
    
    $
    44.5
    
    
    $
    43.2
    
    
    $
    33.4
 Part II licence fees
   Leisure and Entertainment segment
 archambault.ca ZIK.ca
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2008 operating results
 Revenues:
 
    
    8.8% decrease in the Book divisions revenues, due primarily to lower distribution
volume in 2008 than 2007 and decreased sales in the academic segment.
    
    The revenues of Archambault Group decreased by 7.4%, mainly because of fewer CDs
released and distributed and lower retail sales of music. The impact of higher broadcast
revenues due to the success of the Paul McCartney concert during Quebec Citys
400th anniversary celebrations was outweighed by a decrease in revenues due
to the transfer of video on demand operations to the Cable segment.
 Operating income:
 Cash flows from operations:
 
    
    The $11.1 million decrease was mainly due to:
 o
    
    $6.5 million decrease in operating income;o
    
    $6.2 million increase in additions to property, plant and equipment, mainly
at Archambault Group essentially as a result of the opening of an Archambault store
in Laval, Quebec, as well as the expansion and renovation of other stores.
 Table 10: Leisure and Entertainment segment
Cash flows from operations
(in millions of Canadian dollars)
 2008
    
    
    2007
    
    
    2006Operating income
    
    $
    20.5
    
    
    $
    27.0
    
    
    $
    19.3Additions to property, plant and equipment
    
    
    (9.1
    )
    
    
    (2.9
    )
    
    
    (3.4
    )Proceeds from disposal of assets
    
    
    1.7
    
    
    
    0.1
    
    
    
    0.2Cash flows from segment operations
    
    $
    13.1
    
    
    $
    24.2
    
    
    $
    16.1
 Interactive Technologies and Communications segment
  2008 operating results
 Revenue:
 
    
    The increase was mainly due to:
 o
    
    impact of increased volumes from customers in Europe, particularly France
and Italy, as well as in Asia and Canada, and favourable variance in currency
translation, partially offset by a decrease in volume in the United States.
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Operating income:
 
    
    The increase was due mainly to:
 o
    
    impact of increased revenues in Canada, Europe and Asia;o
    
    increase in tax credits for e-commerce R&D;o
    
    favourable variance in currency translation.
  o
    
    impact of decreased volume in the United States;o
    
    increases in some operating expenses, including those related to labour.
 Cash flows from operations:
 Table 11: Interactive Technologies and Communications segment
Cash flows from operations
(in millions of Canadian dollars)
 2008
    
    
    2007
    
    
    2006Operating income
    
    $
    5.1
    
    
    $
    2.8
    
    
    $
    7.5Additions to property, plant and equipment
    
    
    (3.6
    )
    
    
    (3.3
    )
    
    
    (1.8
    )Cash flows from segment operations
    
    $
    1.5
    
    
    $
    (0.5
    )
    
    $
    5.7
 2008/2007 Fourth Quarter Comparison
 Operating results of Quebecor Media
 Revenue:
 
    
    Revenues increased in: Cable (by $46.2 million or 10.8% of segment revenues),
reflecting continued customer growth for all services; Interactive Technologies and
Communications ($3.9 million or 19.4%) and Broadcasting ($2.8 million or 2.3%).
    
    Revenues decreased in Newspapers ($17.6 million or -5.5%) and Leisure and
Entertainment ($3.0 million or -2.9%).
 Operating income:
 
    
    Operating income increased in: Cable (by $42.4 million or 24.1% of segment operating
income), due primarily to customer growth; Interactive Technologies and Communications
($3.0 million); and Leisure and Entertainment ($0.8 million or 7.8%).
    
    Operating income decreased in Newspapers ($24.6 million or -31.0%) and Broadcasting
($0.4 million or -1.8%).
    
    Despite the increase in operating income in the fourth quarter of 2008, the fair
value of Quebecor Media, based on market comparables, decreased during the quarter,
compared with an increase in the same period of 2007. The changes in fair value
generated a $21.1 million favourable variance in the stock option expense in the fourth
quarter of 2008, compared with the same period of 2007.
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
    
    A $4.1 million provision for CRTC Part II licence fee accruals was recognized in the
fourth quarter of 2008, compared with nil in the same quarter of 2007 (see Part II
licence fees in the sections on the results of the Cable and Broadcasting segments for
2008).
    
    Excluding the operating income of Osprey Media and the impact of the consolidated
stock option expense, and if the figures for prior periods were restated to reflect the
Part II licence fee adjustment, the increase in operating income in the fourth quarter
of 2008 would have been 3.9%, compared with 11.7% in the same period of 2007.
 Net loss:
 
    
    The $748.0 million unfavourable variance was due primarily to:
 o
    
    recognition of a $671.2 million non-cash charge for impairment of goodwill
and intangible assets, including $631.0 million without any tax consequences, in the
fourth quarter of 2008 ($5.4 million in the same period of 2007);o
    
    unfavourable variance of $53.8 million in the charge for restructuring of
operations, impairment of assets and other special items;o
    
    $25.7 million increase in income tax expense;o
    
    $24.6 million increase in losses on valuation and translation of financial instruments;o
    
    $7.2 million increase in amortization charges.
  o
    
    $23.2 million increase in operating income;o
    
    $3.9 million decrease in financial expenses;
 Amortization charges
 
    
    The increase was mainly due to significant capital expenditures in 2007 and 2008,
largely in the Cable and Newspapers segments, and the acquisition of Osprey Media.
 Financial expenses:
 
    
    The decrease was mainly due to lower base interest rates and an increase in interest
capitalized to additions to property, plant and equipment and to intangible assets, as
well as foreign-exchange losses recorded in the fourth quarter of 2007 in connection
with non-cash balances related to operations.
 Loss on valuation and translation of financial instruments:
 
    
    The $24.6 million increase in the loss on valuation and translation of financial
instruments was due to:
 o
    
    unfavourable variance related to the ineffectiveness of cross-currency
interest rate swaps as a result of changing yield curves and counterparty risks;o
    
    unfavourable variance related to re-measurement of embedded derivatives.
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Charge for restructuring of operations, impairment of assets and other special items:
 
    
    In December 2008, Quebecor Media introduced a staff-reduction program as part of a
major restructuring of the operations of its Newspapers segment across Canada, leading
to the recognition of a $28.8 million charge for restructuring of operations in the
fourth quarter of 2008. The Newspapers segment is contending with the dramatic industry
wide changes of the past several years, combined with a difficult economic environment
that is impacting its advertising revenues.
    
    Quebecor Media also concluded that the restructuring initiatives launched in December
2008 and the loss of a major printing contract were a triggering event for impairment
tests and that write-downs of some long-lived assets were necessary. As a result, an
impairment charge totalling $19.1 million was recorded against buildings, machinery and
equipment.
    
    The reversal of the reserve in the fourth quarter of 2007 related primarily to
changes in plans to close the London, Ontario, plant.
 Non-cash charge for impairment of goodwill and intangible assets:
 Income tax expense:
 
    
    The $25.7 million increase was mainly due to:
 o
    
    unfavourable tax rate mix in the various components of the gains and losses
on financial instruments, derivative financial instruments and foreign currency
translation of financial instruments;o
    
    recognition in the fourth quarter of 2007 of a $22.2 million favourable
impact related to lower tax rates introduced by the federal government.
 Segmented Analysis
 Cable segment
 Revenues:
 
    
    Total revenues from cable television services increased $17.1 million (9.0%) to
$208.1 million.
    
    Revenues from Internet access services increased $17.5 million (15.3%) to $132.2
million.
    
    Revenues from cable telephone service increased $19.2 million (32.4%) to $78.5
million.
    
    Revenues from the wireless telephone service increased $2.5 million (41.0%) to $8.6
million.
    
    Revenues of Le SuperClub Videotron decreased $3.8 million (-19.1%) to $16.1 million.
 Monthly ARPU:
 Customer statistics
 Cable television  . th
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
    
    The customer base for illico Digital TV increased by 50,600 in the fourth quarter of
2008, the largest quarterly increase since the service was introduced in 1999. It grew
by 47,900 in the same quarter of 2007.
    
    The customer base for analog cable television services decreased by 26,500, compared
with 26,100 in the same period of 2007, primarily as a result of customer migration to
illico Digital TV.
 Internet access
 Cable telephone service
 Wireless telephone service
 Operating income:
 
    
    The increase was due primarily to:
 o
    
    customer growth for all services;o
    
    higher volume of orders on illico on Demand;o
    
    $14.6 million favourable variance in expenses related to Quebecor Medias stock option plan.
  o
    
    an unfavourable variance related to $3.2 million in CRTC Part II licence
fee accruals recognized in the fourth quarter of 2008, compared with nil in the same
quarter of 2007 (see Part II licence fees in the section on the Cable segments
results for 2008).
 
    
    Excluding the favourable variation in the stock option expense, and if the figures
for prior periods were restated to reflect the Part II licence fee adjustment, operating
income would have increased by 16.7% in the fourth quarter of 2008, compared with 22.7%
in the same period of 2007.
 Operating costs
 
    
    the significant fixed component of costs, which does not fluctuate in proportion to
revenue growth;
    
    the favourable variance in the stock option expense.
 Newspapers segment
 Revenues:
 
    
    Advertising revenues decreased 8.2%, circulation revenues increased 2.9%, commercial
printing and other revenues combined increased 10.7%.
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
    
    The revenues of the urban dailies and the community newspapers decreased by 5.2% and
4.3% in the fourth quarter of 2008.
    
    19.1% increase in revenues at the general-interest portals, due mainly to website
creation and maintenance, and 6.8% increase at the special-interest portals, primarily
attributable to revenue growth at the autonet.casite resulting mainly from the
acquisition of ASL.
 Operating income:
 
    
    The decrease was due primarily to:
 o
    
    impact of the decrease in revenues, on a comparable basis;o
    
    wage indexing;o
    
    expenditures related to the start-up of Quebecor MediaPages;o
    
    increase in operating expenses at the portals, including advertising
expenses and investment in new products.
  o
    
    $4.3 million favourable variance related to the stock option expense.
 Operating costs
 
    
    increase in the proportion of fixed costs, on a comparable basis, given the decrease in revenues;
    
    unfavourable net cost factors, described above in the discussion of operating income.
 Broadcasting segment
 Revenues:
 
    
    Revenues from broadcasting operations increased $3.4 million, mainly because of:
 o
    
    higher advertising and video on demand revenues at the TVA Network;o
    
    higher subscription revenues and advertising revenues at the specialty
channels (Mystère, Argent, Prise 2, LCN, MenTV, Mystery and Les idées de ma maison);o
    
    higher revenues from the Internet and Canal Indigo.
 
    
    Distribution revenues increased $0.2 million.
    
    Publishing revenues decreased $0.5 million, primarily as a result of the decrease in
advertising revenues, partially offset by an increase in custom publishing operations.
 Operating income:
 
    
    The favourable impact of the revenue increase and the decrease in selling and
administrative expenses for broadcasting operations was more than offset by higher
content costs and the unfavourable variance related to the $1.0 million provision for
Part II licence fee accruals recognized in the fourth quarter of 2008 (see Part II
licence fees in the section on the Cable segments results for 2008).
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
    
    Operating income from distribution operations decreased by $0.4 million, mainly
because of lower revenues from television products.
    
    Operating income from publishing operations increased by $0.3 million, mainly as a
result of the decrease in advertising, marketing and distribution expenses, partially
offset by the unfavourable impact of the decrease in revenues.
 Operating costs
 Leisure and Entertainment segment
 Revenues:
 
    
    7.9% increase in revenues in the Book division, due primarily to increased
international sales by the publishing houses and higher revenues from academic
publishing, partially offset by lower distribution volume.
    
    6.0% decrease in revenues at Archambault Group. The favourable impact of increased CD
releases on distribution and production revenues, and higher sales at Archambault
stores, essentially due to the opening of a store in Laval, Quebec, were outweighed by a
decrease in revenues due to the transfer of video on demand operations to the Cable
segment and lower same-store sales of music at Archambault stores.
 Operating income:
 Interactive Technologies and Communications segment
 Revenues:
 
    
    The increase was mainly due to the impact of:
 o
    
    increased revenues from customers in Europe, particularly France and Italy,
including a favourable variance in currency translation;o
    
    increased revenues in Asia and Canada, including government customers in Quebec.
  o
    
    decreased volume from customers in the United States.
 Operating income:
 
    
    The $3.0 million increase was mainly due to:
 o
    
    favourable impact of new tax credits for research and development related to e-commerce;o
    
    recognition of a foreign-exchange gain in the fourth quarter of 2008;o
    
    impact of revenue increase;o
    
    favourable variance due to one-time charges related to taking Nurun
private, recorded in the fourth quarter of 2007.
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o
    
    impact of the decrease in revenues in the United States, combined with
increases in some market development costs in that country.
 2007/2006 Financial Year Comparison
 Operating results of Quebecor Media
 Revenues:
 
    
    Revenues increased in all segments: Cable (by $243.1 million or 18.6% of segment
revenues), due mainly to customer growth; Newspapers ($107.9 million or 11,2%), mainly
because of the impact of the acquisition of Osprey Media in August 2007; Broadcasting
($22.2 million or 5.6%); Leisure and Entertainment ($14.0 million or 4.4%); and
Interactive Technologies and Communications ($8.1 million or 11.0%).
 Operating income:
 
    
    Operating income increased in Cable (by $130.2 million or 25.4% of segment operating
income), Newspapers ($15.1 million or 6.9%), Broadcasting ($17.3 million or 41.1%) and
Leisure and Entertainment ($7.7 million or 39.9%).
    
    Operating income decreased in Interactive Technologies and Communications ($4.7
million or -62.7%).
    
    The growth in the fair value of Quebecor Media was greater in 2007 than in 2006,
resulting in a $26.0 million increase in the consolidated stock option charge.
    
    In 2007, the Cable and Broadcasting reversed their provisions for CRTC Part II
licence fees, which had a favourable impact in the amount of $16.7 million (see Part II
licence fees in the sections on the results of the Cable and Broadcasting segments for
2008).
    
    Excluding Osprey Medias operating income, the impact of the consolidated stock
option plan and the provision for Part II licence fees, operating income increased by
17.8% in 2007, compared with 11.0% in 2006.
 Net income:
 
    
    The $496.8 million improvement was mainly due to:
 o
    
    favourable impact on the 2007 analysis of the recognition in 2006 of a
$342.6 million loss on debt refinancing ($219.0 million net of income tax);o
    
    favourable impact on the 2007 analysis of the recognition in 2006 of a
$180.0 million charge for impairment of goodwill and broadcasting licences in the
Broadcasting segment ($156.6 million net of income tax and non-controlling interest).o
    
    $164.3 million increase in operating income.
  o
    
    $29.7 million increase in amortization charges;o
    
    $15.4 million increase in financial expenses.
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Amortization charge:
 Financial expenses:
 
    
    The increase was due to:
 o
    
    approximately $15.0 million impact of increased indebtedness and higher interest rates.
  o
    
    the favourable impact, which extended over a full year for the first time,
of the refinancing of Quebecor Medias notes at more advantageous interest rates in
early 2006.
 
    
    The increase in Quebecor Medias indebtedness in 2007 compared with 2006 was due
primarily to:
 o
    
    financing, beginning in August 2007, of the acquisition of Osprey Media for
a total consideration of $414.4 million;o
    
    liabilities totalling $161.8 million assumed as part of the acquisition of
Osprey Media;o
    
    financing of the settlement in October 2007 of a $106.0 million liability
in connection with derivative financial instruments related to Sun Media
Corporations term loan B;o
    
    financing of the payment in July 2007 of the Additional Amount payable, for
a total consideration of $127.2 million (see Financing Activities below for details
of the increase in the long-term debt in 2007).
 Loss on valuation and translation of financial instruments:
 
    
    The decrease was primarily due to the $5.3 million decrease in the loss on
re-measurement of the Additional Amount payable, which was partially offset by a $3.5
million unfavourable variance related to recognition on the income statement of
fluctuations in the fair value of derivative financial instruments and financial
instruments.
 Charge for restructuring of operations, impairment of assets and other special items:
 
    
    The Newspapers segment recorded a $2.3 million net charge in connection with the
project to acquire new presses, including a $6.7 million charge for termination benefits
related to the elimination of production jobs at the Toronto Sunand the Ottawa Sun, and
the reversal of a reserve in the amount of $4.4 million related to changes in plans for
the closing of the London, Ontario plant.
    
    A $5.3 million charge was also recorded for termination benefits related to the
elimination of jobs at the London Free Press, the Toronto Sunand Bowes Publishers in
connection with the voluntary workforce reduction program.
    
    A $2.3 million charge was recognized for termination benefits in connection with the
project to streamline newsgathering announced in the second quarter of 2006 and the
elimination of newsroom positions throughout the organization.
    
    Quebecor Medias other segments recorded total reserves for restructuring of
operations in the amount of $1.7 million, primarily in the Broadcasting segment, in 2007
($1.9 million in 2006).
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
    
    Quebecor Media also recorded a gain on the sale of businesses and other assets of
$0.4 million in 2007 ($2.2 million in 2006).
 Loss on settlement of debt: 3 4
 Non-cash charge for impairment of goodwill and intangible assets:
 Income tax charge:
 
    
    The unfavourable variance of $128.5 million resulted primarily from:
 o
    
    unfavourable impact on the 2007 analysis of tax savings recognized in 2006
in connection with the loss on debt refinancing related to the repurchase of Quebecor
Medias Senior Notes and impairment of broadcasting licences.
  o
    
    the tax rate reduction by the Canadian federal government in 2007, which was greater than in 2006;o
    
    the adoption in 2007 of a more favourable conversion rate for Part VI.1 tax
benefits acquired from a related party (tax that corporations must pay on preferred
dividends paid during a financial year).
 Free cash flows from continuing operating activities:
 
    
    The $363.3 million improvement was mainly due to:
 o
    
    payment in 2006 of $197.3 million in accrued interest on Senior Discount
Notes as part of the refinancing carried out on January 17, 2006;
 o
    
    $164.3 million increase in operating income;o
    
    $54.9 million net change in non-cash balances related to operations.
  o
    
    $33.2 million increase in additions to property, plant and equipment.
 Segmented Analysis
 Cable segment
 Revenues:
 o
    
    Combined revenues from all cable television services: $735.8 million, an increase of
$58.6 million (8.7%), due to the impact of customer base growth, increases in some
rates, revenues from the HD package, and the favourable impact of the growth in the
illico Digital TV customer base on revenues from illico on Demand, pay TV and
pay-per-view.
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
    
    Revenues from Internet access services: $422.4 million, an increase of $77.3 million
(22.4%). The favourable variance was mainly due to customer growth, as well as heavier
consumption and the impact of increases in some rates.
    
    Revenues from the cable telephone service: $195.5 million, an increase of $88.1
million (82.0%) essentially due to customer growth.
    
    Revenues from the wireless telephone service: $17.7 million, an increase of $16.5
million.
    
    Revenues of Le SuperClub Videotron: $60.0 million, an increase of $4.4 million
(7.9%), due primarily to increased same-store sales in the
Microplaytm sections, the opening of Videotron stores and the impact
of store acquisitions.
 Average monthly revenue per user:
 Operating income:
 
    
    The increase was primarily due to:
 o
    
    customer growth for all services;o
    
    increases in some rates;o
    
    $12.6 million favourable variance related to reversal in 2007 of current
Part II licence fee accruals (see Part II licence fees in the section on the
results of the Cable segment for 2008).
  o
    
    $20.9 million unfavourable impact of expenses related to Quebecor Medias stock option plan.
 
    
    Excluding the favourable variation in the stock option expense, and if the figures
were restated to reflect the Part II licence fee adjustment, operating income would have
increased by 26.0% in 2007, compared with 26.9% in 2006.
 Operating costs
 
    
    The 2.3 percentage point decrease was mainly due to:
 o
    
    the significant fixed component of costs, which does not fluctuate in proportion to revenue growth;o
    
    the marginal impact on costs of increases in some rates.
 Cash flows from segment operations:
 
    
    The impact of the $130.2 million increase in operating income was partially offset by
a $27.5 million increase in additions to property, plant and equipment, primarily
attributable to investments in network upgrades and to modernization by the Cable
segment, as well as purchases of cable telephony equipment for use by customers.
 107




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Newspapers segment
 Revenues:
 
    
    Excluding the impact of that acquisition, revenues increased by $12.4 million.
    
    Commercial printing and other revenues combined increased by 33.7%, advertising
revenues grew by 1.0%, and circulation revenues decreased by 5.7% in comparison with
2006.
    
    The revenues of the urban dailies decreased by 1.5% in 2007. Excluding the
acquisition of Osprey Media, the revenues of the community newspapers increased by 1.1%.
    
    Within the urban dailies group, revenues of the free dailies increased by 62.7%, due
to excellent results posted by the Montreal, Toronto and Vancouver dailies, and the
launch of free dailies in Ottawa and Ottawa-Gatineau in November 2006, and in Calgary
and Edmonton in February 2007.
    
    23.8% increase in revenues at the special-interest portals, primarily attributable to
increases in revenues from packages and other revenue streams at jobboom.com, and 6.5%
increase in revenues at the general-interest portals.
 Operating income:
 
    
    The favourable impact of the acquisition of Osprey Media ($25.3 million) was
partially offset by:
 o
    
    investments and one-time charges, including investments related to the
launch of four new free dailies (Ottawa, Ottawa-Gatineau, Calgary and Edmonton) and
the launch of Quebecor MediaPages;o
    
    the impact of the labour disputes at Le Journal de Montrealand Le Journal
de Quebecin 2006 and 2007 respectively;o
    
    variances in the charge for Quebecor Medias stock option plan.
 
    
    Excluding these items, operating income was $232.1 million in 2007, an increase of
$7.8 million (3.5%) due to:
 o
    
    lower newsprint costs;o
    
    the impact of restructuring initiatives;o
    
    decrease in operating losses at the free dailies, on a comparable basis
(i.e., at the Montreal, Toronto and Vancouver dailies).
  o
    
    cost of implementing certain projects;o
    
    increase in some portal operating costs, including labour costs and
advertising and promotion expenses, due in part to the introduction of a new business
development strategy and investments in new products.
 
    
    Operating income from the dailies in the Western Group (those published in the
Western provinces and Ontario) increased 13.8% in 2007.
    
    Osprey Medias operating income increased by 12.6% in 2007, on a comparable basis.
 108




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
    
    Excluding the launch of the four new free dailies and the impact on results of the
labour disputes at Le Journal de Montrealand Le Journal de Quebec, operating income
increased by 5.5% at the urban dailies.
    
    Excluding the impact of the acquisition of Osprey Media, operating income increased
by 6.3% at the community newspapers.
 Operating costs
 Cash flows from segment operations:
 
    
    The $18.3 million increase was mainly due to the $15.1 million increase in operating
income (Table 8).
    
    During 2007, the Newspapers segment acquired a building from Quebecor World for a
cash consideration of $62.5 million. The corresponding increase in additions to
property, plant and equipment, and spending on website launches and on computer projects
at the portals, was offset by a year-over-year decrease in instalment payments in 2007
under contracts to acquire six new presses.
 Broadcasting segment
 Revenues:
 
    
    Revenues from broadcasting operations increased by $11.7 million, primarily as a result of:
 o
    
    higher advertising revenues at the TVA Network and Sun TV;o
    
    higher subscription and advertising revenues at the specialty channels
(Mystère, Argent, Prise 2, LCN, MenTV and Mystery);o
    
    higher revenues from video on demand, Shopping TVA and commercial production.
 
    
    Revenues from distribution operations increased by $5.5 million due to:
 o
    
    more theatrical releases in 2007 than in 2006;o
    
    increased revenues from video releases.
 
    
    Revenues from publishing operations increased by $1.8 million in 2007. The favourable
impact of the acquisition of the interest in TV Hebdoand TV 7 Joursnot already held by
TVA Group was partially offset by a decrease in newsstand revenues.
 Operating income:
 
    
    Operating income from broadcasting operations increased by $7.2 million, mainly because of:
 o
    
    impact of higher revenues from the specialty channels, Sun TV and video on demand;o
    
    non-recognition in 2007 of current CRTC Part II licence fee accruals for a
favourable variance of $4.1 million.
 
    
    Operating income from distribution operations improved by $3.0 million in 2007,
mainly because of higher revenues from video releases.
 109




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
    
    Operating income from publishing operations increased by $6.5 million, primarily as a
result of reductions in some operating expenses, including printing costs.
 Operating costs
 
    
    decrease in the proportion of fixed costs, on a comparable basis, given revenue
growth, coupled with the favourable impact of the reversal of current CRTC Part II
licence fee accruals.
 Cash flows from segment operations:
 
    
    The $9.8 million increase (Table 9) was mainly due to:
 o
    
    $17.3 million increase in operating income, partially offset by a $7.2
million increase in additions to property, plant and equipment, primarily due to
building improvements and certain data processing projects.
 Leisure and Entertainment segment
 Revenues:
 
    
    11.1% increase in the revenues of the Book division in 2007, mainly due to higher
revenues in the academic segment and at Messageries A.D.P., due in the latter case to
the distribution of several successful releases, including the French translation of the
international bestseller The Secretby Rhonda Byrne.
    
    0.8% increase in the revenues of Archambault Group.
 Operating income:
 Cash flows from segment operations:
 Interactive Technologies and Communications segment
 Revenues:
 
    
    The increase was mainly due to:
 o
    
    recruitment of new customers;o
    
    positive impact of the acquisition of Crazy Labs in July 2006.
  o
    
    impact of lower volume in the U.S.
 Operating income:
 
    
    The decrease was due primarily to:
 o
    
    lower volume in the U.S.;o
    
    impact of a change in the stock option plan;
 110




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o
    
    one-time charges related to the purchase of all Nurun shares by Quebecor Media;o
    
    increase in the conditional compensation charge related to the acquisition
of Ant Farm Interactive LLC (Ant Farm) in 2004;o
    
    recognition in 2006 of federal research and development tax credits from previous years.
  o
    
    impact of increased revenues from new customers.
 Cash flows from segment operations:
 
    
    The unfavourable variance of $6.2 million was mainly due to:
 o
    
    decrease in operating income;o
    
    increase in additions to property, plant and equipment, caused in part by
higher investments in certain computer projects and leasehold improvements.
 Cash Flows And Financial Position
 Operating Activities
 2008 financial year
 Cash flows provided by continuing operating activities:
 
    
    The $33.9 million increase was mainly due to:
 o
    
    $155.6 million increase in operating income:
  o
    
    $51.0 million increase in use of funds for non-cash balances related to
operations, due primarily to disbursements of $94.1 million in connection with the
exercise of stock options (the Quebecor Media stock option plan did not allow the
exercise of any option before 2008, at which time it covered a six year compensation
value). This factor was partially offset by a decrease in accounts receivable and an
increase in accounts payable and accrued charges:o
    
    $41.4 million increase in cash interest expense, mainly as a result of the
impact of higher indebtedness:o
    
    $24.3 million increase in cash charge for restructuring of operations,
impairment of assets and other special items.
 2007 financial year
 Cash flows provided by continuing operating activities:
 
    
    The $399.8 million increase was mainly due to:
 111




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o
    
    payment of $197.3 million in accrued interest in connection with the
repurchase and cancellation of Senior Discount Notes in 2006 as part of the
refinancing carried out in January 2006:o
    
    $164.3 million increase in operating income:o
    
    $54.9 million positive net change in non-cash balances related to operations.
 Working capital
  Financing Activities
 2008 financial year
 Consolidated debt
 
    
    The increase was due mainly to:
 o
    
    estimated $673.0 million unfavourable impact of exchange rate fluctuations.
The impact of this item was offset by a decrease in the liability (or increase in the
asset) related to cross-currency swap agreements entered under Derivative financial
instruments;o
    
    issuance by Videotron on April 15, 2008 of US$455.0 million in aggregate
principal amount of Senior Notes for net proceeds of $447.8 million (after financing
expenses). The Senior Notes were sold at a price equivalent to 98.43% of face value,
bear 9 1/8% interest (an effective rate of 9 3/8%) and mature on April 15, 2018;o
    
    increased drawings on the revolving bank credit facilities, long-term
credit facilities and bank borrowings of Videotron, TVA Group and Quebecor Media in
the amounts of $55.1 million, $37.7 million and $21.2 million respectively;o
    
    $89.4 million increase in debt related to hedged interest rate exposure and
embedded derivatives, due mainly to interest rate fluctuations.
  o
    
    debt repayments of $25.7 million, mainly by Quebecor Media.
 
    
    Long-term debt and free cash flows from continuing operating activities were used to
finance: the disbursement of a cash consideration of $554.6 million for the purpose of
acquiring AWS licences; for business acquisitions, including buyouts of minority
interests in Nurun, for a cash consideration of $75.2 million when Nurun was taken
private; and, in TVA Group, for the disbursement of a cash consideration of $51.4
million under its Substantial Issuer Bid.
    
    Assets and liabilities related to derivative financial instruments totalled a net
asset of $200.6 million at December 31, 2008 (net of a $117.3 million liability at that
date), compared with a net liability of $538.5 million at December 31, 2007. The
favourable variance was caused by fluctuations in the Canadian dollar against the U.S.
dollar, which were partially offset by changes in estimates of the fair value of
derivative
 112




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1 8 5 8 1 8 1 8
 2007 financial year
 Consolidated debt
 
    
    $809.4 million increase in long-term debt due to the following transactions:
 o
    
    completion of a placement on October 5, 2007 of US$700.0 million in
aggregate principal amount of Senior Notes due 2016 by Quebecor Media. The notes were
sold at a price equivalent to 93 3/4% of face value, bear interest at 7 3/4% (an
effective rate of 8.81%) and mature on March 15, 2016. Quebecor Media used the net
proceeds of $662.4 million (including accrued interest of $16.6 million) from the
placement, as well as its revolving credit facilities, to:
 §
    
    finance the acquisition of Osprey Media for a total consideration of $414.4
million;§
    
    repay, on October 31, 2007, US$179.7 million drawn on Sun Media Corporations
term loan B;§
    
    settle the $106.0 million liability related to derivative financial
instruments connected to the term loan B;
 o
    
    assumption of debt totalling $161.8 million as part of the acquisition of
Osprey Media;o
    
    financing of the settlement of the Additional Amount payable, for a total
consideration of $127.2 million.
 
    
    The increase in long-term debt caused by the above transactions was partially offset
by:
 o
    
    favourable impact of the exchange rate, estimated at $392.4 million. The
decrease in debt related to changes in the exchange rate was, however, generally
offset by an increase in liabilities related to the value of the cross-currency swap
agreements, entered under Derivative financial instruments;o
    
    reduction in drawings on revolving bank credit facilities and mandatory
debt repayments in the total amount of $118.5 million, using cash flows generated by
operating activities;o
    
    $65.5 million favourable impact of the adoption of new accounting standards
for financial instruments and hedge accounting (see Changes in Accounting Policies
below).
 113




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
    
    The value of liabilities related to Quebecor Medias derivative financial instruments
increased from $231.3 million as of December 31, 2006 (or $320.2 million on January 1,
2007, following the adoption of new accounting standards for financial instruments and
hedge accounting) to $538.5 million as of December 31, 2007. The repayment of $106.0
million in liabilities related to Sun Media Corporations term loan B credit facility
is reflected in the change in liabilities related to derivative financial instruments.
 Investing Activities
 2008 financial year
 Additions to property, plant and equipment:
 
    
    The $58.6 million increase was mainly due to investments in network modernization by
the Cable segment and phase two of the project to acquire new presses in the Newspapers
segment. In 2007, the Newspapers segment acquired a building from Quebecor World for a
cash consideration of $62.5 million.
 Business acquisitions
 
    
    Business acquisitions in 2008 were as follows:
 o
    
    acquired all outstanding Common Shares of Nurun not already held in the
first quarter of 2008 for a total cash consideration of $75.2 million;o
    
    repurchased by TVA Group of 3,000,642 of its Class B Shares in the second
quarter of 2008 for a total cash consideration of $51.4 million;o
    
    acquired certain businesses in 2008, primarily in the Newspapers segment,
for a total cash consideration of $15.1 million;o
    
    made a $5.0 million payment in 2008 in connection with the acquisition of
Sogides in 2005.
 
    
    In the third quarter of 2007, Quebecor Media closed the acquisition of Osprey Media
for a total cash consideration of $414.4 million (excluding assumed liabilities).
 Acquisition of intangible assets:
 2007 financial year
 Additions to property, plant and equipment:
 
    
    The $33.2 million increase was mainly due to:
 o
    
    increased investments in network upgrades and modernization by the Cable segment in 2007;o
    
    acquisition of a building by Quebecor Media from Quebecor World for a cash
consideration of $62.5 million:
  o
    
    decrease in instalment payments in 2007 under contracts to acquire six new
presses to be used, among other things, to print some of Quebecor Medias newspapers.
 114




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##### Table of Contents



Business acquisitions
 
    
    The substantial increase was mainly due to the acquisition of Osprey Media in August
2007 for a total cash consideration of $414.4 million (excluding $161.8 million in
assumed debt).
 Financial Position at December 31, 2008
 Net available liquid assets:
 Consolidated debt:
 
    
    Consolidated debt included Videotrons $1.81 billion debt ($960.8 million at December
31, 2007), Sun Media Corporations $294.3 million debt ($225.1 million at December 31,
2007), Osprey Medias $134.1 million debt
($150.0 million at December 31, 2007), TVA Groups $93.9 million debt ($56.1 million at
December 31, 2007) and Quebecor Medias $2.01 billion corporate debt ($1.65 billion at
December 31, 2007).
  Table 12
Aggregate amount of minimum principal payments on long-term debt
required in each of the next five years and thereafter
(in millions of Canadian dollars)
 2009
    
    $
    37.12010
    
    
    162.12011
    
    
    166.22012
    
    
    269.62013
    
    
    651.72014 and thereafter
    
    
    3,013.9Total
    
    $
    4,300.6
 Dividends declared and paid
   Advanced Wireless Services (AWS):
 115




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116




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Analysis of consolidated balance sheet at December 31, 2008
 Table 13
Consolidated balance sheet of Quebecor Media
Analysis of main variances between December 31, 2007 and December 31, 2008
(in millions of Canadian dollars)
 Dec. 31
    
    Dec. 312008
    
    2007
    
    Difference
    
    Main reasons for differenceAssetsAccounts receivable
    
    $
    483.9
    
    
    $
    496.2
    
    
    $
    (12.3
    )
    
    Impact of current variance in activitiesInventory and investment in television
products and films
    
    
    189.3
    
    
    
    169.0
    
    
    
    20.3
    
    
    Opening of Archambault store in Laval,
Quebec and enlargement of other stores,
and impact of customer increase on
subscriber equipment in the Cable
segment.Property, plant and equipment
    
    
    2,334.7
    
    
    
    2,110.2
    
    
    
    224.5
    
    
    Additions to property, plant and
equipment (see Investing activities
above), less amortization.Derivative financial instruments
    
    
    317.9
    
    
    
    0.2
    
    
    
    317.7
    
    
    Increase in assets related to
derivative financial instruments (see
Financing Activities above).Intangible assets
    
    
    858.6
    
    
    
    334.4
    
    
    
    524.2
    
    
    Acquisition of 17 operating licences in
Advanced Wireless Services spectrum
auction (see Advanced Wireless
Services (AWS) above), partially
offset by $40.2 million impairment of
mastheads in the Newspapers segment in
December 2008.Goodwill
    
    
    3,516.7
    
    
    
    4,081.3
    
    
    
    (564.6
    )
    
    $631.0 million goodwill impairment in
December 2008, including $595.0 million
in the Newspapers segment, partially
offset by increase in Companys
interest in Nurun and TVA Group,
payment of a contingent consideration
related to the acquisition of Sogides,
acquisition of other businesses, and
finalization of purchase price equation
for Osprey Media acquisition.LiabilitiesAccounts payable and accrued charges
    
    $
    793.7
    
    
    $
    756.0
    
    
    $
    37.7
    
    
    Increase in provision for CRTC Part II
licence fees at Videotron and TVA
Group, increase in volume in Cable
segment, and increase in reserve for
restructuring in Newspapers segment,
partially offset by disbursements in
connection with stock option plan.Deferred revenue
    
    
    224.0
    
    
    
    202.7
    
    
    
    21.3
    
    
    Increase in Cable segment customer base
and increased volume at Quebecor
MediaPages.Long-term debt
    
    
    4,298.7
    
    
    
    3,002.8
    
    
    
    1,295.9
    
    
    See Financing activities aboveDerivative financial instruments
    
    
    117.3
    
    
    
    538.7
    
    
    
    (421.4
    )
    
    See Financing activities aboveNet future tax liabilities(1)
    
    
    242.3
    
    
    
    81.5
    
    
    
    160.8
    
    
    Use of tax benefits, decrease in future
tax assets resulting from exercise of
stock options, and increase in future
tax liabilities related to temporary
differences in property, plant and
equipment.Non-controlling interest
    
    
    106.0
    
    
    
    154.2
    
    
    
    (48.2
    )
    
    Partial buyout of non-controlling
interest by TVA Group and full buyout
by Quebecor Media of non-controlling
interest in Nurun
 
 (1)
    
    Long-term liabilities less current and long-term assets. 117




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Additional Information
 Contractual Obligations
  Table 14
Contractual obligations of Quebecor Media as of December 31, 2008
(in millions of Canadian dollars)
 Under
    
    
    
    
    
    
    
    
    
    
    5 yearsTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    or moreLong-term debt
    
    
    4,300.6
    
    
    
    37.1
    
    
    
    328.3
    
    
    
    921.3
    
    
    
    3,013.9Interest payments1
    
    
    1,746.0
    
    
    
    241.4
    
    
    
    549.0
    
    
    
    491.4
    
    
    
    464.2Operating leases
    
    
    259.6
    
    
    
    54.1
    
    
    
    67.1
    
    
    
    43.2
    
    
    
    95.2Additions to property, plant and equipment and other commitments
    
    
    138.6
    
    
    
    80.8
    
    
    
    38.6
    
    
    
    7.2
    
    
    
    12.0Derivative financial instruments2
    
    
    (176.4
    )
    
    
    (0.2
    )
    
    
    (0.3
    )
    
    
    48.3
    
    
    
    (224.2
    )Total contractual obligations
    
    
    6,268.4
    
    
    
    413.2
    
    
    
    982.7
    
    
    
    1,511.4
    
    
    
    3,361.1
 
 1.
    
    Estimated interest payable on long-term debt, based on interest rates, hedging interest rates
and hedging of foreign exchange rates as of December 31, 2008.2.
    
    Estimated future receipts, net of disbursements related to derivative financial instruments
used for foreign exchange hedging. .
     Financial Instruments
  118




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Table 15: Quebecor Media Inc.
Fair value of derivative financial instruments
(in millions of dollars)
 December 31, 2008
    
    
    
    
    
    December 31, 2007Book value
    
    
    
    
    
    
    
    
    
    Book value andNotional

    
    and fair value
    
    
    
    
    

    Notional

    
    fair valuevalue
    
    asset (liability)
    
    
    
    
    
    value
    
    asset (liability)Derivative financial instruments:Interest rate swap agreements
    
    CA$
    217.2
    
    
    
    (7.5
    )
    
    
    
    CA$
    75.0
    
    
    
    0.2Foreign exchange forward contracts: In US$
    
    US$
    274.5
    
    
    
    9.0
    
    
    
    
    US$
    73.1
    
    
    
    (4.2
    ) In 
    
    
    12.9
    
    
    
    0.1
    
    
    
    
    
    13.0
    
    
    
    (0.2
    ) In CHF
    
    CHF
    2.3
    
    
    
    
    
    
    
    
    CHF
    6.7
    
    
    
    (0.1
    )Cross-currency interest rate swap agreements
    
    US$
    3,050.4
    
    
    
    199.0
    
    
    
    
    US$
    2,598.9
    
    
    
    (534.2
    )
  Related Party Transactions
  Operating transactions
  119




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##### Table of Contents



Management arrangements
  Tax transactions
  Quebecor World Inc.
  
    
    From January 1, 2008 to January 21, 2008, the Company made purchases from Quebecor
World Inc. of $3.0 million ($55.3 million in 2007 and $74.8 million in 2006) and made
sales to Quebecor World Inc. of $1.3 million ($17.9 million in 2007 and 2006).
    
    On January 10, 2008, the Company settled a balance of $4.3 million payable to
Quebecor World Inc. by set-off. As the balance was due in 2013 and recorded at present
value, the difference of $2.7 million between the settled amount of $7.0 million and the
carrying value of $4.3 million was recorded as a reduction in contributed surplus.
    
    In October 2007, the Company increased its investment in Nurun Inc. by acquiring.
500,000 Common Shares of Nurun Inc. from Quebecor World Inc. at the exchange amount, for
a cash consideration of $1.7 million.
    
    On October 11, 2007, the Company acquired a property from Quebecor World Inc. for a
total net consideration of $62.5 million. Simultaneously, Quebecor World Inc. entered
into a long-term operating lease with the Company to rent a portion of the property for
a 17-year term. The consideration for the two transactions was settled by the payment of
a net amount of $43.9 million to Quebecor World Inc. as of the date of the transactions,
and the assumption by the Company of a $7.0 million balance of sale, including interest,
payable in 2013. The transactions were concluded and accounted for at the exchange
amount.
    
    During the year ended December 31, 2006, some of the Companys subsidiaries acquired
tax benefits amounting to $6.5 million from Quebecor World Inc. that were recorded as
income taxes receivable. These
 120




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##### Table of Contents



transactions allowed the Company to realize a gain of $0.4 million (net of non-controlling
interest), which was recorded as contributed surplus.
 Guarantees
  Operating leases
  Business and asset disposals
  Outsourcing companies and suppliers
  Risks and Uncertainties
  Financial risk Management
   121




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##### Table of Contents



Description of derivative financial instruments
 Table 16
Foreign Exchange Forward Contracts
At December 31, 2008
(in millions of dollars)
 AverageCurrencies (sold/bought)
    
    Maturing
    
    
    Exchange Rate
    
    
    Notional AmountQuebecor Media Inc.$/Euro
    
    Less than 1 year
    
    
    1.6796
    
    
    $
    21.6$/CHF
    
    Less than 1 year
    
    
    1.1304
    
    
    
    2.6Sun Media Corporation$/US$
    
    February 15, 2013
    
    
    1.5227
    
    
    
    312.2Videotron Ltd. and its subsidiaries$/US$
    
    Less than 1 year
    
    
    1.0865
    
    
    
    75.5
 Table 17
Cross-Currency Interest Rate Swaps
as at December 31, 2008
(in millions of dollars)
 CDN dollarAnnual

    
    
    exchange rate onAnnual effective
    
    
    nominal
    
    
    interest andPeriod
    
    
    Notional
    
    
    interest rate
    
    
    interest
    
    
    capital paymentscovered
    
    
    amount
    
    
    using hedged rate
    
    
    rate of debt
    
    
    per one US dollarQuebecor Media Inc.Senior Notes
    
    
    2007 to 2016
    
    
    US$
    700.0
    
    
    
    7.69
    %
    
    
    7.75
    %
    
    
    0.9990Senior Notes
    
    
    2006 to 2016
    
    
    US$
    525.0
    
    
    
    7.39
    %
    
    
    7.75
    %
    
    
    1.1600Term loan B credit
facilities
    
    
    2006 to 2009
    
    
    US$
    194.5
    
    
    
    6.27
    %
    
    LIBOR plus 2.00
    %    
    
    1.1625Term loan B credit
facilities
    
    
    2009 to 2013
    
    
    US$
    194.5
    
    
    Bankers acceptances 3 months plus 2.22
    %    
    LIBOR plus 2.00
    %
        
    1.1625Term loan B
credit facilities
    
    
    2006 to 2013
    
    
    US$
    145.9
    
    
    
    6.44
    %
    
    LIBOR plus 2.00
    %
        
    1.1625Videotron Ltd.Senior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    
    Bankers acceptances 3 months plus 2.80
    %    
    
    6.875
    %
    
    
    1.2000Senior Notes
    
    
    2004 to 2014
    
    
    US$
    125.0
    
    
    
    7.45
    %
    
    
    6.875
    %
    
    
    1.1950Senior Notes
    
    
    2003 to 2014
    
    
    US$
    200.0
    
    
    Bankers acceptances 3 months plus 2.73
    %    
    
    6.875
    %
    
    
    1.3425Senior Notes
    
    
    2003 to 2014
    
    
    US$
    135.0
    
    
    
    7.66
    %
    
    
    6.875
    %
    
    
    1.3425Senior Notes
    
    
    2005 to 2015
    
    
    US$
    175.0
    
    
    
    5.98
    %
    
    
    6.375
    %
    
    
    1.1781Senior Notes
    
    
    2008 to 2018
    
    
    US$
    455.0
    
    
    
    9.65
    %
    
    
    9.125
    %
    
    
    1.0210Sun Media CorporationSenior Notes
    
    
    2008 to 2013
    
    
    US$
    155.0
    
    
    Bankers acceptances 3 months plus 3.70
    %    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    
    2003 to 2013
    
    
    US$
    50.0
    
    
    Bankers acceptances 3 months plus 3.70
    %    
    
    7.625
    %
    
    
    1.5227
  122




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##### Table of Contents



Table 18
Interest Rate Swaps
At December 31, 2008
(in millions of dollars)
 Maturity
    
    Notional Amount
    
    Pay/Receive
    
    Fixed Rate
    
    Floating RateOsprey Media Publishing Inc.December 2010
    
    $
    50.0
    
    
    Pay fixed/Receive floating
    
    
    3.53
    %
    
    Bankers acceptances 3 monthsDecember 2010
    
    $
    43.3
    
    
    Pay fixed/Receive floating
    
    
    2.13
    %
    
    Bankers acceptances 1 monthDecember 2010
    
    $
    40.0
    
    
    Pay fixed/Receive floating
    
    
    2.73
    %
    
    Bankers acceptances 3 monthsSun Media CorporationOctober 2012
    
    $
    38.9
    
    
    Pay fixed/Receive floating
    
    
    3.75
    %
    
    Bankers acceptances 3 monthsTVA Group Inc.March 2010
    
    $
    45.0
    
    
    Pay fixed/Receive floating
    
    
    1.88
    %
    
    Bankers acceptances 1 month
 Fair value of financial instruments
   Table 19
Fair Value of Financial Instruments
At December 31, 2008
(in millions of dollars)
 Carrying
    
    2008
    
    Carrying
    
    2007value
    
    Fair value
    
    value
    
    Fair valueQuebecor Media Inc.Long-term debt 1
    
    $
    (2 013.7
    )
    
    $
    (1 491.3
    )
    
    $
   (1 664.9
    )
    
    $
    (1 646.6
    )Cross-currency interest rate swaps
    
    
    182.5
    
    
    
    182.5
    
    
    
    (159.8
    )
    
    
    (159.8
    )Foreign exchange forward contracts
    
    
    0.1
    
    
    
    0.1
    
    
    
    (0.3
    )
    
    
    (0.3
    )Videotron Ltd.Long-term debt 1
    
    
    (1 766.6
    )
    
    
    (1 577.0
    )
    
    
    (973.3
    )
    
    
    (938.2
    )Cross-currency interest rate swaps
    
    
    69.5
    
    
    
    69.5
    
    
    
    (241.3
    )
    
    
    (241.3
    )Foreign exchange forward contracts
    
    
    9.0
    
    
    
    9.0
    
    
    
    (4.2
    )
    
    
    (4.2
    )Sun Media CorporationLong-term debt 1
    
    
    (294.2
    )
    
    
    (242.4
    )
    
    
    (238.0
    )
    
    
    (234.1
    )Cross-currency interest rate swaps
and foreign exchange forward
contract
    
    
    (53.0
    )
    
    
    (53.0
    )
    
    
    (133.1
    )
    
    
    (133.1
    )Interest rate swaps
    
    
    (3.0
    )
    
    
    (3.0
    )
    
    
    
    
    
    
    Osprey Media Publishing Inc.Long-term debt 1
    
    
    (132.3
    )
    
    
    (128.1
    )
    
    
    (145.3
    )
    
    
    (145.3
    )Interest rate swaps
    
    
    (4.1
    )
    
    
    (4.1
    )
    
    
    0.2
    
    
    
    0.2TVA Group Inc.Long-term debt 1
    
    
    (93.8
    )
    
    
    (91.4
    )
    
    
    (56.3
    )
    
    
    (56.3
    )Interest rate swaps
    
    
    (0.4
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    
 
 1.
    
    The carrying value of long-term debt excludes adjustments to record changes in the fair value
of long-term debt related to hedged interest risk, embedded derivatives, or financing fees.  123




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Credit risk management
     Liquidity risk management
  Market risk
  Foreign currency risk
  124




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OthercomprehensiveIncome
    
    incomeIncrease of $0.10Gain (loss) U.S. dollar-denominated accounts payable
    
    $
    (0.7
    )
    
    $
    Gain (loss) on valuation and translation of
financial instruments and derivative financial
instruments
    
    
    (1.2
    )
    
    
    78.2Decrease of $0.10Gain (loss) U.S. dollar-denominated accounts payable
    
    
    0.7
    
    
    
    Gain (loss) on valuation and translation of
financial instruments and derivative financial
instruments
    
    
    1.2
    
    
    
    (78.2
    )
 Interest rate risk and non-performance risk
    OthercomprehensiveIncome
    
    incomeIncrease of 100 basis point
    
    $
    10.3
    
    
    $
    (1.6
    )Decrease of 100 basis point
    
    
    (10.3
    )
    
    
    1.6
 Capital management
    125




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Table 21
Capital structure of Quebecor Media
At December 31, 2008
(in millions of dollars)
 2008
    
    
    2007Bank indebtedness
    
    $
    11.5
    
    
    $
    16.3Long-term debt
    
    
    4 335.8
    
    
    
    3 027.5Net (assets) liabilities related to derivative financial instruments
    
    
    (200.6
    )
    
    
    538.5Non-controlling interest
    
    
    106.0
    
    
    
    154.2Cash and cash equivalents
    
    
    (22.5
    )
    
    
    (26.1
    )Net liabilities
    
    
    4 230.2
    
    
    
    3 710.4Shareholders equity
    
    $
    1 943.0
    
    
    $
    2 450.3
  Contingencies
     Critical Accounting Policies and Estimates
 Revenue recognition
  
    
    persuasive evidence of an arrangement exists;
    
    delivery has occurred or services have been rendered;
    
    the sellers price to the buyer is fixed or determinable; and
    
    the collection of the sale is reasonably assured.
 126




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Cable segment
   Newspapers segment
  Broadcasting segment
    Leisure and Entertainment segment
  127




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Goodwill
           Intangible Assets with Indefinite Useful Life
  128




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Impairment of Long-Lived Assets
 CICA Handbook Impairment of Long-Lived Assets
  Derivative Financial Instruments and Hedge Accounting
   
    
    The Company uses foreign exchange forward contracts to hedge the foreign currency
rate exposure on (i) anticipated equipment or inventory purchases in a foreign currency
and (ii) principal payments on long-term debt in a foreign currency. These latest
foreign exchange forward contracts are designated as cash flow hedges.
 129




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
    
    The Company uses cross-currency interest rate swaps to hedge (i) the foreign currency
rate exposure on interest and principal payments on foreign currency denominated debt
and/or (ii) the fair value exposure on certain debt resulting from changes in interest
rates. The cross-currency interest rate swaps that set all future interest and principal
payments on U.S.-denominated debt in fixed Canadian dollars are designated as cash flow
hedges. The Companys cross-currency interest rate swaps that set all future interest
and principal payments on U.S.-denominated debt in fixed Canadian dollars, in addition
to converting the interest rate from a fixed rate to a floating rate, or converting a
floating rate index to another floating rate index, are designated as fair value hedges.
    
    The Company uses interest rate swaps to manage the fair value exposure on certain
debt resulting from changes in interest rates. These swap agreements require a periodic
exchange of payments without the exchange of the notional principal amount on which the
payments are based. These interest rate swaps are designated as fair value hedges when
they convert the interest rate from a fixed rate to a floating rate, or as cash flow
hedges when they convert the interest rate from a floating rate to a fixed rate.
  
    
    For derivative financial instruments designated as fair value hedges, changes in the
fair value of the hedging derivative recorded in income are substantially offset by
changes in the fair value of the hedged item to the extent that the hedging relationship
is effective. When a fair value hedge is discontinued, the carrying value of the hedged
item is no longer adjusted and the cumulative fair value adjustments to the carrying
value of the hedged item are amortized to income over the remaining term of the original
hedging relationship.
    
    For derivative financial instruments designated as cash flow hedges, the effective
portion of a hedge is reported in other comprehensive income until it is recognized in
income during the same period in which the hedged item affects income, while the
ineffective portion is immediately recognized in the consolidated statements of income.
When a cash flow hedge is discontinued, the amounts previously recognized in accumulated
other comprehensive income are reclassified to income when the variability in the cash
flows of the hedged item affects income.
  
    
    For purchases of property, plant and equipment or inventories hedged by foreign
exchange forward contracts, foreign exchange translation gains and losses were
recognized as an adjustment to the cost of the hedged item when the transaction was
recorded.
    
    For long-term debt in foreign currency hedged by foreign exchange forward contracts
and cross-currency interest rate swaps, foreign exchange translation gains and losses on
long-term debt were offset by corresponding gains and losses on derivative instruments
recorded under other assets or other liabilities. The fees on forward foreign exchange
contracts and on cross-currency swaps were recognized as an adjustment to interest
expenses over the term of the agreement.
    
    For long-term debt hedged by interest rate swaps, interest expense on the debt was
adjusted to include payments made or received under interest rate swaps.
    
    In addition, realized and unrealized gains or losses associated with derivative
financial instruments that were terminated or ceased to be effective prior to maturity,
for hedge accounting purposes were deferred under other current or non-current assets or
liabilities on the balance sheet and recognized in income in the period in which the
underlying hedged transaction was recognized. In the event a designated hedged item was
sold, extinguished or matured prior to the termination of the related derivative
financial instrument, any realized or unrealized gain or loss on such derivative
financial instrument was recognized in income.
 130




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Pension plans and post-retirement benefits
     Pension
    
    
    
    
    
    
    Postretirementbenefits
    
    
    
    
    
    
    benefits1%
    
    
    1%
    
    
    1%
    
    
    1%Sensitivity analysis (in million)
    
    increase
    
    
    decrease
    
    
    increase
    
    
    decreaseEffect on benefit costs (gain) loss
    
    $
    (6.2
    )
    
    $
    6.7
    
    
    $
    (0.5
    )
    
    $
    0.6Effect on benefit obligations
    
    
    (66.4
    )
    
    
    76.5
    
    
    
    (5.0
    )
    
    
    6.0
 131




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Pension
    
    
    
    
    
    
    Postretirementbenefits
    
    
    
    
    
    
    benefits1%
    
    
    1%
    
    
    1%
    
    
    1%Sensitivity analysis (in million)
    
    increase
    
    
    decrease
    
    
    increase
    
    
    decreaseEffect on benefit costs (gain) loss
    
    
    (3.7
    )
    
    
    3.7
    
    
    
    
    
    
    
    
  Pension
    
    
    
    
    
    
    Postretirementbenefits
    
    
    
    
    
    
    benefits1%
    
    
    1%
    
    
    1%
    
    
    1%Sensitivity analysis (in million)
    
    increase
    
    
    decrease
    
    
    increase
    
    
    decreaseEffect on benefit costs (gain) loss
    
    $
    2.3
    
    
    $
    (2.0
    )
    
    $
    
    
    
    $
    Effect on benefit obligations
    
    
    9.1
    
    
    
    (9.0
    )
    
    
    
    
    
    
    
  Postretirementbenefits1%
    
    
    1%Sensitivity analysis (in million)
    
    increase
    
    
    decreaseEffect on benefit costs (gain) loss
    
    $
    0.9
    
    
    $
    (0.7
    )Effect on benefit obligations
    
    
    5.5
    
    
    
    (4.2
    )
 Allowance for doubtful accounts
  Business combinations
   
 132




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Future income taxes
   Changes in Accounting Policies and Estimates
 Current changes in accounting policies
 Inventories
 Capital Disclosures Financial Instruments  Disclosures Financial Instruments 
Presentation
 Current changes in accounting estimates
  Recent Accounting Developments in Canada
 Goodwill and Intangible Assets Goodwill and Other Intangible Assets Research and Development Costs Revenues and Expenditures During the Pre-operating Period Enterprises in the Development Stage
  133




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Recent Accounting Developments in the United States
  Business Combinations Noncontrolling Interests in Consolidated Financial Statements
 134




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##### Table of Contents



ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A  Directors and Senior Management
  Name and Municipality of Residence
    
    Age
    
    PositionSerge Gouin
Outremont, Quebec
    
    
    65
    
    
    Director, Chairman of the Board of Directors and
Chairman of the Compensation CommitteePierre Karl Péladeau
Outremont, Quebec
    
    
    47
    
    
    Director, President and Chief Executive OfficerÉrik Péladeau
Rosemère, Quebec
    
    
    53
    
    
    Director and Vice Chairman of the Board of DirectorsJean La Couture, FCA
Montreal, Quebec
    
    
    62
    
    
    Director and Chairman of the Audit CommitteeAndré Delisle
Montreal, Quebec
    
    
    62
    
    
    Director and Member of the Audit CommitteeA Michel Lavigne, FCA
Brossard, Quebec
    
    
    58
    
    
    Director and Member of the Audit Committee and the
Compensation CommitteeSamuel Minzberg
Westmount, Quebec
    
    
    59
    
    
    Director and Member of the Compensation CommitteeThe Right Honourable Brian
Mulroney, P C , C C , LL D
Westmount, Quebec
    
    
    69
    
    
    DirectorJean Neveu
Longueuil, Quebec
    
    
    68
    
    
    DirectorNormand Provost
Brossard, Quebec
    
    
    54
    
    
    DirectorHugues Simard
Outremont, Quebec
    
    
    42
    
    
    Senior Vice President, Development and StrategyLouis Morin
Kirkland, Quebec
    
    
    51
    
    
    Vice President and Chief Financial OfficerIsabelle Dessureault
Verdun, Quebec
    
    
    38
    
    
    Vice President, Public AffairsMichel Ethier
Montreal, Quebec
    
    
    53
    
    
    Vice President, TaxationBruno Leclaire 
Saint-Bruno, Quebec
    
    
    43
    
    
    Vice President, Interactive MediaRoger Martel
Montreal, Quebec
    
    
    60
    
    
    Vice President, Internal AuditDenis Sabourin
Kirkland, Quebec
    
    
    48
    
    
    Vice President and Corporate Controller
 135




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##### Table of Contents



Name and Municipality of Residence
    
    Age
    
    PositionClaudine Tremblay
Nuns Island, Quebec
    
    
    55
    
    
    Vice President and SecretaryJulie Tremblay
Westmount, Quebec
    
    
    49
    
    
    Vice President, Human ResourcesMarc Tremblay
Westmount, Quebec
    
    
    48
    
    
    Vice President, Legal AffairsJean-François Pruneau
Repentigny, Quebec
    
    
    38
    
    
    TreasurerChristian Marcoux
Laval, Quebec
    
    
    34
    
    
    Assistant Secretary
 Serge Gouin
 Pierre Karl Péladeau
 Érik Péladeau
 Jean La Couture Regroupement des assureurs
 136




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##### Table of Contents



de personnes à charte du Quebec (RACQ)
 André Delisle Caisse de
dépôt et placement du Québec Barreau du Quebec
 A. Michel Lavigne Caisse de dépôt et placement du Québec Ordre des comptables agréés du Quebec
 Samuel Minzberg
 The Right Honourable Brian Mulroney, P.C., C.C., LL.D
 Jean Neveu
 137




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##### Table of Contents



Normand Provost Caisse de dépôt et
placement du Québec Caisse de dépôt et placement du
Quebec
 Hugues Simard
 Louis Morin
 Isabelle Dessureault, M.B.A.
 Michel Ethier
 Bruno Leclaire
 Roger Martel
 Denis Sabourin
 Claudine Tremblay
 138




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##### Table of Contents



Chambre des notaires
du Quebec
 Julie Tremblay
 Marc Tremblay
 Jean-François Pruneau
 Christian Marcoux
 B  Board of Directors
  Board Practices
  139




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##### Table of Contents



Audit Committee
   Compensation Committee
  C   Compensation
 Compensation of Directors
  140




---



##### Table of Contents



Compensation of Executive Officers
   Quebecor Medias Stock Option Plan
  141




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##### Table of Contents



Quebecor Inc.s Stock Option Plan
 1 3 2 3
  142




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##### Table of Contents



Pension Benefits
 Income Tax Act Income Tax Act
   Years of ParticipationCompensation
    
    10
    
    
    15
    
    
    20
    
    
    25
    
    
    30$122,222 or more
    
    $
    24,444
    
    
    $
    36,667
    
    
    $
    48,889
    
    
    $
    61,111
    
    
    $
    73,333
 Supplemental Retirement Benefit Plan for Designated Executives
    Years of Credited ServiceCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$   200,000
    
    $
    15,556
    
    
    $
    23,333
    
    
    $
    31,111
    
    
    $
    38,889
    
    
    $
    46,667$   300,000
    
    $
    35,556
    
    
    $
    53,333
    
    
    $
    71,111
    
    
    $
    88,889
    
    
    $
    106,667$   400,000
    
    $
    55,556
    
    
    $
    83,333
    
    
    $
    111,111
    
    
    $
    138,889
    
    
    $
    166,667$   500,000
    
    $
    75,556
    
    
    $
    113,333
    
    
    $
    151,111
    
    
    $
    188,889
    
    
    $
    226,667$   600,000
    
    $
    95,556
    
    
    $
    143,333
    
    
    $
    191,111
    
    
    $
    238,889
    
    
    $
    286,667$   800,000
    
    $
    135,556
    
    
    $
    203,333
    
    
    $
    271,111
    
    
    $
    338,889
    
    
    $
    406,667$1,000,000
    
    $
    175,556
    
    
    $
    263,333
    
    
    $
    351,111
    
    
    $
    438,889
    
    
    $
    526,667$1,200,000
    
    $
    215,556
    
    
    $
    323,333
    
    
    $
    431,111
    
    
    $
    538,889
    
    
    $
    646,667$1,400,000
    
    $
    255,556
    
    
    $
    383,333
    
    
    $
    511,111
    
    
    $
    638,889
    
    
    $
    766,667
 143




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##### Table of Contents



D  Liability Insurance
  E  Employees
  Total number
    
    Number of employees under
    
    Number ofOperations
    
    of employees
    
    collective agreements
    
    collective agreementsCable
    
    
    4,770
    
    
    
    2,850
    
    
    
    5Newspapers(1)
    
    
    7,940
    
    
    
    2,680
    
    
    
    86Broadcasting
    
    
    1,980
    
    
    
    810
    
    
    
    15Leisure and Entertainment
    
    
    1,490
    
    
    
    320
    
    
    
    6Interactive Technologies
and Communications
    
    
    780
    
    
    
    0
    
    
    
    0Head office
    
    
    140
    
    
    
    
    
    
    
    Total
    
    
    17,100
    
    
    
    6,660
    
    
    
    112
 
 (1)
    
    This number includes, among others, 480 employees of Canoe, which is now part of our
Newspapers segment. In December 2008, Sun Media Corporation announced a reduction of
approximately 600 full-time employees. There remain employees who will exit the organization
over the next few months as a result of this.  
    
    Videotron is party to 5 collective bargaining agreements, representing
approximately 2,850 employees. Of these collective bargaining agreements, one
(representing approximately 40 employees) has expired, and negotiations are
ongoing. Two others, representing approximately 2,510 employees, or 88% of
Videotrons unionized employees, will expire in December 2009. The remaining
two collective bargaining agreements, representing approximately 300
employees, or 10% of Videotrons unionized workforce will expire between
December 31, 2010 and August 31, 2011;
    
    Sun Media (including Osprey Media) is  party to 84 collective bargaining agreements,
representing approximately 2 480 employees. One collective bargaining
agreement, representing 6 employees, is under negotiation. 8 collective
bargaining agreements, representing approximately 510 employees, or 20% of its
unionized workforce, have expired. Negotiations regarding these collective
bargaining agreements are either in progress or will be undertaken in 2009.
One collective agreement, representing approximately 40 employees, is under
arbitration. The other collective bargaining agreements are scheduled to
expire on various dates through April 2012;
    
    TVA Group is party to 15 collective bargaining agreements, representing
approximately 810 employees. Of this number, 5 collective bargaining
agreements, representing approximately 120 employees, or 15% of its unionized
workforce, have expired. Negotiations regarding these collective bargaining
agreements are either in progress or will be undertaken in 2009. 3 collective
bargaining agreements, representing approximately 550 employees, or 68% of its
unionized workforce, will expire at the end of 2009. The others are scheduled
to expire at various dates between April 20, 2011 and October 31, 2013; and
 144




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
    
    The other 8 collective bargaining agreements, representing approximately
520 employees or 8% of our unionized employees, will expire between the end of
April 2009 and June 2010.
 Journal de Montreal Journal
de Montreal Journal de Montreal
 F  Share Ownership
  145




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ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A  Major Shareholders
 Caisse de dépôt et placement du Québec
   B  Consolidated and Amended Shareholders Agreement
   (a)
    
    standard rights of first refusal with respect to certain transfers of QMI Shares;(b)
    
    standard preemptive rights which permit shareholders to maintain their respective
holdings of QMI Shares on a fully diluted basis in the event of issuances of additional
QMI Shares or our convertible securities;(c)
    
    rights of representation on our Board of Directors in proportion to
shareholdings, with Quebecor initially having five nominees (now six nominees) and
Capital CDPQ having four nominees to our Board of Directors;(d)
    
    consent rights in certain circumstances with respect to matters relating to us
and our non-reporting issuer (public) subsidiaries, including (1) a substantial change
in the nature of our business and our subsidiaries taken as a whole, (2) an amendment to
our articles or certain of our subsidiaries, (3) the merger or amalgamation of us
 146




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or certain of our subsidiaries with a person other than an affiliate, (4) the issuance
by us or certain of our subsidiaries of shares or of securities convertible into shares
except in the event of an initial public offering of QMI Shares, (5) any transaction
having a value of more than $75,000,000, other than the sale of goods and services in
the normal course of business, (6) a business acquisition in a business sector unrelated
to sectors in which we and certain of our subsidiaries are involved, and (7) in respect
of capital expenditures in excess of certain amounts for each of the first five years of
our operations;(e)
    
    standard rights of first refusal in favor of Capital CDPQ with respect to the
sale of all or substantially all of the shares or assets of TVA Group
or Videotron; and(f)
    
    a non-competition covenant by Quebecor in respect of it and its affiliates
pursuant to which Quebecor and its affiliates shall not compete with Quebecor Media and
its subsidiaries in their areas of activity so long as Quebecor has de jure or de
facto control of us, subject to certain limited exceptions.
    C   Certain Relationships and Related Party Transactions
 Related Party Transactions
  Operating transactions
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##### Table of Contents



Management arrangements
  Tax benefit transactions
  Quebecor World Inc.
  
    
    From January 1, 2008 to January 21, 2008, the Company made purchases from
Quebecor World Inc. of $3.0 million ($55.3 million in 2007 and $74.8 million
in 2006) and made sales to Quebecor World Inc. of $1.3 million ($17.9 million
in 2007 and 2006).
    
    On January 10, 2008, the Company settled a balance of $4.3 million payable
to Quebecor World Inc. by set-off. As the balance was due in 2013 and recorded
at present value, the difference of $2.7 million between the settled amount of
$7.0 million and the carrying value of $4.3 million was recorded as a
reduction in contributed surplus.
    
    In October 2007, the Company increased its investment in Nurun Inc. by
acquiring. 500,000 Common Shares of Nurun Inc. from Quebecor World Inc. at the
exchange amount, for a cash consideration of $1.7 million.
    
    On October 11, 2007, the Company acquired a property from Quebecor World
Inc. for a total net consideration of $62.5 million. Simultaneously, Quebecor
World Inc. entered into a long-term operating lease with the Company to rent a
portion of the property for a 17-year term. The consideration for the two
transactions was settled by the payment of a net amount of $43.9 million to
Quebecor World Inc. as of the date of the transactions, and the assumption by
the Company of a $7.0 million balance of sale, including interest, payable in
2013. The transactions were concluded and accounted for at the exchange
amount.
    
    During the year ended December 31, 2006, some of the Companys subsidiaries
acquired tax benefits amounting to $6.5 million from Quebecor World Inc. that
were recorded as income taxes receivable. These transactions allowed the
Company to realize a gain of $0.4 million (net of non-controlling interest),
which was recorded as contributed surplus.
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##### Table of Contents



Tax Consolidation Transactions
  Issuance and Redemption of Convertible Obligations and Investments in Quebecor Media
Preferred Shares
       Issuance of Subordinated Loans and Investments in Quebecor Media Preferred Shares
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D  Interests of Experts and Counsel
  
 ITEM 8  FINANCIAL INFORMATION
 A  Consolidated Statements and Other Financial Information
  B  Legal Proceedings
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C   Dividend Policy and Dividends
 Dividend Policies and Payments
  
    
    123,602,807 common shares outstanding, of which 67,636,713 were held by
Quebecor and 55,966,094 were held by Capital CDPQ; and
    
    2,055,000 Cumulative First Preferred Shares, Series G, outstanding, all of
which were held by 9101-0835 Quebec Inc.
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D  Significant Changes
  
 ITEM 9  THE OFFER AND LISTING
 A   Offer and Listing Details
  B   Plan of Distribution
  C   Markets
 Outstanding Notes
 3 4 3 4 3 4 3 4 3 4
 3 4 3 4 3 4 3 4
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##### Table of Contents



3 4
 D   Selling Shareholders
  E   Dilution
  F   Expenses of the Issuer
  
 ITEM 10  ADDITIONAL INFORMATION
 A  Share Capital
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B  Memorandum and Articles of Association
  1.
    
    
    
    We were incorporated, in Canada, under Part IA of the
Companies Act(Quebec) (the Companies Act) as 9093-9687
Quebec Inc. on August 8, 2000 under registration number
1149501992. On August 18, 2000, a Certificate of Amendment
was filed to change our name to Media Acquisition Inc. Our
name was further changed to Quebecor Media Inc. on September
26, 2000. Our Articles do not describe our object and
purpose.2.
    
    (a)
    
    Our by-laws provide that we may transact business with one or
more of our directors or with any firm of which one or more
of our directors are members or employees or with any
corporation or association of which one or more of our
directors are shareholders, directors, officers or employees.
The director who has an interest in the transaction shall
disclose his interest to us and to the other directors and
shall abstain from discussing and voting on the transaction,
except if his vote is required to bind us in respect of the
transaction.(b)
    
    Neither the Articles nor our by-laws contain provisions with
respect to directors power, in the absence of an independent
quorum, to determine their remuneration.(c)
    
    Subject to any restriction which may from time to time be
included in the Articles or our by-laws, or the terms, rights
or restrictions of any of our shares or securities
outstanding, the directors may authorize us to borrow money
and obtain advances upon the credit of our company, from any
bank, corporation, firm, association or person, upon such
terms and conditions, in all respects, as they think fit. The
directors may authorize the issuance of bonds or other
evidences of indebtedness of our company, and may authorize
the pledge or sale of the same upon such terms and
conditions, in all respects, as they think fit. The directors
are also authorized to hypothecate the property, undertaking
and assets, movable or immovable, of our company to secure
payment for any bonds or other evidences of indebtedness or
otherwise give guarantees to secure the payment of loans.
  3.
    
    The rights, preferences and restrictions attaching to our Common
Shares, Cumulative First Preferred Shares (consisting of the Series A
Shares, the Series B Shares, the Series C Shares, the Series D Shares,
the Series F Shares and the Series G Shares) and our Preferred Shares,
Series E are set forth below:
 Common Shares
 (a)
    
    Dividend rights: Subject to the rights of the holders of our Preferred Shares,
each common share shall be entitled to receive such dividends as our Board of Directors
shall determine.
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(b)
    
    Voting rights: The holders of our common shares shall be entitled to receive
notice of any meeting of our shareholders and to attend and vote on all matters to be
voted on by our shareholders, except at meetings at which only the holders of another
specified series or class of shares are entitled to vote. At each such meeting, each
common share shall entitle the holder thereof to one vote.(c)
    
    Rights to share in our profits: Other than as provided in paragraph (a) above
(the holders of our common shares are entitled to receive dividends as determined by our
Board of Directors) and paragraph (d) below (the holders of our common shares are
entitled to participation in our remaining property and assets available for
distribution in the event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding up our affairs, whether voluntarily or involuntarily, the holders of
our common shares shall be entitled, subject to the rights of the holders of Preferred
Shares, to participate equally, share for share, in our remaining property and assets
available for distribution to our shareholders, without preference or distinction.(e)
    
    Redemption provisions: None(f)
    
    Sinking fund provisions: None(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Quebec) and as determined by the Board of Directors. Our
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of common
shares as a result of such holder owning a substantial number of shares: None
  Cumulative First Preferred Shares
  Companies Act pari passu
 Cumulative First Preferred Shares, Series A (Series A Shares)
 (a)
    
    Dividend rights: The holders of record of the Series A Shares shall be entitled
to receive in each fiscal year fixed cumulative preferred dividends at the rate of 12.5%
per share per annum. No dividends may be paid on
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any shares ranking junior to the Series A Shares unless all dividends which shall have
become payable on the Series A Shares have been paid or set aside for payment.
 (b)
    
    Voting rights: Holders of Series A Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay semi-annual dividends on the Series A Shares. In that event and only
for so long as the dividend remains in arrears, the holders of Series A Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series A Share shall entitle the holder
thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series A Shares are entitled to receive a 12.5% cumulative preferential
dividend) and paragraph (d) below (the holders of Series A Shares are entitled to
receive, in preference to the holders of common shares, an amount equal to $1,000 per
Series A Share and any accumulated and unpaid dividends with respect thereto in the
event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series A Shares shall be entitled to receive, in preference to the holders of common shares,
an amount equal to $1,000 per Series A Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series A Shares may require us to redeem the
Series A preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at our
option, redeem the Series A Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Quebec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series A
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series B (Series B Shares)
 (a)
    
    Dividend rights: The holders of record of the Series B Shares shall be entitled
to receive a single dividend, payable in cash, in an amount to be determined by our
Board of Directors in accordance with the Articles, which dividend, once determined by
our Board of Directors, shall be paid on the date of conversion of the Series B Shares
into our common shares. No dividends may be paid on any shares ranking junior to the
Series B Shares unless all dividends which shall have become payable on the Series B
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series B Shares, as such, shall not be entitled to
receive notice of, and to attend or vote at, any meeting of our shareholders, unless we
shall have failed to pay the dividend due to such holders. In that event and only for so
long as the said dividend remains in arrears, the holders of Series B Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series B Share shall entitle the holder
thereof to one vote.
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(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series B Shares are entitled to receive the dividend referred to in paragraph
(a) above) and paragraph (d) below (the holders of the Series B Shares are entitled to
receive, in preference to the holders of common shares, an amount equal to $1.00 per
Series B Share and the dividend referred to in paragraph (a) above in the event of
liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series B Shares shall be entitled to receive, in preference to the holders of common shares,
an amount equal to $1.00 per Series B Share held and the dividend referred to in
paragraph (a) above.(e)
    
    Redemption provisions: Holders of Series B Shares may require us to redeem the
Series B Shares at any time at a price of $1.00 per share plus the dividend referred to
in paragraph (a) above. In addition, we may, at our option, redeem the Series B Shares
at a price of $1.00 per share plus the dividend referred to in paragraph (a) above.(f)
    
    Sinking fund provisions:None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Quebec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series B
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series C (Series C Shares)
 (a)
    
    Dividend rights: The holders of record of the Series C Shares shall be entitled
to receive in each fiscal year fixed cumulative preferred dividends at the rate of
11.25% per share per annum. No dividends may be paid on any shares ranking junior to the
Series C Shares unless all dividends which shall have become payable on the Series C
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series C Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay certain dividends on the Series C Shares. In that event and only for
so long as the dividend remains in arrears, the holders of Series C Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series C Share shall entitle the holder
thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series C Shares are entitled to receive a 11.25% cumulative preferential
dividend) and paragraph (d) below (the holders of Series C Shares are entitled to
receive, in preference to the holders of Common Shares, an amount equal to $1,000 per
Series C Share and any accumulated and unpaid dividends with respect thereto in the
event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation:In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series C Shares shall be entitled to receive, in preference to the holders of Common
Shares, an amount equal to $1,000 per Series C Share and any accumulated and unpaid
dividends with respect thereto.
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(e)
    
    Redemption provisions: Holders of Series C Shares may require us to redeem the
Series C preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at its
option, redeem the Series C Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Quebec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series C
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series D (Series D Shares)
 (a)
    
    Dividend rights: The holders of record of the Series D Shares shall be entitled
to receive in each fiscal year fixed cumulative preferred dividends at the rate of 11.0%
per share per annum. No dividends may be paid on any shares ranking junior to the Series
D Shares unless all dividends which shall have become payable on the Series D Shares
have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series D Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay certain dividends on the Series D Shares. In that event and only for
so long as the dividend remains in arrears, the holders of Series D Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series D Share shall entitle the holder
thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series D Shares are entitled to receive a 11.0% cumulative preferential
dividend) and paragraph (d) below (the holders of Series D Shares are entitled to
receive, in preference to the holders of Common Shares, an amount equal to $1,000 per
Series D Share and any accumulated and unpaid dividends with respect thereto in the
event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series D Shares shall be entitled to receive, in preference to the holders of Common
Shares, an amount equal to $1,000 per Series D Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series D Shares may require us to redeem the
Series D preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at its
option, redeem the Series D Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Quebec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.
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(h)
    
    Provisions discriminating against existing or prospective holders of Series D
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series F (Series F Shares)
 (a)
    
    Dividend rights: The holders of record of the Series F Shares shall be entitled
to receive in each fiscal year fixed cumulative semi-annual dividends at the rate of
10.85% per share per annum. No dividends may be paid on any shares ranking junior to the
Series F Shares unless all dividends which shall have become payable on the Series F
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series F Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay eight semi-annual dividends on the Series F Shares. In that event and
only for so long as the dividend remains in arrears, the holders of Series F Shares
shall be entitled to receive notice of, and to attend and vote at, all shareholders
meetings, except meetings at which only holders of another specified series or class of
            shares are entitled to vote. At each such meeting, each Series F Share shall entitle the
holder thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above
(holders of Series F Shares are entitled to receive a 10.85% cumulative preferential
semi-annual dividend) and paragraph (d) below (the holders of Series F Shares are
entitled to receive, in preference to the holders of common shares, an amount equal to
$1,000 per Series F Share and any accumulated and unpaid dividends with respect thereto
in the event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series F Shares shall be entitled to receive, in preference to the holders of common
            shares, an amount equal to $1,000 per Series F Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series F Shares may require us to redeem the
Series F preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at our
option, redeem the Series F Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Quebec) and as determined by the Board of Directors. The
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series F
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series G (Series G Shares)
 (a)
    
    Dividend rights: The holders of record of the Series G Shares shall be entitled
to receive in each fiscal year fixed cumulative semi-annual dividends at the rate of
10.85% per share per annum. No dividends may be paid on any shares ranking junior to the
Series G Shares unless all dividends which shall have become payable on the Series G
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series G Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay eight semi-annual dividends on the Series G
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Shares. In that event and only for so long as the dividend remains in arrears, the
holders of Series G Shares shall be entitled to receive notice of, and to attend and
vote at, all shareholders meetings, except meetings at which only holders of another
specified series or class of shares are entitled to vote. At each such meeting, each
Series G Share shall entitle the holder thereof to one vote.
 (c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above
(holders of Series G Shares are entitled to receive a 10.85% cumulative preferential
semi-annual dividend) and paragraph (d) below (the holders of Series G Shares are
entitled to receive, in preference to the holders of common shares, an amount equal to
$1,000 per Series G Share and any accumulated and unpaid dividends with respect thereto
in the event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series G Shares shall be entitled to receive, in preference to the holders of common
            shares, an amount equal to $1,000 per Series G Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series G Shares may require us to redeem the
Series G preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at our
option, redeem the Series G Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Quebec) and as determined by the Board of Directors. The
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series G
Shares as a result of such holders owning a substantial number of shares: None.
 Preferred Shares
 Preferred Shares, Series E (Series E Shares)
 (a)
    
    Dividend rights: The holders of record of the Series E Shares shall be entitled
to receive a maximum non-cumulative preferential monthly dividend at the rate of 1.25%
per share per month, which dividend shall be calculated based on the redemption price
(the amount equal to the aggregate consideration for such share). The Series E Shares
rank senior to the common shares but junior to the Series A Shares, Series B Shares,
Series C Shares and Series D Shares.(b)
    
    Voting rights: Holders of Series E Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series E Shares are entitled to receive a 1.25% maximum non-cumulative
preferential monthly dividend) and paragraph (d) below (the holders of Series E Shares
are entitled to receive, in preference to the holders of common shares, but subsequent
to the holders of Series A Shares, Series B Shares, Series C Shares and Series D Shares,
an amount equal to the redemption price of the Series E Shares and the amount of any
declared but unpaid dividends on the Series E Shares referred to in paragraph (a)
above), none.
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(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series E Shares shall be entitled to receive, in preference to the holders of common
            shares, but subsequent to the holders of Series A Shares, Series B Shares, Series C
Shares and Series D Shares, an amount equal to the redemption price of the Series E
Shares held and the amount of any declared but unpaid dividends on the Series E Shares
referred to in paragraph (a) above.(e)
    
    Redemption provisions: Holders of Series E Shares may require us to redeem the
Series E preferred shares at any time at a price equal to the redemption price plus an
amount equal to any dividends declared thereon but unpaid up to the date of redemption.
The redemption price shall be equal to the aggregate consideration received for such
share.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Quebec) and as determined by the Board of Directors. The
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series E
Shares: None.
 4.
    
    Actions necessary to change the rights of shareholders: For a
description of the action necessary to change the rights of holders of
our Cumulative First Preferred Shares, see Section 3. Cumulative
First Preferred Shares above. As regards our Preferred Shares,
Series E, we will not, unless consented to by the holders of the
Series E Shares and upon compliance with the provisions of the
Companies Act(Quebec), repeal, amend or otherwise alter any
provisions of the Articles relating to the Series E Shares. Under the
general provisions of the Companies Act(Quebec), (i) our Articles may
be amended by the affirmative vote of the holders of two-thirds
(2/3) of
the vote cast by the shareholders at a special meeting, and (ii) our
by-laws may be amended by our directors and ratified by a majority of
the vote cast by the shareholders at a meeting called for such
purpose.5.
    
    Shareholder meetings: Our by-laws provide that the annual meetings of
the shareholders shall be held at such time, on such date and at such
place as the Board of Directors determines from time to time. Annual
meetings of the shareholders may be called at any time by order of the
Board of Directors, the chairman of the board, or, provided they are
directors of our company, by the president or any vice president.
Special general meetings of the shareholders shall be held at such
time, on such date and at such place as the Board of Directors
determines from time to time. Special general meetings of the
shareholders may be called at any time by order of the Board of
Directors, the chairman of the board, or, provided they are directors
of our company, by the president or any vice president.For any general meeting, our by-laws provide that a notice specifying
the date, time and place of the meeting and the items to be discussed
at the meeting must be sent to each shareholder entitled to vote at
that meeting (at the address indicated in our books) at least
twenty-one (21) days before the date of such a meeting. If the
convening of any meeting of shareholders is a matter of urgency,
notice of a meeting may be given not less than 48 hours before such
meeting is to be held.The Chairman of the Board or, in his absence, the President, if he is
a director or, in his absence, one of the Vice Presidents who is a
director of our company shall preside at all meetings of shareholders.
If all of the aforesaid officers are absent or decline to act, the
persons present and entitled to vote may choose one of their number to
act as chairman of the meeting.Our by-laws provide that the holders of not less than 50.1% of the
outstanding shares of our share capital carrying rights to vote at
such meeting, present in person or represented by proxy, shall
constitute a quorum for any meeting of our shareholders.
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6.
    
    Limitations on right to own securities: There are regulations related
to the ownership and control of Canadian broadcast undertakings as
described under Item 4  Information on the Company  Regulation.
There is no other limitation imposed by Canadian law or by the
Articles or other constituent documents on the right of nonresidents
or foreign owners to hold or vote shares, other than as provided in
the Investment Canada Act(Canada) and the Radiocommunication Act. The
Investment Canada Actrequires non-Canadian (as defined in the
Investment Canada Act) (Canada) individuals, governments, corporations
and other entities who wish to acquire control of a Canadian
business (as defined in the Investment Canada Act(Canada)) to file
either an application for review (when certain asset value thresholds
are met) or a post closing notification with the Director of
Investments appointed under the Investment Canada Act(Canada), unless
a specific exemption applies. The Investment Canada Act(Canada)
requires that, when an acquisition of control of a Canadian business
by a non-Canadian is subject to review, it must be approved by the
Minister responsible for the Investment Canada Act(Canada) on the
basis that the Minister is satisfied that the acquisition is likely
to be of net benefit to Canada, having regard to criteria set forth
in the Investment Canada Act(Canada). Radio licenses may be issued
under the Radiocommunication Actto radiocommunication service
providers (Service Providers) that meet the eligibility criteria of
Canadian ownership and control set forth in the Canadian
Telecommunications Common Carrier Ownership and Contol Regulationsor
CTCCOCR. Under the CTCCOCR, the holding corporation of a Service
Provider may refuse to accept any subscription for or register the
transfer of any of its voting shares unless it receives a declaration
that such subscription or transfer would not result in the percentage
of the total voting shares of the holding corporation of the Service
Provider that are beneficially owned and controlled by non-Canadians
exceeding
331/3 %.7.
    
    Provisions that could have the effect of delaying, deferring or
preventing a change in control: The Articles provide that none of our
shares may be transferred without the consent of the directors
expressed in a resolution duly adopted by them.A register of transfers containing the date and particulars of all
transfers of shares of our share capital shall be kept either at our
head office or at another of our offices or at such other place in the
Province of Quebec as may be determined, from time to time, by the
Board of Directors.8.
    
    Not applicable.9.
    
    Not applicable.10.
    
    Not applicable.
 C  Material Contracts
  (a)
    
    Indenture relating to US$700,000,000 of our 7 3/4% Senior Notes due March 15, 2016,
dated as of October 5, 2007, by and between Quebecor Media Inc., and U.S. Bank National
Association, as trustee.On October 5, 2007, we issued US$700,000,000 aggregate principal amount of our 7 3/4%
Senior Notes due March 15, 2016 pursuant to an Indenture, dated as of October 5, 2007,
by and between Quebecor Media and U.S. Bank National Association, as trustee. These
notes are unsecured and are due on March 15, 2016. Interest on these notes is payable
semi-annually in arrears on June 15 and December 15 of each year, beginning on December
15, 2007. These notes are not guaranteed by our subsidiaries. These notes are
redeemable, at our option, under certain circumstances and at the redemption prices set
forth in these indentures. These indentures contain customary restrictive covenants with
respect to Quebecor Media and certain of its subsidiaries and customary events of
default. If an event of default occurs and is continuing, other than our bankruptcy or
insolvency, the trustee or the holders of at least 25% in principal amount at maturity
of the then-outstanding
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notes may declare all the notes to be due and payable immediately. These notes were
issued under a different indenture from, and do not form a single series and are not
fungible with, our 7 3/4 % Senior Notes due 2016 which we issued in 2006, as described in
the next paragraph.
 (b)
    
    Indenture relating to US$525,000,000 of our 7 3/4% Senior Notes due March 15, 2016,
dated as of January 17, 2006, by and between Quebecor Media Inc., and U.S. Bank National
Association, as trustee.On January 17, 2006, we issued US$525,000,000 aggregate principal amount of our 7 3/4%
Senior Notes due March 15, 2016 pursuant to an Indenture, dated as of January 17, 2006,
by and between Quebecor Media and U.S. Bank National Association, as trustee. These
notes are unsecured and are due on March 15, 2016. Interest on these notes is payable
semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15,
2006. These notes are not guaranteed by our subsidiaries. These notes are redeemable, at
our option, under certain circumstances and at the redemption prices set forth in these
indentures. These indentures contain customary restrictive covenants with respect to
Quebecor Media and certain of its subsidiaries and customary events of default. If an
event of default occurs and is continuing, other than our bankruptcy or insolvency, the
trustee or the holders of at least 25% in principal amount at maturity of the
then-outstanding notes may declare all the notes to be due and payable immediately.
These notes were issued under a different indenture from, and do not form a single
series and are not fungible with, our 7 3/4 % Senior Notes due 2016 which we issued in
2007, as described in the previous paragraph.(c)
    
    Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media Inc.,
as Borrower, the financial institutions party thereto from time to time, as Lenders, and
Bank of America, N.A., as Administrative Agent.On January 17, 2006, in connection with our refinancing plan, we entered into Senior
Secured Credit Facilities comprised of (i) a 5-year $100.0 million revolving credit
facility that matures in January 2011, (ii) a 5-year $125.0 million term loan A that
matures in January 2011, and (iii) a 7-year US$350.0 million term loan B facility that
matures in January 2013. The Senior Secured Credit Facilities also include an
uncommitted $350 million incremental facility that may be available to us, subject to
compliance at all times with all financial covenants, absence of default and lenders
being willing to fund the incremental amount. This incremental facility will have a term
to be agreed with the lenders, although the maturity of borrowings under the incremental
facility will be required to have a maturity falling on or extending beyond the maturity
of the term loan B facility. We may draw Letters of Credit under the Senior Secured
Credit Facilities. The proceeds of the term loan A and term loan B were used to
refinance existing debt. The proceeds of our revolving facility may be used for our
general corporate purposes.Borrowings under the revolving credit facility, term loan A and term loan B bear
interest at the Canadian prime rate, the U.S. prime rate, the bankers acceptance rate
or LIBOR, plus, in each case, an applicable margin.Borrowings under the revolving credit facility are repayable in full in January 2011.
Borrowings under our term loan A facility are repayable in full in January 2011 and
borrowing under our term loan B facility are repayable in full in January 2013. We are
also required to make specified quarterly repayments of amounts borrowed under the term
loan A and term loan B.Borrowings under the Senior Secured Credit Facilities and under eligible derivative
instruments are secured by a first-ranking hypothec and security agreement (subject to
certain permitted encumbrances) on all of our movable property and first-ranking pledges
of all of the shares (subject to certain permitted encumbrances) of Sun Media and
Videotron.The Senior Secured Credit Facilities contain customary covenants that restrict and limit
our ability to, among other things, enter into merger or amalgamation transactions,
grant encumbrances, sell assets, pay dividends or make other distributions, issue shares
of capital stock, incur indebtedness and enter into related party transactions. In
addition, the Senior Secured Credit Facilities contain customary financial covenants.
The Senior Secured Credit Facilities contain customary events of default including the
non-payment of principal or
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interest, the breach of any financial covenant, the failure to perform or observe any
other covenant, certain bankruptcy events relating to Quebecor Media and its
subsidiaries, and the occurrence of a change of control.
 (d)
    
    Indenture relating to US$650,000,000 of Videotrons 6
7/8% Senior Notes due January
15, 2014, dated as of October 8, 2003, by and among Videotron ltée, the guarantors party
thereto and Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National
Association) as trustee, as supplemented.On October 8, 2003, Videotron issued
US$335.0 million aggregate principal amount of 6
7/8%
Senior Notes due January 15, 2014 and, on November 19, 2004, Videotron issued an
additional US$315.0 million in aggregate principal amount of these notes, pursuant to an
Indenture, dated as of October 8, 2003, by and among Videotron, the guarantors party
thereto and Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National
Association), as trustee. These notes are unsecured and are due January 15, 2014.
Interest on these notes is payable semi-annually in arrears on January 15 and July 15 of
each year, beginning on July 15, 2004. These notes are guaranteed on a senior unsecured
basis by most, but not all, of Videotrons subsidiaries. The notes are redeemable, at
Videotrons option, under certain circumstances and at the redemption prices set forth
in the indenture. The indenture contains customary restrictive covenants with respect to
Videotron and certain of its subsidiaries and customary events of default. If an event
of default occurs and is continuing (other than Videotrons bankruptcy or insolvency)
the trustee or the holders of at least 25% in principal amount at maturity of the
then-outstanding notes may declare all the notes to be due and payable immediately.(e)
    
    Indenture relating to US$175,000,000 of Videotrons
63/8% Senior Notes due December
15, 2015, dated as of September 16, 2005, by and among Videotron ltée, the guarantors
party thereto, and Wells Fargo, National Association, as trustee.On September 16, 2005, Videotron issued US$175,000,000 aggregate principal amount of its
6
3/8 Senior Notes due December 15, 2015, pursuant to an Indenture, dated as of September
16, 2005, by and among Videotron, the guarantors party thereto, and Wells Fargo,
National Association, as trustee. These notes are unsecured and are due on December 15,
2015. Interest on these notes is payable semi-annually in arrears on June 15 and
December 15 of each year, beginning on December 15, 2005. These notes are guaranteed on
a senior unsecured basis by most, but not all, of Videotrons subsidiaries. These notes
are redeemable, at Videotrons option, under certain circumstances and at the redemption
prices set forth in the indenture. The indenture contains customary restrictive
covenants with respect to Videotron and certain of its subsidiaries, and customary
events of default. If an event of default occurs and is continuing, other than
Videotrons bankruptcy or insolvency, the trustee or the holders of at least 25% in
principal amount at maturity of the then-outstanding notes may declare all the notes to
be due and payable immediately.(f)
    
    Indenture relating to US$455,000,000 of Videotrons 9
1/8% Senior Notes due April
15, 2018, dated as of April 15, 2008, by and among Videotron, the guarantors party
thereto, and Wells Fargo Bank, National Association, as trustee, as supplemented by a
Supplemental Indenture, dated as of March 5, 2009, relating to the issuance of an
additional US$260,000,000 aggregate principal amount of 9
1/8% Senior Notes due April 15,
2018.On April 15, 2008, Videotron issued US$455,000,000
aggregate principal amount of its
91/8%
Senior Notes due April 15, 2018, pursuant to an Indenture, dated as of April 15, 2018,
by and among Videotron, the guarantors party thereto, and Wells Fargo Bank, National
Association, as trustee. These notes are unsecured and are due on April 15, 2018.
Interest on these notes is payable semi-annually in arrears on June 15 and December 15
of each year, beginning on June 15, 2008. These notes are guaranteed on a senior
unsecured basis by most, but not all, of Videotrons subsidiaries. These notes are
redeemable, at Videotrons option, under certain circumstances and at the redemption
prices set forth in the indenture. The indenture contains customary restrictive
covenants with respect to Videotron and certain of its subsidiaries, and customary
events of default. If an event of default occurs and is continuing, other than
Videotrons bankruptcy or insolvency, the trustee or the holders of at least 25% in
principal amount at maturity of the then-outstanding notes may declare all the notes to
be due and payable immediately. On March 5, 2009, Videotron issued an additional
US$260.0 million aggregate
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1 8 1 8
 (g)
    
    Amended and Restated Credit Agreement, as amended as of April 7, 2008, by and
among Videotron ltée, as borrower, the guarantors party thereto, the financial
institutions party thereto from time to time, as lenders, and Royal Bank of Canada, as
administrative agent, as amended.On April 7, 2008, Videotron amended its senior secured credit facility to increase
commitments under the facility from $450.0 million to $575.0 million and extend the
maturity date to April 2012. Pursuant to these amendments, Videotron may, subject to
certain conditions, increase the commitments under the senior secured credit facility by
an additional $75.0 million (for aggregate commitments of $650.0 million) subject to
approval by existing lenders providing such commitments or by adding new lenders. The
proceeds of our senior secured credit facility are to be used for general corporate
purposes, including, without limitation, for distributions to our shareholder in certain
circumstances.Borrowings under our amended and restated credit facility bear interest at the Canadian
prime rate, the bankers acceptance rate or LIBOR, plus, in each case an applicable
margin. Borrowings under this revolving credit facility are repayable in full in April
2012.Borrowings under this amended and restated senior secured credit facility and under
eligible derivative instruments are secured by a first-ranking hypothec or security
interest (subject to certain permitted encumbrances) on all of Videotrons current and
future assets, as well as those of the guarantors party thereto, including most but not
all of Videotrons subsidiaries (the Videotron Group), guarantees of all the members
of the Videotron Group, pledges of the shares of Videotron and the members of the
Videotron Group, and other security.This amended and restated senior secured credit facility contains customary covenants
that restrict and limit the ability of Videotron and the members of the Videotron Group
to, among other things, enter into merger or amalgamation transactions, grant
encumbrances, sell assets, pay dividends or make other distributions, issue shares of
capital stock, incur indebtedness and enter into related party transactions. In
addition, this amended and restated senior secured credit facility contains customary
financial covenants. It also contains customary events of default including the
non-payment of principal or interest, the breach of any financial covenant, the failure
to perform or observe any other covenant, certain bankruptcy events relating to us and
the members of the Videotron Group, and the occurrence of a change of control.(h)
    
    Indenture relating to US$205,000,000 of Sun Medias
7 5/8% Senior Notes due
February 15, 2013, dated as of February 7, 2003 by and among Sun Media Corporation, the
guarantors party thereto, and National City Bank, as trustee, as supplemented.On February 7, 2003 Sun Media issued US$205.0 million aggregate principal amount of its
7 5/8% Senior Notes due February 15, 2013 under an Indenture, dated as of February 7,
2003, as supplemented, by and among Sun Media, the guarantors party thereto, and
National City Bank, as trustee. These notes are unsecured and are due February 15,
2013. Interest on these notes is payable semi-annually in arrears on February 15 and
August 15 of each year, beginning on August 15, 2003. These notes are guaranteed on a
senior unsecured basis by most, but not all, of Sun Medias subsidiaries. These notes
are redeemable, at Sun Medias option, under certain circumstances and at the redemption
prices set forth in the indenture. The indenture contains customary restrictive
covenants with respect to Sun Media and certain of its subsidiaries and customary events
of default. If an event of default occurs and is continuing, other than Sun Medias
bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount
at maturity of the then-outstanding notes may declare all the notes to be due and
payable immediately.
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(i)
    
    Credit Agreement, dated as of February 7, 2003, by and among Sun Media
Corporation, the guarantors party thereto, Banc of America Securities LLC, Credit Suisse
First Boston Canada, the lenders party thereto, and Bank of America, N.A., as
Administrative Agent, as amended.On February 7, 2003, as part of the refinancing of its indebtedness, Sun Media entered
into a secured credit facility consisting of a five-year revolving credit facility of
$75.0 million and a six-year US$230.0 million term loan B. In connection with Quebecor
Medias 2006 refinancing, Sun Medias credit facility was amended for the addition of a
$40.0 million term loan C in January 2006. On October 31, 2007, Sun Media repaid in full
and terminated its term loan B. In addition, on October 31, 2007, Sun Media entered
into a Fifth Amending Agreement to its credit agreement. The amendment reduces the
revolving credit facility from $75.0 million to $70.0 million, extends the term of the
credit facilities to October 31, 2012, and modifies certain definitions and covenants
related to leverage and interest coverage ratios, while removing the fixed charge ratio.Borrowings under the revolving credit facility and the term loan C are repayable in full
in October 2012. Sun Media is also required to make specified quarterly repayments of
amounts borrowed under the term loan C.Borrowings under the revolving credit facility and the term loan C facility are in
Canadian dollars and bear interest at the Canadian prime rate or the bankers acceptance
rate plus an applicable margin. The proceeds of the term loan C were used to refinance
existing debt and for permitted distributions to Sun Medias shareholder. The proceeds
of Sun Medias revolving facility may be used for general corporate purposes including
distributions to Sun Medias shareholder in certain circumstances.Borrowings under this amended and restated credit facility and under eligible derivative
instruments are secured by a first-ranking hypothec and security agreement (subject to
certain permitted encumbrances) on all of Sun Medias current and future assets, as well
as those of the guarantors party thereto, if any (the Sun Media Group), guarantees of
all the members of the Sun Media Group, pledges of shares of the members of the Sun
Media Group, and other security.This credit facility contains customary covenants that restrict and limit the ability of
Sun Media and its subsidiaries, if any, to, among other things, enter into merger or
amalgamation transactions, grant encumbrances, sell assets, pay dividends or make other
distributions, issue shares of capital stock, incur indebtedness and enter into related
party transactions. In addition, this credit facility contains customary financial
covenants. This credit facility also contains customary events of default including the
non-payment of principal or interest, the breach of any financial covenant, the failure
to perform or observe any other covenant, certain bankruptcy events relating to Sun
Media and members of the Sun Media Group, and the occurrence of a change of control.(j)
    
    Share Purchase Agreement dated December 22, 2003 between Carlyle VTL Holdings,
L.P. and Carlyle Partners III (Videotron), L.P., and Quebecor Media Inc. and 9101-0827
Quebec Inc. relating to the purchase by 9101-0827 Quebec Inc. of 5,000 Class C Preferred
Shares of 3662527 Canada Inc., as amended by a First Amendment to Share Purchase
Agreement dated as of December 31, 2004, and by an Assignment and Assumption Agreement
dated as of June 30, 2006.On December 22, 2003, 9101-0827 Quebec Inc., a wholly-owned subsidiary of Quebecor Media
entered into an agreement with Carlyle VTL Holdings, L.P. and Carlyle Partners III
(Videotron), L.P. (collectively Carlyle) to purchase the 5,000 Class C Preferred
Shares held by Carlyle in 3662527 Canada Inc., the parent company of Videotron Télécom
Ltd., Quebecor Medias business telecommunications venture. The acquisition was made for
a purchase price with a value estimated at approximately $125 million at closing. A
payment of $55 million was made to Carlyle at closing on December 22, 2003. The balance
of the purchase price was subject to variation on the basis of the valuation of the
common shares of Quebecor Media and was payable on demand at any time after December 15,
2004, but no later than December 15, 2008. Quebecor Media held an option to pay this
Additional Amount in cash, at its fair value for a period of 30 days following each of
June 15, 2007 and June 15, 2008. At the date of the transaction, both parties had
agreed that the initial value of the Additional
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Amount payable was $70.0 million ($122.0
million as at December 31, 2006), and on July 23,
2007, Quebecor Media exercised its option to pay in full the Additional Amount payable
to The Carlyle Group for total cash consideration of $127.2 million.(k)
    
    Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, by
and among 4411986 Canada Inc., Osprey Media Income Fund, Osprey Media LP and Osprey
Media Income Fund, as borrowers, the financial institutions party thereto from time to
time, as lenders, and The Bank of Nova Scotia, as administrative agent, as amended.On September 28, 2007, 4411986 Canada Inc., Osprey Media LP and Osprey Media Income Fund
entered into a fourth amended and restated secured credit facility consisting of a
39-month revolving credit facility of $65.0 million and a 39-month $133.3 million term
facility. Borrowings under the revolving credit facility and the term facility are
repayable in full in January 2011. Pursuant to a corporate reorganization following the
acquisition of Osprey Media, 4411986 Canada Inc., Osprey Media L.P., Osprey Media
Publishing Inc. and other subsidiaries of 4411986 Canada Inc. entered into, inter alia,
a first amendment dated as of January 1, 2008, a second amendment dated as of August 31,
2008 and an assumption and confirmation agreement dated as of December 28, 2008 to
evidence such corporate reorganization.Borrowings under the revolving credit facility and the term facility are in Canadian
dollars and bear interest at the Canadian prime rate or the bankers acceptance rate
plus an applicable margin. The proceeds of the term facility were used to refinance
existing debt. The proceeds of Osprey Medias revolving facility may be used for
general corporate purposes including acquisitions, capital expenditures and
distributions to Osprey Medias shareholder (subject in each case to certain
restrictions).Borrowings under this Fourth Amended and Restated Credit Agreement and under eligible
derivative instruments are secured by a first-ranking hypothec and security agreement
(subject to certain permitted encumbrances) on all of Osprey Medias current and future
assets, as well as those of its subsidiaries (the Osprey Media Group) and other
security.This credit facility contains customary covenants that restrict and limit the ability of
Osprey Media and its subsidiaries to, among other things, enter into merger or
amalgamation transactions, grant encumbrances, sell assets, pay dividends or make other
distributions, issue shares of capital stock, incur indebtedness and enter into related
party transactions. In addition, this credit facility contains customary financial
covenants. This credit facility also contains customary events of default including the
non-payment of principal or interest, the breach of any financial covenant, the failure
to perform or observe any other covenant, and certain bankruptcy events relating to
Osprey Media and members of the Osprey Media Group.
 D  Exchange Controls
  Investment Canada Act North American Free Trade Agreement Implementation Act World Trade
Organization (WTO) Agreement Implementation Act
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E  Taxation
 Certain U.S. Federal Income Tax Considerations
 3 4 3 4
  
    
    dealers in stocks, securities or currencies;
    
    securities traders that use a mark-to-market accounting method;
    
    banks and financial institutions;
    
    insurance companies;
    
    regulated investment companies;
    
    real estate investment trusts;
    
    tax-exempt organizations;
    
    persons holding notes as part of a hedging or conversion transaction or a
straddle;
    
    persons deemed to sell notes under the constructive sale provisions of the
Code;
    
    persons who or that are, or may become, subject to the expatriation
provisions of the Code;
    
    persons whose functional currency is not the U.S. dollar; and
    
    direct, indirect or constructive owners of 10% or more of our outstanding
voting shares.
   
    
    an individual citizen or resident alien of the United States;
    
    a corporation or other entity treated as such formed in or under the laws
of the United States, any state thereof or the District of Columbia;
    
    an estate, the income of which is subject to U.S. federal income taxation
regardless of its source; or
    
    a trust, if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more U.S.
persons (within the meaning of the Code) have the authority to control all
substantial decisions of the trust, or if a valid election is in effect to be
treated as a U.S. person.
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To ensure compliance with requirements imposed by the IRS, we inform you that the United
States tax advice contained herein: (i) is written in connection with the promotion or marketing by
Quebecor Media Inc. of the transactions or matters addressed herein, and (ii) is not intended or
written to be used, and cannot be used by any taxpayer, for the purpose of avoiding United States
tax penalties. Each taxpayer should seek advice based on the taxpayers particular circumstances
from an independent tax advisor.
  
 Interest on the Notes
 Interest on the 2006 notes
  Interest on the 2007 OID notes
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Market Discount, Acquisition Premium, and Bond Premium
 de minimis
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##### Table of Contents



Other
   Sale, Exchange or Retirement of a Note
  
    
    the amount of cash and the fair market value of any property received (less
any portion allocable to the payment of accrued interest or, in the case of
2007 OID notes, OID not previously included in income, which amount will be
taxable as ordinary interest income); and
    
    the U.S. Holders adjusted tax basis in the note.
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Information Reporting and Backup Withholding
  
    
    fails to furnish a social security number or other taxpayer identification
number (TIN) certified under penalty of perjury within a reasonable time
after the request for the TIN;
    
    furnishes an incorrect TIN;
    
    is notified by the IRS that it has failed to report properly interest or
dividends; or
    
    under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and
that such holder is not subject to backup withholding.
 provided provided
  Certain Canadian Federal Income Tax Considerations for Residents of the United States
 3 4 3 4 Income Tax Act provided
  Interest Payments
  Dispositions
  172




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.
 F   Dividends and Paying Agents
  G   Statement by Experts
  H   Documents on Display
   I  Subsidiary Information
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ITEM
11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign currency risk, interest rate risk and non-performance risk
   Commodity price risk
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##### Table of Contents



Credit risk management
   Fair value of financial instruments
  Material limitations
  Principal repayments
  Twelve month period ending December 31,(in millions)2009
    
    $
    37.12010
    
    
    162.12011
    
    
    166.22012
    
    
    269.62013
    
    
    651.72014 and thereafter
    
    
    3,013.9
 
 ITEM 12   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
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PART II
 
 ITEM 13   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 A.
    
    None.B.
    
    Not applicable.
 
 ITEM 14   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A 
    
    Material Modifications to the Rights of Security HoldersThese have been no material modifications to the rights of security holders.B 
    
    Use of ProceedsNot applicable.
 
 ITEM 15   CONTROLS AND PROCEDURES
   Internal Control  Integrated Framework
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ITEM 16   [RESERVED]
 
 ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B  CODE OF ETHICS
  
 ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 de minimis
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2008(1)
    
    
    2008(2)
    
    
    2007Audit Fees(3)
    
    $
    2,178,643
    
    
    $
    559,810
    
    
    $
    2,723,699Audit-related Fees(4)
    
    
    206,078
    
    
    
    368,153
    
    
    
    921,489Tax Fees(5)
    
    
    31,228
    
    
    
    32,500
    
    
    
    76,024All Other Fees(6)
    
    
    
    
    
    
    52,500
    
    
    
    724,564Total
    
    $
    2,415,949
    
    
    $
    1,012,963
    
    
    $
    4,445,776
 
 (1)
    
    Fees of Ernst & Young LLP.(2)
    
    Fees of KPMG LLP.(3)
    
    Audit Fees consist of fees approved for the annual audit of the Companys
consolidated financial statements and quarterly reviews of interim financial statements of
the Company with the SEC, including required assistance or services that only the external
auditor reasonably can provide and accounting consultations on specific issues.(4)
    
    Audit-related Fees consist of fees billed for assurance and related services that are
traditionally performed by the external auditor, and include consultations concerning
financial accounting and reporting standards on proposed transactions, due diligence or
accounting work related to acquisitions; employee benefit plan audits, and audit or
attestation services not required by statute or regulation and audit and attestation
services required by statute or regulation, such as comfort letters and consents, SEC
prospectus and registration statements, other filings and other offerings, including
annual reports and SEC forms and statutory audits.(5)
    
    Tax Fees include fees billed for tax compliance services, including the preparation
of original and amended tax returns and claims for refunds, tax consultations, such as
assistance and representation in connection with tax audits and appeals, tax advice
related to mergers, acquisitions and divestitures, transfer pricing, and requests for
advance tax rulings or technical interpretations.(6)
    
    All Other Fees include fees billed for forensic accounting and occasional training
services, assistance with respect to internal controls over financial reporting and
disclosure controls and procedures. 
 ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 ITEM 16F CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANT
    178




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ITEM 16G CORPORATE GOVERNANCE
  
 PART III
 
 ITEM 17   FINANCIAL STATEMENTS
 179




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##### Table of Contents



ITEM 18 FINANCIAL STATEMENTS
  
 ITEM 19 EXHIBITS
 EXHIBITS
  ExhibitNumber
    
    Description1.1
    
    Articles of Incorporation of Quebecor Media Inc. (translation) (incorporated by reference to
Exhibit 3.1 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5,
2001, Registration Statement No. 333-13792).1.2
    
    Certificate of Amendment of Articles of Incorporation filed February 3, 2003 (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2002, filed on March 31, 2003).1.3
    
    By-laws of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 3.2 to
Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001, Registration
Statement No. 333-13792).1.4
    
    Certificate of Amendment of Articles of Incorporation filed December 5, 2003 (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2003, filed on March 31, 2004).1.5
    
    Certificate of Amendment of Articles of Incorporation filed January 16, 2004 (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2003, filed on March 31, 2004).1.6
    
    Certificate of Amendment of Articles of Incorporation filed November 26, 2004 (translation)
(incorporated by reference to Exhibit 1.6 of Quebecor Medias Annual Report on Form 20-F for
fiscal year ended December 31, 2004, filed on March 31, 2005).1.7
    
    By-law number 2004-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.7 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2004,
filed on March 31, 2005).1.8
    
    By-law number 2004-2 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.8 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2004,
filed on March 31, 2005).1.9
    
    Certificate of Amendment of Articles of Incorporation of Quebecor Media Inc., as of January 14,
2005 (translation) (incorporated by reference to Exhibit 1.9 of Quebecor Medias Annual Report
on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).1.10
    
    By-law number 2005-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.10 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2005,
filed on March 31, 2006).
 180




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##### Table of Contents



ExhibitNumber
    
    Description1.11
    
    Certificate of Amendment of Articles of Incorporation of Quebecor Media, Inc., as of January
12, 2007 (translation) (incorporated by reference to Exhibit 1.11 of Quebecor Medias Annual
Report on Form 20-F for fiscal year ended December 31, 2006, filed on March 30, 2007).1.12
    
    By-law number 2007-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.12 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2006,
filed on March 30, 2007).1.13
    
    Certificate of Amendment of Articles of Incorporation of Quebecor Media Inc., as of November
30, 2007 (translation) (incorporated by reference to Exhibit 1.13 of Quebecor Medias Annual
Report on Form 20-F for fiscal year ended December 31, 2007, filed on March 27, 2008).1.14
    
    By-law number 2007-2 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.14 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2007,
filed on March 27, 2008).1.15
    
    By-law number 2008-1 of Quebecor
Media Inc. (translation).2.1
    
    Form of 7 3/4 % Senior Note due 2016 originally issued on January 17, 2006 (included as Exhibit A
to Exhibit 2.2 below) (incorporated by reference to Exhibit 2.7 of Quebecor Medias Annual
Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).2.2
    
    7 3/4% Senior Notes Indenture, dated as of January 17, 2006, by and between Quebecor Media Inc.,
and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 2.8 of
Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on
March 29, 2006).2.3
    
    Form of 7 3/4 % Senior Note due 2016 originally issued on October 5, 2007 (included as Exhibit A
to Exhibit 2.4 below) (incorporated by reference to Exhibit 4.3 of Quebecor Medias
Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No.
333-147551).2.4
    
    7 3/4% Senior Notes Indenture, dated as of October 5, 2007, by and between Quebecor Media Inc.,
and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.4 of
Quebecor Medias Registration Statement on Form F-4 dated November 20, 2007, Registration
Statement No. 333-147551).2.5
    
    Form of Sun Media Corporation 7
5/8% Senior Note due 2013 (included in Exhibit A to Exhibit 2.6
below) (incorporated by reference to Exhibit A to Exhibit 4.2 to Sun Media Corporations
Registration Statement on Form F-4 dated April 10, 2003, Registration Statement No.
333-103998).2.6
    
    Indenture relating to Sun Media
Corporation 7 5/8% Senior Notes due 2013, dated as of
February 7, 2003, among Sun Media Corporation, the subsidiary guarantors signatory thereto, and
National City Bank, as trustee (incorporated by reference to Exhibit 4.2 to Sun Media
Corporations Registration Statement on Form F-4 dated April 10, 2003, Registration Statement
No. 333-103998).2.7
    
    Sun Media Corporation First Supplemental Indenture, dated as of July 30, 2004, by and among Sun
Media Corporation, the subsidiary guarantors signatory thereto, and U.S. Bank Corporate Trust
Services (formerly National City Bank), as trustee (incorporated by reference to Exhibit 2.4 of
Sun Media Corporations annual report on Form 20-F for the year ended December 31, 2004, filed
on March 24, 2005).2.8
    
    Form of Videotron Ltd. 6
7/8% Senior Notes due January 15, 2014 (incorporated by reference to
Exhibit A to Exhibit 4.3 to Videotrons Registration Statement on Form F-4 dated January 8,
2004, Registration Statement No. 333-110697).2.9
    
    Form of Notation of Guarantee by
the subsidiary guarantors of the 6
7/8% Videotron Ltd. Senior
Notes due January 15, 2014 (incorporated by reference to Exhibit E to Exhibit 4.3 to
Videotrons Registration Statement on Form F-4 dated January 8, 2004, Registration Statement
No. 333-110697).2.10
    
    Indenture relating to Videotron
ltée 6 7/8% Notes due 2014, dated as of October 8, 2003, by and
among Videotron Ltd., the subsidiary guarantors signatory thereto and Wells Fargo Bank
Minnesota, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Videotrons
Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No.
333-110697).2.11
    
    Supplemental Indenture, dated as of July 12, 2004, by and among Videotron Ltd., SuperClub
Videotron
 181




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##### Table of Contents



ExhibitNumber
    
    DescriptionCanada inc., Les Propriétés SuperClub inc. and Wells Fargo Bank, National
Association, as trustee, to the Indenture dated as of October 8, 2003 (incorporated by
reference to Exhibit 4.4 to Videotrons Registration Statement on Form F-4 dated January 18,
2005, Registration Statement No. 333-121032).2.12
    
    Supplemental Indenture, dated as of April 15, 2008, by and among Videotron Ltd., Videotron US
Inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the Indenture
dated as of October 8, 2003 (incorporated by reference to Exhibit 2.5 of Videotron Ltds Annual
Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No.
033-51000).2.13
    
    Supplemental Indenture, dated as of September 23, 2008, by and among Videotron Ltd., 9193-2962
Quebec inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the
Indenture dated as of October 8, 2003 (incorporated by reference to Exhibit 2.6 of Videotron
Ltds Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009,
Commission file No. 033-51000).2.14
    
    Form of Videotron Ltd. 6
3/8 % Senior Note due 2015 (included as Exhibit A to Exhibit 2.16 below).2.15
    
    Form of Notation of Guarantee by
the subsidiary guarantors of Videotron Ltd.s 6
3/8% Senior
Notes due 2015 (included as Exhibit E to Exhibit 2.16 below).2.16
    
    Indenture relating to Videotron
Ltd. 6 3/8% Senior Notes, dated as of September 16, 2005, by and
between Videotron Ltd., the guarantors party thereto, and Wells Fargo, National Association, as
trustee (incorporated by reference to Exhibit 4.3 of Videotrons Registration Statement on
Form F-4 dated October 14, 2005, Registration Statement No. 333-128998).2.17
    
    Supplemental Indenture, dated as of April 15, 2008, by and among Videotron Ltd., Videotron US
Inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the Indenture
dated as of September 16, 2005 (incorporated by reference to Exhibit 2.10 of Videotron Ltds
Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission
file No. 033-51000).2.18
    
    Supplemental Indenture, dated as of September 23, 2008, by and among Videotron Ltd., 9193-2962
Quebec inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the
Indenture dated as of September 16, 2005 (incorporated by reference to Exhibit 2.11 of
Videotron Ltds Annual Report on Form 20-F for the year December 31, 2008, filed on March 6,
2009, Commission file No. 033-51000).2.19
    
    Form of
91/8% Senior Notes due April 15, 2018 of Videotron Ltd. (incorporated by reference to
Exhibit 2.12 of Videotron Ltds Annual Report on Form 20-F for the year December 31, 2008,
filed on March 6, 2009, Commission file No. 033-51000).2.20
    
    Form of Notation of Guarantee by
the subsidiary guarantors of the
91/8% Senior Notes due April
15, 2018 of Videotron ltée (incorporated by reference to Exhibit 2.13 of Videotron Ltds Annual
Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No.
033-51000).2.21
    
    Indenture, dated as of April 15, 2008, by and among Videotron Ltd., the subsidiary guarantors
signatory thereto and Wells Fargo Bank, National Association, as trustee (incorporated by
reference to Exhibit 2.14 of Videotron Ltds Annual Report on Form 20-F for the year December
31, 2008, filed on March 6, 2009, Commission file No. 033-51000).2.22
    
    Supplemental Indenture, dated as of September 23, 2008, by and among Videotron Ltd., 9193-2962
Quebec inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the
Indenture dated as of April 15, 2008 (incorporated by reference to Exhibit 2.15 of Videotron
Ltds Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009,
Commission file No. 033-51000).3.1
    
    Shareholders Agreement dated December 11, 2000 by and among Quebecor Inc., Capital
Communications CDPQ inc. (now known as Capital dAmérique CDPQ inc.) and Quebecor Media,
together with a summary thereof in the English language (incorporated by reference to Exhibit
9.1 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001,
Registration Statement No. 333-13792).3.2
    
    Letter Agreement dated December 11, 2000 between Quebecor Inc. and Capital Communications CDPQ
inc. (now known as Capital dAmérique CDPQ inc.) (translation) (incorporated by reference to
 182




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ExhibitNumber
    
    DescriptionExhibit 9.2 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001
Registration Statement 333-13792).3.3
    
    Written Resolution adopted by the Shareholders of Quebecor Media Inc. on May 5, 2003 relating
to the increase in the size of the Board of Directors of Quebecor Media Inc. (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2003, filed on March 31, 2004).4.1
    
    Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media Inc., as Borrower,
the financial institutions party thereto from time to time, as Lenders, and Bank of America,
N.A., as Administrative Agent. (incorporated by reference to Exhibit 4.2 of Quebecor Medias
Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).4.2
    
    Credit Agreement, dated as of April 7, 2006, by and between Société Générale (Canada), as
lender, and Quebecor Media Inc., as borrower (incorporated by reference to Exhibit 10.3 of
Quebecor Medias Registration Statement on Form F-4 dated November 20, 2007, Registration
Statement No. 333-147551).4.3
    
    Credit Agreement dated as of February 7, 2003 among Sun Media Corporation, as borrower, Bank of
America, N.A., Banc of America Securities LLC and Credit Suisse First Boston Corporation, as
arrangers, Bank of America, N.A., as administrative agent, and the financial institutions
signatory thereto, as lenders (incorporated by reference to Exhibit 10.4 to Sun Media
Corporations Registration Statement on Form F-4 dated April 10, 2003, Registration Statement
No. 333-103998).4.4
    
    First Amending Agreement, dated as of December 3, 2003, amending the Credit Agreement dated as
of February 7, 2003 among Sun Media Corporation, Banc of America Securities LLC and Credit
Suisse First Boston Canada and the lenders thereto (incorporated by reference to the applicable
exhibit to Sun Medias Annual Report on Form 20-F for the year ended December 31, 2003, filed
on March 30, 2004).4.5
    
    Second Amending Agreement, dated as of October 12, 2004, amending the Credit Agreement dated as
of February 7, 2003 among Sun Media Corporation, Banc of America Securities LLC and Credit
Suisse First Boston Canada and the lenders thereto (incorporated by reference to Exhibit 4.5 of
Sun Media Corporations Annual Report on Form 20-F for the year ended December 31, 2004, filed
on March 24, 2005, Commission file No. 333-6690).4.6
    
    Third Amending Agreement, dated as of January 17, 2006, amending the Credit Agreement dated as
of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC,
Credit Suisse First Boston Canada, the lenders party thereto, and Bank of America, N.A., as
Administrative Agent (incorporated by reference to Exhibit 4.6 of Sun Media Corporations
Annual Report on Form 20-F for the year ended December 31, 2005, filed on March 21, 2006,
Commission file no. 333-6690).4.7
    
    Fourth Amending Agreement, dated as of April 27, 2006, amending the Credit Agreement dated as
of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC,
Credit Suisse First Boston Canada and the lenders party thereto, and Bank of America, N.A., as
administrative agent (incorporated by reference to Exhibit 10.8 of Quebecor Medias
Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No.
333-147551).4.8
    
    Fifth Amending Agreement, dated as of October 31, 2007, amending the Credit Agreement dated as
of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC,
Credit Suisse First Boston Canada and the lenders party thereto, and Bank of America, N.A., as
administrative agent (incorporated by reference to Exhibit 10.9 of Quebecor Medias
Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No.
333-147551).4.9
    
    Form of Amended and Restated Credit Agreement (the Credit Agreement) entered into as of
November 28, 2000, (as amended by a First Amending Agreement dated as of January 5, 2001, a
Second Amending Agreement dated as of June 29, 2001, a Third Amending Agreement dated December
12, 2001 and accepted by the Lenders as of December 21, 2001, a Fourth Amending Agreement dated
as of December 23, 2002, a Fifth Amending Agreement dated as of March 24, 2003, a Sixth
Amending Agreement dated as of October 8, 2003, a Seventh Amending Agreement dated as of
November 19,
 183




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ExhibitNumber
    
    Description2004, an Eighth Amending Agreement dated as of March 6, 2008 and a Ninth Amending
Agreement dated as of April 7, 2008) entered into as of November 28, 2000, as amended as of
April 7, 2008, by and among Videotron Ltd., Royal Bank of Canada, as administrative agent, and
the financial institutions signatory thereto (incorporated by reference to Exhibit 4.1 of
Videotron Ltds Annual Report on Form 20-F for the year December 31, 2008, filed on March 6,
2009, Commission file No. 033-51000).4.10
    
    Seventh Amending Agreement, dated as of November 19, 2004, to the Credit Agreement dated as of
November 28, 2000, among Videotron Ltd., Royal Bank of Canada, as administrative agent, and the
financial institutions signatory thereto and acknowledged by Le SuperClub Videotron ltée,
Groupe de Divertissement SuperClub inc., Videotron (1998) ltée, CF Cable TV Inc., Videotron
(Regional) Ltd., 9139-3256 Quebec inc., Videotron TVN inc., Les Propriétés SuperClub inc. and
SuperClub Videotron Canada inc., as guarantors (the Guarantors), and by Quebecor Media Inc.
(incorporated by reference to Exhibit 10.2 to Videotrons Registration Statement on Form F-4
dated January 18, 2005, Registration Statement No. 333-121032).4.11
    
    Eighth Amending Agreement, dated as of March 6, 2008, to the Credit Agreement, dated as of
November 28, 2000, as amended by the First Amending Agreement, dated as of January 5, 2001, a
Second Amending Agreement, dated as of June 29, 2001, a Third Amending Agreement, dated as of
December 12, 2001, a Fourth Amending Agreement, dated as of December 23, 2002, a Fifth Amending
Agreement, dated as of March 24, 2003, a Sixth Amending Agreement dated as of October 8, 2003
and a Seventh Amending Agreement, dated as of November 19, 2004 among Videotron Ltd., Royal
Bank of Canada, as administrative agent, and the financial institutions signatory thereto and
acknowledged by Le SuperClub-Videotron ltée, Groupe de Divertissement SuperClub inc., CF Cable
TV Inc., Les Propriétés SuperClub inc. and SuperClub Videotron Canada inc., as guarantors, and
by Quebecor Media Inc. (incorporated by reference to Exhibit 4.3 of Videotron Ltds Annual
Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No.
033-51000).4.12
    
    Ninth Amending Agreement, dated as of April 7, 2008, to the Credit Agreement, dated as of
November 28, 2000, as amended by the First Amending Agreement, dated as of January 5, 2001, a
Second Amending Agreement, dated as of June 29, 2001, a Third Amending Agreement, dated as of
December 12, 2001, a Fourth Amending Agreement, dated as of December 23, 2002, a Fifth Amending
Agreement, dated as of March 24, 2003, a Sixth Amending Agreement dated as of October 8, 2003,
a Seventh Amending Agreement dated as of November 19, 2004 and an Eighth Amending Agreement
dated as of March 6, 2008, among Videotron Ltd., Royal Bank of Canada, as administrative agent,
and the financial institutions signatory thereto and acknowledged by Le SuperClub-Videotron
ltée, Groupe de Divertissement SuperClub inc., CF Cable TV Inc., Les Propriétés SuperClub inc.
and SuperClub Videotron Canada inc., as guarantors, and by Quebecor Media Inc. (incorporated by
reference to Exhibit 4.2 of Videotron Ltds Annual Report on Form 20-F for the year December
31, 2008, filed on March 6, 2009, Commission file No. 033-51000).4.13
    
    Form of Guarantee under the Videotron Ltd. Credit Agreement (incorporated by reference to
Schedule D of Exhibit 10.5 to Quebecor Medias Registration Statement on Form F-4 dated
September 5, 2001, Registration Statement No. 333-13792).4.14
    
    Form of Share Pledge of the shares of Videotron ltée and of the guarantors of the Videotron
ltée Credit Agreement (incorporated by reference to Schedule E of Exhibit 10.5 to Videotrons
Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No.
333-13792).4.17
    
    Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, between 4411986
Canada Inc., Osprey Media LP, Osprey Media Income Fund, as borrowers, the financial
institutions party thereto, as Credit Facility lenders, the Canadian Imperial Bank of Commerce,
as syndication agent, Bank of Montreal, as documentation agent, and the Bank of Nova Scotia, as
administrative agent, including the First Amendment, made as of January 1, 2008, to the Fourth
Amended and Restated Credit Agreement (incorporated by reference to Exhibit 4.16 of Quebecor
Medias Annual Report on Form 20-F for fiscal year ended December 31, 2007, filed on March 27,
2008).
 184




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ExhibitNumber
    
    Description4.18
    
    Second Amendment, dated as of August 31, 2008, to the Fourth Amended and Restated Credit
Agreement, dated as of September 28, 2007, between 4411986 Canada Inc., Osprey Media LP, Osprey
Media Income Fund, as borrowers, the financial institutions party thereto, as Credit Facility
lenders, the Canadian Imperial Bank of Commerce, as syndication agent, Bank of Montreal, as
documentation agent, and the Bank of Nova Scotia, as administrative agent.7.1
    
    Statement regarding calculation of ratio of earnings to fixed charges.8.1
    
    Subsidiaries of Quebecor Media Inc.11.1
    
    Code of Ethics.12.1
    
    Certification of Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor Media
Inc., pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.12.2
    
    Certification of Louis Morin, Vice President and Chief Financial Officer of Quebecor Media
Inc., pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.13.1
    
    Certification of Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor Media
Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.13.2
    
    Certification of Louis Morin, Vice President and Chief Financial Officer of Quebecor Media
Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.99.1
    
    Letter from KPMG LLP
 185




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##### Table of Contents



SIGNATURE
  QUEBECOR MEDIA INC.By:
    /s/ Louis MorinName:
    Louis MorinTitle:
    Vice President and Chief Financial Officer  186




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##### Table of Contents



INDEX TO HISTORICAL FINANCIAL STATEMENTS
 PageAnnual Financial Information as of December 31, 2008 and 2007 and
for the Years Ended December 31, 2008, 2007 and 2006Report of Independent Registered Public Accounting Firm
    
    
    F-2Report of Independent Registered Public Accounting Firm
    
    
    F-3Consolidated Statements of Income for the years ended December 31,
2008, 2007 and 2006
    
    
    F-4Consolidated Statements of Comprehensive Income for the years ended December 31, 2008, 2007 and 2006
    
    
    F-5Consolidated Statements of Shareholders Equity for the years ended December 31, 2008, 2007 and 2006
    
    
    F-6Consolidated Statements of Cash Flows for the years ended December
31, 2008, 2007 and 2006
    
    
    F-7Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    F-9Segmented Information
    
    
    F-11Notes to Consolidated Financial Statements for the years ended
December 31, 2008, 2007 and 2006
    
    
    F-14
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 to the Board of Directors and to the shareholders of Quebecor Media Inc.
         F-2




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
to the Board of Directors and to the shareholder of Quebecor Media Inc.
     
     F-3




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Consolidated statements of income
 
 2008
    
    
    2007
    
    
    2006Revenues
    
    $
    3,730.1
    
    
    $
    3,365.9
    
    
    $
    2,998.6Cost of sales and selling and administrative expenses
    
    
    2,610.6
    
    
    
    2,402.0
    
    
    
    2,199.0Amortization
    
    
    318.5
    
    
    
    290.4
    
    
    
    260.7Financial expenses (note 2)
    
    
    276.0
    
    
    
    230.1
    
    
    
    212.9Loss on valuation and translation of financial
instruments (note 3)
    
    
    3.7
    
    
    
    9.9
    
    
    
    11.7Restructuring of operations, impairment of assets
and other special items (note 4)
    
    
    54.6
    
    
    
    11.2
    
    
    
    16.7Loss on debt refinancing (note 5)
    
    
    
    
    
    
    1.0
    
    
    
    342.6Impairment of goodwill and intangible assets (note 6)
    
    
    671.2
    
    
    
    5.4
    
    
    
    180.0(Loss) income before income taxes and
non-controlling interest
    
    
    (204.5
    )
    
    
    415.9
    
    
    
    (225.0
    )Income taxes (note 8)
    
    
    154.7
    
    
    
    74.8
    
    
    
    (53.7
    )(Loss) income before non-controlling interest
    
    
    (359.2
    )
    
    
    341.1
    
    
    
    (171.3
    )Non-controlling interest
    
    
    (23.1
    )
    
    
    (19.2
    )
    
    
    (0.4
    )(Loss) Income from continuing operations
    
    
    (382.3
    )
    
    
    321.9
    
    
    
    (171.7
    )Income from discontinued operations
    
    
    2.3
    
    
    
    5.2
    
    
    
    2.0Net (loss) income
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )
  F-4




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Consolidated statements of comprehensive income
 
 2008
    
    
    2007
    
    
    2006Net (loss) income
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )Other comprehensive (loss) income, net of income taxes:Unrealized gain (loss) on translation of net investments in
foreign operations
    
    
    5.0
    
    
    
    (2.0
    )
    
    
    1.2(Loss) gain on valuation of derivative financial
instruments, including income tax expense of $47.9 million
in 2008
(including income tax recovery of $11.5 million in 2007)
    
    
    (64.6
    )
    
    
    48.0
    
    
    
    (59.6
    )
    
    
    46.0
    
    
    
    1.2Comprehensive (loss) income
    
    $
    (439.6
    )
    
    $
    373.1
    
    
    $
    (168.5
    )
  F-5




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Consolidated statements of shareholders equity
 
 Accumulatedothercomprehensive
    
    
    TotalCapital
    
    
    Contributed
    
    
    
    
    
    
    income (loss)
    
    
    shareholdersStock
    
    
    Surplus
    
    
    Deficit
    
    
    (note 21)
    
    
    equityBalance as of December 31, 2005
    
    $
    1,773.7
    
    
    $
    3,216.8
    
    
    $
    (2,538.1
    )
    
    
    $  (2.3
    )
    
    $
    2,450.1Net loss
    
    
    
    
    
    
    
    
    
    
    (169.7
    )
    
    
    
    
    
    
    (169.7
    )Dividends
    
    
    
    
    
    
    
    
    
    
    (23.7
    )
    
    
    
    
    
    
    (23.7
    )Reduction in paid-up capital
    
    
    (21.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21.3
    )Related party transaction (note 25)
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Other comprehensive income, net of
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    1.2Balance as of December 31, 2006
    
    
    1,752.4
    
    
    
    3,217.2
    
    
    
    (2,731.5
    )
    
    
    (1.1
    )
    
    
    2,237.0Cumulative effect of changes in
accounting policies
    
    
    
    
    
    
    
    
    
    
    (14.3
    )
    
    
    (35.5
    )
    
    
    (49.8
    )Net income
    
    
    
    
    
    
    
    
    
    
    327.1
    
    
    
    
    
    
    
    327.1Dividends
    
    
    
    
    
    
    
    
    
    
    (110.0
    )
    
    
    
    
    
    
    (110.0
    )Other comprehensive income, net of
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46.0
    
    
    
    46.0Balance as of December 31, 2007
    
    
    1,752.4
    
    
    
    3,217.2
    
    
    
    (2,528.7
    )
    
    
    9.4
    
    
    
    2,450.3Net (loss) income
    
    
    
    
    
    
    
    
    
    
    (380.0
    )
    
    
    
    
    
    
    (380.0
    )Dividends
    
    
    
    
    
    
    
    
    
    
    (65.0
    )
    
    
    
    
    
    
    (65.0
    )Related party transaction (note 25)
    
    
    
    
    
    
    (2.7
    )
    
    
    
    
    
    
    
    
    
    
    (2.7
    )Other comprehensive loss, net of
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59.6
    )
    
    
    (59.6
    )Balance as of December 31, 2008
    
    $
    1,752.4
    
    
    $
    3,214.5
    
    
    $
    (2,973.7
    )
    
    
    $ (50.2
    )
    
    $
    1,943.0
  F-6




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Consolidated statements of cash flows
 
 2008
    
    
    2007
    
    
    2006Cash flows related to operating activities:(Loss) Income from continuing operations
    
    
    $ (382.3
    )
    
    $
    321.9
    
    
    $
    (171.7
    )Adjustments for:Amortization of property, plant and equipment
    
    
    294.2
    
    
    
    275.4
    
    
    
    251.2Amortization of intangible assets and deferred charges
    
    
    24.3
    
    
    
    15.0
    
    
    
    9.5Impairment of property, plant and equipment (note 4(a))
    
    
    19.1
    
    
    
    
    
    
    
    Impairment of goodwill and intangible assets (note 6)
    
    
    671.2
    
    
    
    5.4
    
    
    
    180.0Loss on valuation and translation of financial
instruments (note 3)
    
    
    3.7
    
    
    
    9.9
    
    
    
    11.7Loss on debt refinancing (note 5)
    
    
    
    
    
    
    1.0
    
    
    
    342.6Repayment of accrued interest on Senior Discount Notes
    
    
    
    
    
    
    
    
    
    
    (197.3
    )Amortization of financing costs and long-term debt discount (note 2)
    
    
    9.3
    
    
    
    4.8
    
    
    
    7.3Future income taxes (note 8)
    
    
    142.0
    
    
    
    63.5
    
    
    
    (59.1
    )Non-controlling interest
    
    
    23.1
    
    
    
    19.2
    
    
    
    0.4Other
    
    
    (0.3
    )
    
    
    3.3
    
    
    
    (0.1
    )804.3
    
    
    
    719.4
    
    
    
    374.5Net change in non-cash balances related to operating activities
    
    
    (18.3
    )
    
    
    32.7
    
    
    
    (22.2
    )Cash flows provided by continuing operating activities
    
    
    786.0
    
    
    
    752.1
    
    
    
    352.3Cash flows provided by discontinued operating activities
    
    
    
    
    
    
    1.4
    
    
    
    2.1Cash flows provided by operating activities
    
    
    786.0
    
    
    
    753.5
    
    
    
    354.4Cash flows related to investing activities:Acquisition of property, plant and equipment
    
    
    (527.3
    )
    
    
    (468.7
    )
    
    
    (435.5
    )Business acquisitions, net of cash and cash equivalents (note 7)
    
    
    (146.7
    )
    
    
    (438.6
    )
    
    
    (10.5
    )Acquisition of intangible assets (note 12)
    
    
    (567.1
    )
    
    
    
    
    
    
    Net decrease in temporary investments
    
    
    0.1
    
    
    
    1.2
    
    
    
    39.2Acquisition of tax deductions from parent company (note 25)
    
    
    (18.4
    )
    
    
    (14.9
    )
    
    
    (16.1
    )Decrease in advances receivable from parent company
    
    
    
    
    
    
    
    
    
    
    15.9Other
    
    
    2.0
    
    
    
    13.1
    
    
    
    6.5Cash flows used in investing activities
    
    
    (1,257.4
    )
    
    
    (907.9
    )
    
    
    (400.5
    )Sub-total, balance carried forward
    
    
    $ (471.4
    )
    
    $
    (154.4
    )
    
    $
    (46.1
    )
 F-7




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Consolidated statements of cash flows ( )
 
 2008
    
    
    2007
    
    
    2006Sub-total, balance brought forward
    
    $
    (471.4
    )
    
    $
    (154.4
    )
    
    $
    (46.1
    )Cash flows related to financing activities:Net (decrease) increase in bank indebtedness
    
    
    (4.8
    )
    
    
    (6.6
    )
    
    
    7.9Net borrowings (repayments) under revolving and bridge bank facilities
    
    
    98.4
    
    
    
    (56.7
    )
    
    
    38.4Issuance of long-term debt, net of financing fees
    
    
    463.8
    
    
    
    756.1
    
    
    
    1,225.8Repayments of long-term debt and unwinding of hedging contracts
    
    
    (25.7
    )
    
    
    (301.3
    )
    
    
    (1,201.2
    )Repayment of the Additional Amount payable (note 15)
    
    
    
    
    
    
    (127.2
    )
    
    
    Dividends and reduction of Common Shares paid-up capital
    
    
    (65.0
    )
    
    
    (110.0
    )
    
    
    (105.0
    )Dividends paid to non-controlling shareholders
    
    
    (3.0
    )
    
    
    (4.0
    )
    
    
    (4.5
    )Net decrease in prepayments under cross-currency
swap agreements
    
    
    
    
    
    
    
    
    
    
    21.6Other
    
    
    2.7
    
    
    
    (3.1
    )
    
    
    (0.6
    )Cash flow provided by (used in) financing activities
    
    
    466.4
    
    
    
    147.2
    
    
    
    (17.6
    )Net decrease in cash and cash equivalents
    
    
    (5.0
    )
    
    
    (7.2
    )
    
    
    (63.7
    )Effect of exchange rate changes on cash and cash equivalents
denominated in foreign currencies
    
    
    1.4
    
    
    
    (0.8
    )
    
    
    0.4Cash and cash equivalents at beginning of year
    
    
    26.1
    
    
    
    34.1
    
    
    
    97.4Cash and cash equivalents at end of year
    
    $
    22.5
    
    
    $
    26.1
    
    
    $
    34.1Cash and cash equivalents consist of:Cash
    
    $
    9.9
    
    
    $
    6.8
    
    
    $
    13.9Cash equivalents
    
    
    12.6
    
    
    
    19.3
    
    
    
    20.2$
    22.5
    
    
    $
    26.1
    
    
    $
    34.1Additional information on the consolidated statements of cash flows:Changes in non-cash balances related to operations
(net of effect of business acquisitions and disposals):Accounts receivable
    
    $
    18.3
    
    
    $
    (41.5
    )
    
    $
    (14.5
    )Inventories and investments in televisual products and movies
    
    
    (26.0
    )
    
    
    (6.4
    )
    
    
    (2.7
    )Accounts payable and accrued charges
    
    
    87.8
    
    
    
    35.5
    
    
    
    (15.8
    )Stock-based compensation
    
    
    (100.0
    )
    
    
    54.1
    
    
    
    24.4Other
    
    
    1.6
    
    
    
    (9.0
    )
    
    
    (13.6
    )$
    (18.3
    )
    
    $
    32.7
    
    
    $
    (22.2
    )Cash interest payments
    
    $
    282.0
    
    
    $
    243.3
    
    
    $
    446.3Cash income taxes payments (net of refunds)
    
    
    24.4
    
    
    
    (1.0
    )
    
    
    7.0
  F-8




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Consolidated balance sheets
 
 2008
    
    
    2007AssetsCurrent Assets:Cash and cash equivalents
    
    $
    22.5
    
    
    $
    26.1Accounts receivable (note 9)
    
    
    483.9
    
    
    
    496.2Income taxes
    
    
    9.4
    
    
    
    10.5Amounts receivable from parent company and companies under
common control
    
    
    5.3
    
    
    
    1.9Inventories and investments in televisual products and movies (note 10)
    
    
    189.3
    
    
    
    169.0Prepaid expenses
    
    
    31.0
    
    
    
    32.7Future income taxes (note 8)
    
    
    102.8
    
    
    
    153.6844.2
    
    
    
    890.0Property, plant and equipment (note 11)
    
    
    2,334.7
    
    
    
    2,110.2Future income taxes (note 8)
    
    
    12.3
    
    
    
    57.4Derivative financial instruments (note 24)
    
    
    317.9
    
    
    
    0.2Intangible assets (note 12)
    
    
    858.6
    
    
    
    334.4Other assets (note 13)
    
    
    111.8
    
    
    
    87.4Goodwill (note 14)
    
    
    3,516.7
    
    
    
    4,081.3$
    7,996.2
    
    
    $
    7,560.9
 F-9




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  consolidated balance sheets ( )
 
 2008
    
    
    2007Liabilities and shareholders equityCurrent liabilities:Bank indebtedness
    
    $
    11.5
    
    
    $
    16.3Accounts payable and accrued charges
    
    
    793.7
    
    
    
    756.0Deferred revenue
    
    
    224.0
    
    
    
    202.7Income taxes
    
    
    9.8
    
    
    
    19.2Current portion of long-term debt (note 16)
    
    
    37.1
    
    
    
    24.71,076.1
    
    
    
    1,018.9Long-term debt (note 16)
    
    
    4,298.7
    
    
    
    3,002.8Derivative financial instruments (note 24)
    
    
    117.3
    
    
    
    538.7Other liabilities (note 17)
    
    
    97.7
    
    
    
    103.5Future income taxes (note 8)
    
    
    357.4
    
    
    
    292.5Non-controlling interest (note 18)
    
    
    106.0
    
    
    
    154.2Shareholders equity:Capital stock (note 19)
    
    
    1,752.4
    
    
    
    1,752.4Contributed surplus (note 25)
    
    
    3,214.5
    
    
    
    3,217.2Deficit
    
    
    (2,973.7
    )
    
    
    (2,528.7
    )Accumulated other comprehensive (loss) income (note 21)
    
    
    (50.2
    )
    
    
    9.41,943.0
    
    
    
    2,450.3Commitments and contingencies (note 22)Guarantees (note 23)Subsequent event (note 29)$
    7,996.2
    
    
    $
    7,560.9
  F-10




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Segmented information
 2008
    
    
    2007
    
    
    2006Revenues:Cable
    
    $
    1,804.2
    
    
    $
    1,552.6
    
    
    $
    1,309.5Newspapers
    
    
    1,181.4
    
    
    
    1,073.9
    
    
    
    966.0Broadcasting
    
    
    436.7
    
    
    
    415.5
    
    
    
    393.3Leisure and Entertainment
    
    
    301.9
    
    
    
    329.8
    
    
    
    315.8Interactive Technologies and Communications
    
    
    89.6
    
    
    
    82.0
    
    
    
    73.9Inter-segment
    
    
    (83.7
    )
    
    
    (87.9
    )
    
    
    (59.9
    )$
    3,730.1
    
    
    $
    3,365.9
    
    
    $
    2,998.6
 
 F-11




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Segmented information
 2008
    
    
    2007
    
    
    2006Income from continuing operations before amortization,
financial expenses, loss on valuation and translation of
financial instruments, restructuring of operations, impairment
of assets and other special items, loss on debt refinancing,
impairment of goodwill and intangible assets, income taxes and
non-controlling interest:Cable
    
    $
    797.2
    
    
    $
    642.7
    
    
    $
    512.5Newspapers
    
    
    227.1
    
    
    
    232.8
    
    
    
    217.7Broadcasting
    
    
    66.3
    
    
    
    59.4
    
    
    
    42.1Leisure and Entertainment
    
    
    20.5
    
    
    
    27.0
    
    
    
    19.3Interactive Technologies and Communications
    
    
    5.1
    
    
    
    2.8
    
    
    
    7.5Head office
    
    
    3.3
    
    
    
    (0.8
    )
    
    
    0.5$
    1,119.5
    
    
    $
    963.9
    
    
    $
    799.6
 2008
    
    
    2007
    
    
    2006Amortization:Cable
    
    $
    227.6
    
    
    $
    219.4
    
    
    $
    198.4Newspapers
    
    
    62.1
    
    
    
    46.3
    
    
    
    37.6Broadcasting
    
    
    14.4
    
    
    
    13.2
    
    
    
    14.3Leisure and Entertainment
    
    
    9.6
    
    
    
    7.9
    
    
    
    7.2Interactive Technologies and Communications
    
    
    4.3
    
    
    
    3.0
    
    
    
    2.3Head Office
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.9$
    318.5
    
    
    $
    290.4
    
    
    $
    260.7
 2008
    
    
    2007
    
    
    2006Additions to property, plant and equipment:Cable
    
    $
    404.4
    
    
    $
    330.1
    
    
    $
    302.6Newspapers
    
    
    86.8
    
    
    
    116.0
    
    
    
    118.2Broadcasting
    
    
    21.9
    
    
    
    16.2
    
    
    
    9.0Leisure and Entertainment
    
    
    9.1
    
    
    
    2.9
    
    
    
    3.4Interactive Technologies and Communications
    
    
    3.6
    
    
    
    3.3
    
    
    
    1.8Head Office
    
    
    1.5
    
    
    
    0.2
    
    
    
    0.5$
    527.3
    
    
    $
    468.7
    
    
    $
    435.5
 F-12




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Segmented information
 2008
    
    
    2007Assets:Cable
    
    $
    5,275.9
    
    
    $
    4,460.1Newspapers
    
    
    1,788.4
    
    
    
    2,426.8Broadcasting
    
    
    439.1
    
    
    
    407.9Leisure and Entertainment
    
    
    189.0
    
    
    
    176.9Interactive Technologies and Communications
    
    
    105.1
    
    
    
    85.9Head Office
    
    
    198.7
    
    
    
    3.3$
    7,996.2
    
    
    $
    7,560.9
 F-13




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Notes to consolidated
financial statements
 
  1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:The consolidated financial statements have been prepared in accordance with Canadian generally
accepted accounting principles (GAAP). The significant differences between generally accepted
accounting principles in Canada and in the United States are described in note 27.
 (a)
    
    Basis of presentation:The consolidated financial statements include the accounts of the Company and all its
subsidiaries. Intercompany transactions and balances are eliminated on consolidation.Certain comparative figures for the years 2007 and 2006 have been reclassified to conform to
the presentation adopted for the year ended December 31, 2008.(b)
    
    Changes in accounting policies:On January 1, 2008, the Company adopted Canadian Institute of Chartered Accountants (CICA)
Section 3031, Inventories, which provides more extensive guidance on the recognition and
measurement of inventories and related disclosures. The adoption of this new section had no
impact on the consolidated financial statements; the new accounting policy is described in
note 1(l).On January 1, 2008, the Company adopted the CICA Section 1535, Capital Disclosures, Section
3862, Financial Instruments  Disclosures, and Section 3863, Financial Instruments 
Presentation. These sections relate to disclosures and presentation of information and did
not affect the consolidated financial results. All the disclosure requirements related to
these new accounting standards are presented in note 24.(c)
    
    Changes in accounting estimates:The Company estimates the fair value of its derivative financial instruments using a
discounted cash flow valuation technique, since no quoted market prices exist for such
instruments. In the second quarter of 2008, the Company made some amendments to the
technique used in measuring the fair value of its derivatives in a liability position and in
an asset position. These amendments change the way the Company factors counterparty and its
own non-performance risk in its valuation technique, considering market development and
recent accounting guidelines. The cumulative impact of these changes as of December 31,
2008, is a decrease of the fair value of these derivatives by $22.7 million, a decrease of
the loss on valuation and translation of financial instruments by $4.9 million, and an
increase of other comprehensive loss by $27.6 million (before income taxes).(d)
    
    Foreign currency translation:Financial statements of self-sustaining foreign operations are translated using the rate in
effect at the balance sheet date for asset and liability items, and using the average
exchange rates during the year for revenues and expenses. Adjustments arising from this
translation are recorded in other comprehensive income and are reclassified in income only
when a reduction in the investment in these foreign operations is realized.Foreign currency transactions are translated using the temporal method. Translation gains
and losses are included in financial expenses or in gain or loss on valuation and
translation of financial instruments, unless hedge accounting is used.
 F-14




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (e)
    
    Use of estimates:The preparation of consolidated financial statements in accordance with Canadian GAAP
requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, related amounts of revenues and expenses, and disclosure of
contingent assets and liabilities. Significant areas requiring the use of management
estimates relate to the determination of pension and postretirement benefit costs, key
economic assumptions used in determining the allowance for doubtful accounts, the provision
for obsolescence, the allowance for sales returns, legal contingencies, the costs for
restructuring of operations, the useful life of assets for amortization and evaluation of
expected future cash flows to be generated by those assets, the determination of the implied
fair value of goodwill and the fair value of assets and liabilities for business purchase
price allocation purposes and goodwill impairment test purposes, fair value of long-lived
assets for purpose of the impairment of long-lived assets, fair value of broadcasting
licences and mastheads for impairment test purposes, provisions for income taxes and
determination of future income tax assets and liabilities, and the determination of fair
value of financial instruments and derivative instruments. Actual results could differ from
these estimates.(f)
    
    Impairment of long-lived assets:The Company reviews long-lived assets with definite useful lives whenever events or changes
in circumstances indicate that the carrying amount of such assets may not be recoverable.
An impairment loss is recognized when the carrying amount of an asset or a group of assets
held for use exceeds the sum of the undiscounted cash flows expected from its use and
eventual disposition. Measurement of an impairment loss is based on the amount by which the
carrying amount of a group of assets exceeds its fair value. Fair value is determined using
quoted market prices, when available, or using accepted valuation techniques such as the
discounted future cash flows method.(g)
    
    Revenue recognition:The Company recognizes its operating revenues when the following criteria are met:
 
    
    persuasive evidence of an arrangement exists;
    
    delivery has occurred or services have been rendered;
    
    the sellers price to the buyer is fixed or determinable; and
    
    the collection of the sale is reasonably assured.
 The portion of revenue that is unearned is recorded under Deferred revenue when customers
are invoiced.Revenue recognition policies for each of the Companys main segments are as follows:Cable segmentThe Cable segment provides services under arrangements with multiple deliverables, for which
there are two separate accounting units: one for subscriber services (cable television,
Internet, IP telephony or wireless telephone, including connecting fees) and the other for
equipment sales to subscribers. Components of multiple deliverable arrangements are
separately accounted for, provided the delivered elements have stand-alone value to the
customer and the fair value of any undelivered elements can be objectively and reliably
determined.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (g)
    
    Revenue recognition (continued):Cable segment (continued)Cable connection fee revenues of the Cable segment are deferred and recognized as revenues
over the estimated average period that subscribers are expected to remain connected to the
network. The incremental and direct costs related to cable connection fees, in an amount not
exceeding the revenue, are deferred and recognized as an operating expense over the same
period. The excess of these costs over the related revenues is recognized immediately in
income. Operating revenues from cable and other services, such as Internet access, IP
telephony and wireless telephone, are recognized when services are rendered. Revenues from
equipment sales to subscribers and their costs are recognized in income when the equipment
is delivered and, in the case of wireless phones, revenues from equipment sales are
recognized when the phone is delivered and activated. Revenues from video rentals are
recorded as revenue when services are provided. Promotion offers related to subscriber
services are accounted for as a reduction in the related service revenue over the period of
performance of the service contract. Promotion offers related to equipment, including
wireless telephones, are accounted for as a reduction in the related equipment sales when
the equipment is delivered. Operating revenues related to service contracts are recognized
in income over the life of the specific contracts on a straight-line basis over the period
in which the services are provided.Newspapers segmentRevenues of the Newspapers segment, derived from circulation and advertising are recognized
when the publication is delivered, net of provisions for estimated returns based on the
segments historical rate of returns. Revenues from the distribution of publications and
products are recognized upon delivery, net of provisions for estimated returns.Broadcasting segmentRevenues of the Broadcasting segment derived from the sale of advertising airtime are
recognized when the advertisement has been broadcast. Revenues derived from subscriptions to
specialty television channels are recognized on a monthly basis at the time service is
rendered. Revenues derived from circulation and advertising from publishing activities are
recognized when the publication is delivered, net of provisions for estimated returns based
on the segments historical rate of returns.Revenues derived from the distribution of televisual products and movies and from television
program rights are recognized when the customer can begin exploitation, exhibition or sale,
and the licence period of the arrangement has begun.Theatrical revenues are recognized over the period of presentation and are based on a
percentage of revenues generated by movie theatres. Revenues generated from the distribution
of DVDs are recognized at the time of their delivery, less a provision for estimated
returns, or are accounted for based on a percentage of retail sales.Leisure and Entertainment segmentRevenues derived from retail stores, book publishing and distribution activities are
recognized on delivery of the products, net of provisions for estimated returns based on the
segments historical rate of returns.
 (h)
    
    Barter transactions:In the normal course of operations, the Newspapers and the Broadcasting segments offer
advertising in exchange for goods and services. Revenues thus earned and expenses incurred
are accounted for on the basis of the fair value of the goods and services obtained.For the year ended December 31, 2008, the Company recorded $19.2 million of barter
advertising ($19.0 million in 2007 and $19.5 million in 2006).
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (i)
    
    Financial instruments:Classification, recognition and measurement:Effective January 1, 2007, financial instruments must be classified as held-for-trading,
available-for-sale, held-to-maturity, loans and receivables, or other financial liabilities,
and measurement in subsequent periods depends on their classification. The Company has
classified its cash and cash equivalents and its bank indebtedness as held-for-trading.
Accounts receivable, amounts receivable from parent company and companies under common
control, loans and other long-term receivables included in other assets have been classified
as loans and receivables. All portfolio investments included in other assets have been
classified as available-for-sale. All of the Companys financial liabilities have been
classified as other liabilities.Financial instruments held-for-trading are measured at fair value with changes recognized in
income as gain or loss on valuation and translation of financial instruments.
Available-for-sale portfolio investments are measured at fair value or at cost in the case
of equity investments that do not have a quoted market price in an active market. Changes in
fair value are recorded in other comprehensive income. Financial assets classified as loans
and receivables and other financial liabilities are measured at amortized cost, using the
effective interest rate method of amortization.Financing fees related to long-term financing are capitalized in reduction of long-term debt
and amortized using the effective interest rate method.Derivative financial instruments and hedge accounting:The Company uses various derivative financial instruments to manage its exposure to
fluctuations in foreign currency exchange rates and interest rates. The Company does not
hold or use any derivative financial instruments for trading purposes. Under hedge
accounting, the Company documents all hedging relationships between hedging items and hedged
items, as well as its strategy for using hedges and its risk-management objective. It also
designates its derivative financial instruments as either fair value hedges or cash flow
hedges. The Company assesses the effectiveness of derivative financial instruments when the
hedge is put in place and on an ongoing basis.The Company enters into the following types of derivative financial instruments:
 
    
    The Company uses foreign exchange forward contracts to hedge the foreign currency
rate exposure on (i) anticipated equipment or inventory purchases in a foreign currency
and (ii) principal payments on long-term debt in a foreign currency. These latest
foreign exchange forward contracts are designated as cash flow hedges.
    
    The Company uses cross-currency interest rate swaps to hedge (i) the foreign
currency rate exposure on interest and principal payments on foreign currency
denominated debt and/or (ii) the fair value exposure on certain debt resulting from
changes in interest rates. The cross-currency interest rate swaps that set all future
interest and principal payments on U.S.-denominated debt in fixed Canadian dollars are
designated as cash flow hedges. The Companys cross-currency interest rate swaps that
set all future interest and principal payments on U.S.-denominated debt in fixed
Canadian dollars, in addition to converting the interest rate from a fixed rate to a
floating rate, or converting a floating rate index to another floating rate index, are
designated as fair value hedges.
    
    The Company uses interest rate swaps to manage the fair value exposure on certain debt
resulting from changes in interest rates. These swap agreements require a periodic exchange of
payments without the exchange of the notional principal amount on which the payments are based. These interest rate swaps are designated
as fair value hedges when they convert the interest rate from a fixed rate to a
floating rate, or as cash flow hedges when they convert the interest rate from a
floating rate to a fixed rate.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (i)
    
    Financial instruments (continued):Derivative financial instruments and hedge accounting (continued):Effective January 1, 2007, under hedge accounting, the Company applies the following
accounting policies:
 
    
    For derivative financial instruments designated as fair value hedges, changes in the
fair value of the hedging derivative recorded in income are substantially offset by
changes in the fair value of the hedged item to the extent that the hedging
relationship is effective. When a fair value hedge is discontinued, the carrying value
of the hedged item is no longer adjusted and the cumulative fair value adjustments to
the carrying value of the hedged item are amortized to income over the remaining term
of the original hedging relationship.
    
    For derivative financial instruments designated as cash flow hedges, the effective
portion of a hedge is reported in other comprehensive income until it is recognized in
income during the same period in which the hedged item affects income, while the
ineffective portion is immediately recognized in the consolidated statements of income.
When a cash flow hedge is discontinued, the amounts previously recognized in
accumulated other comprehensive income are reclassified to income when the variability
in the cash flows of the hedged item affects income.
 Prior to 2007, under hedge accounting, the Company recorded its hedges relationships as
follows:
 
    
    For purchases of property, plant and equipment or inventories hedged by foreign
exchange forward contracts, foreign exchange translation gains and losses were
recognized as an adjustment to the cost of the hedged item when the transaction was
recorded.
 
    
    For long-term debt in foreign currency hedged by foreign exchange forward contracts
and cross-currency interest rate swaps, foreign exchange translation gains and losses
on long-term debt were offset by corresponding gains and losses on derivative
instruments recorded under other assets or other liabilities. The fees on forward
foreign exchange contracts and on cross-currency swaps were recognized as an adjustment
to interest expenses over the term of the agreement.
 
    
    For long-term debt hedged by interest rate swaps, interest expense on the debt was
adjusted to include payments made or received under interest rate swaps.
 
    
    In addition, realized and unrealized gains or losses associated with derivative
financial instruments that were terminated or ceased to be effective prior to maturity,
for hedge accounting purposes were deferred under other current or non-current assets
or liabilities on the balance sheet and recognized in income in the period in which the
underlying hedged transaction was recognized. In the event a designated hedged item
was sold, extinguished or matured prior to the termination of the related derivative
financial instrument, any realized or unrealized gain or loss on such derivative
financial instrument was recognized in income.
 Any change in the fair value of these derivative financial instruments recorded in income is
included in gain or loss on valuation and translation of financial instruments. Interest
expense on hedged long-term debt is reported at the hedged interest and foreign currency
rates.Derivative financial instruments that are ineffective or that are not designated as hedges,
including derivatives that are embedded in financial or non-financial contracts that are not
closely related to the host contracts, are reported on a mark-to-market basis in the
consolidated balance sheets. Any change in the fair value of these derivative financial
instruments is recorded in the consolidated statements of income as gain or loss on
valuation and translation of financial instruments.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (j)
    
    Cash and cash equivalents:Cash and cash equivalents include highly liquid investments purchased three months or less
from maturity and are recorded at fair value. As of December 31, 2008, these highly liquid
investments consisted mainly of Bankers acceptances.(k)
    
    Tax credits and government assistance:The Broadcasting and the Leisure and Entertainment segments have access to several
government programs designed to support production and distribution of televisual products
and movies, as well as music products, magazine and book publishing in Canada. The financial
assistance for production is accounted for as a reduction in expenses. The financial
assistance for broadcast rights is applied against investments in televisual products or
used directly to reduce operating expenses during the year. The financial assistance for
magazine and book publishing is accounted for in revenues when the conditions of the
government programs are met.The Interactive Technologies and Communications and the Leisure and Entertainment segments
receive tax credits mainly related to their research and development activities and
publishing activities. These tax credits are accounted for as a reduction in related costs,
whether they are capitalized or expensed, in the year expenses are incurred, as long as
there is reasonable assurance of their realization.(l)
    
    Inventories:Inventories are valued at the lower of cost, determined by the first-in, first-out method or
the weighted-average cost method, and net realizable value. Net realizable value represents
the estimated selling price in the ordinary course of business, less the estimated costs of
completion and the estimated costs necessary to make the sale. Work in progress is valued
at the pro-rata billing value of the work completed.(m)
    
    Investments in televisual products and movies:
 (i)
    
    Programs produced and productions in progress:Programs produced and productions in progress related to broadcasting activities are
accounted for at the lower of cost and net realizable value. Cost includes direct charges
for goods and services and the share of labour and general expenses related to each
production. The cost of each program is charged to cost of sales when the program is
broadcast.(ii)
    
    Broadcast rights:Broadcast rights are essentially contractual rights allowing limited or unlimited
broadcast of televisual products or movies. The Broadcasting segment records the
broadcast rights acquired as an asset and the obligations incurred under a licence
agreement as a liability when the broadcast licence period begins and all of the
following conditions have been met: (a) the cost of each program, movies or series is
known or can be reasonably determined; (b) the programs, movies or series have been
accepted in accordance with the conditions of the broadcast licence agreement; (c) the
programs, movies or series are available for first showing or telecast.Amounts paid for broadcast rights before all of the above conditions are met are recorded
as prepaid broadcast rights.Broadcast rights are classified as short or long term, based on managements estimate of
the broadcast period. These rights are amortized when televisual products and movies are
broadcast over the contract period, using an amortization method based on future revenues
and the estimated number of showings. This amortization is recorded in cost of sales and
selling and administrative expenses. Broadcast rights are valued at the lower of
unamortized cost or net realizable value. Broadcast rights payable are classified as
current or long-term liabilities based on the payment terms included in the licence.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (m)
    
    Investments in televisual products and movies (continued):
 (iii)
    
    Distribution rights:Distribution rights relate to the distribution of televisual products and movies. Costs
include distribution rights for televisual products and movies and other operating costs
incurred that generate future economic benefits. The net realizable value of
distribution rights represents the Broadcasting segments share of future estimated
revenues to be derived, net of future costs. The Broadcasting segment records an asset
and a liability for the distribution rights and obligations incurred under a licence
agreement when (a) the cost of the licence is known or can be reasonably estimated, (b)
the televisual product and movie has been accepted in accordance with the conditions of
the licence agreement, and (c) the televisual product or movie is available for
distribution.Amounts paid for distribution rights before all of the above conditions are met are
recorded as prepaid distribution rights. Distribution rights are amortized using the
individual film forecast computation method based on actual revenues realized over total
expected revenues.Estimates of revenues related to distribution of television products and movies are
examined periodically by Broadcasting segment management and revised as necessary. The
value of unamortized costs is reduced to net realizable value, as necessary, based on
this assessment. The amortization of distribution rights is recorded in cost of sales and
selling and administrative expenses.
 (n)
    
    Income taxes:The Company uses the liability method of accounting for income taxes. Under this method,
future income tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the carrying amounts of existing assets and
liabilities in the financial statements and their respective tax bases. Future income tax
assets and liabilities are measured using substantively enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or settled. The
effect of a change in tax rates on future income tax assets and liabilities is recognized in
income in the period that includes the substantive enactment date. A valuation allowance is
established, if necessary, to reduce any future income tax asset to an amount that is more
likely than not to be realized.In the course of the Companys operations, there are a number of uncertain tax positions due
to the complexity of certain transactions and due to the fact that related tax
interpretations and legislation are continually changing. When a tax position is uncertain,
the Company recognizes an income tax benefit or reduces an income tax liability only when it
is probable that the tax benefit will be realized in the future or that the income tax
liability is no longer probable.(o)
    
    Long-term investments:Investments in companies subject to significant influence are accounted for by the equity
method. All portfolio investments are classified as available-for-sale and are accounted
for as described in note 1 (i). Carrying values of investments are reduced to estimated fair
values if there is other than a temporary decline in the value of the investment.(p)
    
    Property, plant and equipment:Property, plant and equipment are stated at cost, net of government grants and investment
tax credits. Cost represents acquisition or construction costs, including preparation,
installation and testing costs and interest incurred with respect to the property, plant and
equipment until they are ready for commercial production. In the case of projects to
construct and connect receiving and distribution networks of cable and wireless, the cost
includes equipment, direct labour and direct overhead costs. Projects under development may
also include advances for equipment under construction. Expenditures for additions,
improvements and replacements are capitalized, whereas maintenance and repair expenditures
are expensed as incurred.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (p)
    
    Property, plant and equipment (continued):Amortization is principally calculated on a straight-line basis over the following estimated useful lives:
 EstimatedAssets
    
    useful lifeBuildings
    
    25 to 40 yearsMachinery and equipment
    
    3 to 20 yearsReceiving, distribution and telecommunication networks
    
    3 to 20 years
 Leasehold improvements are amortized over the term of the lease.The Company does not record an asset retirement obligation in connection with its cable
distribution networks. The Company expects to renew all of its agreements with utility
companies to access their support structures in the future, making the retirement date
undeterminable for these assets.(q)
    
    Goodwill and other intangible assets:Goodwill and intangible assets with indefinite useful lives are not amortized.Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The impairment test is carried out
in two steps. In the first step, the carrying amount of the reporting unit is compared to
its fair value. When the fair value of a reporting unit exceeds its carrying amount, then
the goodwill of the reporting unit is considered not to be impaired and the second step is
not required. The second step of the impairment test is carried out when the carrying
amount of a reporting unit exceeds its fair value, in which case the implied fair value of
the reporting units goodwill is compared to its carrying amount to measure the amount of
the impairment loss, if any. When the carrying amount of the reporting units goodwill
exceeds the implied fair value of the goodwill, an impairment loss is recognized in an
amount equal to the excess.Intangible assets acquired, such as broadcasting licences and mastheads that have an
indefinite useful life, are also tested for impairment annually or more frequently if events
or changes in circumstances indicate that the asset might be impaired. The impairment test
compares the carrying amount of the intangible asset to its fair value, and an impairment
loss is recognized in the consolidated statements of income for the excess, if any.The cost of the spectrum licences for Advanced Wireless Services (AWS) includes
acquisition costs and interest incurred during the development period of the wireless
network project, until the network is ready for commercial service.Other intangible assets with definite useful lives, such as customer relationships and
non-competition agreements, are amortized over their useful life using the straight-line
method over a 3 to 10-year period.(r)
    
    Stock-based compensation:The compensation cost attributable to stock-based awards to employees that call for
settlement in cash or other assets at the option of the employee is recognized in operating
expenses over the vesting period. Changes in the intrinsic value of the stock option awards
between the grant date and the measurement date result in a change in the liability and
compensation cost.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (s)
    
    Pension plans and postretirement benefits:
 (i)
    
    Pension plans:The Company offers defined benefit pension plans and defined contribution pension plans
to some of its employees. Defined benefit pension plan costs are determined using
actuarial methods and are funded through contributions determined in accordance with the
projected benefit method pro rated on service, which incorporates managements best
estimate of future salary levels, other cost escalations, retirement ages of employees
and other actuarial factors. Pension plan expense is charged to operations and includes:
 
    
    Cost of pension plan benefits provided in exchange for employee services rendered
during the year.
    
    Amortization of the initial net transition asset, prior service costs and
amendments on a straight-line basis over the expected average remaining service
period of the active employee group covered by the plans.
    
    Interest cost of pension plan obligations, expected return on pension fund
assets, and amortization of cumulative unrecognized net actuarial gains and losses,
in excess of 10.0% of the greater of the accrued benefit obligation, or the fair
value of plan assets, over the expected average remaining of 13-year service period
of the active employee group covered by the plans.
 When an event gives rise to both a curtailment and a settlement, the curtailment is
accounted for prior to the settlement.Actuarial gains and losses arise from the difference between the actual rate of return on
plan assets for a period and the expected rate of return on plan assets for that period,
or from changes in actuarial assumptions used to determine the accrued benefit
obligation.The Company uses the fair value of plan assets as of the end of the year to evaluate plan
assets for the purpose of calculating the expected return on plan assets.(ii)
    
    Postretirement benefits:The Company offers health, life and dental insurance plans to some of its retired
employees. The cost of postretirement benefits is determined using actuarial methods and
the related benefits are funded by the Company as they become due. The Company amortizes
the cumulative unrecognized net actuarial gains and losses, in excess of 10.0% of the
accrued benefit obligation, over the expected average remaining service life of the
active employee group covered by the plans.
 (t)
    
    Rates subject to CRTC regulation:The Cable segment operations are subject to rate regulations on certain services based on
geographical regions, mainly by the Broadcasting Act(Canada) and the Telecommunications Act
(Canada), both managed by the Canadian Radio-television and Telecommunication Commissions
(CRTC). Accordingly, the Cable segments operating revenues could be affected by changes
in regulations or decisions made by this regulating body. The Company does not select
accounting policies that differ from GAAP, even though the Company is subject to these
regulations.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (u)
    
    Future changes in accounting standardsIn January 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, which will
replace Section 3062, Goodwill and Other Intangible Assets, and which results in the
withdrawal of Section 3450, Research and Development Costsand Emerging Issues Committee
(EIC) Abstract 27, Revenues and Expenditures During the Pre-operating Period, and
amendments to Accounting Guideline (AcG) 11, Enterprises in the Development Stage. The new
standard provides guidance on the recognition of intangible assets in accordance with the
definition of an asset and the criteria for asset recognition, as well as clarifying the
application of the concept of matching revenues and expenses, whether those assets are
separately acquired or internally developed. This standard applies to interim and annual
financial statements relating to fiscal years beginning on or after October 1, 2008. The
Company is currently evaluating the effects of adopting this standard, although it does not
expect the adoption will have a material impact on its consolidated financial statements.
 2.
    
    FINANCIAL EXPENSES:
 2008
    
    
    2007
    
    
    2006Interest on long-term debt
    
    $
    278.3
    
    
    $
    232.4
    
    
    $
    215.0Amortization of financing costs and long-term debt discount
    
    
    9.3
    
    
    
    4.8
    
    
    
    7.3Other
    
    
    1.2
    
    
    
    (2.1
    )
    
    
    (0.2
    )288.8
    
    
    
    235.1
    
    
    
    222.1Interest capitalized to the cost of:Property, plant and equipment
    
    
    (0.3
    )
    
    
    (5.0
    )
    
    
    (9.2
    )Intangible assets
    
    
    (12.5
    )
    
    
    
    
    
    
    (12.8
    )
    
    
    (5.0
    )
    
    
    (9.2
    )$
    276.0
    
    
    $
    230.1
    
    
    $
    212.9
 3.
    
    LOSS ON VALUATION AND TRANSLATION OF FINANCIAL INSTRUMENTS:
 2008
    
    
    2007
    
    
    2006(Gain) loss on embedded derivatives and derivative
financial instruments for which hedge accounting is not used
    
    $
    (47.2
    )
    
    $
    44.3
    
    
    $
    4.1Loss (gain) on foreign currency translation of financial
instruments for which hedge accounting is not used
    
    
    34.3
    
    
    
    (34.8
    )
    
    
    (2.9
    )Loss (gain) on the ineffective portion of fair value hedges
    
    
    16.6
    
    
    
    (4.8
    )
    
    
    Loss on revaluation of the Additional Amount payable
    
    
    
    
    
    
    5.2
    
    
    
    10.5$
    3.7
    
    
    $
    9.9
    
    
    $
    11.7
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 4.
    
    RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL ITEMS:
 (a)
    
    Newspapers segmentRestructuring costsThe Newspapers segment has been facing a fundamental transformation under way in the
newspaper industry in recent years, as well as a difficult economic environment affecting
its advertising revenues. In this context, in December 2008, the Company initiated a
workforce-reduction plan as part of a major restructuring of its Newspapers segment
operations across Canada. The Company has also implemented the following restructuring
initiatives in the Newspapers segments operations since 2006:
 
    
    Transfer of the printing of several publications to two new printing facilities in
Mirabel and Islington, as well as the consolidation of other printing activities.
    
    Implementation of voluntary and involuntary workforce-reduction programs.
    
    Introduction of new content-management technologies and streamlining of the
news-gathering process.
 As a result of these initiatives, the Newspapers segment recorded restructuring costs of
$33.3 million in 2008 ($9.9 million in 2007 and $17.0 million in 2006), mainly related to
the elimination of positions at several publications.Continuity of restructuring costs payable
 2008
    
    
    2007Balance at beginning of year
    
    $
    6.0
    
    
    $
    12.7Workforce-reduction initiatives
    
    
    33.3
    
    
    
    9.9Payments
    
    
    (9.6
    )
    
    
    (16.6
    )Balance at end of year
    
    $
    29.7
    
    
    $
    6.0
 Impairment of assetsIn the fourth quarter of 2008, the Company concluded that impairment tests were triggered by
the restructuring initiatives of December 2008 and the loss of an important printing
contract. The Company also concluded that certain long-lived assets were impaired. As a
result, an impairment charge of $19.1 million was recorded related to certain buildings,
equipment and machinery.(b)
    
    Other segmentsIn 2008, other segments recorded restructuring costs of $2.3 million ($1.7 million in 2007
and $1.9 million in 2006).(c)
    
    Other special itemsIn 2008, the Company recorded a gain on the sale of businesses and other special items of
$0.1 million ($0.4 million in 2007 and $2.2 million in 2006).
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 5.
    
    LOSS ON DEBT REFINANCING:
 (a)
    
    Quebecor Media Inc.:On October 5, 2007, the Company issued new Senior Notes (note 16 (iv)) for net proceeds of
$672.2 million (including accrued interest of $16.6 million and before financing fees of
$9.8 million). The Company used these proceeds and cash on hand to (i) repay in full the
$420.0 million of advances under the Companys Senior Bridge Credit Facility entered into to
finance the acquisition of Osprey Media Publishing Inc. in August 2007 (note 7) and
terminate this facility on October 9, 2007; as well as (ii) repay the Sun Media Term Loan B
and settle related hedging contracts on October 31, 2007, for a total cash consideration of
$277.8 million, resulting in a loss of $1.0 million.On January 17, 2006, the Company recorded a loss of $331.6 million as a result of
refinancing substantially all of its 11.125% Senior Notes and 13.75% Senior Discount Notes.
The loss represents the excess of the $1.3 billion consideration paid, including debt
repurchase premiums and disbursements for unwinding hedging contracts, over the carrying
value of the notes and the hedging contracts, and the write-off of financing costs. The
refinancing transactions carried out were as follows:
 
    
    The Company issued new 7.75% Senior Notes of US$525.0 million in aggregate principal
amount (note 16 (iii)).
    
    The Company entered into new credit facilities comprised of (i) a five-year $125.0
million term loan A credit facility, (ii) a seven-year US$350.0 million term loan B
credit facility and (iii) a new $100.0 million five-year revolving credit facility
(note 16 (i)).
    
    Videotron Ltd. borrowed $237.0 million under its existing revolving credit facility
and Sun Media Corporation amended its existing credit facilities to borrow $40.0
million under a new term loan C maturing in 2012 (note 16 (x)).
    
    The proceeds from new Senior Notes, the full amount of new term loans A and B,
the Videotron Ltd. drawing from its existing revolving credit facility, and Sun Media
Corporations new term loan C were used to repurchase US$561.6 million in aggregate
principal amount of the Companys 11.125% Senior Notes and US$275.6 million in
aggregate principal amount at maturity of the Companys 13.75% Senior Discount Notes.
 On July 15, 2006, the Company repurchased the remaining balances of its 11.125% Senior Notes
and 13.75% Senior Discount Notes for a total cash consideration of $39.3 million. The
repurchase resulted in a loss of $10.5 million.(b)
    
    Sun Media Corporation:On December 29, 2006, Sun Media Corporation made a partial repayment of US$15.0 million on
its term loan B credit facility and settled a corresponding portion of its hedging
contracts. As a result, a loss of $0.5 million was recorded.
 6.
    
    IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS:2008The adverse financial and economic environment prevailing at the end of the fourth quarter of
2008 triggered a goodwill and mastheads impairment test at the Newspapers, Leisure and
Entertainment, and Interactive Technologies and Communications reporting units. As a result, the
Company concluded that these segments goodwill and mastheads were impaired. The Company is in
the process of performing the second step of the goodwill impairment test and a total
preliminary estimated goodwill impairment loss of $631.0 million has been recorded: $595.0
million in the Newspapers segment, $10.0 million in the Leisure and Entertainment segment, and
$26.0 million in the Interactive Technologies and Communications segment. The Company will
complete the measurement of the goodwill impairment loss as soon as possible and any adjustment
to the estimated loss will be recognized in a subsequent reporting period. Finally, the Company
has completed its impairment test on mastheads and an impairment loss of $40.2 million has been
recorded.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 6.
    
    IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS (continued):2008 (continued)When performing the second step of the goodwill impairment test, the fair value of goodwill is
determined in the same manner as for business combination. The Company allocates the fair value
of a reporting unit to all of the identifiable assets and liabilities of the reporting unit,
whether or not recognized separately, and the excess of the fair value over the amounts assigned
to the reporting units identifiable assets and liabilities is the fair value of goodwill. In
the process of performing the second step of the test, an estimated fair value of $675.0 million
was attributed to intangible assets such as mastheads and customer relationships, without
recognition in the books, representing an estimated excess of $340.0 million, net of future
income tax, over the carrying value of these related intangibles assets. Therefore, a lesser
portion of the reporting units fair value was attributed to goodwill. As a result, the
magnitude of the estimated goodwill impairment exceeded significantly the reporting units
overall carrying value impairment.2007In the fourth quarter of 2007, the Company concluded that the goodwill of a reporting unit of
its Cable segment related to the DVDs and game rental operations in Ontario was impaired.
Accordingly, an impairment charge of $5.4 million was recorded.2006In 2006, the Company completed its annual impairment test for its broadcasting licences and
goodwill. Based on the results, the Company concluded that the carrying values of the
broadcasting licences and goodwill of its Broadcasting segment were impaired. Conventional
television broadcasters were experiencing pressure on their advertising revenues at that time
due to the fragmentation of the television market. Accordingly, the Company reviewed its
business plan and recorded a total impairment charge of $179.2 million in 2006: $30.8 million
for one of its broadcasting licences and $148.4 million for goodwill.In addition, in 2006, the Broadcasting segment recorded an impairment charge of $0.8 million
related to an operating licence co-owned with another entity.7.
    
    BUSINESS ACQUISITIONS:During the years ended December 31, 2008, 2007, and 2006, the Company acquired or increased its
interest in several businesses and has accounted for these by the purchase method. The results
of operations of these businesses have been included in the Companys consolidated financial
statements from the dates of their respective acquisitions.2008
 
    
    On June 2, 2008, TVA Group Inc., Broadcasting segment, repurchased 3,000,642 Class B
shares at a price of $17.00 per share under a substantial issuer bid for a total cash
consideration of $51.4 million, resulting in goodwill of $4.3 million. The Companys equity
interest in TVA Group Inc. increased from 45.24% to 50.90% following this transaction.
    
    In February 2008, the Company acquired all of the non-controlling interest in Nurun
Inc., Interactive Technologies and Communications segment, pursuant to its offer to
purchase the shares at a price of $4.75 per Common Share for a total cash consideration of
$75.2 million, resulting in goodwill of $40.3 million. Common Shares of Nurun Inc. were
delisted from the Toronto Stock Exchange following this transaction.
    
    The Company paid an earn-out of $5.0 million in the first quarter of 2008 in relation to
the 2005 acquisition of Sogides Group Inc., Leisure and Entertainment segment. The payment
was recorded as goodwill.
    
    The Company acquired and/or increased its interest in various businesses, mainly in the
Newspapers segment, for a total cash consideration of $15.1 million, a contingent amount
payable of $1.0 million as of December 31, 2008, and
additional contingent payments totalling $6.0 million, based on the achievement of specific conditions in the future.
These acquisitions resulted in goodwill of $11.1 million.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 7.
    
    BUSINESS ACQUISITIONS (continued):2007
 
    
    In August 2007, the Company acquired all outstanding units of Osprey Media Income Fund,
which subsequently became Osprey Media Publishing Inc. as a result of a corporate
reorganization, for a total cash consideration, excluding assumed debt, of $415.2 million
(including transaction costs of $0.8 million). As part of the acquisition, the Company
assumed the debt of $161.8 million under Osprey Media Publishing Inc.s credit facilities
(note 16 (xii)). Osprey Media Publishing Inc. is one of Canadas leading publishers of
daily and non-daily newspapers, magazines and specialty publications. Its publications
include 20 daily newspapers and 33 non-daily newspapers, together with shopping guides,
magazines and other publications.
    
    During the year ended December 31, 2007, the Company acquired or increased its interest
in several businesses, mainly in the Newspapers segment, for total consideration of $20.5
million, resulting in preliminary goodwill of $17.4 million, which was reduced by $2.3
million in 2008 when the purchase price allocation was finalized.
    
    In January 2007, TVA Group Inc. and Sun Media Corporation paid the balance payable in
the amount of $3.4 million related to the acquisition of SUN TV in 2004.
 2006
 
    
    Several businesses, mainly in the Interactive Technologies and Communications segment,
were acquired for a total consideration of $14.0 million, including $12.6 million in cash
and $1.4 million in Common Shares of a subsidiary, resulting in additional goodwill of $7.6
million.
 Business acquisitions for 2008 are summarized as follows:
  2008Assets acquired:Cash and cash equivalents
    
    $
    0.5Non-cash current assets
    
    
    1.1Property, plant and equipment
    
    
    3.1Intangible assets
    
    
    18.8Goodwill 1
    
    
    60.7Non-controlling interest
    
    
    73.0157.2Liabilities assumed:Non-cash current liabilities
    
    
    (2.9
    )Future income taxes
    
    
    (6.1
    )(9.0
    )Net assets acquired at fair value
    
    $
    148.2Consideration :Cash
    
    $
    147.2Contingent amount payable
    
    
    1.0$
    148.2
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 7.
    
    BUSINESS ACQUISITIONS (continued):Business acquisitions for 2007 and 2006 are summarized as follows:
 2007
    
    
    2006Osprey MediaPublishing Inc. 3
    
    
    Other 3
    
    
    TotalAssets acquired:Cash and cash equivalents
    
    
    $        
    
    
    $
    0.5
    
    
    $
    0.5
    
    
    $
    2.1Non-cash current assets
    
    
    38.5
    
    
    
    0.4
    
    
    
    38.9
    
    
    
    2.5Property, plant and equipment
    
    
    42.4
    
    
    
    0.5
    
    
    
    42.9
    
    
    
    0.2Intangible assets 2
    
    
    233.7
    
    
    
    3.2
    
    
    
    236.9
    
    
    
    Other assets
    
    
    0.3
    
    
    
    0.4
    
    
    
    0.7
    
    
    
    4.4Goodwill 1
    
    
    360.4
    
    
    
    15.1
    
    
    
    375.5
    
    
    
    7.6Non-controlling interest
    
    
    
    
    
    
    1.9
    
    
    
    1.9
    
    
    
    1.2675.3
    
    
    
    22.0
    
    
    
    697.3
    
    
    
    18.0Liabilities assumed:Bank indebtedness
    
    
    (2.3
    )
    
    
    
    
    
    
    (2.3
    )
    
    
    Non-cash current liabilities
    
    
    (27.3
    )
    
    
    (0.7
    )
    
    
    (28.0
    )
    
    
    (3.1
    )Long-term debt
    
    
    (161.8
    )
    
    
    
    
    
    
    (161.8
    )
    
    
    Other liabilities
    
    
    (6.8
    )
    
    
    
    
    
    
    (6.8
    )
    
    
    Future income taxes
    
    
    (61.9
    )
    
    
    (0.8
    )
    
    
    (62.7
    )
    
    
    (0.9
    )(260.1
    )
    
    
    (1.5
    )
    
    
    (261.6
    )
    
    
    (4.0
    )Net assets acquired at fair value
    
    
    $  415.2
    
    
    $
    20.5
    
    
    $
    435.7
    
    
    $
    14.0Consideration:Cash
    
    
    $  415.2
    
    
    $
    20.5
    
    
    $
    435.7
    
    
    $
    12.6Issuance of Common Shares by Nurun Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4$  415.2
    
    
    $
    20.5
    
    
    $
    435.7
    
    
    $
    14.0
 1
    
    The amount of goodwill that is deductible for tax purposes is $0.7 million in 2008
($3.1 million in 2007 and $1.6 million in 2006).2
    
    In connection with the Osprey Media Publishing Inc. acquisition, intangible assets
are mainly comprised of customer relationship and non-competition agreements with a fair
value of $130.3 million and mastheads with a fair value of $103.4 million.3
    
    During the third quarter of 2008, the Company finalized certain purchase price
allocations, mainly related to the acquisition of Osprey Media Publishing Inc. in August
2007, which resulted in a reduction in property, plant and equipment of $11.9 million, an
increase in intangible assets of $3.1 million, a reduction in other assets of $0.4 million,
an increase in other liabilities of $1.4 million, a reduction in future income tax
liabilities of $3.5 million, and an increase in goodwill of $7.1 million. F-28




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 8.
    
    INCOME TAXES:Income taxes on continuing operations are as follows:
 2008
    
    
    2007
    
    
    2006Current
    
    $
    12.7
    
    
    $
    11.3
    
    
    $
    5.4Future
    
    
    142.0
    
    
    
    63.5
    
    
    
    (59.1
    )$
    154.7
    
    
    $
    74.8
    
    
    $
    (53.7
    )
 The following table reconciles income taxes at the Companys domestic statutory tax rate of
30.9 % in 2008 (32.0% in 2007 and in 2006) and income taxes in the consolidated statements of
income:
 2008
    
    
    2007
    
    
    2006Income taxes at domestic statutory tax rate
    
    $
    (63.2
    )
    
    $
    133.2
    
    
    $
    (72.0
    )Increase (reduction) resulting from:Effect of provincial tax rate differences
    
    
    (3.1
    )
    
    
    (0.9
    )
    
    
    Effect of non-deductible charges,
non-taxable income and differences
between current and future tax rates
    
    
    11.5
    
    
    
    (7.8
    )
    
    
    (9.8
    )Change in valuation allowance
    
    
    15.3
    
    
    
    (3.6
    )
    
    
    (7.8
    )Change in future income tax balances due
to a change in substantively enacted tax
rates
    
    
    
    
    
    
    (35.9
    )
    
    
    (12.9
    )Tax consolidation transactions with the
parent company
    
    
    (6.4
    )
    
    
    (7.7
    )
    
    
    Impairment of goodwill
    
    
    196.4
    
    
    
    
    
    
    
    47.5Other
    
    
    4.2
    
    
    
    (2.5
    )
    
    
    1.3Income taxes
    
    $
    154.7
    
    
    $
    74.8
    
    
    $
    (53.7
    )
 The tax effects of significant items comprising the Companys net future income tax positions
are as follows:
 2008
    
    
    2007Losses carryforwards
    
    $
    214.2
    
    
    $
    245.1Accounts payable and accrued charges
    
    
    16.8
    
    
    
    55.5Long-term debt and derivative financial instruments
    
    
    (10.5
    )
    
    
    28.0Property, plant and equipment
    
    
    (257.1
    )
    
    
    (228.1
    )Goodwill, intangible assets and other assets
    
    
    (56.6
    )
    
    
    (65.4
    )Other
    
    
    3.0
    
    
    
    (4.8
    )(90.2
    )
    
    
    30.3Valuation allowance
    
    
    (152.1
    )
    
    
    (111.8
    )Net future income tax liabilities
    
    $
    (242.3
    )
    
    $
    (81.5
    )
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 8.
    
    INCOME TAXES (continued):The current and long-term future income tax assets and liabilities are as follows:
 2008
    
    
    2007Future income tax assets:Current
    
    $
    102.8
    
    
    $
    153.6Long-term
    
    
    12.3
    
    
    
    57.4115.1
    
    
    
    211.0Future income tax liabilities:Long-term
    
    
    (357.4
    )
    
    
    (292.5
    )Net future income tax liabilities
    
    $
    (242.3
    )
    
    $
    (81.5
    )
 As of December 31, 2008, the Company had loss carryforwards for income tax purposes of $1,014.5
available to reduce future taxable income, including $311.8 million that will expire between
2009 and 2028, and $702.7 million that can be carried forward indefinitely. Of the latter
amount, $682.3 million represents capital losses to be applied against future capital gains.The Company has not recognized a future income tax liability for the undistributed earnings of
its subsidiaries in the current or prior years since the Company does not expect to sell or
repatriate funds from those investments, in which case the undistributed earnings might become
taxable. Any such liability cannot reasonably be determined at the present time.9.
    
    ACCOUNTS RECEIVABLE:
 2008
    
    
    2007Trade
    
    $
    426.7
    
    
    $
    442.8Other
    
    
    57.2
    
    
    
    53.4$
    483.9
    
    
    $
    496.2
 F-30




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 10.
    
    INVENTORIES AND INVESTMENTS IN TELEVISUAL PRODUCTS AND MOVIES:
 2008
    
    
    2007Raw materials and supplies
    
    $
    31.0
    
    
    $
    23.3Work in progress
    
    
    17.3
    
    
    
    17.1Finished goods
    
    
    91.6
    
    
    
    82.7Investments in televisual products and movies
    
    
    49.4
    
    
    
    45.9$
    189.3
    
    
    $
    169.0
 11.
    
    PROPERTY, PLANT AND EQUIPMENT:
 2008Accumulatedamortization/Cost
    
    
    depreciation
    
    
    Net amountLand
    
    $
    40.7
    
    
    
    $           
    
    
    $
    40.7Buildings and leasehold improvements
    
    
    328.9
    
    
    
    74.2
    
    
    
    254.7Machinery and equipment
    
    
    1,080.5
    
    
    
    532.4
    
    
    
    548.1Receiving, distribution and
telecommunication networks
    
    
    2,466.2
    
    
    
    1,086.5
    
    
    
    1,379.7Projects under development
    
    
    111.5
    
    
    
    
    
    
    
    111.5$
    4,027.8
    
    
    
    $   1,693.1
    
    
    $
    2,334.7
 2007Accumulatedamortization/Cost
    
    
    depreciation
    
    
    Net amountLand
    
    $
    41.2
    
    
    $
    
    
    
    $
    41.2Buildings and leasehold improvements
    
    
    314.8
    
    
    
    60.7
    
    
    
    254.1Machinery and equipment
    
    
    873.2
    
    
    
    447.2
    
    
    
    426.0Receiving, distribution and
telecommunication networks
    
    
    2,191.1
    
    
    
    921.1
    
    
    
    1,270.0Projects under development
    
    
    118.9
    
    
    
    
    
    
    
    118.9$
    3,539.2
    
    
    $
    1,429.0
    
    
    $
    2,110.2
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Notes to consolidated financial statements
 
 12.
    
    INTANGIBLE ASSETS:
 2008Accumulatedamortization/Cost
    
    
    depreciation
    
    
    Net amountCustomer relationships, non-competition
agreements and other
    
    $
    179.1
    
    
    
    $       41.3
    
    
    $
    137.8Mastheads (note 6)
    
    
    105.6
    
    
    
    40.2
    
    
    
    65.4Broadcasting licences
    
    
    88.3
    
    
    
    
    
    
    
    88.3AWS spectrum licences 1
    
    
    567.1
    
    
    
    
    
    
    
    567.1$
    940.1
    
    
    
    $       81.5
    
    
    $
    858.6
 1
    
    As a result of the spectrum auction for AWS that ended on July 21, 2008, the
Company acquired 17 new spectrum licences for AWS, covering all of the province of
Québec and certain areas of Ontario, for an aggregate amount of $554.6 million, which
was fully paid by its Cable segment in the third quarter of 2008. In addition, interest
costs of $12.5 million were capitalized to the cost of these licences in 2008. The
spectrum licences were issued by Industry Canada on December 23, 2008 for an initial
term of 10 years.
 2007Accumulatedamortization/Cost
    
    
    depreciation
    
    
    Net amountCustomer relationships, non-competition
agreements and other
    
    $
    166.9
    
    
    $
    20.1
    
    
    $
    146.8Mastheads
    
    
    103.4
    
    
    
    
    
    
    
    103.4Broadcasting licences
    
    
    84.2
    
    
    
    
    
    
    
    84.2$
    354.5
    
    
    $
    20.1
    
    
    $
    334.4
 13.
    
    OTHER ASSETS:
 2008
    
    
    2007Investments in televisual products and movies
    
    $
    36.0
    
    
    $
    27.2Deferred pension charge (note 26)
    
    
    22.9
    
    
    
    20.7Deferred connection costs
    
    
    19.3
    
    
    
    18.8Other
    
    
    33.6
    
    
    
    20.7$
    111.8
    
    
    $
    87.4
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Notes to consolidated financial statements
 
 14.
    
    GOODWILL:For the years ended December 31, 2008 and 2007, the changes in the carrying amounts of goodwill
were as follows:
 2008Adjustment ofBalance as at
    
    
    Business
    
    
    
    
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    Impairment
    
    
    allocation and
    
    
    December 31,2007
    
    
    (disposals)
    
    
    (note 6)
    
    
    other
    
    
    2008Cable
    
    $
    2,576.9
    
    
    
    $         (1.9
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,575.0Newspapers
    
    
    1,397.1
    
    
    
    9.7
    
    
    
    (595.0
    )
    
    
    7.1
    
    
    
    818.9Broadcasting
    
    
    51.4
    
    
    
    4.3
    
    
    
    
    
    
    
    (1.0
    )
    
    
    54.7Leisure and Entertainment
    
    
    43.4
    
    
    
    5.0
    
    
    
    (10.0
    )
    
    
    
    
    
    
    38.4Interactive Technologies
and Communications
    
    
    12.5
    
    
    
    40.9
    
    
    
    (26.0
    )
    
    
    2.3
    
    
    
    29.7Total
    
    $
    4,081.3
    
    
    
    $        58.0
    
    
    $
    (631.0
    )
    
    $
    8.4
    
    
    $
    3,516.7
 2007Adjustment ofBalance as at
    
    
    Business
    
    
    
    
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    Impairment
    
    
    allocation and
    
    
    December 31,2006
    
    
    (disposals)
    
    
    (note 6)
    
    
    other
    
    
    2007Cable
    
    $
    2,581.7
    
    
    $
    0.6
    
    
    $
    (5.4
    )
    
    $
    
    
    
    $
    2,576.9Newspapers
    
    
    1,033.4
    
    
    
    363.7
    
    
    
    
    
    
    
    
    
    
    
    1,397.1Broadcasting
    
    
    51.4
    
    
    
    0.1
    
    
    
    
    
    
    
    (0.1
    )
    
    
    51.4Leisure and Entertainment
    
    
    43.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43.4Interactive Technologies
and Communications
    
    
    11.2
    
    
    
    3.1
    
    
    
    
    
    
    
    (1.8
    )
    
    
    12.5Total
    
    $
    3,721.1
    
    
    $
    367.5
    
    
    $
    (5.4
    )
    
    $
    (1.9
    )
    
    $
    4,081.3
 15.
    
    ADDITIONAL AMOUNT PAYABLE:In July 2007, the Company exercised its right to repay the Additional Amount payable in the
amount of $127.2 million. Until its repayment, the value of the Additional Amount payable,
resulting from the repurchase of the redeemable preferred shares of a subsidiary in 2003,
fluctuated based on a formula established as per the repurchase agreement. Changes in the amount
payable were recorded as a loss on valuation and translation of financial instruments in the
consolidated statements of income.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Notes to consolidated financial statements
 
 16.
    
    LONG-TERM DEBT:
 Effective interestrate as ofDecember 31, 2008
    
    
    Year of maturity
    
    
    2008
    
    
    2007Quebecor Media Inc.:Bank credit facilities (i)
    
    
    6.38
    %
    
    
    2011-2013
    
    
    $
    505.4
    
    
    $
    439.1Other credit facility (ii)
    
    
    3.71
    %
    
    
    2015
    
    
    
    74.4
    
    
    
    66.7Senior Notes (iii)
    
    
    7.75
    %
    
    
    2016
    
    
    
    634.8
    
    
    
    514.8Senior Notes (iv)
    
    
    8.81
    %
    
    
    2016
    
    
    
    799.1
    
    
    
    644.32,013.7
    
    
    
    1,664.9Videotron Ltd. and its subsidiaries (v):Bank credit facility (vi)
    
    
    3.39
    %
    
    
    2012
    
    
    
    207.7
    
    
    
    147.7Senior Notes (vii)
    
    
    6.59
    %
    
    
    2014
    
    
    
    800.4
    
    
    
    652.8Senior Notes (viii)
    
    
    6.44
    %
    
    
    2015
    
    
    
    212.4
    
    
    
    172.8Senior Notes (ix)
    
    
    9.38
    %
    
    
    2018
    
    
    
    546.1
    
    
    
    1,766.6
    
    
    
    973.3Sun Media Corporation and its subsidiaries (v):Bank credit facilities (x)
    
    
    4.10
    %
    
    
    2012
    
    
    
    48.5
    
    
    
    39.1Senior Notes (xi)
    
    
    7.88
    %
    
    
    2013
    
    
    
    245.7
    
    
    
    198.9294.2
    
    
    
    238.0Osprey Media Publishing Inc. (v):Bank credit facilities (xii)
    
    
    3.75
    %
    
    
    2011
    
    
    
    132.3
    
    
    
    145.3TVA Group Inc. and its subsidiaries (v):Revolving credit facility (xiii)
    
    
    3.43
    %
    
    
    2010
    
    
    
    93.8
    
    
    
    56.3Total long-term debt
    
    
    
    
    
    
    4,300.6
    
    
    
    3,077.8Change in fair value related to hedged interest rate risk
    
    
    
    
    
    
    52.0
    
    
    
    (24.1
    )Adjustments related to embedded derivatives
    
    
    
    
    
    
    24.7
    
    
    
    11.4Financing fees, net of amortization
    
    
    
    
    
    
    
    
    
    
    (41.5
    )
    
    
    (37.6
    )35.2
    
    
    
    (50.3
    )4,335.8
    
    
    
    3,027.5Less current portion:
    
    
    
    
    
    
    
    
    
    
    37.1
    
    
    
    24.7$
    4,298.7
    
    
    $
    3,002.8
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Notes to consolidated financial statements
 
 16.
    
    LONG-TERM DEBT (continued):
 (i)
    
    The bank credit facilities of Quebecor Media Inc. are comprised of (i) a $125.0 million
term loan A credit facility, bearing interest at Bankers acceptance rate, London
Interbanking Offered Rate (LIBOR) or Canadian prime rate, plus a premium determined by a
leverage ratio, and maturing in January 2011, (ii) a US$350.0 million term loan B credit
facility, bearing interest at U.S. prime rate, plus a premium of 1.0%, or at LIBOR, plus a
premium of 2.0%, and maturing in January 2013, and (iii) a $100.0 million revolving credit
facility, bearing interest at Bankers acceptance rate, LIBOR or Canadian prime rate, plus
a premium determined by a leverage ratio, and maturing in January 2011. These credit
facilities contain covenants concerning certain financial ratios and restricting the
declaration and payment of dividends and other distributions. They are collateralized by
liens on all of the movable property and assets of the Company (primarily shares of its
subsidiaries), now owned or hereafter acquired. As of December 31, 2008, the credit
facilities of the Company were secured by assets with a carrying value of $3,758.7 million
($4,203.8 million in 2007). The Company shall repay the term loan A in quarterly
repayments equal to 2.5% of the principal amount during the first three years of the term,
5.0% in the fourth year and 12.5% in the fifth year of the term. It shall repay the
principal amount of its term loan B in quarterly repayments of 0.25% of the
principal amount and the balance at the end of the term. As of December 31, 2008, $4.0
million (none in 2007) was drawn on the revolving credit facility, while $89.8 million
($102.0 million in 2007) and $411.6 million ($337.1 million in 2007) were drawn under the
term A and B credit facilities respectively.(ii)
    
    The long-term credit facility with Société Générale (Canada) for the Canadian dollar
equivalent of 59.4 million, bears interest at Bankers acceptance rate, plus a premium,
and matures in 2015. The facility is secured by all the property and assets of the Company,
now owned and hereafter acquired. This facility mostly contains the same covenants as the
bank facilities described in (i).(iii)
    
    In January 2006, the Company issued Senior Notes of US$525.0 million in aggregate
principal amount for net proceeds of $609.0 million, before issuance fees of $9.0 million.
The notes bear interest at 7.75%, payable every six months on June 15 and December 15, and
mature in March 2016. These notes contain certain restrictions on the Company, including
limitations on its ability to incur additional indebtedness, pay dividends or make other
distributions. The notes are unsecured and are redeemable at the option of the Company at a
decreasing premium, commencing on March 15, 2011.(iv)
    
    In October 2007, the Company issued Senior Notes of US$700.0 million in aggregate
principal amount at a discount price of 93.75% for net proceeds of $672.2 million,
including accrued interest of $16.6 million and before financing fees of $9.8 million. The
senior notes bear interest at 7.75% for an effective interest rate of 8.81%, payable every
six months on June 15 and December 15, and mature in March 2016. These notes contain
certain restrictions on the Company, including limitations on its ability to incur
additional indebtedness, pay dividends or make other distributions. The notes are unsecured
and are redeemable at the option of the Company at a decreasing premium, commencing on
March 15, 2011.(v)
    
    The debts of these subsidiaries are non-recourse to the parent company, Quebecor Media
Inc.(vi)
    
    On April 7, 2008, Videotron Ltd. entered into amendments to its Senior Secured Credit
Facility under which commitments under the Senior Secured Credit Facility were increased
from $450.0 million to $575.0 million and the maturity was extended to April 2012. Pursuant
to these amendments, Videotron Ltd. may, subject to certain conditions, increase the
commitments under the Senior Secured Credit Facility by an additional $75.0 million (for
aggregate commitments of $650.0 million). This credit facility bears interest at Bankers
acceptance or Canadian prime rates, plus a margin, depending on Videotron Ltd.s leverage
ratio. The credit facility is secured by a first ranking hypothec on the universality of
all tangible and intangible assets, current and future, of Videotron Ltd. and its
subsidiaries. As of December 31, 2008, the credit facility of Videotron Ltd. was secured by
assets with a carrying value of $5,105.9 million ($4,132.2 million in 2007). The credit
facility contains covenants such as maintaining certain financial ratios and some
restrictions on the payment of dividends and asset acquisitions and dispositions.
 F-35




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Notes to consolidated financial statements
 
 16.
    
    LONG-TERM DEBT (continued):
 (vii)
    
    In October 2003, a first series of US$335.0 million in aggregate principal amount of
Senior Notes was issued at a discount price of 99.08% for net proceeds of $445.6 million,
before issuance fees of $7.6 million. In November 2004, a second series of US$315.0 million
in aggregate principal amount of Senior Notes was issued at a premium price of 105.0% for
net proceeds of $405.1 million, including accrued interest of $8.9 million and before
issuance fees of $7.4 million. These notes bear interest at a rate of 6.875% for an
effective interest rate of 6.59%, payable every six months on January 15 and July 15, and
mature in January 2014. The notes contain certain restrictions on Videotron Ltd., including
limitations on its ability to incur additional indebtedness, and are unsecured. The Senior
Notes are guaranteed by specific subsidiaries of Videotron Ltd. The notes are redeemable at
the option of the Company, in whole or in part, at any time on or after January 15, 2009,
at a decreasing premium.(viii)
    
    On September 16, 2005, US$175.0 million in aggregate principal amount of Senior Notes was
issued at a discount price of 99.5% for net proceeds of $205.2 million, before issuance
fees of $3.8 million. These notes bear interest at a rate of 6.375% for an effective
interest rate of 6.44%, payable every six months on December 15 and June 15, and mature on
December 15, 2015. The notes contain certain restrictions on Videotron Ltd., including
limitations on its ability to incur additional indebtedness, and are unsecured. The Senior
Notes are guaranteed by specific subsidiaries of Videotron Ltd. The notes are redeemable at
the option of the Company, in whole or in part, at any time on or after December 15, 2010,
at a decreasing premium.(ix)
    
    On April 15, 2008, Videotron Ltd. issued US$455.0 million in aggregate principal amount
of Senior Notes at a discount price of 98.43% for net proceeds of $457.3 million, before
financing fees of $9.5 million. The new Senior Notes bear interest at 9.125% for an
effective interest rate of 9.375%, payable every six months on June 15 and December 15, and
mature on April 15, 2018. These notes are unsecured and contain certain restrictions on
Videotron Ltd., including limitations on its ability to incur additional indebtedness, pay
dividends or make other distributions. The notes are guaranteed by specific subsidiaries of
Videotron Ltd. and are redeemable at the option of Videotron Ltd. at a decreasing premium,
commencing April 15, 2013.(x)
    
    The bank credit facilities of Sun Media Corporation are comprised of (i) a revolving
credit facility amounting to $70.0 million, maturing in October 2012, and (ii) a term loan
C credit facility amounting to $40.0 million, also maturing in October 2012. The credit
facilities are collateralized by liens on all of the property and assets of Sun Media
Corporation and its operating subsidiaries, now owned or hereafter acquired. The bank
credit facilities contain covenants concerning certain financial ratios and restrictions on
the declaration and payment of dividends or other distributions. As of December 31, 2008,
the bank credit facilities were secured by assets with a carrying value of $1,307.6 million
($1,729.9 million in 2007). Any amount borrowed under the revolving credit facility bears
interest at Canadian Bankers acceptance and/or Canadian prime rate, plus an applicable
margin determined by financial ratios. Advances under the term C credit facility bear
interest at Canadian Bankers acceptance rate, plus a margin of 1.50% per annum, or
Canadian prime rate, plus a margin of 0.50% per annum. As of December 31, 2008, $10.0
million (none in 2007) was drawn on the revolving credit facility, while $38.5 million
($39.1 million in 2007) was drawn down on the term loan C credit facilities.(xi)
    
    In February 2003, Sun Media Corporation issued US$205.0 million in aggregate
principal amount of Senior Notes at a discount price of 98.29% for net proceeds of $306.8
million, before issuance fees of $8.4 million. These notes bear interest at a rate of
7.625% for an effective interest rate of 7.88%, payable every six months on February 15
and August 15, and mature in February 2013. The notes contain certain restrictions on Sun
Media Corporation, including limitations on its ability to incur additional indebtedness
or make other distributions, and are unsecured. The notes became redeemable at the option
of the Company, in whole or in part, at any time after February 15, 2008, at a decreasing
premium.
 F-36




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Notes to consolidated financial statements
 
 16.
    
    LONG-TERM DEBT (continued):
 (xii)
    
    The credit facilities of Osprey Media Publishing Inc. are comprised of a revolving
credit facility in the amount of $65.0 million and a term credit facility in the amount of
$133.3 million, maturing in January 2011. The credit facilities bear interest at Canadian
prime rate or Bankers acceptance rate, plus an applicable margin determined by financial
ratios, and they contain covenants including, among others, certain financial ratios and
restrictions on the declaration and payment of any distributions. The credit facilities are
secured by liens on all assets of Osprey Media Publishing Inc. and its subsidiary. As of
December 31, 2008, no amount ($13.4 million in 2007) was drawn on the revolving credit
facility and $132.3 million ($131.9 million in 2007) was drawn on the term facility.(xiii)
    
    TVA Group Inc.s revolving credit facility, up to a maximum of $160.0 million, bears
interest at a Canadian chartered banks prime rate or Bankers acceptance rate, plus a
variable margin determined by certain financial ratios. The credit facility matures on June
15, 2010, and contains some restrictions, including the obligation to maintain certain
financial ratios.On December 31, 2008, the Company and its subsidiaries were in compliance with all debt
covenants.Principal repayments of long-term debt over the coming years are as follows:
  2009
    
    $
    37.12010
    
    
    162.12011
    
    
    166.22012
    
    
    269.62013
    
    
    651.72014 and thereafter
    
    
    3,013.9
 17.
    
    OTHER LIABILITIES:
 2008
    
    
    2007Stock-based compensation1
    
    $
    0.8
    
    
    $
    12.7Accrued pension and postretirement benefits liability (note 26)
    
    
    54.9
    
    
    
    48.3Deferred revenue
    
    
    35.5
    
    
    
    36.7Other
    
    
    6.5
    
    
    
    5.8$
    97.7
    
    
    $
    103.5
 1
    
    The current portion of stock-based compensation in the amount of $4.7 million is
included in accounts payable and accrued charges ($98.6 million at December 31, 2007).
 18.
    
    NON-CONTROLLING INTEREST:Non-controlling interest represents the interest of non-controlling shareholders in the
participating shares of the Companys subsidiaries. As of December 31, 2008, the most
significant non-controlling interest is in TVA Group Inc., Broadcasting segment, and it
represents an interest in 0.07% (0.08% in 2007) in votes and 49.10% (54.76% in 2007) in equity.
 F-37




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 19.
    
    CAPITAL STOCK:
 (a)
    
    Authorized capital stock:An unlimited number of Common Shares, without par value;An unlimited number of non-voting Cumulative First Preferred Shares, without par value; the
number of preferred shares in each series and the related characteristics, rights and
privileges are determined by the Board of Directors prior to each issue:
 
    
    An unlimited number of Cumulative First Preferred Shares, Series A (Preferred A
Shares), carrying a 12.5% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series B (Preferred B
Shares), carrying a fixed cumulative preferential dividend generally equivalent to
the Companys credit facility interest rate, redeemable at the option of the holder
and retractable at the option of the Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series C (Preferred C
Shares), carrying an 11.25% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series D (Preferred D
Shares), carrying an 11.00% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series F (Preferred F
Shares), carrying a 10.85% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series G (Preferred G
Shares), carrying a 10.85% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
 An unlimited number of non-voting Preferred Shares, Series E (Preferred E Shares),
carrying a non-cumulative dividend subsequent to the holders of Cumulative First Preferred
Shares, redeemable at the option of the holder and retractable at the option of the Company.
 (b)
    
    Issued capital stock:
 Common SharesNumber
    
    
    AmountBalance as of December 31, 2008 and 2007
    
    
    123,602,807
    
    
    $
    1,752.4
 F-38




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 19.
    
    CAPITAL STOCK (continued):
 (c)
    
    Cumulative First Preferred Shares:All Cumulative First Preferred Shares are owned by subsidiaries of the Company and are
eliminated on consolidation. The following Cumulative First Preferred Shares are issued and
outstanding:
 Preferred SharesNumber
    
    
    AmountPreferred A SharesBalance as of December 31, 2006
    
    
    235,000
    
    
    $
    235.0Redemption
    
    
    (235,000
    )
    
    
    (235.0
    )Balance as of December 31, 2007 and 2008
    
    
    
    
    
    $
    Preferred C SharesBalance as of December 31, 2006
    
    
    275,000
    
    
    $
    275.0Redemption
    
    
    (165,000
    )
    
    
    (165.0
    )Balance as of December 31, 2007
    
    
    110,000
    
    
    
    110.0Redemption
    
    
    (110,000
    )
    
    
    (110.0
    )Balance as of December 31, 2008
    
    
    
    
    
    $
    Preferred F SharesBalance as of December 31, 2006
    
    
    320,000
    
    
    $
    320.0Issuance
    
    
    1,000,000
    
    
    
    1,000.0Conversion into Preferred G Shares
    
    
    (1,320,000
    )
    
    
    (1,320.0
    )Balance as of December 31, 2007 and 2008
    
    
    
    
    
    $
    Preferred G SharesBalance as of December 31, 2006
    
    
    
    
    
    $
    Issuance
    
    
    1,235,000
    
    
    
    1,235.0Conversion of Preferred F Shares into Preferred G Shares
    
    
    1,320,000
    
    
    
    1,320.0Balance as of December 31, 2007
    
    
    2,555,000
    
    
    
    2,555.0Issuance
    
    
    1,100,000
    
    
    
    1,100.0Redemption
    
    
    (1,600,000
    )
    
    
    (1,600.0
    )Balance as of December 31, 2008
    
    
    2,055,000
    
    
    $
    2,055.0
 F-39




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 20.
    
    STOCK-BASED COMPENSATION PLANS:
 (a)
    
    Quebecor Media Inc. stock option plan:Under a stock option plan established by the Company, 6,180,140 Common Shares of the Company
have been set aside for officers, senior employees, directors, and other key employees of
the Company and its subsidiaries. Each option may be exercised within a maximum period of 10
years following the date of grant at an exercise price not lower than, as the case may be,
the fair market value of the Common Shares of Quebecor Media Inc. at the date of grant, as
determined by its Board of Directors (if the Common Shares of Quebecor Media Inc. are not
listed on a stock exchange at the time of the grant), or the five-day weighted average
market price ending on the day preceding the date of grant of the Common Shares of the
Company on the stock exchange(s) where such shares are listed at the time of grant. As long
as the Common Shares of Quebecor Media Inc. are not listed on a recognized stock exchange,
optionees may exercise their vested options during one of the following periods: from March
1 to March 30, from June 1 to June 29, from September 1 to September 29, and from December 1
to December 30. Holders of options under the plan have the choice at the time of exercising
their options to receive an amount in cash (equal to the difference between either the
five-day weighted average market price ending on the day preceding the date of exercise of
the Common Shares of the Company on the stock exchange(s) where such shares are listed at
the time of exercise, or the fair market value, as determined by the Companys Board of
Directors, and the exercise price of their vested options) or, subject to certain stated
conditions, exercise their options to purchase Common Shares of Quebecor Media Inc. at the
exercise price. Except under specific circumstances, and unless the Compensation Committee
decides otherwise, options vest over a five-year period in accordance with one of the
following vesting schedules as determined by the Compensation Committee at the time of
grant: (i) equally over five years with the first 20% vesting on the first anniversary of
the date of the grant; (ii) equally over four years with the first 25% vesting on the second
anniversary of the date of grant; and (iii) equally over three years with the first 33 1/3%
vesting on the third anniversary of the date of grant. The acquisition of the right to
profit on certain options may also be subject to performance criteria.The following table gives summary information on outstanding options granted as of December
31, 2008 and 2007:
 2008
    
    
    
    
    
    
    2007Weighted average
    
    
    
    
    
    
    Weighted averageOptions
    
    
    exercise price
    
    
    Options
    
    
    exercise priceBalance at beginning of year
    
    
    7,029,857
    
    
    $
    32.25
    
    
    
    3,781,767
    
    
    $
    21.38Granted
    
    
    110,000
    
    
    
    46.84
    
    
    
    3,359,563
    
    
    
    44.38Exercised
    
    
    (2,824,012
    )
    
    
    19.00
    
    
    
    
    
    
    
    Cancelled
    
    
    (472,548
    )
    
    
    43.21
    
    
    
    (111,473
    )
    
    
    29.49Balance at end of year
    
    
    3,843,297
    
    
    $
    41.05
    
    
    
    7,029,857
    
    
    $
    32.25Vested options at end of year
    
    
    232,903
    
    
    $
    32.14
    
    
    
    2,517,181
    
    
    $
    18.42
 During the year ended December 31, 2008, 2,824,012 stock options were exercised and resulted
in a cash payment of $94.1 million by the Company.
 F-40




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 20.
    
    STOCK-BASED COMPENSATION PLANS (continued):
 (a)
    
    Quebecor Media Inc. stock option plan (continued):The following table gives summary information on outstanding options as of December 31,
2008:
 Outstanding options
    
    
    
    
    
    
    Vested optionsWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    averageRange of
    
    
    
    
    
    average years
    
    
    exercise
    
    
    
    
    
    
    exerciseexercise price
    
    Number
    
    
    to maturity
    
    
    price
    
    
    Number
    
    
    price$15.19 to 21.75
    
    
    185,631
    
    
    
    5.10
    
    
    $
    21.56
    
    
    
    72,273
    
    
    $
    21.3022.98 to 33.41
    
    
    658,103
    
    
    
    7.28
    
    
    
    30.98
    
    
    
    91,511
    
    
    
    31.5237.82 to 50.51
    
    
    2,999,563
    
    
    
    8.64
    
    
    
    44.46
    
    
    
    69,119
    
    
    
    44.28$15.19 to 50.51
    
    
    3,843,297
    
    
    
    8.23
    
    
    $
    41.05
    
    
    
    232,903
    
    
    $
    32.14
 (b)
    
    TVA Group Inc. plans:
 (i)
    
    Stock option plan for senior executives and directorsUnder this stock option plan, 2,200,000 Class B shares of TVA Group Inc. have been set
aside for senior executives and directors of TVA Group Inc. and its subsidiaries. The
terms and the conditions of options granted are determined by TVA Group Inc.s
Compensation Committee. The subscription price of an option cannot be less than the
closing price of Class B shares on the Toronto Stock Exchange the day before the option
is granted. Options granted prior to January 2006 usually vest equally over a four-year
period, with the first 25% vesting on the second anniversary date of the date of grant.
Beginning January 2006, and unless the Compensation Committee decides otherwise, options
vest over a five-year period in accordance with one of the following vesting schedules,
as determined by the Compensation Committee at the time of grant: (i) equally over five
years with the first 20% vesting on the first anniversary of the date of the grant; (ii)
equally over four years with the first 25% vesting on the second anniversary of the date
of grant; and (iii) equally over three years with the first 33 1/3% vesting on the third
anniversary of the grant. The term of an option cannot exceed 10 years. Holders of
options under the plan have the choice, at the time of exercising their options, to
receive an amount in cash (equal to the number of shares corresponding to the options
exercised, multiplied by the difference between the fair market value and the exercise
price of the option) from TVA Group Inc. or, subject to certain conditions, exercise
their options to purchase TVA Group Inc. Class B shares at the exercise price. The fair
market value is defined by the average closing market price for a Class B share in the
last five trading days immediately preceding the date on which the option was exercised.The following table gives details on changes to outstanding options for the years ended
December 31, 2008 and 2007:
 2008
    
    
    
    
    
    
    2007Weighted average
    
    
    
    
    
    
    Weighted averageOptions
    
    
    exercise price
    
    
    Options
    
    
    exercise priceBalance at beginning of year
    
    
    983,693
    
    
    $
    16.16
    
    
    
    489,695
    
    
    $
    17.59Granted
    
    
    
    
    
    
    
    
    
    
    561,875
    
    
    
    14.82Cancelled
    
    
    (8,538
    )
    
    
    15.81
    
    
    
    (67,877
    )
    
    
    15.52Balance at end of year
    
    
    975,155
    
    
    $
    16.16
    
    
    
    983,693
    
    
    $
    16.16Vested options at end of year
    
    
    185,144
    
    
    $
    19.20
    
    
    
    84,082
    
    
    $
    20.61
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 20.
    
    STOCK-BASED COMPENSATION PLANS (continued):
 (b)
    
    TVA Group Inc. plans (continued):
 (i)
    
    Stock option plan for senior executives and directors (continued)The following table gives summary information on outstanding options as of December 31,
2008:
 Outstanding options
    
    
    
    
    
    
    Vested optionsWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    averageRange of
    
    
    
    
    
    average years
    
    
    exercise
    
    
    
    
    
    
    exerciseexercise price
    
    Number
    
    
    to maturity
    
    
    price
    
    
    Number
    
    
    price$14.50 to 16.40
    
    
    781,024
    
    
    
    8.41
    
    
    $
    14.98
    
    
    
    56,451
    
    
    $
    15.4116.41 to 21.38
    
    
    194,131
    
    
    
    5.86
    
    
    
    20.90
    
    
    
    128,693
    
    
    
    20.86$14.50 to 21.38
    
    
    975,155
    
    
    
    7.90
    
    
    $
    16.16
    
    
    
    185,144
    
    
    $
    19.20
 Had the vested options been exercised as of December 31, 2008, Quebecor Media Inc.s
interest in TVA Group Inc. would have decreased from 50.90% to 50.51% (45.24% to 45.10%
as of December 31, 2007).(ii)
    
    Share purchase plan for executives and employeesIn 1998, TVA Group Inc. introduced a share purchase plan relating to 375,000 TVA Group
Inc. Class B shares for its executives, and a share purchase plan relating to 375,000 TVA
Group Inc. Class B shares for its employees. Under the plans, participants can acquire
shares on certain terms related to their salary. The shares can be acquired at a price
equal to 90% of the average closing market price for a TVA Group Inc. Class B share on
the Toronto Stock Exchange in the five trading days immediately preceding the first day
of the annual subscription period under the plans. The plans also provide financing terms
free of interest. No Class B shares have been issued under the plans in the last three
years. As of December 31, 2008 and 2007, the remaining balance of TVA Group Inc. Class B
Shares that may be issued is 332,643 under the share purchase plan for executives and
229,753 under the share purchase plan for employees.
 (c)
    
    All stock-based option plans:For the year ended December 31, 2008, a net reversal of the consolidated stock-based
compensation charge was recorded, in an amount of $8.3 million (a net charge of
$50.8 million in 2007 and $24.8 million in 2006).
 F-42




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 21.
    
    ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME:
 Translation of netinvestments in
    
    
    Cash flowforeign operations
    
    
    hedges
    
    
    TotalBalance as of December 31, 2005
    
    
    $    (2.3
    )
    
    $
    
    
    
    $
    (2.3
    )Other comprehensive income, net of income taxes
    
    
    1.2
    
    
    
    
    
    
    
    1.2Balance as of December 31, 2006
    
    
    (1.1
    )
    
    
    
    
    
    
    (1.1
    )Cumulative effect of changes in accounting policies
    
    
    
    
    
    
    (35.5
    )
    
    
    (35.5
    )Other comprehensive (loss) income, net of income taxes
    
    
    (2.0
    )
    
    
    48.0
    
    
    
    46.0Balance as of December 31, 2007
    
    
    (3.1
    )
    
    
    12.5
    
    
    
    9.4Other comprehensive income (loss), net of income taxes
    
    
    5.0
    
    
    
    (64.6
    )
    
    
    (59.6
    )Balance as of December 31, 2008
    
    
    $     1.9
    
    
    $
    (52.1
    )
    
    $
    (50.2
    )
 No significant amount is expected to be reclassified in income over the next 12 months in
connection with derivatives designated as cash flow hedges. The balance is expected to reverse
over a 91/2 -year period.
 22.
    
    COMMITMENTS AND CONTINGENCIES:
 (a)
    
    Leases and purchasing agreements:The Company rents premises and equipment under operating leases and has entered into
long-term commitments to purchase services, capital equipment, and distribution and
broadcasting rights that call for total future payments of $398.2 million. The minimum
payments for the coming years are as follows:
 OtherLeases
    
    
    commitments2009
    
    $
    54.1
    
    
    
    $   80.82010
    
    
    37.8
    
    
    
    24.62011
    
    
    29.3
    
    
    
    14.02012
    
    
    24.4
    
    
    
    4.42013
    
    
    18.8
    
    
    
    2.82014 and thereafter
    
    
    95.2
    
    
    
    12.0
 Operating lease expenses amounted to $46.9 million, $46.1 million and $44.8 million for the
years ended December 31, 2008, 2007, and 2006, respectively.
 F-43




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 22.
    
    COMMITMENTS AND CONTINGENCIES (continued):
 (b)
    
    Contingencies:
 (i)
    
    Legal proceedings against certain of the Companys subsidiaries were initiated
by another company in relation to printing contracts, including the resiliation of
printing contracts. As with any litigation subject to a judicial process, the outcome
of such proceedings is impossible to determine with certainty. However, management
believes that the suits are without merit and intends to vigorously defend its
position.A number of other legal proceedings against the Company and its subsidiaries are
pending. In the opinion of the management of the Company and its subsidiaries, the
outcome of these proceedings is not expected to have a material adverse effect on the
Companys results or on its financial position.
 23.
    
    GUARANTEES:In the normal course of business, the Company enters into numerous agreements containing
guarantees, including the following:Operating leases:The Company has guaranteed a portion of the residual values of certain assets under operating
leases for the benefit of the lessor. Should the Company terminate these leases prior to term
(or at the end of these lease term) and should the fair value of the assets be less than the
guaranteed residual value, then the Company must, under certain conditions, compensate the
lessor for a portion of the shortfall. In addition, the Company has provided guarantees to the
lessor of certain premises leases, with expiry dates through 2017. Should the lessee default
under the agreement, the Company must, under certain conditions, compensate the lessor. As of
December 31, 2008, the maximum exposure with respect to these guarantees was $17.8 million and
no liability has been recorded in the consolidated balance sheet. In prior years, the Company
has not made any payments relating to these guarantees.Business and asset disposals:In the sale of all or part of a business or an asset, in addition to possible indemnification
relating to failure to perform covenants and breach of representations or warranties, the
Company may agree to indemnify against claims related to its past conduct of the business.
Typically, the term and amount of such indemnification will be limited by the agreement. The
nature of these indemnification agreements prevents the Company from estimating the maximum
potential liability it could be required to pay to guaranteed parties. The Company has not
accrued any amount in respect of these items in the consolidated balance sheet. In prior years,
the Company has not made any payments relating to these guarantees.Outsourcing companies and suppliers:In the normal course of its operations, the Company enters into contractual agreements with
outsourcing companies and suppliers. In some cases, the Company agrees to provide
indemnifications in the event of legal procedures initiated against them. In other cases, the
Company provides indemnification to counterparties for damages resulting from the outsourcing
companies and suppliers. The nature of the indemnification agreements prevents the Company from
estimating the maximum potential liability it could be required to pay. No amount has been
accrued in the consolidated balance sheet with respect to these indemnifications. In prior
years, the Company has not made any payments relating to these guarantees.
 F-44




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT:The Companys financial risk management policies have been established to identify and analyze
the risks faced by the Company, to set appropriate risk limits and controls, and to monitor
risks and adherence to limits. Risk management policies are reviewed regularly to reflect
changes in market conditions and in the Companys activities.From its use of financial instruments, the Company and its subsidiaries are exposed to credit
risk, liquidity risk and market risks relating to foreign exchange fluctuations, interest rate
fluctuations and equity prices. In order to manage its foreign exchange and interest rate risks,
the Company and its subsidiaries use derivative financial instruments (i) to achieve a targeted
balance of fixed and variable rate debts and (ii) to set in Canadian dollars all future payments
on debts denominated in U.S. dollars (interest and principal) and certain purchases of
inventories and other capital expenditures denominated in a foreign currency. The Company and it
subsidiaries do not intend to settle their financial derivative instruments prior to their
maturity, as none of these instruments is held or issued for speculative purposes. The Company
and its subsidiaries designate their derivative financial instruments either as fair value
hedges or cash flow hedges when they qualify for hedge accounting.
 (a)
    
    Description of derivative financial instruments:
 (i)
    
    Foreign exchange forward contracts:
 Average
    
    
    NotionalCurrencies (sold/bought)
    
    Maturing
    
    
    exchange rate
    
    
    amountQuebecor Media Inc.$/Euro
    
    Less than 1 year
    
    
    
    1.6796
    
    
    $
    21.6$/CHF
    
    Less than 1 year
    
    
    
    1.1304
    
    
    
    2.6Sun Media Corporation$/US$
    
    February 15, 2013
    
    
    
    1.5227
    
    
    
    312.2Videotron Ltd. and its subsidiaries$/US$
    
    Less than 1 year
    
    
    
    1.0865
    
    
    
    75.5
 F-45




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii)
    
    Cross-currency interest rate swaps:
 CDN dollarAnnual
    
    
    Annual
    
    
    exchange rateeffective
    
    
    nominal
    
    
    on interestinterest rate
    
    
    interest
    
    
    and capitalPeriod
    
    
    Notional
    
    
    using
    
    
    rate
    
    
    payments percovered
    
    
    amount
    
    
    hedged rate
    
    
    of debt
    
    
    one U.S. dollarQuebecor Media Inc.Senior Notes
    
    
    2007 to 2016
    
    
    US$
    700.0
    
    
    
    7.69%
    
    
    
    7.75%
    
    
    
    0.9990Senior Notes
    
    
    2006 to 2016
    
    
    US$
    525.0
    
    
    
    7.39%
    
    
    
    7.75%
    
    
    
    1.1600Term loan B credit
facilities
    
    
    2006 to 2009
    
    
    US$
    194.5
    
    
    
    6.27%
    
    LIBOR+2.00%
    
    
    
    1.1625Term loan B credit
facilities
    
    
    2009 to 2013
    
    
    US$
    194.5
    
    Bankers acceptances 3
months+2.22%
    
    LIBOR+2.00%
    
    
    
    1.1625Term loan B credit
facilities
    
    
    2006 to 2013
    
    
    US$
    145.9
    
    
    
    6.44%
    
    LIBOR+2.00%
    
    
    
    1.1625Videotron Ltd.Senior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    Bankers acceptances 3
months+2.80%
    
    
    
    6.875%
    
    
    
    1.2000Senior Notes
    
    
    2004 to 2014
    
    
    US$
    125.0
    
    
    
    7.45%
    
    
    
    6.875%
    
    
    
    1.1950Senior Notes
    
    
    2003 to 2014
    
    
    US$
    200.0
    
    Bankers acceptances 3
months+2.73%
    
    
    
    6.875%
    
    
    
    1.3425Senior Notes
    
    
    2003 to 2014
    
    
    US$
    135.0
    
    
    
    7.66%
    
    
    
    6.875%
    
    
    
    1.3425Senior Notes
    
    
    2005 to 2015
    
    
    US$
    175.0
    
    
    
    5.98%
    
    
    
    6.375%
    
    
    
    1.1781Senior Notes
    
    
    2008 to 2018
    
    
    US$
    455.0
    
    
    
    9.65%
    
    
    
    9.125%
    
    
    
    1.0210
 F-46




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii)
    
    Cross-currency interest rate swaps (continued):
 CDN dollarAnnual
    
    
    Annual
    
    
    exchange rateeffective
    
    
    nominal
    
    
    on interestinterest rate
    
    
    interest
    
    
    and capitalPeriod
    
    
    Notional
    
    
    using
    
    
    rate
    
    
    payments percovered
    
    
    amount
    
    
    hedged rate
    
    
    of debt
    
    
    one U.S. dollarSun Media CorporationSenior Notes
    
    
    2008 to 2013
    
    
    US$
    155.0
    
    Bankersacceptances3 months+3.70%
    
    
    
    7.625%
    
    
    
    1.5227Senior Notes
    
    
    2003 to 2013
    
    
    US$
    50.0
    
    Bankersacceptances3 months+3.70%
    
    
    
    7.625%
    
    
    
    1.5227
 Certain cross-currency interest rate swaps entered into by the Company and its
subsidiaries include an option that allows each party to unwind the transaction on a
specific date at the then settlement amount.
 F-47




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (iii)
    
    Interest rate swaps:
 Notional
    
    
    Pay/
    
    
    Fixed
    
    
    FloatingMaturity
    
    amount
    
    
    receive
    
    
    rate
    
    
    rateOsprey Media Publishing Inc.December 2010
    
    $
    50.0
    
    
    Pay fixed/ Receive floating
    
    
    3.53
    %
    
    Bankers acceptances 3 monthsDecember 2010
    
    $
    43.3
    
    
    Pay fixed/ Receive floating
    
    
    2.13
    %
    
    Bankers acceptances 1 monthDecember 2010
    
    $
    40.0
    
    
    Pay fixed/ Receive floating
    
    
    2.73
    %
    
    Bankers acceptances 3 monthsSun Media CorporationOctober 2012
    
    $
    38.9
    
    
    Pay fixed/ Receive floating
    
    
    3.75
    %
    
    Bankers acceptances 3 monthsTVA Group Inc.March 2010
    
    $
    45.0
    
    
    Pay fixed/ Receive floating
    
    
    1.88
    %
    
    Bankers
acceptances 1 month
 F-48




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
 (b)
    
    Fair value of financial instruments:The carrying amount of accounts receivable from external or related parties (classified as
loans and receivables), accounts payable and accrued charges to external or related parties
(classified as other liabilities), approximates their fair value since these items will be
realized or paid within one year or are due on demand.The carrying value and fair values of long-term debt and derivative financial instruments as
of December 31, 2008 and 2007 are as follows:
 2008
    
    
    2007Carrying
    
    
    
    
    
    
    Carryingvalue
    
    
    Fair value
    
    
    value
    
    
    Fair valueQuebecor Media Inc.Long-term debt 1
    
    $
    (2,013.7
    )
    
    $
    (1,491.3
    )
    
    $
    (1,664.9
    )
    
    $
    (1,646.6
    )Cross-currency interest rate swaps
    
    
    182.5
    
    
    
    182.5
    
    
    
    (159.8
    )
    
    
    (159.8
    )Foreign exchange forward
contracts
    
    
    0.1
    
    
    
    0.1
    
    
    
    (0.3
    )
    
    
    (0.3
    )Videotron Ltd.Long-term debt 1
    
    
    (1,766.6
    )
    
    
    (1,577.0
    )
    
    
    (973.3
    )
    
    
    (938.2
    )Cross-currency interest rate swaps
    
    
    69.5
    
    
    
    69.5
    
    
    
    (241.3
    )
    
    
    (241.3
    )Foreign exchange forward contracts
    
    
    9.0
    
    
    
    9.0
    
    
    
    (4.2
    )
    
    
    (4.2
    )Sun Media CorporationLong-term debt 1
    
    
    (294.2
    )
    
    
    (242.4
    )
    
    
    (238.0
    )
    
    
    (234.1
    )Cross-currency interest rate
swaps and foreign exchange
forward contract
    
    
    (53.0
    )
    
    
    (53.0
    )
    
    
    (133.1
    )
    
    
    (133.1
    )Interest rate swaps
    
    
    (3.0
    )
    
    
    (3.0
    )
    
    
    
    
    
    
    Osprey Media Publishing Inc.Long-term debt 1
    
    
    (132.3
    )
    
    
    (128.1
    )
    
    
    (145.3
    )
    
    
    (145.3
    )Interest rate swaps
    
    
    (4.1
    )
    
    
    (4.1
    )
    
    
    0.2
    
    
    
    0.2TVA Group Inc.Long-term debt 1
    
    
    (93.8
    )
    
    
    (91.4
    )
    
    
    (56.3
    )
    
    
    (56.3
    )Interest rate swaps
    
    
    (0.4
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    
  1
    
    The carrying value of long-term debt excludes adjustments to record changes in
the fair value of long-term debt related to hedged interest risk, embedded derivatives,
or financing fees. F-49




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
 (b)
    
    Fair value of financial instruments (continued):The fair value of long-term debt is estimated based on discounted cash flows using year-end
market yields or the market value of similar instruments with the same maturity, or quoted
market prices when available. The majority of derivative financial instruments (e.g.
cross-currency interest rate swaps) are traded over the counter and, as such, there are no
quoted prices. The fair value of derivative financial instruments is therefore estimated
using valuation models that project future cash flows and discount the future amounts to a
present value using the contractual terms of the derivative instrument and factors
observable in external markets, such as period-end swap rates and foreign exchange rates.
An adjustment is also included to reflect non-performance risk, impacted by the financial
and economic environment prevailing at the date of the valuation, in the recognized measure
of the fair value of the derivative instruments by applying a credit default premium to the
net exposure of the counterparty or the Company. The fair value of early settlement options
recognized as embedded derivatives is determined by option pricing models using market
inputs and assumptions, including volatility and discount factors.Due to the judgment used in applying a wide range of acceptable techniques and estimates in
calculating fair value amounts, fair values are not necessarily comparable among financial
institutions or other market participants and may not be realized in an actual sale or the
immediate settlement of the instrument.(c)
    
    Credit risk management:Credit risk is the risk of financial loss to the Company if a customer or counterparty to a
financial asset fails to meet its contractual obligations.In the normal course of business, the Company continuously monitors the financial condition
of its customers and reviews the credit history of each new customer. As of December 31,
2008, no customer balance represented a significant portion of the Companys consolidated
trade receivables. The Company establishes an allowance for doubtful accounts based on the
specific credit risk of its customers and historical trends. The allowance for doubtful
accounts amounted to $47.6 million as of December 31, 2008 ($34.0 million as of December 31,
2007). As of December 31, 2008, 11.3% of trade receivables were 90 days past their billing
date (10.9% as of December 31, 2007).The Company believes that its product lines and the diversity of its customer base are
instrumental in reducing its credit risk, as well as the impact of fluctuations in
product-line demand. The Company does not believe that it is exposed to an unusual level of
customer credit risk.From their use of derivative financial instruments, the Company and its subsidiaries are
exposed to the risk of non-performance by a third party. When the Company and its
subsidiaries enter into derivative contracts, the counterparties (either foreign or
Canadian) must have credit ratings at least in accordance with the Companys credit risk
management policy and are subject to concentration limits.(d)
    
    Liquidity risk management:Liquidity risk is the risk that the Company and its subsidiaries will not be able to meet
their financial obligations as they fall due or the risk that those financial obligations
have to be met at excessive cost. The Company and its subsidiaries manage this exposure
through staggered debt maturities. The weighted average term of Quebecor Medias
consolidated debt was approximately 5.7 years as of December 31, 2008.Company management believes that cash flows from continuing operations and available sources
of financing should be sufficient to cover committed cash requirements for capital
investments, working capital, interest payments, debt repayments, pension plan
contributions, and dividends (or distributions) in the future. The Company has access to
cash flows generated by its subsidiaries through dividends (or distributions) and cash
advances paid by its wholly owned subsidiaries and through dividends paid by its publicly
traded subsidiary, TVA Group Inc.
 F-50




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
 (d)
    
    Liquidity risk management (continued):As of December 31, 2008, material contractual obligations related to financial instruments
included capital repayment and interest on long-term debt and obligations related to
derivative instruments, less estimated future receipts on derivative instruments. These
obligations and their maturities are as follows:
 Less than
    
    
    
    
    
    
    
    
    
    
    5 yearsTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    or moreBank indebtedness
    
    $
    11.5
    
    
    $
    11.5
    
    
    $
    
    
    
    $
    
    
    
    $
    Accounts payable and accrued
charges
    
    
    793.7
    
    
    
    793.7
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    4,300.6
    
    
    
    37.1
    
    
    
    328.3
    
    
    
    921.3
    
    
    
    3,013.9Interest payments 1
    
    
    1,746.0
    
    
    
    241.4
    
    
    
    549.0
    
    
    
    491.4
    
    
    
    464.2Derivative instruments 2
    
    
    (176.4
    )
    
    
    (0.2
    )
    
    
    (0.3
    )
    
    
    48.3
    
    
    
    (224.2
    )Total
    
    $
    6,675.4
    
    
    $
    1,083.5
    
    
    $
    877.0
    
    
    $
    1,461.0
    
    
    $
    3,253.9
  1
    
    Estimate of interest to be paid on long-term debt is based on hedged and
unhedged interest rates and hedged foreign exchange rates as of December 31, 2008.2
    
    Estimated future receipts, net of future disbursements, on derivative financial
instruments related to foreign exchange hedging. (e)
    
    Market risk:Market risk is the risk that changes in market prices due to foreign exchange rates,
interest rates and/or equity prices will affect the value of the Companys financial
instruments. The objective of market risk management is to mitigate and control exposures
within acceptable parameters while optimizing the return on risk.Foreign currency riskMost of the Companys consolidated revenues and expenses, other than interest expense on
U.S. dollar-denominated debt, purchases of set-top boxes and cable modems and certain
capital expenditures, are received or denominated in Canadian dollars. A large portion of
the interest, principal and premium, if any, payable on its debt is payable in U.S. dollars.
The Company and its subsidiaries have entered into transactions to hedge the foreign
currency risk exposure on 100% of their U.S. dollar-denominated debt obligations outstanding
as of December 31, 2008 and to hedge their exposure on certain purchases of set-top boxes,
cable modems and capital expenditures. Accordingly, the Companys sensitivity to variations
in foreign exchange rates is economically limited.
 F-51




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
 (e)
    
    Market risk (continued):Foreign currency risk (continued)The following table summarizes the estimated sensitivity on income and other comprehensive
income, before income tax and non-controlling interest, of a variance of $0.10 in the
year-end exchange rate of a Canadian dollar per one U.S. dollar:
 OthercomprehensiveIncome
    
    
    incomeIncrease of $0.10U.S. dollar-denominated accounts payable
    
    $
    (0.7
    )
    
    
    $     Gain (loss) on valuation and translation of financial instruments and
derivative financial instruments
    
    
    (1.2
    )
    
    
    78.2Decrease of $0.10U.S. dollar-denominated accounts payable
    
    
    0.7
    
    
    
    Gain (loss) on valuation and translation of financial instruments and
derivative financial instruments
    
    
    1.2
    
    
    
    (78.2
    )
   Interest rate risk and non-performance riskThe Companys and its subsidiaries revolving and bank credit facilities bear interest at
floating rates based on the following reference rates: (i) Bankers acceptance rate (BA),
(ii) London Interbank Offered Rate (LIBOR) and (iii) bank prime rate (prime). The Senior
Notes issued by the Company and its subsidiaries bear interest at fixed rates. The Company
and its subsidiaries have entered into various interest rate and cross-currency interest
rate swap agreements in order to manage cash flow and fair value risk exposure due to
changes in interest rates. As of December 31, 2008, after taking into account the hedging
instruments, long-term debt was comprised of 64.5% fixed rate debt and 35.5% floating rate
debt.The estimated sensitivity on financial expense for floating rate debt, before income tax and
non-controlling interest, of a 100 basis-point variance in the year-end Canadian Bankers
acceptance rate is $15.0 million.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
 (e)
    
    Market risk (continued):Interest rate risk and non-performance risk (continued)The estimated sensitivities on income and other comprehensive income, before income tax and
non-controlling interest, of a 100 basis point variance in the discount rate used to
calculate the fair value of financial instruments, as per the Companys valuation model, are
as follows:
 Income
    
    
    Other comprehensive incomeIncrease of 100 basis point
    
    $
    10.3
    
    
    
    $   (1.6
    )Decrease of 100 basis point
    
    
    (10.3
    )
    
    
    1.6
   (f)
    
    Capital management:
 The Companys primary objective in managing capital is to maintain an optimal capital base
in order to support the capital requirements of its various businesses, including growth
opportunities.In managing its capital structure, the Company takes into account the asset characteristics
of its subsidiaries and planned requirements for funds, leveraging their individual
borrowing capacities in the most efficient manner to achieve the lowest cost of financing.
Management of the capital structure involves the issuance of new debt, the repayment of
existing debt using cash generated by operations, and the level of distributions to
shareholders. The Company has not significantly changed its strategy regarding the
management of its capital structure since the last financial year.The Companys capital structure is composed of shareholders equity, bank indebtedness,
long-term debt, assets and liabilities related to derivative financial instruments, and
non-controlling interest, less cash and cash equivalents. The capital structure is as
follows:
 2008
    
    
    2007Bank indebtedness
    
    $
    11.5
    
    
    $
    16.3Long-term debt
    
    
    4,335.8
    
    
    
    3,027.5Net (assets) liabilities related to derivative financial instruments
    
    
    (200.6
    )
    
    
    538.5Non-controlling interest
    
    
    106.0
    
    
    
    154.2Cash and cash equivalents
    
    
    (22.5
    )
    
    
    (26.1
    )Net liabilities
    
    
    4,230.2
    
    
    
    3,710.4Shareholders equity
    
    $
    1,943.0
    
    
    $
    2,450.3
 The Company is not subject to any externally imposed capital requirements other than certain
restrictions under the terms of its borrowing agreements, which relate to permitted
investments, inter-company transactions, the declaration and payment of dividends or other
distributions.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
  25.
    
    RELATED PARTY TRANSACTIONS:Operating transactionsDuring the year ended December 31, 2008, the Company and its subsidiaries made purchases and
incurred rent charges from the parent company, companies under common control and affiliated
companies in the amount of $11.8 million ($9.0 million in 2007 and $14.8 million in 2006), which
are included in cost of sales and selling and administrative expenses. The Company and its
subsidiaries made sales to companies under common control and to an affiliated company in the
amount of $0.4 million ($0.4 million in 2007 and $0.2 million in 2006). These transactions were
concluded and accounted for at the exchange amount.During the year ended December 31, 2008, the Company, received interest of $1.0 million ($0.9
million in 2007 and 2006) from Quebecor Inc. As of December 31, 2008, cash and cash equivalents
totalling $11.8 million ($19.3 million as of December 31, 2007) have been invested on a
revolving basis in Quebecor Inc. under the terms of an agreement for the consolidation of bank
operations. These advances on demand bear interest at prime rate less 1.4%.Management arrangementsThe parent company has entered into management arrangements with the Company. Under these
management arrangements, the parent company and the Company provide management services to each
other on a cost-reimbursement basis. The expenses subject to reimbursement include the salaries
of the Companys executive officers who also serve as executive officers of the parent company.
In 2008, the Company received an amount of $3.0 million, which is included as a reduction in
selling and administrative expenses ($3.0 million in 2007 and 2006), and incurred management
fees of $1.1 million ($1.1 million in 2007 and 2006) with the shareholders.Tax transactionsIn 2008, 2007 and 2006, the parent company transferred $104.9 million, $66.5 million and $74.2
million, respectively, of non-capital losses to certain Company subsidiaries in exchange for
cash considerations of $18.4 million, $14.9 million and $16.1 million. These transactions were
recorded at the exchange amounts. As a result, the Company recorded reductions of $6.4 million
and $7.7 million, respectively, of its income tax expense in 2008 and 2007, and expects to
reduce its income tax expense by $14.0 million in the future.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 25.
    
    RELATED PARTY TRANSACTIONS (continued):Quebecor World Inc.On January 21, 2008, Quebecor World Inc. and its U.S. subsidiaries were granted creditor
protection under the Companies Creditors Arrangement Act in Canada. On the same date, its U.S.
subsidiaries also filed a petition under Chapter 11 of the United States Bankruptcy Code. Since
January 21, 2008, Quebecor World Inc. is no longer a related company under Canadian GAAP. Prior
to this date, the following transactions were made with Quebecor World Inc.:
 
    
    From January 1, 2008 to January 21, 2008, the Company made purchases from Quebecor World
Inc. of $3.0 million ($55.3 million in 2007 and $74.8 million in 2006) and made sales to
Quebecor World Inc. of $1.3 million ($17.9 million in 2007 and 2006).
    
    On January 10, 2008, the Company settled a balance of $4.3 million payable to Quebecor
World Inc. by set-off. As the balance was due in 2013 and recorded at present value, the
difference of $2.7 million between the settled amount of $7.0 million and the carrying
value of $4.3 million was recorded as a reduction in contributed surplus.
    
    In October 2007, the Company increased its investment in Nurun Inc. by acquiring.
500,000 Common Shares of Nurun Inc. from Quebecor World Inc. at the exchange amount, for a
cash consideration of $1.7 million.
    
    On October 11, 2007, the Company acquired a property from Quebecor World Inc. for a
total net consideration of $62.5 million. Simultaneously, Quebecor World Inc. entered into
a long-term operating lease with the Company to rent a portion of the property for a
17-year term. The consideration for the two transactions was settled by the payment of a
net amount of $43.9 million to Quebecor World Inc. as of the date of the transactions, and
the assumption by the Company of a $7.0 million balance of sale, including interest,
payable in 2013. The transactions were concluded and accounted for at the exchange amount.
    
    During the year ended December 31, 2006, some of the Companys subsidiaries acquired tax
benefits amounting to $6.5 million from Quebecor World Inc. that were recorded as income
taxes receivable. These transactions allowed the Company to realize a gain of $0.4 million
(net of non-controlling interest), which was recorded as contributed surplus.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 26.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS:The Company maintains various flat-benefit plans, final-pay plans with indexation features from
zero to 2%, and defined contribution plans. The Companys policy is to maintain its contribution
at a level sufficient to cover benefits. Actuarial valuations of the Companys numerous pension
plans were performed at least once in the last three years and the next required valuations will
be performed within the next three years.The Company provides postretirement benefits to eligible retired employees. The costs of these
benefits, principally health care, are accounted for during the employees active service
period.The following tables show a reconciliation of the changes in the plans benefit obligations and
the fair value of plan assets for the years ended December 31, 2008 and 2007, along with a
statement of the funded status as of those dates:
 Pension benefits
    
    Postretirement benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Change in benefit obligations:Benefit obligations at beginning of year
    
    $
    635.6
    
    
    $
    595.8
    
    
    $
    43.5
    
    
    $
    40.7Service costs
    
    
    20.7
    
    
    
    24.9
    
    
    
    1.6
    
    
    
    1.4Interest costs
    
    
    36.0
    
    
    
    31.9
    
    
    
    2.5
    
    
    
    2.0Plan participants contributions
    
    
    12.9
    
    
    
    11.1
    
    
    
    
    
    
    
    Actuarial gain
    
    
    (157.5
    )
    
    
    (34.8
    )
    
    
    (12.5
    )
    
    
    (1.0
    )Benefits and settlements paid
    
    
    (33.5
    )
    
    
    (30.2
    )
    
    
    (0.8
    )
    
    
    (0.6
    )Plan amendments
    
    
    10.9
    
    
    
    5.0
    
    
    
    
    
    
    
    Curtailment gain
    
    
    (0.9
    )
    
    
    (0.5
    )
    
    
    (0.7
    )
    
    
    Special termination benefits
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    Business acquisition
    
    
    
    
    
    
    32.4
    
    
    
    
    
    
    
    1.0Other
    
    
    1.1
    
    
    
    
    
    
    
    1.9
    
    
    
    Benefit obligations at end of year
    
    $
    526.5
    
    
    $
    635.6
    
    
    $
    35.5
    
    
    $
    43.5
 Pension benefits
    
    Postretirement benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Change in plan assets:Fair value
of plan assets at beginning of year
    
    $
    604.0
    
    
    $
    560.4
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    (77.7
    )
    
    
    5.4
    
    
    
    
    
    
    
    Employer contributions
    
    
    23.1
    
    
    
    25.0
    
    
    
    0.8
    
    
    
    0.6Plan participants contributions
    
    
    12.9
    
    
    
    11.1
    
    
    
    
    
    
    
    Benefits and settlements paid
    
    
    (33.5
    )
    
    
    (30.2
    )
    
    
    (0.8
    )
    
    
    (0.6
    )Transfer from other plans
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    Business acquisition
    
    
    
    
    
    
    32.3
    
    
    
    
    
    
    
    Fair value of plan assets at end of year
    
    $
    529.6
    
    
    $
    604.0
    
    
    $
    
    
    
    $
    
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 26.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):The plan assets are comprised of:
 2008
    
    
    2007Equity securities
    
    
    50.7
    %
    
    
    56.8
    %Debt securities
    
    
    44.9
    
    
    
    38.2Other
    
    
    4.4
    
    
    
    5.0100.0
    %
    
    
    100.0
    %
 As of December 31, 2008, plan assets included shares of related parties representing an
amount of $1.2 million ($2.2 million as of December 31, 2007).
 Pension benefits
    
    
    Postretirement benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Reconciliation of funded status:Plan surplus (deficit)
    
    $
    3.1
    
    
    $
    (31.6
    )
    
    $
    (35.5
    )
    
    $
    (43.5
    )Unrecognized actuarial loss (gain)
    
    
    6.6
    
    
    
    47.7
    
    
    
    (2.0
    )
    
    
    11.5Unrecognized net transition (asset) obligation
    
    
    (4.2
    )
    
    
    (4.6
    )
    
    
    0.3
    
    
    
    0.4Unrecognized prior service cost (benefit)
    
    
    28.4
    
    
    
    19.9
    
    
    
    (3.4
    )
    
    
    (4.6
    )Valuation allowance
    
    
    (25.3
    )
    
    
    (22.8
    )
    
    
    
    
    
    
    Net amount recognized
    
    $
    8.6
    
    
    $
    8.6
    
    
    $
    (40.6
    )
    
    $
    (36.2
    )
 Included in the above benefit obligations and fair value of plan assets at year-end are the
following amounts in respect of plans that are not fully funded:
 Pension benefits
    
    
    Postretirement benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Benefit obligations
    
    $
    (297.0
    )
    
    $
    (457.8
    )
    
    $
    (35.5
    )
    
    $
    (43.5
    )Fair value of plan assets
    
    
    287.3
    
    
    
    417.2
    
    
    
    
    
    
    
    Funded status  plan deficit
    
    $
    (9.7
    )
    
    $
    (40.6
    )
    
    $
    (35.5
    )
    
    $
    (43.5
    )
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 26.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):Amounts recognized in the consolidated balance sheets are as follows:
 Pension benefits
    
    
    Postretirement benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Deferred pension charge
    
    $
    22.9
    
    
    $
    20.7
    
    
    $
    
    
    
    $
    Accrued benefit liability
    
    
    (14.3
    )
    
    
    (12.1
    )
    
    
    (40.6
    )
    
    
    (36.2
    )Net amount recognized
    
    $
    8.6
    
    
    $
    8.6
    
    
    $
    (40.6
    )
    
    $
    (36.2
    )
  Pension benefits
    
    
    Postretirement benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Service costs
    
    $
    20.7
    
    
    $
    24.9
    
    
    $
    22.1
    
    
    $
    1.6
    
    
    $
    1.4
    
    
    $
    1.3Interest costs
    
    
    36.0
    
    
    
    31.9
    
    
    
    29.0
    
    
    
    2.5
    
    
    
    2.0
    
    
    
    1.9Actual return on plan assets
    
    
    77.7
    
    
    
    (5.4
    )
    
    
    (68.5
    )
    
    
    
    
    
    
    
    
    
    
    Current actuarial (gain) loss
    
    
    (157.5
    )
    
    
    (34.8
    )
    
    
    1.8
    
    
    
    (12.5
    )
    
    
    (1.0
    )
    
    
    1.3Current prior service costs
(benefits)
    
    
    10.9
    
    
    
    4.9
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    (3.1
    )Special termination benefits,
curtailment gain and other
    
    
    0.5
    
    
    
    (0.5
    )
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    Elements of net benefit costs
before adjustments to recognize
the long-term nature and
valuation allowance
    
    
    (11.7
    )
    
    
    21.0
    
    
    
    (14.9
    )
    
    
    (9.1
    )
    
    
    2.4
    
    
    
    1.4Difference between actual and
expected return on plan assets
    
    
    (121.3
    )
    
    
    (36.5
    )
    
    
    33.0
    
    
    
    
    
    
    
    
    
    
    
    Deferral of amounts arising during
the period:Actuarial gain (loss)
    
    
    157.5
    
    
    
    34.8
    
    
    
    (1.8
    )
    
    
    12.5
    
    
    
    1.0
    
    
    
    (1.3
    )Prior service (costs) benefits
    
    
    (10.9
    )
    
    
    (4.9
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    
    
    
    
    3.1Amortization of previously
deferred amounts:Actuarial gain
    
    
    3.4
    
    
    
    1.9
    
    
    
    2.0
    
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.6Prior service benefits (costs)
    
    
    2.4
    
    
    
    2.0
    
    
    
    1.8
    
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    (0.7
    )Transitional obligations
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total adjustments to recognize the
long-term nature of benefit costs
    
    
    31.8
    
    
    
    (3.2
    )
    
    
    33.8
    
    
    
    12.6
    
    
    
    1.1
    
    
    
    1.7Valuation allowance
    
    
    2.5
    
    
    
    3.3
    
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    Net benefit costs
    
    $
    22.6
    
    
    $
    21.1
    
    
    $
    21.0
    
    
    $
    3.5
    
    
    $
    3.5
    
    
    $
    3.1
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 26.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):The expense related to defined contribution pension plans amounted to $11.3 million in 2008
($11.1 million in 2007 and $10.9 million in 2006).The total cash amount paid or payable for employee future benefits for all plans, consisting of
cash contributed by the Company to its funded pension plans, cash payment directly to
beneficiaries for its unfunded other benefit plans, and cash contributed to its defined
contribution plans, totalled $35.2 million for the year ended December 31, 2008 ($36.7 million
in 2007 and $37.6 million in 2006).The weighted average rates used in measuring the Companys benefit obligations as of December
31, 2008, 2007, and 2006 and current periodic costs are as follows:
 Pension benefits
    
    
    Postretirement benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Benefit obligationsRates as of year-end:Discount rate
    
    
    7.50
    %
    
    
    5.50
    %
    
    
    5.00
    %
    
    
    7.50
    %
    
    
    5.50
    %
    
    
    5.00
    %Rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50Current periodic costsRates as of preceding year-end:Discount rate
    
    
    5.50
    %
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    5.50
    %
    
    
    5.00
    %
    
    
    5.00
    %Expected return on plan assets 1
    
    
    7.25
    
    
    
    7.25
    
    
    
    7.25
    
    
    
    
    
    
    
    
    
    
    
    Rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    1
    
    After management and professional fees.  Postretirement benefits1%
    
    
    1%Sensitivity analysis
    
    increase
    
    
    decreaseEffect on benefit cost
    
    $
    0.9
    
    
    $
    (0.7
    )Effect on benefit obligations
    
    
    5.5
    
    
    
    (4.2
    )
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 27.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES:The Companys consolidated financial statements are prepared in accordance with Canadian GAAP,
which differ in some respects from those applicable in the United States (U.S. GAAP). The
following tables set forth the impact of material differences between Canadian and U.S. GAAP on
the Companys consolidated financial statements of income, comprehensive income (loss) and
balance sheets:
 (a)
    
    Consolidated statements of income:
 2008
    
    
    2007
    
    
    2006Net (loss) income as per Canadian GAAP
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )Adjustments:Development, pre-operating and start-up costs (i)
    
    
    1.9
    
    
    
    1.9
    
    
    
    (0.7
    )Pension and postretirement benefits (ii)
    
    
    1.4
    
    
    
    0.8
    
    
    
    0.9Change in fair value and ineffective portion
of derivative financial instruments (iii)
    
    
    3.8
    
    
    
    11.0
    
    
    
    71.6Stock-based compensation (iv)
    
    
    4.2
    
    
    
    (6.9
    )
    
    
    (4.8
    )Impairment of goodwill (v)
    
    
    3.8
    
    
    
    
    
    
    
    Income taxes (vi), (viii)
    
    
    (11.8
    )
    
    
    (21.0
    )
    
    
    (40.1
    )3.3
    
    
    
    (14.2
    )
    
    
    26.9Net (loss) income as adjusted per U.S. GAAP
    
    $
    (376.7
    )
    
    $
    312.9
    
    
    $
    (142.8
    )
 (b)
    
    Consolidated statements of comprehensive (loss) income:
 2008
    
    
    2007
    
    
    2006Comprehensive (loss) income as per Canadian GAAP
    
    $
    (439.6
    )
    
    $
    373.1
    
    
    $
    (168.5
    )Adjustments to net (loss) income as per (a) above
    
    
    3.3
    
    
    
    (14.2
    )
    
    
    26.9Adjustments
to other comprehensive income:Pension and postretirement benefits (ii)
    
    
    45.7
    
    
    
    (5.9
    )
    
    
    17.6Derivative financial instruments (iii)
    
    
    2.0
    
    
    
    3.0
    
    
    
    132.0Income taxes (vi)
    
    
    (12.6
    )
    
    
    0.9
    
    
    
    (64.4
    )35.1
    
    
    
    (2.0
    )
    
    
    85.2Comprehensive (loss) income as per U.S. GAAP
    
    $
    (401.2
    )
    
    $
    356.9
    
    
    $
    (56.4
    )
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 27.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c)
    
    Consolidated balance sheets:
 2008
    
    
    2007Canada
    
    
    United States
    
    
    Canada
    
    
    United StatesOther assets
    
    $
    111.8
    
    
    $
    79.8
    
    
    $
    87.4
    
    
    $
    53.7Long-term future income tax assets
    
    
    12.3
    
    
    
    15.7
    
    
    
    57.4
    
    
    
    57.4Goodwill
    
    
    3,516.7
    
    
    
    3,516.7
    
    
    
    4,081.3
    
    
    
    4,077.5Current liabilities
    
    
    (1,076.1
    )
    
    
    (1,074.0
    )
    
    
    (1,018.9
    )
    
    
    (1,053.2
    )Long-term debt
    
    
    (4,298.7
    )
    
    
    (4,281.5
    )
    
    
    (3,002.8
    )
    
    
    (2,991.4
    )Other liabilities
    
    
    (97.7
    )
    
    
    (94.8
    )
    
    
    (103.5
    )
    
    
    (129.3
    )Long-term future income tax liabilities
    
    
    (357.4
    )
    
    
    (343.7
    )
    
    
    (292.5
    )
    
    
    (252.9
    )Non-controlling interest
    
    
    (106.0
    )
    
    
    (103.2
    )
    
    
    (154.2
    )
    
    
    (150.0
    )Contributed surplus (vii), (viii)
    
    
    (3,214.5
    )
    
    
    (3,412.3
    )
    
    
    (3,217.2
    )
    
    
    (3,400.9
    )Deficit
    
    
    2,973.7
    
    
    
    3,159.1
    
    
    
    2,528.7
    
    
    
    2,717.4Accumulated other comprehensive
loss (income)
    
    
    50.2
    
    
    
    52.5
    
    
    
    (9.4
    )
    
    
    28.0
 The accumulated other comprehensive (loss) income as of December 31, 2008, 2007, and 2006 is
as follows:
 2008
    
    
    2007
    
    
    2006Accumulated other comprehensive (loss) income
as per Canadian GAAP
    
    $
    (50.2
    )
    
    $
    9.4
    
    
    $
    (1.1
    )Adjustments:Pension and postretirement benefits (ii)
    
    
    (12.5
    )
    
    
    (58.2
    )
    
    
    (52.3
    )Derivative instruments (iii)
    
    
    5.0
    
    
    
    3.0
    
    
    
    (44.4
    )Income taxes (vi)
    
    
    5.2
    
    
    
    17.8
    
    
    
    25.8(2.3
    )
    
    
    (37.4
    )
    
    
    (70.9
    )Accumulated other comprehensive loss
as per U.S. GAAP
    
    $
    (52.5
    )
    
    $
    (28.0
    )
    
    $
    (72.0
    )
 (i)
    
    Under Canadian GAAP, certain development and pre-operating costs that satisfy
specified criteria for recoverability are deferred and amortized. Also, under Canadian
GAAP, certain start-up costs incurred in connection with various projects have been
recorded in the consolidated balance sheets under the item Other assets and are
amortized over a period not exceeding five years. Under U.S. GAAP, these costs must be
included in income as incurred.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 27.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c)
    
    Consolidated balance sheets (continued):
 (ii)
    
    Under U.S. GAAP, Statement of Financial Accounting Standards (SFAS) No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
requires the recognition of over- or under-funded positions of defined benefit pension
and other postretirement plans on the balance sheet, along with a corresponding
non-cash adjustment to be recorded in accumulated other comprehensive income (loss).Under Canadian GAAP, a company is not required to recognize over- or under-funded
positions or to recognize an additional minimum liability. However, when a defined
benefit plan gives rise to an accrued benefit asset, a company must recognize a
valuation allowance for the excess of the adjusted benefit asset over the expected
future benefit to be realized from plan assets. U.S. GAAP does not provide for a
valuation allowance against pension assets.(iii)
    
    Since January 1, 2007, standards for hedge accounting under Canadian GAAP are
similar to those under U.S. GAAP, as established by SFAS 133, Accounting for Derivative
Instruments and Hedging Activities.However, under Canadian GAAP, certain embedded derivatives, such as early settlement
options included in some of the Companys borrowing agreements, do not meet the criteria
to be considered closely related to their host contracts and therefore must be recorded
at their fair value with changes in income. Under U.S. GAAP, those embedded derivatives
are considered closely related to their host contract and do not have to be recorded
separately at their fair values. Accordingly, the measurement of ineffective hedging
relationships recorded in income under U.S. GAAP differs from the measurement under
Canadian GAAP.(iv)
    
    Under U.S. GAAP, in accordance with SFAS 123R, Share-Based Payment, the
liability related to stock-based awards that call for settlement in cash or other
assets must be measured at its fair value based on the fair value of stock option
awards and is to be re-measured at the end of each reporting period. Under Canadian
GAAP, the liability is measured and re-measured based on the intrinsic values of the
stock option awards instead of their fair values.(v)
    
    In respect of the 1999 acquisition of Sun Media Corporation, certain of the
restructuring costs related to the acquired newspapers were recorded in the purchase
equation as goodwill under Canadian GAAP, but were excluded from the purchase equation
and expensed under U.S. GAAP. The difference between the carrying value of goodwill
under Canada GAAP and U.S. GAAP resulted in an adjustment of the 2008 goodwill
impairment charge.(vi)
    
    Under U.S. GAAP, the FASB issued interpretation No. 48, Accounting for
Uncertainty in Income Taxes(FIN 48), an interpretation of SFAS. 109, Accounting for
Income Taxes.FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in accordance with SFAS 109 and
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. This interpretation also provides guidance as to derecognition,
classification, interest and penalties, accounting in interim periods, disclosure, and
transition.Under Canadian GAAP, there is no such interpretation and therefore the reserve related
to income tax contingencies is not based on the same level of likelihood as prescribed
by FIN 48.Further, under Canadian GAAP, income taxes are measured using substantively enacted tax
rates, while under U.S. GAAP, measurement is based on enacted tax rates.Other adjustments represent the tax impact of U.S. GAAP adjustments.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 27.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c)
    
    Consolidated balance sheets (continued):
 (vii)
    
    Under Canadian GAAP, a gain on repurchase of redeemable preferred shares of a
subsidiary was included in income in 2003. Under U.S. GAAP, any such gain is included
in contributed surplus.(viii)
    
    The Company and its subsidiaries have entered into tax consolidation transactions
with the Companys parent company, through which tax losses have been transferred
between the parties. Under Canadian GAAP, this resulted in the recognition of deferred
credits. Under U.S. GAAP, since those transactions related to asset transfers between
related parties, the difference between the carrying value of the tax benefits
transferred and the cash consideration received or paid would have been recognized in
contributed surplus.(ix)
    
    On January 1, 2008, the Company adopted the provisions of SFAS 157, Fair Value
Measurements, which enhance guidance for using fair value to measure assets and
liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-1,
Application of SFAS 157 to FASB Statement No. 13 and Other Accounting Pronouncements
that Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13, which removes certain leasing transactions from the
scope of SFAS 157, and FSP FAS 157-2, Effective Date of SFAS 157, which defers the
effective date of SFAS 157 for one year for certain non-financial assets and
non-financial liabilities, except those that are recognized or disclosed at fair value
in the financial statements on a recurring basis. The Company is still in the process
of evaluating this standard with respect to its effect on non-financial assets and
liabilities and has not yet determined the impact it will have on its financial
statements on full adoption in 2009.(x)
    
    In December 2007, the FASB issued SFAS 141 (Revised 2007), Business
Combinations(SFAS 141R), and SFAS 160, Non-controlling Interests in Consolidated
Financial Statements(SFAS 160), to improve and internationally converge the accounting
for business combinations, the reporting of non-controlling interests in consolidated
financial statements, the accounting and reporting standards for a non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. The provisions of
SFAS 141R apply prospectively to business combinations for which the acquisition date
is on or after December 31, 2008, and SFAS 160 will be effective as of the beginning of
2009. The Company is currently evaluating the impact of adopting SFAS 160 on its
consolidated financial statements.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 28.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY:The Company has access to the cash flows generated by its subsidiaries by way of dividends
declared by its public subsidiaries and dividends and advances from its private subsidiaries.
However, some of the Companys subsidiaries have restrictions, based on contractual debt
obligations and corporate solvency tests, regarding the amounts of dividends and advances that
can be paid to the Company.The U.S Securities and Exchange Commission requires that the non-consolidated financial
statements of the parent company be presented when its subsidiaries have restrictions that may
limit the amount of cash that can be paid to the parent company. These non-consolidated and
condensed financial statements, as prepared under Canadian GAAP, are shown below.Non-consolidated and condensed statements of income and comprehensive (loss) income
 2008
    
    
    2007
    
    
    2006RevenuesManagement fees
    
    $
    46.4
    
    
    $
    65.4
    
    
    $
    41.8Interest on loan to subsidiaries
    
    
    
    
    
    
    3.4
    
    
    
    0.7Other
    
    
    
    
    
    
    
    
    
    
    7.346.4
    
    
    
    68.8
    
    
    
    49.8ExpensesGeneral and administrative
    
    
    43.1
    
    
    
    66.5
    
    
    
    49.1Depreciation and amortization
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.8Financial
    
    
    145.8
    
    
    
    138.8
    
    
    
    106.4Loss before undernoted items
    
    
    (143.0
    )
    
    
    (137.1
    )
    
    
    (106.5
    )Gain on disposal of investments and other assets
    
    
    0.4
    
    
    
    1.0
    
    
    
    0.1Loss on debt refinancing
    
    
    
    
    
    
    
    
    
    
    (342.1
    )Loss before income taxes
    
    
    (142.6
    )
    
    
    (136.1
    )
    
    
    (448.5
    )Income taxes
    
    
    81.7
    
    
    
    41.8
    
    
    
    (93.6
    )(224.3
    )
    
    
    (177.9
    )
    
    
    (354.9
    )Equity (loss) income from subsidiaries
    
    
    (155.7
    )
    
    
    505.0
    
    
    
    185.2Net (loss) income
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )2008
    
    
    2007
    
    
    2006Net (loss) income
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )Other comprehensive (loss) income, net of income taxes
    
    
    (40.8
    )
    
    
    34.5
    
    
    
    Share of other comprehensive (loss) income from subsidiaries
    
    
    (18.8
    )
    
    
    11.5
    
    
    
    1.2(59.6
    )
    
    
    46.0
    
    
    
    1.2Comprehensive (loss) income
    
    $
    (439.6
    )
    
    $
    373.1
    
    
    $
    (168.5
    )
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 28.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):
  2008
    
    
    2007
    
    
    2006Cash flows related to operationsNet (loss) income
    
    $
    (380.0
    )
    
    $
    327.1
    
    
    $
    (169.7
    )Amortization of plant, property and equipment
    
    
    0.5
    
    
    
    0.6
    
    
    
    0.8Loss on valuation and translation of financial instruments
    
    
    8.8
    
    
    
    10.5
    
    
    
    13.8Gain on disposal of investments and other assets
    
    
    (0.4
    )
    
    
    (1.0
    )
    
    
    (0.1
    )Loss on debt refinancing
    
    
    
    
    
    
    
    
    
    
    342.1Repayment of accrued interest on Senior Discount Notes
    
    
    
    
    
    
    
    
    
    
    (197.3
    )Amortization of financing costs and of long term
debt discount
    
    
    6.1
    
    
    
    1.5
    
    
    
    4.8Future income taxes
    
    
    81.7
    
    
    
    41.8
    
    
    
    (93.3
    )Excess of equity loss (income) on dividends from
subsidiaries
    
    
    446.4
    
    
    
    (420.3
    )
    
    
    (86.3
    )Net change in non-cash balances related to operations
    
    
    (24.5
    )
    
    
    56.5
    
    
    
    21.2Cash flows provided by (used in) operations
    
    
    138.6
    
    
    
    16.7
    
    
    
    (164.0
    )Cash flows related to investing activitiesNet acquisitions of investments in subsidiaries
    
    
    (126.3
    )
    
    
    (484.9
    )
    
    
    (100.3
    )Dividends received in excess of accumulated equity income
from subsidiaries
    
    
    
    
    
    
    
    
    
    
    10.0Reduction to paid-up capital of subsidiaries
    
    
    120.0
    
    
    
    299.6
    
    
    
    164.6Disposal of a business to a subsidiary
    
    
    0.4
    
    
    
    3.5
    
    
    
    7.7Other
    
    
    (1.5
    )
    
    
    1.2
    
    
    
    8.3Cash flows (used in) provided by investing activities
    
    
    (7.4
    )
    
    
    (180.6
    )
    
    
    90.3Sub-total, balance carried forward
    
    $
    131.2
    
    
    $
    (163.9
    )
    
    $
    (73.7
    )
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 28.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):Non-consolidated and condensed statements of cash flows (continued)
 2008
    
    
    2007
    
    
    2006Sub-total, balance brought forward
    
    $
    131.2
    
    
    $
    (163.9
    )
    
    $
    (73.7
    )Cash flows related to financing activitiesProceeds from issuance of redeemable preferred shares
    
    
    1,100.0
    
    
    
    2,235.0
    
    
    
    279.0Repurchases of redeemable preferred shares
    
    
    (1,710.0
    )
    
    
    (400.0
    )
    
    
    (842.0
    )Net increase (decrease) in bank indebtedness
    
    
    0.7
    
    
    
    (0.1
    )
    
    
    1.9Borrowings under revolving facility
    
    
    4.0
    
    
    
    
    
    
    
    Repayments of long-term debt and unwinding of hedging
contracts
    
    
    (25.2
    )
    
    
    (20.7
    )
    
    
    (1,174.2
    )Issuance of long-term debt, net of financing fees
    
    
    16.3
    
    
    
    657.5
    
    
    
    1,186.5Repayment of the Additional Amount payable
    
    
    
    
    
    
    (127.2
    )
    
    
    Net decrease in prepayments under cross-currency swap
agreements
    
    
    
    
    
    
    
    
    
    
    21.6Dividends and reduction of Common Shares paid-up capital
    
    
    (65.0
    )
    
    
    (110.0
    )
    
    
    (105.0
    )Net decrease (increase) in convertible obligations,
subordinated loans and notes receivable  subsidiaries
    
    
    516.6
    
    
    
    (2,072.5
    )
    
    
    563.0Net decrease in advances to or from subsidiaries
    
    
    31.2
    
    
    
    2.1
    
    
    
    124.9Cash flows (used in) provided by financing activities
    
    
    (131.4
    )
    
    
    164.1
    
    
    
    55.7Net (decrease) increase in cash and cash equivalents
    
    
    (0.2
    )
    
    
    0.2
    
    
    
    (18.0
    )Cash and cash equivalents at beginning of year
    
    
    0.2
    
    
    
    
    
    
    
    18.0Cash and cash equivalents at end of year
    
    $
    
    
    
    $
    0.2
    
    
    $
    
 Non-consolidated and condensed balance sheets
 2008
    
    
    2007AssetsCurrent assets
    
    $
    2.7
    
    
    $
    119.3Advances to subsidiaries
    
    
    
    
    
    
    38.7Investments in subsidiaries
    
    
    3,551.8
    
    
    
    4,005.6Convertible obligations, subordinated loans and
notes receivable  subsidiaries
    
    
    2,385.9
    
    
    
    2,902.5Other assets
    
    
    204.2
    
    
    
    40.2$
    6,144.6
    
    
    $
    7,106.3
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 28.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):Non-consolidated and condensed balance sheets (continued)
 2008
    
    
    2007Liabilities and Shareholders equityCurrent liabilities
    
    $
    101.1
    
    
    $
    119.9Long-term debt
    
    
    1,972.9
    
    
    
    1,626.3Advances from subsidiaries
    
    
    62.2
    
    
    
    69.7Other liabilities
    
    
    10.4
    
    
    
    175.1Redeemable preferred shares issued to subsidiaries
    
    
    2,055.0
    
    
    
    2,665.0Shareholders equity
    
    
    1,943.0
    
    
    
    2,450.3$
    6,144.6
    
    
    $
    7,106.3
 29.
    
    EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF
INDEPENDANT REGISTERED PUBLIC ACCOUNTING FIRMOn March 5, 2009, Videotron Ltd. issued US$260.0 million in aggregate principal amount of Senior
Notes at a discount price of 98.625% for net proceeds of $332.4
million, including accrued
interest of $6.9 million and net of estimated financing fees of $6.9 million. The
Senior Notes bear interest at 9.125% for an effective interest rate
of 9.35%, payable every
six months on June 15 and December 15, and will mature on April 15, 2018. These notes are
unsecured and contain certain restrictions on Videotron Ltd., including limitations on its
ability to incur additional indebtedness, pay dividends or make other distributions. The notes
are guaranteed by specific subsidiaries of Videotron Ltd. and are redeemable at the option of
Videotron Ltd. at a decreasing premium, commencing April 15,
2013. Videotron Ltd. has fully
hedged the foreign currency risk associated with the new Senior Notes by using cross-currency
interest rate swaps, under which all payments have been set in Canadian dollars.
 F-67