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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, 2006
 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
 Commission file number: 333-13792
 QUEBECOR MEDIA INC.
  Province of Québec, Canada   612 Saint-Jacques Street
Montréal, Québec, Canada H3C 4M8
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  None
  73/4% Senior Notes due March 2016
  123,602,807 Common Shares
235,000 Cumulative First Preferred Shares, Series A
275,000 Cumulative First Preferred Shares, Series C
320,000 Cumulative First Preferred Shares, Series F
  o þ
  o þ
  þ o
  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
    
    iiiForward 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
    
    
    19ITEM 4A  UNRESOLVED STAFF COMMENTS
    
    
    67ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    68ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    106ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    118ITEM 8  FINANCIAL INFORMATION
    
    
    122ITEM 9  THE OFFER AND LISTING
    
    
    124ITEM 10  ADDITIONAL INFORMATION
    
    
    125ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    143ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    146PART IIITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    147ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    147ITEM 15  CONTROLS AND PROCEDURES
    
    
    147ITEM 16  [RESERVED]
    
    
    147ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    147ITEM 16B  CODE OF ETHICS
    
    
    147ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    147ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    148ITEM 16E  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    148PART IIIITEM 17  FINANCIAL STATEMENTS
    
    
    148ITEM 18  FINANCIAL STATEMENTS
    
    
    148ITEM 19  EXHIBITS
    
    
    149Signature
    
    
    153Index to Consolidated Financial Statements
    
    
    154Certificate of Amendmentby law number 2007-1 of Quebecor Media IncStatement regarding calculation of ratio of earning to fixed chargesSubsidiaries of Quebecor Media Inc.Certification of Pierre Karl Peladeau (S. 302)Certification of Louis Morin (S. 302)Certification of Pierre Karl Peladeau (S. 906)Certification of Louis Morin (S. 906)




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




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EXCHANGE RATE INFORMATION
  Year Ended
    
    Average(1)
    
    High
    
    Low
    
    Period EndDecember 31, 2002
    
    
    0.6370
    
    
    
    0.6619
    
    
    
    0.6200
    
    
    
    0.6329December 31, 2003
    
    
    0.7205
    
    
    
    0.7738
    
    
    
    0.6349
    
    
    
    0.7738December 31, 2004
    
    
    0.7719
    
    
    
    0.8493
    
    
    
    0.7158
    
    
    
    0.8310December 31, 2005
    
    
    0.8282
    
    
    
    0.8690
    
    
    
    0.7872
    
    
    
    0.8579December 31, 2006
    
    
    0.8847
    
    
    
    0.9100
    
    
    
    0.8528
    
    
    
    0.8582
 Month Ended
    
    Average(2)
    
    High
    
    Low
    
    Period EndSeptember 30, 2006
    
    
    0.8960
    
    
    
    0.9048
    
    
    
    0.8872
    
    
    
    0.8968October 31, 2006
    
    
    0.8861
    
    
    
    0.8965
    
    
    
    0.8784
    
    
    
    0.8907November 30, 2006
    
    
    0.8804
    
    
    
    0.8869
    
    
    
    0.8715
    
    
    
    0.8762December 31, 2006
    
    
    0.8672
    
    
    
    0.8760
    
    
    
    0.8582
    
    
    
    0.8582January 31, 2007
    
    
    0.8502
    
    
    
    0.8586
    
    
    
    0.8457
    
    
    
    0.8480February 28, 2007
    
    
    0.8540
    
    
    
    0.8631
    
    
    
    0.8437
    
    
    
    0.8547March 2007 (through March 15, 2007)
    
    
    0.8513
    
    
    
    0.8557
    
    
    
    0.8467
    
    
    
    0.8506
 
 (1)
    
    The average of the exchange rates on the last day of each month during the
applicable year.(2)
    
    The average of the exchange rates for all days during the applicable month. iii




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FORWARD LOOKING STATEMENTS
  
    
    general economic, financial or market conditions;
    
    the intensity of competitive activity in the industries in which we operate,
including competition from alternative means of programs and content transmission;
    
    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 continue to distribute a wide range of television programming and to
attract large audiences and readership;
    
    variations in the cost, quality and variety of our television programming;
    
    cyclical and seasonal variations in our advertising revenue;
    
    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;
    
    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 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.
  iv




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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
 Years Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(in millions, except ratio)STATEMENT OF INCOME DATA:RevenuesCable
    
    $
    1,309.5
    
    
    $
    1,080.3
    
    
    $
    937.6
    
    
    $
    862.8
    
    
    $
    843.1Newspapers
    
    
    928.2
    
    
    
    915.6
    
    
    
    888.1
    
    
    
    845.9
    
    
    
    831.6Broadcasting
    
    
    393.3
    
    
    
    401.4
    
    
    
    358.0
    
    
    
    340.9
    
    
    
    323.4Leisure and Entertainment
    
    
    315.8
    
    
    
    255.4
    
    
    
    241.7
    
    
    
    205.0
    
    
    
    206.3Interactive Technologies and Communications
    
    
    73.9
    
    
    
    65.1
    
    
    
    51.9
    
    
    
    44.8
    
    
    
    49.9Internet/Portals
    
    
    64.9
    
    
    
    50.0
    
    
    
    34.5
    
    
    
    28.2
    
    
    
    26.8Head Office and inter-segment
    
    
    (74.7
    )
    
    
    (64.9
    )
    
    
    (49.4
    )
    
    
    (29.5
    )
    
    
    (28.1
    )3,010.9
    
    
    
    2,702.9
    
    
    
    2,462.4
    
    
    
    2,298.1
    
    
    
    2,253.0Cost of sales, selling and administrative expenses
    
    
    (2,208.1
    )
    
    
    (1,969.3
    )
    
    
    (1,765.2
    )
    
    
    (1,686.3
    )
    
    
    (1,680.6
    )Amortization
    
    
    (260.7
    )
    
    
    (231.9
    )
    
    
    (225.9
    )
    
    
    (226.6
    )
    
    
    (224.6
    )Financial expenses
    
    
    (224.6
    )
    
    
    (285.3
    )
    
    
    (314.6
    )
    
    
    (300.1
    )
    
    
    (323.4
    )Reserve for restructuring of operations,
impairment of assets and other special charges
    
    
    (18.9
    )
    
    
    0.2
    
    
    
    (2.8
    )
    
    
    (1.8
    )
    
    
    (36.9
    )(Loss) gain on debt refinancing and on repurchase
of redeemable preferred shares of a subsidiary
    
    
    (342.6
    )
    
    
    (60.0
    )
    
    
    (4.8
    )
    
    
    144.1
    
    
    
    Gain (loss) on sales of businesses and other assets
    
    
    2.2
    
    
    
    0.1
    
    
    
    9.3
    
    
    
    (1.1
    )
    
    
    3.6Depreciation of goodwill and intangible assets
    
    
    (180.0
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    (178.1
    )Income taxes
    
    
    52.6
    
    
    
    (44.0
    )
    
    
    (37.4
    )
    
    
    12.5
    
    
    
    (4.4
    )Non-controlling interest
    
    
    (0.4
    )
    
    
    (16.2
    )
    
    
    (31.7
    )
    
    
    (34.6
    )
    
    
    (30.5
    )(Loss) income from discontinued operations
    
    
    (0.1
    )
    
    
    
    
    
    
    (1.1
    )
    
    
    0.2
    
    
    
    (7.9
    )Net (loss) income
    
    
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
    
    
    $
    203.9
    
    
    $
    (229.8
    )OTHER FINANCIAL DATA AND RATIO:Operating income(1)
    
    $
    802.8
    
    
    $
    733.6
    
    
    $
    697.2
    
    
    $
    611.8
    
    
    $
    572.4Additions to property, plant and equipment
    
    
    435.5
    
    
    
    319.8
    
    
    
    181.1
    
    
    
    131.2
    
    
    
    135.8Ratio of earnings to fixed charges(2)
    
    
    
    
    
    
    1.5
    x
    
    
    1.5
    x
    
    
    1.7
    x
    
    
    0.4
    x
 As at December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(in millions)BALANCE SHEET DATA:Cash and cash equivalents
    
    $
    34.1
    
    
    $
    97.4
    
    
    $
    108.8
    
    
    $
    103.6
    
    
    $
    188.3Total assets
    
    
    6,583.9
    
    
    
    6,675.5
    
    
    
    6,509.2
    
    
    
    6,610.6
    
    
    
    6,742.8Total debt
    
    
    2,796.1
    
    
    
    2,533.2
    
    
    
    2,548.8
    
    
    
    2,756.8
    
    
    
    3,506.6Capital stock
    
    
    1,752.4
    
    
    
    1,773.7
    
    
    
    1,773.7
    
    
    
    1,773.7
    
    
    
    1,341.8Shareholders equity
    
    
    2,237.0
    
    
    
    2,450.1
    
    
    
    2,459.9
    
    
    
    2,395.0
    
    
    
    1,751.9
 2




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U.S. GAAP DATA
 Year Ended December 31,2006
    
    2005
    
    2004(in millions, except ratio)STATEMENT OF INCOME DATA:RevenuesCable
    
    $
    1,312.2
    
    
    $
    1,086.5
    
    
    $
    946.9Newspapers
    
    
    928.2
    
    
    
    915.6
    
    
    
    888.1Broadcasting
    
    
    393.3
    
    
    
    401.4
    
    
    
    358.0Leisure and Entertainment
    
    
    315.8
    
    
    
    255.4
    
    
    
    241.7Interactive Technologies and Communications
    
    
    73.9
    
    
    
    65.1
    
    
    
    51.9Internet/Portals
    
    
    64.9
    
    
    
    50.0
    
    
    
    34.5Head Office and inter-segment
    
    
    (74.7
    )
    
    
    (64.9
    )
    
    
    (49.4
    )3,013.6
    
    
    
    2,709.1
    
    
    
    2,471.7Cost of sales, selling and administrative expenses
    
    
    (2,216.9
    )
    
    
    (1,973.5
    )
    
    
    (1,764.3
    )Amortization
    
    
    (257.9
    )
    
    
    (229.6
    )
    
    
    (225.7
    )Financial expenses
    
    
    (209.5
    )
    
    
    (285.5
    )
    
    
    (308.0
    )Reserve for restructuring of operations,
impairment of assets and other special charges
    
    
    (18.9
    )
    
    
    0.2
    
    
    
    (2.8
    )Loss on debt refinancing
    
    
    (275.7
    )
    
    
    (48.5
    )
    
    
    (4.8
    )Gain on sales of businesses and other assets
    
    
    2.2
    
    
    
    1.6
    
    
    
    9.3Depreciation of goodwill and intangible assets
    
    
    (180.0
    )
    
    
    
    
    
    
    Income taxes
    
    
    9.2
    
    
    
    (14.2
    )
    
    
    (43.4
    )Non-controlling interest
    
    
    (1.3
    )
    
    
    (18.4
    )
    
    
    (35.1
    )Loss from discontinued operations
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.8
    )Net (loss) income
    
    $
    (135.3
    )
    
    $
    141.2
    
    
    $
    96.1OTHER FINANCIAL DATA AND RATIOS:Operating income(1)
    
    $
    796.7
    
    
    $
    735.6
    
    
    $
    707.4Additions to property, plant and equipment
    
    
    435.5
    
    
    
    319.8
    
    
    
    181.1Comprehensive (loss) income
    
    
    (48.9
)

    
    
    172.4
    
    
    
    (11.3
    )Ratio of earnings to fixed charges(2)
    
    
    
    
    
    
    1.6
    x
    
    
    1.6
    x
 As of December 31,2006
    
    2005
    
    2004(in millions)BALANCE SHEET DATA:Cash and cash equivalents
    
    $
    34.1
    
    
    $
    97.4
    
    
    $
    108.8Total assets
    
    
    6,533.4
    
    
    
    6,664.1
    
    
    
    6,480.1Long-term debt
    
    
    2,723.2
    
    
    
    2,468.5
    
    
    
    2,514.9Capital stock
    
    
    1,752.4
    
    
    
    1,773.7
    
    
    
    1,773.7Shareholders equity
    
    
    2,189.3
    
    
    
    2,301.7
    
    
    
    2,218.4
 
 (1)
    
    Quebecor Media defines operating income, as reconciled to net (loss) income under
Canadian GAAP, as net (loss) income before amortization, financial expenses, reserve for
restructuring of operations, impairment of assets and other special charges, (loss) gain on
debt refinancing and on repurchase of redeemable preferred shares of a subsidiary, gain (loss)
on sales of businesses and other assets, depreciation of goodwill and intangible assets,
income taxes, non-controlling interest and (loss) income from discontinued operations.
Quebecor Media defines operating income, as reconciled to net (loss) income under U.S. GAAP,
as net (loss) income before amortization, financial expenses, reserve for restructuring of
operations, impairment of assets and other special charges, loss on debt refinancing, gain on
sales of businesses and other assets, depreciation of goodwill and intangible assets, income
taxes, non-controlling interest and loss from 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 3




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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. It is not intended to represent funds
available for debt service, dividends or distributions, reinvestment or other discretionary
uses, 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 management believes
that operating income is a meaningful measure of performance. Our parent company, Quebecor
Inc., 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. The Company uses
other measures that do reflect such costs, such as free cash flows from 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 of operating income to net (loss) income as
disclosed in our financial statements: Three Month PeriodYears Ended December 31,
    
    
    Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2006
    
    
    2005(in millions)
    
    
    (in millions)(unaudited)Reconciliation between net (loss) income and
operating income disclosed herein (Canadian
GAAP)Net (loss) income
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
    
    
    $
    203.9
    
    
    $
    (229.8
    )
    
    $
    (97.1
    )
    
    $
    58.4Amortization
    
    
    260.7
    
    
    
    231.9
    
    
    
    225.9
    
    
    
    226.6
    
    
    
    224.6
    
    
    
    68.3
    
    
    
    64.7Financial expenses
    
    
    224.6
    
    
    
    285.3
    
    
    
    314.6
    
    
    
    300.1
    
    
    
    323.4
    
    
    
    57.6
    
    
    
    68.3Reserve for restructuring of operations,
impairment of assets and other special
charges
    
    
    18.9
    
    
    
    (0.2
    )
    
    
    2.8
    
    
    
    1.8
    
    
    
    36.9
    
    
    
    9.5
    
    
    
    (0.2
    )Loss (gain) on debt refinancing and on
repurchase of redeemable preferred shares of
a subsidiary
    
    
    342.6
    
    
    
    60.0
    
    
    
    4.8
    
    
    
    (144.1
    )
    
    
    
    
    
    
    0.5
    
    
    
    (Gain) loss on sale of businesses and other
assets
    
    
    (2.2
    )
    
    
    (0.1
    )
    
    
    (9.3
    )
    
    
    1.1
    
    
    
    (3.6
    )
    
    
    (0.4
    )
    
    
    Depreciation of goodwill and intangible assets
    
    
    180.0
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    178.1
    
    
    
    179.2
    
    
    
    Income taxes
    
    
    (52.6
    )
    
    
    44.0
    
    
    
    37.4
    
    
    
    (12.5
    )
    
    
    4.4
    
    
    
    29.0
    
    
    
    16.8Non-controlling interest
    
    
    0.4
    
    
    
    16.2
    
    
    
    31.7
    
    
    
    34.6
    
    
    
    30.5
    
    
    
    (6.8
    )
    
    
    5.4Loss (income) from discontinued operations
    
    
    0.1
    
    
    
    
    
    
    
    1.1
    
    
    
    (0.2
    )
    
    
    7.9
    
    
    
    (0.4
    )
    
    
    Operating income
    
    $
    802.8
    
    
    $
    733.6
    
    
    $
    697.2
    
    
    $
    611.8
    
    
    $
    572.4
    
    
    $
    239.4
    
    
    $
    213.4
 4




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The following table provides a reconciliation under U.S. GAAP of operating income to net
(loss) income as disclosed in our financial statements: Year Ended December 31,2006
    
    
    2005
    
    
    2004(in millions)Reconciliation between net (loss) income and
operating income disclosed herein (U.S. GAAP)Net (loss) income
    
    $
    (135.3
    )
    
    $
    141.2
    
    
    $
    96.1Amortization
    
    
    257.9
    
    
    
    229.6
    
    
    
    225.7Financial expenses
    
    
    142.6
    
    
    
    274.0
    
    
    
    308.0Reserve for restructuring of operations,
impairment of assets and other special
charges
    
    
    18.9
    
    
    
    (0.2
    )
    
    
    2.8Loss on debt refinancing
    
    
    342.6
    
    
    
    60.0
    
    
    
    4.8Gain on sales of businesses and other assets
    
    
    (2.2
    )
    
    
    (1.6
    )
    
    
    (9.3
    )Depreciation of goodwill and intangible assets
    
    
    180.0
    
    
    
    
    
    
    
    Income taxes
    
    
    (9.2
    )
    
    
    14.2
    
    
    
    43.4Non-controlling interest
    
    
    1.3
    
    
    
    18.4
    
    
    
    35.1Loss from discontinued operations
    
    
    0.1
    
    
    
    
    
    
    
    0.8Operating income
    
    $
    796.7
    
    
    $
    735.6
    
    
    $
    707.4
 
 (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. For the years
ended December 31, 2002 and 2006, earnings, as calculated under Canadian GAAP, were inadequate
to cover our fixed charges, and the coverage deficiency was $209.2 million and $231.1 million.
For the year ended December 31, 2006, earnings, as calculated under U.S. GAAP, were inadequate
to cover our fixed charges, and the coverage deficiency was $147.6 million. B   Capitalization and Indebtedness
  C   Reasons for the Offer and Use of Proceeds
  5




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D   Risk Factors
 This section describes some of the risks that could affect our business, financial condition
and results of operations as well as the market value of our 7 3/4% Senior Notes due 2016, which we
refer to as our Senior Notes. The factors below should be considered in connection with any
forward-looking statements in this document and with the cautionary statements contained in
Forward-Looking Statements at the beginning of this document.
 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. Any of
these risks could materially affect our business, financial condition and results of operations.
 We operate in highly competitive industries and our inability to effectively compete could have a
material adverse effect on our business.
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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 are regularly required to make capital expenditures to remain technologically and economically
competitive. We may not be able to obtain additional capital to continue the development of our
business.
  We may not successfully implement our business and operating strategies.
  We have grown rapidly. This rapid growth presents significant strains on our management. If we do
not effectively manage our growth, our financial results and operations could be adversely
affected.
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##### Table of Contents



Our financial performance could be materially adversely affected if we cannot continue to
distribute a wide range of television programming on reasonable terms.
   Our content may not attract large audiences, which may limit our ability to generate advertising
and circulation revenue.
  We may be adversely affected by variations in our costs, quality and variety of our television
programming.
   Our advertising revenue is subject to cyclical and seasonal variations, which may cause our results
to vary.
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##### Table of Contents



We provide our digital television, Internet access and telephony services through a single
clustered network, which may be more vulnerable to widespread disruption.
  We depend on third-party suppliers and providers for services and other items critical to our
operations.
  We are dependent upon our information technology systems and those of certain third-parties and the
inability to enhance our systems or a security breach or disaster could have an adverse impact on
our financial results and operations.
  Malicious and abusive Internet practices could impair our cable data services.
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##### Table of Contents



We may not be able to protect our services from piracy, which may have a negative effect on our
customer base and lead to a possible decline in revenues.
  We may be adversely affected by variations in the cost of newsprint.
   We may be adversely affected by strikes and other labour protests.
  
    
    As of December 31, 2006, 3 of Videotrons 5 collective bargaining agreements,
representing approximately 2,275 or 94% of its unionized employees will expire between
December 2007 and December 2009; two other agreements, representing approximately 138 or
6% of its unionized employees, will expire between December 2010 and August 2011;
    
    As of February 28, 2007, 15 of Sun Medias 50 collective bargaining agreements,
representing approximately 642 or 31% of its 2,057 unionized employees, have expired.
Negotiations regarding these 15 collective bargaining agreements are either in progress
or will be undertaken in 2007. The other 35 of Sun Medias collective bargaining
agreements, representing approximately 1,415 or 69% of its unionized employees, are
scheduled to expire on various dates between October 2007 and June 2010;
    
    As of December 31, 2006, 12 of TVA Groups 15 collective bargaining agreements,
representing approximately 273 or 33% of its unionized employees, will expire between
April 2007 and the end of December 2008; 3 of its collective bargaining agreements,
representing approximately 544 or 67% of its unionized employees, have expired and
negotiations regarding these collective bargaining agreements are in progress;
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##### Table of Contents




    
    As of December 31, 2006, 1 of the remaining 6 collective bargaining agreements,
representing approximately 20 or 6% of our unionized employees, expired in 2006.
Negotiations regarding this agreements will be undertaken in 2007. The other 5
collective bargaining agreements, representing approximately 315 or 94% of our other
unionized employees, will expire between the end of April 2009 and April 2010.
 Le Journal de Montréal
 We depend on key personnel.
  Our substantial indebtedness and significant interest payment requirements could adversely affect
our financial condition and prevent us from fulfilling our obligations.
  
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations to make
interest and principal payments on our indebtedness, 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
    
    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.
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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 the notes.
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We may need to refinance certain of our indebtedness. Our inability to do so on favorable terms, or
at all, could have a material adverse effect on us.
  We may be adversely affected by fluctuations of exchange rates.
     We are subject to extensive government regulation. Changes in government regulation could adversely
affect our business, financial condition or results of operations.
  Broadcasting Act Telecommunications Act
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Broadcasting Act Telecommunications Act Broadcasting Act Telecommunications Act Radiocommunication Act Competition Act
   Radiocommunication Act i.e. i.e. Radiocommunication Act
  14




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##### Table of Contents



The CRTC may not renew our existing distribution licenses or grant us new 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.
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##### Table of Contents



We may have to support increasing costs in securing access to support structures needed for our
network.
 Telecommunications Act
  We are subject to environmental laws and regulations.
  If we fail to maintain proper and effective internal controls, our ability to produce accurate
financial statements could be impaired, which could adversely affect our ability to operate our
business, our financial results and investors view of us.
  16




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##### Table of Contents



There is no public market for our Senior Notes.
   Non-U.S. holders of our Senior Notes are subject to restrictions on the resale or transfer 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 indenture governing our Senior 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
 17




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##### Table of Contents



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.
  18




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##### Table of Contents



ITEM 4  INFORMATION ON THE COMPANY
 A   History and Development of Quebecor Media
 CT
Corporation System
 Companies Act (Québec)
   
    
    On August 2, 2006, TVA Group filed a new Normal Course Issuer Bid in
order to purchase for cancellation, between August 4, 2006 and August 3, 2007, up
to a maximum of 1,135,242 issued and outstanding Class B shares. During the
financial years ended December 31, 2006 and 2005, Quebecor Medias interest in
TVA Group increased as a result of the Substantial Issuer Bid dated May 19, 2005
and various Normal Course Issuer Bids. In 2006 and 2005 respectively, 9,800 and
3,739,599 Class B shares were repurchased under the Substantial Issuer Bid and
Normal Course Issuer Bids for cash considerations of $0.2 million and $81.9
million respectively. As a result of these repurchases, Quebecor Medias interest
in TVA Group increased by 5.5 percentage points, from 39.7% on January 1, 2005 to
45.2% as of December 31, 2006.
    
    On July 11, 2006, Nurun closed the acquisition of Crazy Labs Web
Solutions, S.L. (Crazy Labs), an interactive communications agency based in
Madrid, Spain, for a consideration of $5.9 million, including $5.1 million in
cash and $0.8 million in Common Shares of Nurun. The acquisition strengthens
Nuruns presence in Spain, where it already has an office in Barcelona.
    
    In May 2006, Sun Media acquired two community publications The Devon
Dispatch Newsand The Nouvelle Beaumont News, for total cash consideration of
$1.1 million, including acquisition costs.
    
    On February 27, 2006, Nurun renewed its Normal Course Issuer Bid to
repurchase, between March 1, 2006 and February 28, 2007, up to 1,656,016 Common
Shares for cancellation on the open market, or approximately 5% of its issued and
outstanding Common Shares. During the 12-month period ended December 31, 2006, a
total of 437,500 Common Shares were repurchased for a cash consideration of $1.6
million. In 2005, Nurun repurchased a total of 377,600 Common Shares for a
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##### Table of Contents



cash consideration
of $0.8 million under its Normal Course issuer Bid. In consideration of the
acquisition of China Interactive in January 2006 and Crazy Labs in July 2006, Nurun
issued 161,098 and 215,680 Common Shares respectively. As a result of these
transactions, Quebecor Medias interest in Nurun decreased from 57.9% as of January
1, 2005 to 57.8% as of December 31, 2006.
    
    On January 26, 2006, Nurun acquired China Interactive Limited, an
interactive marketing firm located in Shanghai, Peoples Republic of China for a
consideration of $3.0 million, including $2.4 million in cash and $0.6 million in
Common Shares of Nurun. The acquisition is an important step for Nurun in
developing the Asian markets.
    
    On January 17, 2006, we repurchased US$561.6 million in aggregate
principal amount of our 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 outstanding Senior Notes due 2011 and Senior Discount Notes
due 2011. We 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. See also Item 5. Operating and Financial Review and
Prospects below.
    
    On January 1, 2006, our indirect wholly-owned subsidiary Vidéotron
Telecom was merged with and into Vidéotron pursuant to an amalgamation under Part
IA of the Companies Act(Québec). On the same date, Vidéotron (Régional) ltée was
merged with and into CF Cable TV Inc. On July 1, 2006, Vidéotron was also merged
with its parent 9101-0827 Québec inc.
    
    On December 12, 2005, we closed our acquisition of Sogides ltée (now
Groupe Sogides inc.), which we refer to as Sogides, a major Québec-based book
publishing and distribution group which owns the publishing houses Les Éditions
de lHomme, Le Jour, Utilis, Les Presses Libres and Groupe Ville-Marie
Littérature inc. (which includes LHexagone, VLB Éditeur and Typo), and owns the
distributor Les Messageries A.D.P. inc. (Messageries ADP), which is a distributor for more than 160
Québec-based and foreign publishing houses. With this acquisition, Quebecor Media
offers a more complete selection of books by Québec authors, will be able to
promote Québec writers in Europe through the Sogides network on that continent
and becomes the largest Québec-based publisher and distributor of French-language
books in the Province of Québec. For the acquisition of Sogides, we paid cash
consideration of $24.0 million, and an additional contingent amount of $5.0
million, payable upon the satisfaction of specific conditions in 2008.
    
    On September 20, 2005, we announced, through Vidéotron, that we had
signed a strategic relationship agreement with Rogers Wireless, Inc.
(Rogers Wireless), the operator of
Canadas largest integrated wireless voice and data network, which was going to
enable us to offer Québec consumers a quadruple play of television, broadband
Internet, cable telephony and Videotron branded mobile wireless telephony
services. Recently, on August 10, 2006, we launched our mobile wireless telephony
services in the Quebec City area. Since then, the service has been completely
rolled out throughout the Province of Québec. Our services include international
roaming and popular options such as voicemail, call waiting, call
display, call forwarding, text messaging and conference calling. We are responsible for acquiring and billing
customers, as well as for providing customer support under our own brand. We
operate as a Mobile Virtual Network Operator, or MVNO, utilizing wireless voice
and data services provided by Rogers Wireless across its GSM/GPRS network.
    
    On September 16, 2005, Vidéotron issued US$175.0 million aggregate
principal amount of its 6 3/8% Senior Notes due December 15, 2015. The net proceeds
from this sale of Vidéotrons
6 3/8% Senior Notes were used primarily to refinance
the repurchase of all the outstanding Senior Notes issued by
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our CF Cable TV subsidiary and a portion of the repurchase by Quebecor Media of its
Senior Notes due 2011 and Senior Discount Notes due 2011.
    
    In August 2005, we announced a plan to invest in a new printing
facility located in Toronto, Ontario. As part of this plan, Sun Media will
transfer the printing of certain of its publications in Ontario to the new
facility. In addition, in August 2005, we announced a plan to relocate the
printing of certain Sun Media publications to a new printing facility owned by
us, located in Saint-Janvier-de-Mirabel, Québec. During the fourth quarter of
2006, this new printing facility began printing certain Québec community
publications, as well as The Ottawa Sunand 24 Heures(Montréal). The new
facilities should make it possible to consolidate some of Sun Medias printing
operations in Ontario and Québec, improve the quality of its newspaper products
and create additional revenue opportunities as well as strengthen the convergence
among our Toronto media properties.
    
    On July 19, 2005, we repurchased and retired US$128.2 million in
aggregate principal amount of our 11
1/8%Senior Notes due 2011 and
US$12.1 million in aggregate principal amount at maturity of our 13 3/4% Senior
Discount Notes due 2011 pursuant to cash tender offers commenced on June 20,
2005. We paid aggregate cash consideration of $215.3 million to purchase these
notes, including the redemption premium and the cost of settlement of related
cross-currency swap agreements, recognizing a $60.8 million loss on settlement of
debt ($41.0 million after taxes).
    
    In January 2005, Vidéotron launched its telephony services in the
Province of Québec, using VoIP technology. Vidéotron became the first major cable
company in Canada to offer consumers residential telephone service over cable.
See  Cable below.
 B  Business Overview
 Overview
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##### Table of Contents



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;
    
    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 Québec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;
    
    leverage our advanced broadband network, 98% 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 and mobile wireless
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 new telephony
service and the offering of our other advanced products and services.
 Our Strategy
  
    
    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 and continuing penetration of products and services such as
digital cable services, cable Internet access, cable and mobile
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##### Table of Contents



wireless 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.
    
    Offer multi-platform media advertising solutions.Our multi-platform media assets
enable us to provide advertisers with an integrated advertising solution. 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 will focus on further integrating our television, newspaper and magazine
publishing, and Internet advertising platforms to enable us to tailor advertising
packages to customers needs.
    
    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.
    
    Use content across media properties.We are the largest private-sector
French-language programming broadcaster, a leading producer of French-language
programming, the second largest newspaper publisher, and a leading English- and French-
language Internet news and information portal in Canada. Our objective is to further
accelerate the distribution of our content across platforms.
    
    Leverage geographic clustering.Our Vidéotron subsidiary holds cable licenses that
cover over 80% of Québecs 3 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
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Cable Television Industry Overview
  24




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##### Table of Contents



Twelve Months Ended August 31,CAGR(1)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001(Homes passed and basic cable customers in millions; dollars in billions)CanadaIndustry Revenue

    
    7.6
    %
    
    $
    4.6
    
    
    $
    4.5
    
    
    $
    4.2
    
    
    $
    3.7
    
    
    $
    3.4Homes Passed(2)

    
    3.0
    %
    
    
    10.7
    
    
    
    10.2
    
    
    
    10.0
    
    
    
    9.7
    
    
    
    9.5Basic Cable Customers
    
    
    (0.8
    )%
    
    
    6.6
    
    
    
    6.6
    
    
    
    6.6
    
    
    
    6.7
    
    
    
    6.9Basic Penetration
    
    
    
    
    
    
    61.9
    %
    
    
    65.0
    %
    
    
    65.5
    %
    
    
    69.3
    %
    
    
    72.0
    %
 Twelve Months Ended August 31,CAGR(3)
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002(Homes passed and basic cable customers in millions; US$ in billions)United StatesIndustry Revenue
    
    
    6.7
    %
    
    US$
    68.2
    
    
    US$
    62.3
    
    
    US$
    57.6
    
    
    US$
    51.3
    
    
    US$
    49.4Homes Passed(2)
    
    
    1.7
    %
    
    
    111.6
    
    
    
    110.8
    
    
    
    108.2
    
    
    
    102.9
    
    
    
    102.7Basic Cable Subscribers
    
    
    (0.4
    )%
    
    
    65.3
    
    
    
    65.3
    
    
    
    65.7
    
    
    
    66.0
    
    
    
    66.5Basic Penetration
    
    
    
    
    
    
    66.0
    %
    
    
    68.0
    %
    
    
    71.3
    %
    
    
    71.6
    %
    
    
    72.6
    %
 
 Source of Canadian data: CRTC. Source of U.S. data: NCTA, A.C. Nielsen Media Research and Kagan
Research LLC.(1)
    
    Compounded annual growth rate from 2001 through 2005.(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 2002 through 2006.   Expansion of Digital Distribution and Programming
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Products and Services
    Traditional Cable Television Services
   
    
    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 27 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
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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 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. As of December 31, 2006, we had 791,966 cable Internet
access customers, representing 50.4% of our basic customers and 32.2% of our total homes
passed. In addition, as of December 31, 2006, we had 13,426 dial-up Internet access
customers. Based on internal estimates, we are the largest provider of high-speed
Internet access services in the areas we serve with an estimated market share of 53.7%
as of December 31, 2006.
    
    Digital Television.As part of our network modernization program, 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. We launched our digital television service in March 1999 with
the introduction of digital video compression terminals in the greater Montréal area.
Since introducing our digital television service in the greater Montréal area, we have
also introduced the service in other major markets. In September 2001, we launched a new
digital service offering under the illico brand. In addition to providing high quality
sound and image quality, illico offers our customers significant programming
flexibility. Our basic digital package includes 25 television channels, 45 audio
services providing CD-quality music, 18 AM/FM radio channels, an interactive programming
guide as well as television-based e-mail capability. Our extended digital basic
television service, 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 service
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 carte basis 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, 2006, we had 623,646 customers for our digital
television service, representing 39.7% of our basic customers and 25.4% 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, 2006, approximately 94%
of our digital television customers had purchased and 6% were leasing our digital set-top
boxes.
    
    Cable Telephony. In January 2005, we launched our new cable telephony service using
VoIP technology in selected areas of the Province of Québec (South Shore and
North Shore of Montréal, the Island of Montréal, Laval and Quebec City). In 2006, we
continued to launch this service progressively among our other residential and
commercial customers in the Province of Québec which was available to 83.9% of our basic
cable customers as of December 31, 2006. Our new telephony service includes both local
and long-distance calling, and permits all of our telephony customers, both residential
and
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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 new 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 launched in December 2005, 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 new 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. As of December 31, 2006, we had 397,860 subscribers to our cable
telephony service.
    
    Mobile Wireless Telephony Services. On August 10, 2006, we launched our mobile
wireless telephony services in the Quebec City area. Since then, the service has been
completely rolled out throughout the Province of Québec. Through our strategic
relationship with Rogers Wireless, the operator of Canadas largest integrated wireless
voice and data network, we offer Québec consumers a quadruple play of television,
broadband Internet, cable telephony and Vidéotron branded mobile wireless telephony
services. Our services include international roaming and popular
options such as voicemail, call waiting, call display, call
forwarding, text messaging and conference calling. We are
responsible for acquiring and billing customers, as well as for providing customer
support under our own brand. We operate as a Mobile Virtual Network Operator, or MVNO,
utilizing wireless voice and data services provided by Rogers Wireless across its
GSM/GPRS network.
    
    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 98% of the homes passed by us.
We also offer pay television channels on a subscription basis that permit our customers
to access and watch any of their video-on-demand selections at any time at their
convenience.
    
    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.
  As of December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Homes passed(1)
    
    
    2,457,213
    
    
    
    2,419,335
    
    
    
    2,383,443
    
    
    
    2,351,344
    
    
    
    2,329,023Basic analog cableBasic customers(2)
    
    
    1,572,411
    
    
    
    1,506,113
    
    
    
    1,452,554
    
    
    
    1,424,144
    
    
    
    1,431,060Penetration(3)
    
    
    64.0
    %
    
    
    62.3
    %
    
    
    60.9
    %
    
    
    60.6
    %
    
    
    61.4
    %Digital cable
 28




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##### Table of Contents





As of December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Digital customers
    
    
    623,646
    
    
    
    474,629
    
    
    
    333,664
    
    
    
    240,863
    
    
    
    171,625Penetration(4)
    
    
    39.7
    %
    
    
    31.5
    %
    
    
    23.0
    %
    
    
    16.9
    %
    
    
    12.0
    %Number of digital terminals
    
    
    738,530
    
    
    
    537,364
    
    
    
    362,053
    
    
    
    257,350
    
    
    
    182,010Dial-up Internet accessDial-up customers
    
    
    13,426
    
    
    
    18,034
    
    
    
    23,973
    
    
    
    28,821
    
    
    
    43,627Cable Internet accessCable modem customers
    
    
    791,966
    
    
    
    637,971
    
    
    
    502,630
    
    
    
    406,277
    
    
    
    305,054Penetration(3)
    
    
    32.2
    %
    
    
    26.4
    %
    
    
    21.1
    %
    
    
    17.3
    %
    
    
    13.1
    %Telephony
servicesCable telephony customers
    
    
    397,860
    
    
    
    162,979
    
    
    
    2,135
    
    
    
    
    
    
    
    Penetration(3)
    
    
    16.2
    %
    
    
    6.7
    %
    
    
    0.1
    %Wireless telephony lines
    
    
    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. The numbers of basic customers for the years 2002-2004, inclusive, were restated in
order to permit such numbers to be compared to the 2005 and 2006 numbers of basic customers.
|   
|(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




Pricing of Our Products and Services




29



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##### Table of Contents



Service
    
    Price RangeBasic analog cable(1)
    
    $
    15.07
    
    
    
    
    
    
    $
    28.88Extended basic analog cable(1)
    
    $
    27.50
    
    
    
    
    
    
    $
    41.19Basic digital cable(1)
    
    $
    13.98
    
    
    
    
    
    
    $
    15.98Extended basic digital cable(1)
    
    $
    26.98
    
    
    
    
    
    
    $
    75.98Pay-television
    
    $
    3.99
    
    
    
    
    
    
    $
    29.99Pay-per-view (per movie or event)
    
    $
    2.99
    
    
    
    
    
    
    $
    49.99Video-on-demand (per movie or event)
    
    $
    0.99
    
    
    
    
    
    
    $
    14.99Dial-up Internet access
    
    $
    9.95
    
    
    
    
    
    
    $
    19.95Cable Internet access
    
    $
    26.95
    
    
    
    
    
    
    $
    89.95Cable telephony
    
    $
    15.95
    
    
    
    
    
    
    $
    22.95Mobile wireless telephony
    
    $
    22.65
    
    
    
    
    
    
    $
    78.10
 
 (1)
    
    These rates reflect price increases, effective March 15, 2007, of $0.69 on
basic analog cable and extended basic analog cable, $1.00 on basic digital
cable and $1.00 on extended digital cable. Our Network Technology
   450 MHz
    
    480 to
    
    750 to
    
    Two-Wayand Under
    
    625 MHz
    
    860 MHz
    
    CapabilityDecember 31, 2002
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2003
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2004
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2005
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %December 31, 2006
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %
  30




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##### Table of Contents



Marketing and Customer Care
  
    
    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;
 31




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##### Table of Contents




    
    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 Vidéotron, Archambault Group 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 1-900
service for audience voting during television programs such as Star Académie, Occupation
Doubleand other reality shows popular in Québec) 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 Vidéotron 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
   Competition
  32




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##### Table of Contents




    
    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 which is
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.
    
    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.
 33




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##### Table of Contents




    
    Other Cable Distribution.Currently, a cable operator offering television
distribution and providing cable-modem Internet access service is serving the greater
Montréal area. This cable operator, which has approximately 15,000 customers, 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 Québec, which
controls a significant portion of the telephony market in Québec, as well as other VoIP telephony service providers and cellular telephone service providers.
    
    Mobile wireless telephony services.Our new 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.
    
    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
 24 Hours Vancouver 24 Hours 24 Heures 24 Hours 24
Heures 24
Hours Calgary 24 Hours Edmonton Le Journal de Montréal The
Toronto Sun
 Messageries
Dynamiques.
    34




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##### Table of Contents



Canadian Newspaper Publishing Industry Overview
  The London Free Press
    Advertising and Circulation
   35




---



##### Table of Contents



Newspaper Operations
  
    
    the Urban Daily Group; and
    
    the Community Newspaper Group.
  The Ottawa Sun 24 Heures
 The Urban Daily Group
  Paid daily newspapers
 The London Free Press Messageries
Dynamiques
 36




---



##### Table of Contents



®
 ®
  2006 Average Readership
    
    Market Position byNewspaper
    
    Saturday
    
    Sunday
    
    Mon-Fri
    
    Paid Circulation(1)Le Journal de Montréal
    
    
    687,800
    
    
    
    470,100
    
    
    
    663,400
    
    
    
    1Le Journal de Québec
    
    
    206,300
    
    
    
    129,200
    
    
    
    182,700
    
    
    
    1The Toronto Sun
    
    
    555,100
    
    
    
    816,100
    
    
    
    705,500
    
    
    
    2The London Free Press
    
    
    169,700
    
    
    
    106,700
    
    
    
    167,200
    
    
    
    1The Ottawa Sun
    
    
    101,900
    
    
    
    97,300
    
    
    
    122,500
    
    
    
    2The Winnipeg Sun
    
    
    102,200
    
    
    
    92,200
    
    
    
    117,700
    
    
    
    2The Edmonton Sun
    
    
    138,400
    
    
    
    175,000
    
    
    
    194,600
    
    
    
    2The Calgary Sun
    
    
    145,000
    
    
    
    184,600
    
    
    
    197,900
    
    
    
    2Total Average Readership
    
    
    2,106,400
    
    
    
    2,071,200
    
    
    
    2,351,500
 
 (1)
    
    Based on paid circulation data published by the Audit Bureau of Circulations in September
2006 with respect to non-national newspapers in each market. Le Journal de Montréal. Le Journal de Montréal Messageries Dynamiques Le Journal de Montréal Le Journal de Montréal La Presse The Gazette
 Le Journal de Montréal
 Year Ended December 31,2006
    
    2005
    
    2004Le Journal de MontréalSaturday
    
    
    309,300
    
    
    
    308,000
    
    
    
    312,500Sunday
    
    
    263,700
    
    
    
    259,800
    
    
    
    262,400Monday to Friday
    
    
    263,400
    
    
    
    268,200
    
    
    
    267,000
 
 Source: Internal Statistics. 37




---



##### Table of Contents



Le Journal de Québec. Le Journal de Québec Messageries Dynamiques Le Journal de Québec Le Journal de Québec Le Soleil
 Le Journal de Québec
 Year Ended December 31,2006
    
    2005
    
    2004Le Journal de QuébecSaturday
    
    
    127,400
    
    
    
    123,400
    
    
    
    124,100Sunday
    
    
    107,300
    
    
    
    101,400
    
    
    
    101,600Monday to Friday
    
    
    104,500
    
    
    
    99,700
    
    
    
    100,500
 
 Source: Internal Statistics. The Toronto Sun. The Toronto Sun The Toronto Sun
 The Toronto Sun The Toronto Star The Globe & Mail The National
Post The Toronto Sun
 The Toronto Sun
 Year Ended December 31,2006
    
    2005
    
    2004The Toronto SunSaturday
    
    
    149,000
    
    
    
    148,000
    
    
    
    158,900Sunday
    
    
    328,500
    
    
    
    326,500
    
    
    
    339,700Monday to Friday
    
    
    189,900
    
    
    
    183,600
    
    
    
    192,600
 
 Source: Internal Statistics. The London Free Press. The London Free Press
 The London Free Press
 Year Ended December 31,2006
    
    2005
    
    2004The London Free PressSaturday
    
    
    100,400
    
    
    
    104,400
    
    
    
    108,300Sunday
    
    
    62,800
    
    
    
    64,600
    
    
    
    66,300Monday to Friday
    
    
    84,200
    
    
    
    87,600
    
    
    
    90,700
 
 Source: Internal Statistics. The London Free Press The London Pennysaver
 38




---



##### Table of Contents



The Ottawa Sun. The Ottawa Sun The Ottawa Sun The Ottawa Citizen Le Droit
 The Ottawa Sun
 Year Ended December 31,2006
    
    2005
    
    2004The Ottawa SunSaturday
    
    
    44,100
    
    
    
    44,800
    
    
    
    44,200Sunday
    
    
    51,200
    
    
    
    51,000
    
    
    
    51,600Monday to Friday
    
    
    50,500
    
    
    
    51,200
    
    
    
    49,100
 
 Source: Internal Statistics. Ottawa Sun The Ottawa Pennysaver
 The Winnipeg Sun. The Winnipeg Sun The Winnipeg Sun The Winnipeg Free Press
 The Winnipeg Sun
 Year Ended December 31,2006
    
    2005
    
    2004The Winnipeg SunSaturday
    
    
    38,200
    
    
    
    40,500
    
    
    
    41,200Sunday
    
    
    47,100
    
    
    
    49,100
    
    
    
    52,700Monday to Friday
    
    
    39,500
    
    
    
    40,600
    
    
    
    42,100
 
 Source: Internal Statistics. The Edmonton Sun. The Edmonton Sun The Edmonton Sun The Edmonton Journal
 The Edmonton Sun
 Year Ended December 31,2006
    
    2005
    
    2004The Edmonton SunSaturday
    
    
    64,700
    
    
    
    68,100
    
    
    
    66,200Sunday
    
    
    90,500
    
    
    
    94,900
    
    
    
    95,400Monday to Friday
    
    
    68,000
    
    
    
    70,000
    
    
    
    68,900
 
 Source: Internal Statistics. The Calgary Sun. The Calgary Sun The Calgary Sun The Calgary Herald
 The Calgary Sun
 39




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##### Table of Contents



Year Ended December 31,2006
    
    2005
    
    2004The Calgary SunSaturday
    
    
    59,000
    
    
    
    62,500
    
    
    
    62,800Sunday
    
    
    90,000
    
    
    
    91,500
    
    
    
    94,400Monday to Friday
    
    
    60,600
    
    
    
    62,300
    
    
    
    64,200
 
 Source: Internal Statistics. Free daily newspapers
 24 Heures. Montréal
Métropolitain 24 Heures
 24 Hours. 24 Hours Find-A-Rental 24 Hours 24
Hours
 Vancouver 24 Hours. Vancouver 24 Hours Vancouver
24 Hours
 24 Hours in Ottawa and 24 Heures in Ottawa-Gatineau . 24 Hours 24 Heures
 24 Hours Calgary and 24 Hours Edmonton .
 Competition
  Le Journal de Montréal Le Journal de Québec Le Journal de Montréal The Toronto Star Le Journal de Montréal
 The London Free Press
 The Toronto Sun The Toronto Sun 24 Hours Metro The Toronto Sun
 40




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##### Table of Contents



The Community Newspaper Group
 NetMedia
  Average DailyNewspaper
    
    Location
    
    Paid CirculationThe Brockville Recorder and Times
    
    Brockville, Ontario
    
    
    12,000Stratford Beacon Herald
    
    Stratford, Ontario
    
    
    10,500The Daily Herald Tribune
    
    Grande Prairie, Alberta
    
    
    8,600Woodstock Sentinel-Review
    
    Woodstock, Ontario
    
    
    6,800Simcoe Reformer
    
    Simcoe, Ontario
    
    
    6,800St. Thomas Time-Journal
    
    St. Thomas, Ontario
    
    
    6,600Fort McMurray Today
    
    Fort McMurray, Alberta
    
    
    3,600The Daily Miner & News
    
    Kenora, Ontario
    
    
    2,900The Daily Graphic
    
    Portage La Prairie, Manitoba
    
    
    2,600Total Average Daily Paid Circulation
    
    
    
    
    60,400
 
 Source: Internal Statistics.  Number ofProvince
    
    PublicationsQuébec
    
    
    53Ontario
    
    
    51Alberta
    
    
    45Manitoba
    
    
    12Saskatchewan
    
    
    6New Brunswick
    
    
    1Total Publications
    
    
    168
  Competition
  41




---



##### Table of Contents



Other Operations
 Commercial Printing and Distribution
   Messageries Dynamiques
 NetMedia
 Television Station
  Seasonality and Cyclicality
   Raw Materials
  42




---



##### Table of Contents



Broadcasting
 Occupation Double Lance et Compte: La
Revanche Surprise Surprise
 LCN Canal Évasion Canal Indigo illico sur Demande Canal TVAchats Argent LCN-Affaires Mystery TV Mystère Prise 2 MenTV
  43




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##### Table of Contents



Canadian Television Industry Overview
     Share of Province of QuébecNetwork
    
    Television AudienceTVA Group
    
    
    27.0
    %Société Radio-Canada
    
    
    14.0
    %Réseau TQS
    
    
    13.0
    %Télé-Québec
    
    
    3.1
    %Various French-language specialty cable channels
    
    
    36.1
    %Others
    
    
    6.8
    %
 
 Source: BBM People Meter January 1, 2006 through December 31, 2006 (audimetry data). Transition of Over-the-air Television Broadcasting from Analog to Digital
  44




---



##### Table of Contents



Television Broadcasting
 French-language Market
   English-language Market
 60 Minutes
 Advertising Sales and Revenue
  Programming
  45




---



##### Table of Contents



Specialty Broadcasting
  Type of Service
    
    Language
    
    Voting InterestAnalog Specialty Services: LCN  Le Canal Nouvelles
    
    French
    
    TVA(1) 99.9% Canal Évasion
    
    French
    
    TVA 8.3% CPAC
    
    French and English
    
    V(2) 21.7%Category One Digital Specialty Services: MenTV
    
    English
    
    TVA 51.0% Mystery (13th Street)
    
    English
    
    TVA 50.0% Mystère (13e rue)
    
    French
    
    TVA 99.9% Argent (LCN  Affaires)
    
    French
    
    TVA 99.9%Category Two Digital Specialty Services: Prise 2 (Nostalgie)
    
    French
    
    TVA 99.9%Pay Per View Services (terrestrial & direct broadcasting satellite): Canal Indigo
    
    French
    
    TVA 20.0%Video-on Demand Services: illico sur Demande
    
    French and English
    
    AG(3) 100%Exempted Programming Service: Canal TVAchats
    
    French
    
    TVA(1) 99.9%
 
 (1)
    
    TVA Group (TVA) controls the programming services. Quebecor Media controls TVA Group.(2)
    
    Vidéotron (V) controls the programming services. Quebecor Media controls Vidéotron.(3)
    
    Archambault Group (AG) controls the programming services. Quebecor Media controls the
Archambault Group. Le Canal Nouvelles LCN
 Le Canal Nouvelles LCN LCN LCNs
 Argent
 Argent Argent Argent Argent
 Canal Évasion
 Canal Évasion Canal Évasion
 46




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##### Table of Contents



MenTV
 MenTV MenTV
 Mystery TV
 Mystery TV 13th Street Mystery TV
 Mystère
 Mystère 13ieme rue Mystery TV Mystère
 Prise 2
 Prise 2 Nostalgie Prise 2
 Canal Indigo
 Canal Indigo Canal Indigo
 Canal TVAchats; Home Shopping Service; Infomercials
 La Boutique TVA Canal TVAchats
 Canadian Public Affairs Channel (CPAC)
  Authorized Digital Specialty Services
 Humour
 Télé-Services
 47




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##### Table of Contents



Star Système.
  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
 archambault.ca camelot.ca paragraphbooks.com ik.ca
  48




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##### Table of Contents



Book Publishing and Distribution
   Video-On-Demand Services
  Ownership
  Interactive Technologies and Communications
      49




---



##### Table of Contents



Ownership
  Internet/Portals
    Media Properties
  
    
    CANOE (canoe.qc.caand canoe.ca), a bilingual, integrated media and Internet services
network and one of Canadas leading Internet portals with more than 369.8 million page
views in October 2006, according to Canoe internal statistics;
    
    CanoeKlix (canoeklix.com). Canoe developed and launched in 2006 CanoeKlix, its own
pay per click software.
    
    Webfin Argent and Canoe Money (argent.canoe.comand
money.canoe.ca), a financial website which offers, among other things, a variety of services ranging from financial
information to portfolio management tools (the Webfin Argent website was redesigned in
early 2005 in partnership with TVAs new financial channel, Argent);
    
    TVA Group and LCN (tva.canoe.comand
lcn.canoe.com) dedicated websites for the TVA
television network and the LCN all-news channel, which started streaming TVA and LCN
shows live on the websites; and
    
    Several websites for popular TVA Group programs, such as Occupation Double
(occupationdouble.com) and Star Académie(staracademie.ca).
 50




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##### Table of Contents



E-commerce Properties
  
    
    Jobboom.com, a unique Web-based employment site with over 1.8 million members, which
also includes Jobboom Formation, an Internet directory of continuing education services;
    
    Autonet.ca, one of Canadas leading site devoted entirely to automobiles;
    
    ReseauContact.com/ flirt.canoe.ca, a bilingual dating and friendship site with
622,000 unique visitors per month, over 1,073,000 registered members and approximately
115,000 active members generating more than 125 million page views per month, as of
October 2006, according to internal statistics;
    
    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; and
    
    Canoeclassifieds.caand canoeclassees.ca, classified ad sites through which visitors
can view classified ads from more than 190 Canadian newspapers.
 Ownership
   Intellectual Property
    Insurance
  51




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##### Table of Contents



Environment
  Ministère du Développement durable, de
lEnvironnement et des Parcs
 C  Organizational Structure
  52




---



##### Table of Contents



Caisse de dépôt et placement du
Québec Caisse
de dépôt et placement du Québec
 D  Property, Plants and Equipment
  Cable
  53




---



##### Table of Contents



Newspapers
   Floor SpaceAddress
    

Use
of Property
    

Press
Capacity(1)
    

occupied
(sq. ft.)Toronto, Ontario
    
    Operations building,
    
    4 Metro presses
    
    274,400333 King Street East
    
    including printing plant
    
    (32 units) andThe Toronto Sun
    
    1 Metroliner press(8 units)Montréal, Québec
    
    Operations building,
    
    3 Metro presses and
    
    162,0004545 Frontenac Street
    
    including printing plant 
    
    1 Cosmo pressLe Journal de Montréal
    
    (37 units)London, Ontario
    
    Operations building,
    
    2 Headliner presses
    
    150,100369 York Street
    
    including printing plant 
    
    (12 units) andThe London Free Press
    
    1 Urbanite press(8 units)Calgary, Alberta
    
    Operations building,
    
    1 Headliner press
    
    90,0002615-12 Street NE
    
    including printing plant 
    
    (7 units)The Calgary SunVanier, Québec
    
    Operations building,
    
    2 Urbanite presses
    
    74,000450 Bechard Avenue
    
    including printing plant 
    
    (24 units)Le Journal de QuébecWinnipeg, Manitoba
    
    Operations building,
    
    1 Urbanite press
    
    63,0001700 Church Avenue
    
    including printing plant 
    
    (15 units)The Winnipeg SunEdmonton, Alberta
    
    Printing plant 
    
    1 Metro press
    
    50,7009300-47 Street
    
    The Edmonton Sun
    
    (8 units)Edmonton, Alberta
    
    Operations building
    
    N/A
    
    45,2004990-92 Avenue
    
    The Edmonton Sun  (leased until Dec. 2013)
 54




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##### Table of Contents



Floor SpaceAddress
    
    Use of Property
    
    Press Capacity(1)
    
    occupied (sq. ft.)Gloucester, Ontario
    
    Distribution facility
    
    N/A
    
    23,0004080 Belgreen Drive(2)
    
    The Ottawa SunOttawa, Ontario
    
    DriveOperations building
    
    N/A
    
    19,3006 Antares
    
    (leased until Oct. 2013) The 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 15 units.(2)
    
    In October 2006, the press facilities of The Ottawa Sunwere transferred to the new printing facilities in Saint-Janvier-de-Mirabel, owned by Quebecor Media. Accordingly, this building is currently being used principally as a distribution facility. The Ottawa Sun 24
Heures
 Television Broadcasting
  Leisure and Entertainment segment and Interactive Technologies and Communications segment
  Liens and charges
  E  Regulation
 Foreign Ownership Restrictions applicable under both the Telecom Act and the Broadcasting Act
  55




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##### Table of Contents




    
    In the first phase, the Telecommunications Act should 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 percent 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-percent
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 percent.
    
    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.
  Ownership and Control of Canadian Broadcast Undertakings
  Ineligibility of Non-Canadians
 56




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##### Table of Contents



Broadcasting Act
 Jurisdiction Over Canadian Broadcast Undertakings
 Broadcasting Act Broadcasting
Act Radiocommunication Act
 Broadcasting Act
 Canadian Broadcast Distribution (Cable Television)
 Licensing of Canadian Broadcasting Distribution Undertakings
   57




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##### Table of Contents



Distribution of Canadian Content
 Broadcasting Distribution Regulations Broadcasting Act
  58




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##### Table of Contents



1998 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.
 59




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##### Table of Contents




    
    Canadian Programming and Community Expression Financing Rules. All distributors,
except systems with less 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.
    
    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. On October 9, 2002, the CRTC, had ordered Câblage QMI
Inc. and Videotron to comply with the inside wiring access rules. In Broadcasting
Decision CRTC 2005-223 of May 31, 2005, the CRTC rescinded the Mandatory Order issued
against Videotron and its subsidiaries.
  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.
     Winback Restrictions
  60




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##### Table of Contents



Copyright Board Proceedings
  Royalties for the Retransmission of Distant Signals
 Copyright
Act
 Copyright Act
  Royalties for the Transmission of Pay and Specialty Services
 Copyright Act
 61




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##### Table of Contents



Royalties for Pay Audio Services
   Tariff in Respect of Internet Service Provider Activities
 Copyright Act
 62




---



##### Table of Contents



Canadian Broadcast Programming (Off the Air and Thematic Television)
 Programming of Canadian Content
   Advertising
  Broadcasting License Fees
   63




---



##### Table of Contents



Any update? Cause gagnée au fédéral. Dossier suivi par
Frédéric
  Canadian Telecommunications Services
 Jurisdiction
 Telecommunications Act Act
 Telecommunications Act Telecommunications Act Telecommunications Act
  Overview of the Telecommunications Competition Framework
 Review of Regulatory Framework Local Competition
 Application of Canadian Telecommunications Regulation
 Telecommunications Act
 i.e.
 64




---



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65




---



##### Table of Contents



Winback Restrictions
   Right to Access to Telecommunications and Hydro-Electric Support Structures
 Telecommunications Act Telecommunications Act
  Access by Third Parties to Cable Networks
   66




---



##### Table of Contents



Canadian Publishing
 Income Tax Act Income Tax Act
 
 ITEM 4A  UNRESOLVED STAFF COMMENTS
  67




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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 differ from U.S. GAAP in certain respects. For a discussion of
the principal differences between Canadian GAAP and U.S. GAAP, and the extent to which these
differences affect our consolidated financial statements, see note 26 to our audited consolidated
financial statements for the years ended December 31 2006, 2005 and 2004. 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
Forward-looking statements and in Item 3. Key Information  D. Risk Factors.
 Overview
    Trend Information
    68




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##### Table of Contents



Segments
  Cable segment
  Newspapers segment
 24 Hours Vancouver 24 Hours 24 Heures 24 Hours 24 Heures 24 Hours Calgary 24 Hours Edmonton
 69




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##### Table of Contents



Broadcasting segment
  Leisure and Entertainment segment
 archambault.ca ik.ca
 Interactive Technologies and Communications segment
  Internet/Portals segment
 canoe.ca, canoe.qc.ca (toile.com) money.canoe.ca argent.canoe.com jobboom.com autonet.ca reseaucontact.com micasa.ca classifieds.canoe.ca classees.canoe.ca tva.canoe.com lcn.canoe.com occupationdouble.com staracademie.ca Carrières davenir
 Quebecor Medias Interest In Subsidiaries
   70




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##### Table of Contents



Non-GAAP Financial Measures
  Operating Income
  71




---



##### Table of Contents



Free Cash Flows from Operations
  Average Revenue per User
  2006 Highlights
      72




---



##### Table of Contents



3 4
 1 8 3 4
  
     73




---



##### Table of Contents



2006/2005 Financial Year Comparison
      The London Free Press, The Toronto Sun, The Ottawa Sun Le Journal de Montréal The London Free Press The Toronto Sun
 1 8 3 4
 74




---



##### Table of Contents



.
    2006/2005 Fourth Quarter Comparison
    75




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##### Table of Contents



Segmented Analysis
 Cable segment
  illico TM illico TM illico TM
 illico TM see Chart 1 . illico TM illico TM
 see Chart 1 see Chart 1
 Chart 1
  
 76




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##### Table of Contents



(see Chart 2)
 Chart 2
  
 see Chart 3
  Chart 3
  
      illico TM
 77




---



##### Table of Contents



Table 1: Cable segment
Operating income
 2006
    
    
    2005
    
    
    2004Operating income before cost of
equipment subsidies to customers
    
    $
    541.2
    
    
    $
    450.0
    
    
    $
    400.5Cost of equipment subsidies to customers
    
    
    (28.7
    )
    
    
    (36.7
    )
    
    
    (36.7
    )Operating income
    
    $
    512.5
    
    
    $
    413.3
    
    
    $
    363.8
 (see Table 2)
 Table 2: Cable segment
Free cash flows from operations
 2006
    
    
    2005
    
    
    2004Cash flows from operating activities
before undernoted item
    
    $
    449.2
    
    
    $
    353.7
    
    
    $
    318.8Net change in non-cash balances
related to operations
    
    
    (8.6
    )
    
    
    33.5
    
    
    
    10.6Cash flows from operating activities
    
    
    440.6
    
    
    
    387.2
    
    
    
    329.4Additions to property, plant and equipment
    
    
    (302.6
    )
    
    
    (219.9
    )
    
    
    (144.5
    )Proceeds from disposal of assets
    
    
    0.6
    
    
    
    1.3
    
    
    
    3.0Free cash flows from operations
    
    $
    138.6
    
    
    $
    168.6
    
    
    $
    187.9
  78




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
    
    On January 16, 2006, Videotron increased download and upload speeds on its basic cable
Internet access service from 300 kbps to 600 kbps. On the Extreme High-Speed service,
download speeds were increased from 6.5 mbps to 10 mbps.
    
    On February 20, 2006, Videotron launched a new Extreme Plus High-Speed Internet service,
which supports speeds of up to 16 mbps. On July 17, 2006, Videotron announced an increase
in the speed of its Extreme Plus High-Speed Internet service from 16 mbps to 20 mbps.
Videotron became the first major telecom provider in Canada to offer Internet access
service of this speed throughout its service area.
    
    On August 17, 2006, Videotron announced an increase in the speed of its High-Speed
Internet service from 5.1 mbps to 7.0 mbps. The upgrade was phased in across Videotrons
service area starting September 7, 2006.
    
    On December 22, 2006, Videotron began testing a new technology that promises to
substantially increase Internet access speed across its network. The technology will enable
Videotron to offer customers throughout its service area speeds of up to 100 mbps, five
times faster than its current Extreme High-Speed Internet service.
    Newspapers segment
  Toronto Sun Le Journal de Montréal Le Journal de Montréal
  79




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Table
3: Newspapers segment
 Free cash flows from operations
 2006
    
    
    2005
    
    
    2004Cash flows from operating activities
before undernoted item
    
    $
    161.0
    
    
    $
    184.6
    
    
    $
    187.1Net change in non-cash balances
related to operations
    
    
    (16.2
    )
    
    
    (3.2
    )
    
    
    (9.7
    )Cash flows from operating activities
    
    
    144.8
    
    
    
    181.4
    
    
    
    177.4Additions to property, plant and equipment
    
    
    (116.3
    )
    
    
    (74.0
    )
    
    
    (18.8
    )Proceeds from disposal of assets
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.6Free cash flows from operations
    
    $
    29.0
    
    
    $
    107.9
    
    
    $
    159.2
 24 Hours tm 24 Heures mc
 The Ottawa Sun
  Le Journal de Montréal Le Journal
de Montréal
 Broadcasting segment
  80




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##### Table of Contents



Slither Guide de la petite
vengeance, C.R.A.Z.Y White Noise C.R.A.Z.Y White Noise.
  C.R.A.Z.Y White Noise
  TV Hebdo TV 7 Jours
 Prise 2 Nostalgie
 Leisure and Entertainment segment
  81




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##### Table of Contents



Le Guide de lauto 2007, Cuisiner avec les aliments contre le cancer Passages obligés
 Interactive Technologies and Communications segment
      82




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##### Table of Contents



Internet/Portals segment
      2005/2004 Financial Year Comparison
   illico TM
 Results of Operations
  83




---



##### Table of Contents



Segmented Analysis
 Cable segment
 illico TM
 84




---



##### Table of Contents



illico TM
         Newspapers segment
  24
Hours tm
 85




---



##### Table of Contents



Le Journal de Montréal
 24 Hours tm
 Broadcasting segment
 White Noise C.R.A.Z.Y.
 White Noise C.R.A.Z.Y.
  Leisure and Entertainment segment
    86




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##### Table of Contents



Interactive Technologies and Communications segment
    Internet/Portals segment
 jobboom.com
 micasa.ca,
 Cash Flows And Financial Position
 Operating Activities
   87




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##### Table of Contents



Financing Activities
 2006 financial year
  
 3 4
  
  88




---



##### Table of Contents



2005 financial year
     1 8 3 4
   89




---



##### Table of Contents



Investing Activities
     Financial Position
      Contractual Obligations
  90




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##### Table of Contents



Table 4
 Contractual obligations as of December 31, 2006
 Less than
    
    
    
    
    
    
    5 yrsTotal
    
    
    1 yr
    
    
    1-3 yrs
    
    
    3-5 yrs
    
    
    and moreLong-term debt
    
    $
    2,796.1
    
    
    $
    23.1
    
    
    $
    353.4
    
    
    $
    187.4
    
    
    $
    2,232.2Interest payments (1)
    
    
    1,441.1
    
    
    
    209.6
    
    
    
    395.4
    
    
    
    354.2
    
    
    
    481.9Operating leases
    
    
    158.8
    
    
    
    39.6
    
    
    
    60.2
    
    
    
    32.5
    
    
    
    26.5Capital asset purchases
and other commitments
    
    
    138.7
    
    
    
    103.1
    
    
    
    33.0
    
    
    
    2.6
    
    
    
    Derivative financial instruments
    
    
    205.3
    
    
    
    0.8
    
    
    
    63.0
    
    
    
    
    
    
    
    141.5Total contractual obligations
    
    $
    4,740.0
    
    
    $
    376.2
    
    
    $
    905.0
    
    
    $
    576.7
    
    
    $
    2,882.1
 
 (1)
    
    Estimate of interest to be paid on long-term debt based on the interest rates and foreign
exchange rate at December 31, 2006.    The Carlyle Group
   91




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Financial Instruments
          92




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##### Table of Contents



Fair Value of Derivative Financial Instruments
 (see Table 5)
 Table 5: Quebecor Media Inc.
 Fair value of derivative financial instruments
 December 31, 2006Notional
    
    
    
    
    
    
    Carrying amount
    
    
    Fair valuevalue
    
    
    
    
    
    
    asset (liability)
    
    
    asset (liability)Derivative financial instrumentsInterest rate swap agreements
    
    $
    5.0
    
    
    CAD
    
    $
    
    
    
    $
    Foreign-exchange forward contracts- In US$
    
    $
    45.2
    
    
    US
    
    
    
    
    
    
    2.1- In 
    
    
    17.4
    
    
    


    
    
    1.6
    
    
    
    1.6- In CHF
    
    
    16.1
    
    
    CHF
    
    
    0.6
    
    
    
    0.6Cross-currency interest rate
swap agreements
    
    $
    2,084.2
    
    
    US
    
    
    (216.8
    )
    
    
    (335.0
    )
 Related Party Transactions
  Management arrangements
   Lease arrangements
  Commercial printing and other services
  93




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Tax benefit transactions
   94




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##### Table of Contents



Off-balance sheet arrangements
 Guarantees
  Operating leases
  Business and asset disposals
  Outsourcing companies and suppliers
  Risks and Uncertainties
  Labour disputes
  
    
    As of December 31, 2006, 3 of Videotrons 5 collective bargaining agreements,
representing approximately 2,275 or 94% of its unionized employees, will expire between
December 2007 and December 2009; two other agreements, representing approximately 138 or
6% of its unionized employees, will expire between December 2010 and August 2011;
 95




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##### Table of Contents




    
    As of February 28, 2007, 15 of Sun Medias 50 collective bargaining agreements,
representing approximately 642 or 31% of its 2,057 unionized employees, have expired.
Negotiations regarding these 15 collective bargaining agreements are either in progress
or will be undertaken in 2007. The other 35 of Sun Medias collective bargaining
agreements, representing approximately 1,415 or 69% of its unionized employees, are
scheduled to expire on various dates between October 2007 and June 2010;
    
    As of December 31, 2006, 12 of TVA Groups 15 collective bargaining agreements,
representing approximately 273 or 33% of its unionized employees, will expire between
April 2007 and the end of December 2008; 3 of its collective bargaining agreements,
representing approximately 544 or 67% of its unionized employees, have expired and
negotiations regarding these collective bargaining agreements are in progress;
    
    As of December 31, 2006, 1 of the remaining 6 collective bargaining agreements,
representing approximately 20 or 6% of our unionized employees, expired in 2006.
Negotiations regarding this agreement will be undertaken in 2007. The other 5 collective
bargaining agreements, representing approximately 315 or 94% of our unionized employees,
will expire between the end of April 2009 and April 2010.
 Le Journal de
Montréal
 Contingencies
     Cyclicality and Seasonality
  96




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Commodity price risks
    Financial risks
   Foreign currency risk and interest rate risk
  see Table 6
 97




---



##### Table of Contents



Table
6
 Cross-currency interest rate swaps
as at December 31, 2006
 CDN dollarexchange rateAnnual
    
    Annual
    
    of interesteffective
    
    nominal
    
    and capitalPeriod
    
    Notional
    
    interest
    
    interest
    
    payments percovered
    
    amount
    
    rate
    
    rate
    
    one U.S. dollarQuebecor Media Inc.:Senior Notes
    
    2006 to 2016
    
    US$525.0
    
    
    7.39
    %
    
    
    7.75
    %
    
    
    1.1600Term loan B credit
facilities
    
    2006 to 2009
    
    US$198.9
    
    
    6.27
    %
    
    LIBOR
plus 2.00
    %
    
    
    1.1625Term loan B credit
facilities
    
    2009 to 2013
    
    US$198.9
    
    Bankers
acceptance
3 months
plus 2.22
    %

    
    LIBOR
plus 2.00
    %
    

    
    1.1625Term loan B credit
facilities
    
    2006 to 2013
    
    US$148.9
    
    
    6.44
    %
    
    LIBOR
plus 2.00
    %
    
    
    1.1625Videotron Ltd. and
its subsidiaries:Senior Notes
    
    2004 to 2014
    
    US$190.0
    
    Bankers
acceptance
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
acceptance
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
    %
    
    
    1.1781Sun Media Corporation
and its subsidiaries:Senior Notes
    
    2003 to 2008
    
    US$155.0
    
    
    8.17
    %
    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    2008 to 2013
    
    US$155.0
    
    Bankers
acceptance
3 months
plus 3.70
    %
    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    2003 to 2013
    
    US$50.0
    
    Bankers
acceptance
3 months
plus 3.70
    %
    
    
    7.625
    %
    
    
    1.5227Term-loan B credit
facility
    
    2003 to 2009
    
    US$181.4
    
    Bankers
acceptance
3 months
plus 2.29
    %
    
    LIBOR
plus 1.75
    %
    
    
    1.5175
 98




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##### Table of Contents



Credit risk
   Fair value of financial instruments
  Table 7
Carrying value and fair value of financial instruments
as at December 31, 2006
 2006
    
    
    
    
    
    
    2005Carrying
    
    
    
    
    
    
    Carryingvalue
    
    
    Fair value
    
    
    value
    
    
    Fair valueQuebecor Media Inc.Long-term debt
    
    $
    (1,191.6
    )
    
    $
    (1,206.3
    )
    
    $
    (988.1
    )
    
    $
    (1,078.8
    )Cross-currency interest rate swaps
    
    
    3.8
    
    
    
    (17.8
    )
    
    
    (21.5
    )
    
    
    (261.3
    )Foreign exchange forward contracts
    
    
    2.2
    
    
    
    2.2
    
    
    
    
    
    
    
    (1.8
    )Videotron Ltd. and its subsidiariesLong-term debt
    
    
    (1,021.2
    )
    
    
    (1,010.6
    )
    
    
    (971.7
    )
    
    
    (967.4
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.9
    )Cross-currency interest rate swaps
    
    
    (71.8
    )
    
    
    (141.1
    )
    
    
    (73.7
    )
    
    
    (135.0
    )Foreign exchange forward contract
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    (0.2
    )Sun Media Corporation and its subsidiariesLong-term debt
    
    
    (486.8
    )
    
    
    (492.9
    )
    
    
    (466.3
    )
    
    
    (476.1
    )Cross-currency interest rate swaps and
foreign exchange forward contract
    
    
    (148.8
    )
    
    
    (176.1
    )
    
    
    (154.1
    )
    
    
    (186.5
    )TVA Group Inc. and its subsidiariesLong-term debt
    
    
    (96.5
    )
    
    
    (96.5
    )
    
    
    (107.1
    )
    
    
    (107.1
    )
 Material limitations
  99




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Principal repayments
  Twelve month period ending December 31
 2007
    
    $
    23.12008
    
    
    26.62009
    
    
    326.82010
    
    
    160.72011
    
    
    26.72012 and thereafter
    
    $
    2,232.2
 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.
   Cable segment
   Newspapers segment
  100




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Broadcasting segment
    Leisure and Entertainment segment
  Goodwill
         101




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Broadcasting licences
      Impairment of long-lived assets
 CICA Handbook Impairment of Long-Lived Assets
  Derivative financial instruments
  102




---



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Pension plans and postretirement benefits
    103




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Allowance for doubtful accounts
  Business combinations
    Future income taxes
   Changes in Accounting Policies
  Stock-based compensation
  104




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Recent Accounting Developments in Canada
 Financial Instruments  Recognition and Measurement Hedges Comprehensive Income
  Hedging Relationships Foreign Currency Translation
   Recent Accounting Developments in the United States
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans
 Considering the Effects of Prior Year Misstatements when Quantifying Current Year
Misstatements. .
 Accounting for Uncertainty in Income
Taxes Accounting for Income Taxes
 105




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ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A  Directors and Senior Management
  Name and Municipality of Residence
    
    Age
    
    PositionSerge Gouin(2)
Outremont, Québec
    
    
    63
    
    
    Director, Chairman of the Board of Directors and Chairman of
the Compensation CommitteePierre Karl Péladeau
Montréal, Québec
    
    
    45
    
    
    Director, Vice Chairman of the Board of Directors and Chief
Executive OfficerÉrik Péladeau
Rosemère, Québec
    
    
    51
    
    
    Director and Vice Chairman of the Board of DirectorsJean La Couture, FCA(1) 
Montréal, Québec
    
    
    60
    
    
    Director and Chairman of the Audit CommitteeAndré Delisle(1)
Montréal, Québec
    
    
    60
    
    
    DirectorA. Michel Lavigne, FCA(1)(2)
Brossard, Québec
    
    
    56
    
    
    DirectorSamuel Minzberg(2)
Westmount, Québec
    
    
    57
    
    
    DirectorThe Right HonourableBrian Mulroney, P.C., C.C., LL.D.
Westmount, Québec
    
    
    67
    
    
    DirectorJean Neveu
Longueuil, Québec
    
    
    65
    
    
    DirectorNormand Provost
Longueuil, Québec
    
    
    52
    
    
    DirectorPierre Francoeur
Ste-Adèle, Québec
    
    
    54
    
    
    President and Chief Operating OfficerLuc Lavoie
Montréal, Québec
    
    
    50
    
    
    Executive Vice President, Corporate AffairsBruno Péloquin
Montréal, Québec
    
    
    42
    
    
    Senior Vice President, Strategic Development, Customer
RelationsHugues Simard
Outremont, Québec
    
    
    40
    
    
    Senior Vice President, Development and StrategyLouis
St-Arnaud
Mont-Saint-Hilaire, Québec
    
    
    60
    
    
    Senior Vice President, Legal Affairs and SecretarySylvie Cordeau
Verdun, Québec
    
    
    42
    
    
    Vice President, CommunicationsMichel Ethier
Montréal, Québec
    
    
    52
    
    
    Vice President, Taxation
 106




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Name and Municipality of Residence
    
    Age
    
    PositionPierre Lampron
Outremont, Québec
    
    
    60
    
    
    Vice President, Institutional RelationsBruno Leclaire
Saint-Bruno, Québec
    
    
    41
    
    
    Vice President, Interactive MediaRoger Martel
Repentigny, Québec
    
    
    58
    
    
    Vice President, Internal AuditLouis Morin
Kirkland, Québec
    
    
    49
    
    
    Vice President, and Chief Financial OfficerJean-François Richard
Kirkland, Québec
    
    
    48
    
    
    Vice President, Advertising ConvergenceDenis Sabourin
Kirkland, Québec
    
    
    46
    
    
    Vice President and Corporate ControllerEdouard G. Trépanier
Boucherville, Québec
    
    
    56
    
    
    Vice President, Regulatory AffairsJean-François Pruneau
Repentigny, Québec
    
    
    36
    
    
    TreasurerClaudine Tremblay
Nuns Island, Québec
    
    
    53
    
    
    Senior Director, Corporate Secretariat and Assistant Secretary
 
 (1)
    
    Member of the Audit Committee.(2)
    
    Member of the Compensation Committee. Serge Gouin
 Pierre Karl Péladeau
 107




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##### Table of Contents



Érik Péladeau
 Jean La Couture, Regroupement des assureurs de personnes à charte du Québec
 André Delisle, Caisse de dépôt et placement du Québec Barreau du Québec
 A. Michel Lavigne Caisse de dépôt et placement du
Québec Ordre des comptables agréés du Québec
 Samuel Minzberg
 108




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##### Table of Contents



The Right Honourable Brian Mulroney
 Jean Neveu
 Normand Provost Caisse de dépôt et
placement du Québec Caisse de dépôt et placement du
Québec
 Pierre Francoeur Le Journal de Montréal Le Journal de Montréal Le Journal de
Montréal LHebdo de Laval Le Journal de
Montréal
 Luc Lavoie
 Bruno Péloquin
 Hugues Simard,
 109




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##### Table of Contents



Louis St-Arnaud
 Sylvie Cordeau Barreau du Québec Université Catholique de Louvain
 Michel Ethier
 Pierre Lampron
 Bruno Leclaire,
 Roger Martel,
 Louis Morin
 Jean-François Richard
 110




---



##### Table of Contents



Denis Sabourin
 Edouard G. Trépanier
 Jean-François Pruneau
 Claudine Tremblay
 B  Board of Directors
  111




---



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Board Practices
  Audit Committee
   Compensation Committee
  C  Compensation
 Compensation of Directors
  112




---



##### Table of Contents



Compensation of Executive Officers
   Quebecor Medias Stock Option Plan
  113




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##### Table of Contents



Quebecor Inc.s Stock Option Plan
 1 3 2 3
 114




---



##### Table of Contents



Pension Benefits
 Income Tax Act Income Tax Act
   Years of MembershipCompensation
    
    10
    
    
    15
    
    
    20
    
    
    25
    
    
    30$111,111 or more
    
    $
    22,222
    
    
    $
    33,333
    
    
    $
    44,444
    
    
    $
    55,556
    
    
    $
    66,667
 Supplemental Retirement Benefit Plan for Designated Executives
     Years of Credited ServiceCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$200,000
    
    $
    17,778
    
    
    $
    26,667
    
    
    $
    35,556
    
    
    $
    44,445
    
    
    $
    53,333$400,000
    
    $
    57,778
    
    
    $
    86,667
    
    
    $
    115,556
    
    
    $
    144,445
    
    
    $
    173,333
 115




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##### Table of Contents



Years of Credited ServiceCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$600,000
    
    $
    97,778
    
    
    $
    146,667
    
    
    $
    195,556
    
    
    $
    244,445
    
    
    $
    293,333$800,000
    
    $
    137,778
    
    
    $
    206,667
    
    
    $
    275,556
    
    
    $
    344,445
    
    
    $
    413,333$1,000,000
    
    $
    177,778
    
    
    $
    266,667
    
    
    $
    355,556
    
    
    $
    444,445
    
    
    $
    533,333$1,200,000
    
    $
    217,778
    
    
    $
    326,667
    
    
    $
    435,556
    
    
    $
    544,445
    
    
    $
    653,333$1,400,000
    
    $
    257,778
    
    
    $
    386,667
    
    
    $
    515,556
    
    
    $
    644,445
    
    
    $
    773,333
 D  Liability Insurance
  E  Employees
  Total number
    
    
    Number of employees under
    
    
    Number ofOperations
    
    of employees
    
    
    collective agreements
    
    
    collective agreementsCable
    
    
    4,057
    
    
    
    2,413
    
    
    
    5Newspapers
    
    
    5,939
    
    
    
    2,057
    
    
    
    50Broadcasting
    
    
    1,495
    
    
    
    817
    
    
    
    15Leisure and Entertainment
    
    
    1,543
    
    
    
    335
    
    
    
    6Interactive Technologies
and Communications
    
    
    682
    
    
    
    0
    
    
    
    0Internet / Portals
    
    
    440
    
    
    
    0
    
    
    
    0Others
    
    
    132
    
    
    
    0
    
    
    
    0Total
    
    
    14,288
    
    
    
    5,622
    
    
    
    76
  
    
    As of December 31, 2006, 3 of Videotrons 5 collective bargaining agreements,
representing approximately 2,275 or 94% of its unionized employees, will expire between
December 2007 and December 2009 and two other collective bargaining agreements,
representing approximately 138 or 6% of its unionized employees, will expire between
December 2010 and August 2011;
    
    As of February 28, 2007, 15 of Sun Medias 50 collective bargaining
agreements, representing approximately 642 or 31% of its 2,057 unionized employees, have
expired. Negotiations regarding these 15 collective bargaining agreements are either in
progress or will be undertaken in 2007. The other 35 of Sun Medias collective bargaining
agreements, representing approximately 1,415 or 69% of its unionized employees, are
scheduled to expire on various dates between October 2007 and June 2010;
    
    As of December 31, 2006, 12 of TVA Groups 15 collective bargaining
agreements, representing approximately 273 or 33% of its unionized employees, will expire
between April 2007 and the end of December 2008; 3 of its
 116




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##### Table of Contents



collective bargaining agreements,
representing approximately 544 or 67% of its unionized employees, have expired and
negotiations regarding these collective bargaining agreements are in progress;
    
    As of December 31, 2006, one of the remaining 6 collective bargaining
agreements, representing approximately 20 or 6% of our other unionized employees, expired
in 2006. Negotiations regarding this agreement will be
undertakend in 2007. The other 5 collective bargaining agreements, representing approximately
315 or 94% of our other unionized employees, will expire between the end of April 2009 and
April 2010.
 Le Journal de
Montréal
 F  Share Ownership
  117




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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 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 Vidéotron;(f)
    
    so long as Capital CDPQ holds at least 22.5% of the QMI Shares on a fully diluted
basis, if the Péladeau family (as defined in the shareholders agreement) ceases to
control Quebecor, Capital CDPQ shall have at its
 118




---



##### Table of Contents



option either a call on Quebecors
interest in us at fair market value, or a put right in
respect of Capital CDPQs interest in us to Quebecor or its new controlling shareholder at fair market
value, provided that the call right shall not apply if the Péladeau family (as defined
in the shareholders agreement) has offered a standard right of first refusal on its
Quebecor control block to Capital CDPQ before selling control of Quebecor, and all of
the above-mentioned rights shall cease to apply five years following the approval by the
CRTC of the acquisition by us of Vidéotron; and(g)
    
    a non-competition covenant by Quebecor in respect of it and its affiliates
pursuant to which Quebecor and its affiliates shall not compete with QMI 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
  Management arrangements
   Lease arrangements
  119




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Commercial printing and other services
       Caisse de dépôt et placement du Québec
 Caisse de dépôt et placement du Québec
 Tax Consolidation Transactions
  120




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##### Table of Contents



Issuance and Redemption of Convertible Obligations and Investments in Quebecor Media Preferred
Shares
    Issuance of Subordinated Loans and Investments in Quebecor Media Preferred Shares
     Tax benefit transactions
   121




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##### Table of Contents



D  Interests of Experts and Counsel
  
 ITEM 8   FINANCIAL INFORMATION
 A   Consolidated Statements and Other Financial Information
  B  Legal Proceedings
     C  Dividend Policy and Dividends
 Dividend Policies and Payments
  122




---



##### Table of Contents




    
    123,602,807 common shares outstanding, of which 67,636,713 were held by Quebecor and
55,966,094 were held by Capital CDPQ;
    
    235,000 Cumulative First Preferred Shares, Series A, outstanding, which were held by
Sun Media, Bowes Publishers Limited and Sun Media (Toronto) Corporation;
    
    275,000 Cumulative First Preferred Shares, Series C, outstanding, which were held by
9101-0835 Québec inc.; and
    
    320,000 Cumulative First Preferred Shares, Series F, outstanding, which Series F
Shares were held by Bowes Publishers Limited, a subsidiary of Sun Media.
         123




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##### Table of Contents



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
 1 8 3 4 1 8 3 4 1 8 3 4 1 8 3 4 1 8 1 8 3 4 3 4 1 8 3 4
 124




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##### Table of Contents



D   Selling Shareholders
  E   Dilution
  F   Expenses of the Issuer
  
 ITEM 10   ADDITIONAL INFORMATION
 A   Share Capital
         125




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B   Memorandum and Articles of Association
  1.
    
    
    
    We were incorporated, in Canada, under Part IA of the
Companies Act(Québec) (the Companies Act) as 9093-9687
Québec 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.
 126




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##### Table of Contents



(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(Québec) 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
 127




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##### Table of Contents



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(Québec) 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(Québec) 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(Québec) 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(Québec) 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(Québec) 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(Québec) 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, 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 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(Québec) 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.
    
    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(Québec), repeal, amend or otherwise alter any
provisions of the Articles relating to the Series E Shares. Under the
general provisions of the Companies Act(Québec), (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.
    
    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
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any meeting of our shareholders.6.
    
    There is no 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). 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).7.
    
    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. In addition, the total number of shareholders of our
company is limited to fifty, exclusive of present or former employees
of our company or a subsidiary.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 Québec 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$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.In connection with the issuance of these notes, we have agreed to file, within 120 days
after the issue date of the notes, a registration statement relating to the exchange of
these privately placed notes for publicly registered exchange notes with substantially
identical terms evidencing the same continuing indebtedness. We have also agreed to use
our best efforts to cause the registration statement to become effective within 210
days after the issue date of the notes and to consummate the exchange offer with 255
days after the issue date of the notes.
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(b)
    
    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
Vidéotron.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 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.(c)
    
    Indenture relating to US$650,000,000 of
Vidéotrons 6 7/8% Senior Notes due January
15, 2014, dated as of October 8, 2003, by and among Vidéotron 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, Vidéotron issued
US$335.0 million aggregate principal amount of 6
7/8%
Senior Notes due January 15, 2014 and, on November 19, 2004, Vidéotron 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 Vidéotron, 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 Vidéotrons subsidiaries. The notes are redeemable, at
Vidéotrons option, under certain circumstances and at the redemption prices set forth
in the indenture. The indenture contains customary restrictive covenants with
respect to Vidéotron and certain of its subsidiaries and customary events of default. If
an event of default occurs and is continuing
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(other than Vidéotron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.(d)
    
    Indenture relating to US$175,000,000 of
Vidéotrons 63/8% Senior Notes due December
15, 2015, dated as of September 16, 2005, by and among Vidéotron ltée, the guarantors
party thereto, and Wells Fargo, National Association, as trustee.On September 16, 2005, Vidéotron 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 Vidéotron, 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 Vidéotrons subsidiaries. These notes
are redeemable, at Vidéotrons option, under certain circumstances and at the redemption
prices set forth in the indenture. The indenture contains customary restrictive
covenants with respect to Vidéotron and certain of its subsidiaries, and customary
events of default. If an event of default occurs and is continuing, other than
Vidéotron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)
    
    Amended and Restated Credit Agreement, dated as of November 19, 2004, by and
among Vidéotron 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 November 19, 2004, concurrently with the closing of the private placement of a new
series of Vidéotrons 6
7/8% Senior Notes due January 15, 2014, Vidéotron amended and
restated its credit agreement, dated as of November 28, 2000, by executing and
delivering the seventh amending agreement to its credit agreement. Pursuant to this
amendment, Vidéotrons amended and restated credit agreement provides for a $450.0
million revolving credit facility maturing in 2009. The proceeds of Vidéotrons
revolving credit facility are to be used for Vidéotrons general corporate purposes,
including for distributions to Vidéotrons shareholder in certain circumstances.Borrowings under Vidéotrons 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 Vidéotrons revolving credit facility are repayable
in full in November 2009.Borrowings under this amended and restated credit facility and under eligible derivative
instruments are secured by a first-ranking hypothec or security interest (subject to
certain permitted encumbrances) on most but not all of Vidéotrons current and future
assets, as well as those of the guarantors party thereto, including most but not all of
Vidéotrons subsidiaries (the Vidéotron Group), guarantees of all the members of the
Vidéotron Group, pledges of the shares of Vidéotron and the members of the Vidéotron
Group, and other security.This amended and restated credit facility contains customary covenants that restrict and
limit the ability of Vidéotron and the members of the Vidéotron 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 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 Vidéotron and the members of the Vidéotron Group,
and the occurrence of a change of control.(f)
    
    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.
 136




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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.(g)
    
    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 term loan B of US$230.0 million. In connection with
Quebecor Medias refinancing plan completed in January 2006, Sun Medias credit facility
was amended for the addition of a $40.0 million term loan C.Borrowings under the revolving credit facility are repayable in full in February 2008.
Borrowings under the term loan B and term loan C facilities are repayable in full in
February 2009. Sun Media is also required to make specified quarterly repayments of
amounts borrowed under the term loan B and term loan C facilities.Borrowings under the term loan B facility are in US dollars and bear interest at LIBOR
plus an applicable margin. 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 B
and and 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, including most, but not all, of Sun Medias
subsidiaries (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 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.(h)
    
    Indenture relating to US$715,000,000 of our 11
1/8% Senior Notes due July 15, 2011,
dated as of July 6, 2001, by and between Quebecor Media Inc. and National City Bank (now
U.S. Bank Corporate Trust Services), as trustee, as amended, and Indenture relating to
US$295,000,000 of our 13 3/4% Senior Discount Notes due July 15, 2011, dated as of July 6,
2001, by and between Quebecor Media Inc. and National City Bank (now U.S. Bank Corporate
Trust Services), as trustee, as amended.In July 2001, we issued US$715.0 million aggregate
principal amount of our 11 1/8 % Senior
Notes due 2011 and US$295.0 million aggregate principal amount at maturity of our 13 3/4%
Senior Discount Notes due 2011
 137




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##### Table of Contents



in a private placement exempt from the registration
requirements of the Securities Act. In October 2001 we completed an exchange offer
pursuant to which we exchanged without novation our unregistered 11 1/8 % Senior Notes due
2011 and 13 3/4% Senior Discount Notes due 2011 for new SEC-
registered 11 1/8% Senior Notes due 2011 and 13 3/4% Senior Discount Notes due 2011,
respectively. On July 19, 2005, pursuant to partial tender offers, we purchased
US$128.2 million in aggregate principal amount of our 11 1/8 % Senior Notes due 2011 and
US$12.1 million in aggregate principal amount at maturity of our 13 3/4% Senior Discount
Notes due 2011, for aggregate cash consideration of $215.3 million, including the
redemption premium and the cost of settlement of the cross-currency swap agreements. On
January 17, 2006, as part of Quebecor Medias refinancing plan, we repurchased US$561.6
million in aggregate principal amount of our 11 1/8 % Senior Notes due 2011 (representing
95.7% of the 11 1/8 % Senior Notes due 2011 outstanding) and US$275.6 million in aggregate
principal amount at maturity of 13 3/4% Senior Discount Notes due 2011 (representing 97.4%
of the 13 3/4% Senior Discount Notes due 2011 outstanding) for aggregate cash
consideration of $1.3 billion, including the premium and the cost of settlement of
cross-currency swap agreements. On July 15, 2006, we redeemed all of our remaining
outstanding 11 1/8 % Senior Notes due 2011 and 13 3/4% Senior Discount Notes due 2011 for
aggregate cash consideration of $39.3 million.(i)
    
    Share Purchase Agreement dated December 22, 2003 between Carlyle VTL Holdings,
L.P. and Carlyle Partners III (Vidéotron), L.P., and Quebecor Media Inc. and 9101-0827
Québec Inc. relating to the purchase 9101-0827 Québec 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 Québec Inc., a wholly-owned subsidiary of Quebecor Media
entered into an agreement with Carlyle VTL Holdings, L.P. and Carlyle Partners III
(Vidéotron), L.P. (collectively Carlyle) to purchase the 5,000 Class C Preferred
Shares held by Carlyle in 3662527 Canada Inc., the parent company of Vidéotron 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 is subject to variation on the basis of the valuation of the
common shares of Quebecor Media and is payable on demand at any time after December 15,
2004, but no later than December 15, 2008. If the Company files a prospectus for an
initial public offering, the holder has the right to require the Company to pay the
Additional Amount payable by delivering 3,740,682 Common Shares of the Company. The
Company holds 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. Quebecor Media may,
under certain conditions and if its shares are publicly traded at that time, pay the
deferred purchase price by delivering 3,740,682 common shares to Carlyle (123,602,807
common shares of QUEBECOR MEDIA were outstanding as of December 22, 2003).
 D   Exchange Controls
    138




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##### Table of Contents



E   Taxation
 Certain U.S. Federal Income Tax Considerations
 3 4
  
    
    dealers in stocks, securities or currencies;
    
    securities traders that use a mark-to-market accounting method;
    
    banks and financial institutions;
    
    insurance companies;
    
    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
 139




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##### Table of Contents



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
   Sale, Exchange or Retirement of a Note
  140




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##### Table of Contents




    
    the amount of cash and the fair market value of any property received (less
any portion allocable to the payment of accrued interest not previously included
in income, which amount will be taxable as ordinary interest income); and
    
    the U.S. Holders tax basis in the notes.
  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 is 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 Non-Residents of Canada
 Income Tax Act provided
 141




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##### Table of Contents



Interest Payments
  Dispositions
   .
 F   Dividends and Paying Agents
  G   Statement by Experts
  H   Documents on Display
   I  Subsidiary Information
  142




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##### Table of Contents



ITEM
11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign currency risk and interest rate risk
  see Table 6
 143




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##### Table of Contents



Cross-currency interest rate swaps
as at December 31, 2006
 CDN dollarexchange rateAnnual

    
    
    
    Annual

    
    
    
    of interesteffective

    
    
    
    nominal

    
    
    
    and capitalPeriod
    
    
    Notional
    
    
    interest

    
    
    
    interest
    
    
    
    payments percovered
    
    
    amount
    
    
    rate

    
    
    
    rate

    
    
    
    one U.S. dollarQuebecor Media Inc.:Senior Notes
    
    
    2006 to 2016
    
    
    US$
    525.0
    
    
    
    7.39

    
    %
    
    
    7.75

    
    %
    
    
    1.1600Term loan B credit
facilities
    
    
    2006 to 2009
    
    
    US$
    198.9
    
    
    
    6.27

    
    %
    
    LIBORplus 2.00
    
    %
    
    
    1.1625Term loan B credit
facilities
    
    
    2009 to 2013
    
    
    US$
    198.9
    
    
    Bankersacceptance3 monthsplus 2.22
    
    %
    
    LIBORplus 2.00
    
    %
    
    
    1.1625Term loan B credit
facilities
    
    
    2006 to 2013
    
    
    US$
    148.9
    
    
    
    6.44

    
    %
    
    LIBORplus 2.00
    
    %
    
    
    1.1625Videotron Ltd. and
its subsidiaries:Senior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    
    Bankersacceptance3 monthsplus 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acceptance3 monthsplus 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

    
    %
    
    
    1.1781Sun Media Corporation
and its subsidiaries:Senior Notes
    
    
    2003 to 2008
    
    
    US$
    155.0
    
    
    
    8.17

    
    %
    
    
    7.625

    
    %
    
    
    1.5227Senior Notes
    
    
    2008 to 2013
    
    
    US$
    155.0
    
    
    Bankersacceptance3 monthsplus 3.70
    
    %
    
    
    7.625

    
    %
    
    
    1.5227Senior Notes
    
    
    2003 to 2013
    
    
    US$
    50.0
    
    
    Bankersacceptance3 monthsplus 3.70
    
    %
    
    
    7.625

    
    %
    
    
    1.5227Term-loan B credit facility
    
    
    2003 to 2009
    
    
    US$
    181.4
    
    
    Bankersacceptance3 monthsplus 2.29
    
    %
    
    LIBORplus 1.75
    
    %
    
    
    1.5175
 144




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##### Table of Contents



Commodity price risk
    Credit risk
   Fair value of financial instruments
  145




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##### Table of Contents



Carrying
value and fair value of financial instruments
as at December 31, 2006
  2006
    
    
    2005Carrying
    
    
    
    
    
    
    Carryingvalue
    
    
    Fair value
    
    
    value
    
    
    Fair valueQuebecor Media Inc.Long-term debt
    
    $
    (1,191.6
    )
    
    $
    (1,206.3
    )
    
    $
    (988.1
    )
    
    $
    (1,078.8
    )Cross-currency interest rate swaps
    
    
    3.8
    
    
    
    (17.8
    )
    
    
    (21.5
    )
    
    
    (261.3
    )Foreign exchange forward contracts
    
    
    2.2
    
    
    
    2.2
    
    
    
    
    
    
    
    (1.8
    )Videotron Ltd. and its subsidiariesLong-term debt
    
    
    (1,021.2
    )
    
    
    (1,010.6
    )
    
    
    (971.7
    )
    
    
    (967.4
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.9
    )Cross-currency interest rate swaps
    
    
    (71.8
    )
    
    
    (141.1
    )
    
    
    (73.7
    )
    
    
    (135.0
    )Foreign exchange forward contract
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    (0.2
    )Sun Media Corporation and its subsidiariesLong-term debt
    
    
    (486.8
    )
    
    
    (492.9
    )
    
    
    (466.3
    )
    
    
    (476.1
    )Cross-currency interest rate swaps and
foreign exchange forward contract
    
    
    (148.8
    )
    
    
    (176.1
    )
    
    
    (154.1
    )
    
    
    (186.5
    )TVA Group Inc. and its subsidiariesLong-term debt
    
    
    (96.5
    )
    
    
    (96.5
    )
    
    
    (107.1
    )
    
    
    (107.1
    )
 Material limitations
  Principal repayments
  Twelve month period ending December 31,
 2007
    
    $
    23.12008
    
    
    26.62009
    
    
    326.82010
    
    
    160.72011
    
    
    26.72012 and thereafter
    
    $
    2,232.2
 
 ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  146




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##### Table of Contents



PART II
 
 ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
   
 ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A   Material Modifications to the Rights of Security Holders
  B   Use of Proceeds
  
 ITEM 15  CONTROLS AND PROCEDURES
   
 ITEM 16  [RESERVED]
 
 ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B  CODE OF ETHICS
  
 ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  147




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##### Table of Contents



2005
    
    2006Audit Fees(1)
    
    $
    2,422,696
    
    
    $
    2,520,904Audit-related Fees(2)
    
    
    462,030
    
    
    
    614,494Tax Fees(3)
    
    
    186,447
    
    
    
    23,580All Other Fees(4)
    
    
    349,125
    
    
    
    19,115Total
    
    $
    3,420,298
    
    
    $
    3,178,093
 
 (1)
    
    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.(2)
    
    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, review of security
controls and operational effectiveness of systems, due diligence or accounting work related to
acquisitions; employee benefit plan audits, internal control reviews 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,
statutory audits, and reports on internal controls required by the Sarbanes-Oxley Act of 2002
or other regulations.(3)
    
    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.(4)
    
    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
  
 PART III
 
 ITEM 17  FINANCIAL STATEMENTS
  
 ITEM 18
 148




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##### Table of Contents



ITEM 19
 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).1.11
    
    
    Certificate of Amendment of Articles of Incorporation of Quebecor Media, Inc., as of January
12, 2007 (translation)1.12
    
    
    By-law number 2007-1 of Quebecor Media Inc. (translation)2.1
    
    

Form of 11 1/8% Senior Note due 2011 (included in Exhibit A to Exhibit 2.3 below) (incorporated
by reference to Exhibit 4.1 to Quebecor Media Inc.s Registration Statement on Form F-4 dated
September 5, 2001, Registration Statement No. 333-13792).2.2
    
    
    Form of 13 3/4% Senior Discount Note due 2011 (included in Exhibit A to Exhibit 2.4 below)
(incorporated by reference to Exhibit 4.2 to Quebecor Media Inc.s Registration Statement on
Form F-4 dated September 5, 2001, Registration Statement No. 333-13792).2.3
    
    

11 1/8% Senior Note Indenture, dated as of July 6, 2001, by and between Quebecor Media Inc. and
National City Bank, as trustee (incorporated by reference to Exhibit 4.3 to Quebecor Media
Inc.s Registration
 149




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##### Table of Contents



ExhibitNumber
    
    DescriptionStatement on Form F-4 dated September 5, 2001, Registration Statement No.
333-13792).2.4
    
    
    13 3/4% Senior Discount Note Indenture, dated as of July 6, 2001, by and between Quebecor Media
Inc. and National City Bank, as trustee (incorporated by reference to Exhibit 4.4 to Quebecor
Media Inc.s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement
No. 333-13792).2.5
    
    
    First Supplemental Indenture, dated as of December 30, 2005, to the Indenture, dated as of July
6, 2001, relating to Quebecor Media Inc.s 11
1/8% Senior Notes due 2011, by and between Quebecor
Media Inc. and U.S. Bank Corporate Trust Services (as successor to National City Bank), as
trustee. (incorporated by reference to Exhibit 2.5 of Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).2.6
    
    
    First Supplemental Indenture, dated as of December 30, 2005, to the Indenture, dated as of July
6, 2001, relating to Quebecor Media Inc.s 13 3/4% Senior Discount Notes due 2011,, by and
between Quebecor Media Inc. and U.S. Bank Corporate Trust Services (as successor to National
City Bank), as trustee. (incorporated by reference to Exhibit 2.6 of Quebecor Medias Annual
Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).2.7
    
    
    Form of 7 3/4 % Senior Note due 2016 (included as Exhibit A to Exhibit 2.8 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).2.8
    
    
    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).2.9
    
    
    Form of Sun Media Corporation 7 5/8% Senior Note due 2013 (included in Exhibit A to Exhibit 2.10
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).2.10
    
    
    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).2.11
    
    
    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).2.12
    
    

Form of Vidéotron ltée 6 7/8% Senior Notes due January 15, 2014 (incorporated by reference to
Exhibit A to Exhibit 4.3 to Vidéotrons Registration Statement on Form F-4 dated January 8,
2004, Registration Statement No. 333-110697).2.13
    
    

Form of Notation of Guarantee by the subsidiary guarantors of the 6 7/8% Vidéotron ltée Senior
Notes due January 15, 2014 (incorporated by reference to Exhibit E to Exhibit 4.3 to
Vidéotrons Registration Statement on Form F-4 dated January 8, 2004, Registration Statement
No. 333-110697).2.14
    
    

Indenture relating to Vidéotron ltée 6 7/8% Notes due 2014, dated as of October 8, 2003, by and
among Vidéotron ltée, the subsidiary guarantors signatory thereto and Wells Fargo Bank
Minnesota, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Vidéotron ltées
Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No.
333-110697).2.15
    
    
    Vidéotron ltée First Supplemental Indenture, dated as of July 12, 2004, by and among Vidéotron
ltée, SuperClub Vidéotron Canada inc., Les Propriétés SuperClub inc. and Wells Fargo Bank,
National Association, as trustee (incorporated by reference to Exhibit 4.4 to Vidéotrons
Registration Statement on Form F-4 dated January 18, 2005, Registration Statement No.
333-121032).2.16
    
    

Form of Vidéotron ltée 6 3/8 % Senior Note due 2015 (included as Exhibit A to Exhibit 2.18 below).2.17
    
    

Form of Notation of Guarantee by the subsidiary guarantors of Vidéotron ltées 6 3/8% Senior
Notes due 2015 (included as Exhibit E to Exhibit 2.18 below).2.18
    
    

Indenture relating to Vidéotron ltée 6 3/8% Senior Notes, dated as of September 16, 2005, by and
between Vidéotron ltée, the guarantors party thereto, and Wells Fargo, National Association, as
trustee (incorporated by reference to Exhibit 4.3 of Vidéotron ltées Registration Statement
on Form F-4 dated October 14, 2005, Registration Statement No. 333-128998).3.1
    
    
    Shareholders Agreement dated December 11, 2000 by and among Quebecor Inc., Capital
Communications
 150




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##### Table of Contents



ExhibitNumber
    
    DescriptionCDPQ 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
Exhibit 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
    
    
    Lease Agreement dated November 24, 1993 between Le Groupe Vidéotron ltée and National Bank of
Canada for the property located at 300 Viger Avenue East, Montréal, Province of Québec, Canada,
together with a summary thereof in the English language (incorporated by reference to Exhibit
10.3 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001,
Registration Statement No. 333-13792).4.2
    
    
    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)4.3
    
    
    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
    
    
    Credit Agreement dated as of November 28, 2000 among Vidéotron ltée, RBC Dominion Securities
Inc., Royal Bank of Canada and the co-arrangers and lenders thereto, together with the First
Amending Agreement dated as of January 5, 2001 and the Second Amending Agreement dated as of
June 29, 2001 (incorporated by reference to Exhibit 10.5 to Quebecor Media Inc.s Registration
Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792).4.8
    
    
    Sixth Amending Agreement, dated as of October 8, 2003, to the Credit Agreement dated as of
November 28, 2000, among Vidéotron ltée, Royal Bank of Canada, as administrative agent, and the
financial institutions signatory thereto and acknowledged by Le SuperClub Vidéotron ltée,
Groupe de Divertissement SuperClub inc., Vidéotron (1998) ltée, CF Cable TV Inc., Videotron
(Regional) Ltd, Télé-Câble Charlevoix (1997) inc., Vidéotron TVN inc. and Câblage QMI inc., as
guarantors and by Quebecor Media Inc. (incorporated by reference to Exhibit 10.1 to Vidéotron
ltées Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No.
333-110697).4.9
    
    
    Seventh Amending Agreement dated as of November 19, 2004 to the Credit Agreement dated as of
November 28, 2000, among Vidéotron ltée, Royal Bank of Canada, as administrative agent, and the
 151




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##### Table of Contents



ExhibitNumber
    
    Descriptionfinancial institutions signatory thereto and acknowledged by Le SuperClub Vidéotron ltée,
Groupe de Divertissement SuperClub inc., Vidéotron (1998) ltée, CF Cable TV Inc., Videotron
(Regional) Ltd., 9139-3256 Québec inc., Vidéotron TVN inc., Les Propriétés SuperClub inc. and
SuperClub Vidéotron Canada inc., as guarantors (the Guarantors), and by Quebecor Media Inc.
(incorporated by reference to Exhibit 10.2 to Vidéotron ltées Registration Statement on Form
F-4 dated January 18, 2005, Registration Statement No. 333-121032).4.10
    
    
    Form of Amended and Restated Credit Agreement entered into as of November 28, 2000, as amended
by a First Amending Agreement dated as of January 5, 2001, as 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 and a Seventh Amending Agreement dated as of November 19, 2004, among Vidéotron
ltée, Royal Bank of Canada, as administrative agent, and the financial institutions signatory
thereto (incorporated by reference to Schedule 2 to Exhibit 10.2 to Vidéotrons Registration
Statement on Form F-4 dated January 18, 2005, Registration Statement No. 333-121032).4.11
    
    
    Form of Guarantee under the Vidéotron ltée 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).4.12
    
    
    Form of Share Pledge of the shares of Vidéotron ltée and of the guarantors of the Vidéotron
ltée Credit Agreement (incorporated by reference to Schedule E of Exhibit 10.5 to Vidéotrons
Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No.
333-13792).4.13
    
    
    Share Purchase Agreement dated December 22, 2003 between Carlyle VTL Holdings, L.P. and Carlyle
Partners III (Vidéotron), L.P., and Quebecor Media Inc. and 9101-0827 Québec Inc. relating to
the purchase 9101-0827 Québec Inc. of 5,000 Class C Preferred Shares of 3662527 Canada Inc.
(incorporated by reference to Exhibit 4.11 of Quebecor Medias Annual Report on Form 20-F for
the fiscal year ended December 31, 2003, filed on March 31, 2004).4.14
    
    
    First Amendment to Share Purchase Agreement dated as of December 31, 2004 between Carlyle VTL
Holdings, L.P. and Carlyle Partners III (Vidéotron), L.P. and Quebecor Media Inc. and 9101-0827
Québec Inc. (incorporated by reference to Exhibit 4.18 of Quebecor Medias Annual Report on
Form 20-F for the fiscal year ended December 31, 2004, filed on March 31, 2005).7.1
    
    
    Statement regarding calculation of ratio of earnings to fixed charges.8.1
    
    
    Subsidiaries of Quebecor Media Inc.11.1
    
    
    Code of Ethics (incorporated by reference to Exhibit 11.1 of Quebecor Medias Annual Report on
Form 20-F for fiscal year ended December 31, 2003, filed on March 31, 2004).12.1
    
    
    Certification of Pierre Karl Péladeau, Vice Chairman 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, Vice Chairman 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.
 152




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##### Table of Contents



SIGNATURE
  QUEBECOR MEDIA INC.By:
    /s/ Louis MorinName:
    Louis MorinTitle:
    Vice President and Chief Financial Officer  153




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##### Table of Contents



QUEBECOR
MEDIA INC. AND ITS SUBSIDIARIES
 
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Years ended December 31, 2006, 2005 and 2004
 Report of Independent Registered Public Accounting Firm to the Board
of Directors and to the Shareholder of Quebecor Media Inc.
    
    F-2Financial StatementsConsolidated Statements of Income
    
    F-3Consolidated Statements of Shareholder Equity
    
    F-4Consolidated Statements of Cash Flows
    
    F-5Consolidated Balance Sheets
    
    F-7Segmented Information
    
    F-9Notes to Consolidated Financial Statements
    
    F-12
 154




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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



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated statements of income
 
 2006
    
    
    2005
    
    
    2004Revenues
    
    $
    3,010.9
    
    
    $
    2,702.9
    
    
    $
    2,462.4Cost of sales and selling and administrative expenses
    
    
    (2,208.1
    )
    
    
    (1,969.3
    )
    
    
    (1,765.2
    )Amortization
    
    
    (260.7
    )
    
    
    (231.9
    )
    
    
    (225.9
    )Financial expenses (note 2)
    
    
    (224.6
    )
    
    
    (285.3
    )
    
    
    (314.6
    )Reserve for restructuring of operations, impairment of assets
and other special charges (note 3)
    
    
    (18.9
    )
    
    
    0.2
    
    
    
    (2.8
    )Loss on debt refinancing (note 4)
    
    
    (342.6
    )
    
    
    (60.0
    )
    
    
    (4.8
    )Gain on sale of businesses and other assets
    
    
    2.2
    
    
    
    0.1
    
    
    
    9.3Impairment of goodwill and intangible assets (note 5)
    
    
    (180.0
    )
    
    
    
    
    
    
    (Loss) income before income taxes
    
    
    (221.8
    )
    
    
    156.7
    
    
    
    158.4Income taxes (note 7)
    
    
    (52.6
    )
    
    
    44.0
    
    
    
    37.4(169.2
    )
    
    
    112.7
    
    
    
    121.0Non-controlling interest
    
    
    (0.4
    )
    
    
    (16.2
    )
    
    
    (31.7
    )(Loss) income from continuing operations
    
    
    (169.6
    )
    
    
    96.5
    
    
    
    89.3Loss from discontinued operations (note 8)
    
    
    (0.1
    )
    
    
    
    
    
    
    (1.1
    )Net (loss) income
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
  F-3




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated statements of shareholders equity
 
 Capital Stock
    
    
    Contributed
    
    
    
    
    
    
    Translation
    
    
    Total shareholderssurplus
    
    
    Deficit
    
    
    adjustment
    
    
    equityBalance as at December 31, 2003
    
    $
    1,773.7
    
    
    $
    3,220.6
    
    
    $
    (2,597.8
    )
    
    $
    (1.5
    )
    
    $
    2,395.0Net income
    
    
    
    
    
    
    
    
    
    
    88.2
    
    
    
    
    
    
    
    88.2Dividends
    
    
    
    
    
    
    
    
    
    
    (20.0
    )
    
    
    
    
    
    
    (20.0
    )Purchase of tax credits from a
company under common control
    
    
    
    
    
    
    (3.8
    )
    
    
    
    
    
    
    
    
    
    
    (3.8
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.5Balance as at December 31, 2004
    
    
    1,773.7
    
    
    
    3,216.8
    
    
    
    (2,529.6
    )
    
    
    (1.0
    )
    
    
    2,459.9Net income
    
    
    
    
    
    
    
    
    
    
    96.5
    
    
    
    
    
    
    
    96.5Dividends
    
    
    
    
    
    
    
    
    
    
    (105.0
    )
    
    
    
    
    
    
    (105.0
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.3
    )
    
    
    (1.3
    )Balance as at 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
    )Purchase of tax credits from a
company under common control
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    1.2Balance as at December 31, 2006
    
    $
    1,752.4
    
    
    $
    3,217.2
    
    
    $
    (2,731.5
    )
    
    $
    (1.1
    )
    
    $
    2,237.0
  F-4




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated statements of cash flows
 
 2006
    
    
    2005
    
    
    2004Cash flows related to operations:(Loss) income from continuing operations
    
    $
    (169.6
    )
    
    $
    96.5
    
    
    $
    89.3Adjustments for:Amortization of property, plant and equipment
    
    
    251.2
    
    
    
    225.3
    
    
    
    218.1Amortization of deferred charges and other assets
    
    
    9.5
    
    
    
    6.6
    
    
    
    7.8Impairment of goodwill and intangible assets (note 5)
    
    
    180.0
    
    
    
    
    
    
    
    Net loss on derivative instruments and on
foreign currency translation on financial instruments
    
    
    1.2
    
    
    
    4.4
    
    
    
    8.0Loss on revaluation of the Additional Amount payable (note 14)
    
    
    10.5
    
    
    
    10.1
    
    
    
    26.9(Gain) loss on sale of businesses and other assets
    
    
    (0.4
    )
    
    
    (1.7
    )
    
    
    3.1Loss on debt refinancing (note 4)
    
    
    342.6
    
    
    
    60.0
    
    
    
    4.8Repayment of accrued interest on Senior Discount Notes
    
    
    (197.3
    )
    
    
    (3.0
    )
    
    
    Amortization of deferred financing costs and
of long-term debt discount
    
    
    7.3
    
    
    
    62.7
    
    
    
    56.9Future income taxes
    
    
    (58.0
    )
    
    
    25.0
    
    
    
    16.5Non-controlling interest
    
    
    0.4
    
    
    
    16.2
    
    
    
    31.7Other
    
    
    0.3
    
    
    
    (1.5
    )
    
    
    (1.8
    )377.7
    
    
    
    500.6
    
    
    
    461.3Net change in non-cash balances related to operations
    
    
    (23.3
    )
    
    
    (27.9
    )
    
    
    38.6Cash flows provided by continuing operations
    
    
    354.4
    
    
    
    472.7
    
    
    
    499.9Cash flows provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.6Cash flows provided by operations
    
    
    354.4
    
    
    
    472.7
    
    
    
    500.5Cash flows related to investing activities:Business acquisitions, net of cash and cash equivalents (note 6)
    
    
    (10.5
    )
    
    
    (110.5
    )
    
    
    (112.5
    )Proceeds from disposal of businesses, net of cash and cash
equivalents (note 8)
    
    
    0.5
    
    
    
    4.3
    
    
    
    (7.8
    )Additions to property, plant and equipment
    
    
    (435.5
    )
    
    
    (319.8
    )
    
    
    (181.1
    )Net decrease in temporary investments
    
    
    39.2
    
    
    
    59.1
    
    
    
    94.5Proceeds from disposal of assets
    
    
    9.4
    
    
    
    5.5
    
    
    
    7.5Acquisition of tax deductions from parent company (note 23)
    
    
    (16.1
    )
    
    
    
    
    
    
    Decrease (increase) in advances receivable from parent company
    
    
    15.9
    
    
    
    (15.9
    )
    
    
    Proceeds from disposal of tax deductions to the parent company (note 23)
    
    
    
    
    
    
    15.9
    
    
    
    Other
    
    
    (3.4
    )
    
    
    (3.6
    )
    
    
    (3.7
    )Cash flows used in investing activities
    
    
    (400.5
    )
    
    
    (365.0
    )
    
    
    (203.1
    )Sub-total, balance carried forward
    
    $
    (46.1
    )
    
    $
    107.7
    
    
    $
    297.4
 F-5




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Consolidated statements of cash flows ( )
 
 2006
    
    
    2005
    
    
    2004Sub-total, balance brought forward
    
    $
    (46.1
    )
    
    $
    107.7
    
    
    $
    297.4Cash flows related to financing activities:Net increase (decrease) in bank indebtedness
    
    
    7.9
    
    
    
    12.3
    
    
    
    (4.2
    )Net borrowings (repayments) under revolving bank facilities
    
    
    38.4
    
    
    
    72.2
    
    
    
    (86.4
    )Issuance of long-term debt, net of financing fees
    
    
    1,225.8
    
    
    
    200.9
    
    
    
    389.5Repayments of long-term debt and unwinding of hedging contracts
    
    
    (1,201.2
    )
    
    
    (315.9
    )
    
    
    (384.9
    )Net decrease (increase) in prepayments under cross-currency
swap agreements
    
    
    21.6
    
    
    
    (34.1
    )
    
    
    (184.4
    )Dividends and reduction of Common Shares paid-up capital
    
    
    (105.0
    )
    
    
    (45.0
    )
    
    
    (20.0
    )Dividends paid to non-controlling shareholders
    
    
    (4.5
    )
    
    
    (5.2
    )
    
    
    (5.0
    )Issuance of capital stock by subsidiaries
    
    
    0.1
    
    
    
    
    
    
    
    2.6Other
    
    
    (0.7
    )
    
    
    (3.6
    )
    
    
    Cash flows used in financing activities
    
    
    (17.6
    )
    
    
    (118.4
    )
    
    
    (292.8
    )Net (decrease) increase in cash and cash equivalents
    
    
    (63.7
    )
    
    
    (10.7
    )
    
    
    4.6Effect of exchange rate changes on cash and cash equivalents
denominated in foreign currencies
    
    
    0.4
    
    
    
    (0.7
    )
    
    
    0.6Cash and cash equivalents at beginning of year
    
    
    97.4
    
    
    
    108.8
    
    
    
    103.6Cash and cash equivalents at end of year
    
    $
    34.1
    
    
    $
    97.4
    
    
    $
    108.8Cash and cash equivalents consist of:Cash
    
    $
    13.9
    
    
    $
    14.9
    
    
    $
    8.0Cash equivalents
    
    
    20.2
    
    
    
    82.5
    
    
    
    100.8$
    34.1
    
    
    $
    97.4
    
    
    $
    108.8Additional 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
    
    $
    (14.5
    )
    
    $
    (57.6
    )
    
    $
    (10.9
    )Inventories and investments in televisual products and movies
    
    
    (2.7
    )
    
    
    (20.3
    )
    
    
    5.3Accounts payable and accrued charges
    
    
    (15.8
    )
    
    
    43.7
    
    
    
    15.0Other
    
    
    9.7
    
    
    
    6.3
    
    
    
    29.2$
    (23.3
    )
    
    $
    (27.9
    )
    
    $
    38.6Cash interest payments
    
    $
    446.3
    
    
    $
    233.5
    
    
    $
    239.6Cash income taxes payments (net of refunds)
    
    
    7.0
    
    
    
    13.5
    
    
    
    8.8
  F-6




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated balance sheets
 
 2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    34.1
    
    
    $
    97.4Temporary investments
    
    
    1.4
    
    
    
    40.6Accounts receivable (note 9)
    
    
    426.2
    
    
    
    415.7Income taxes
    
    
    17.3
    
    
    
    9.3Amounts receivable from parent company and companies under common control
    
    
    
    
    
    
    15.6Inventories and investments in televisual products and movies (note 10)
    
    
    158.7
    
    
    
    155.5Prepaid expenses
    
    
    24.4
    
    
    
    22.4Future income taxes (note 7)
    
    
    65.9
    
    
    
    98.7728.0
    
    
    
    855.2Property, plant and equipment (note 11)
    
    
    1,830.1
    
    
    
    1,631.5Future income taxes (note 7)
    
    
    61.1
    
    
    
    57.5Other assets (note 12)
    
    
    243.6
    
    
    
    259.4Goodwill (note 13)
    
    
    3,721.1
    
    
    
    3,871.9$
    6,583.9
    
    
    $
    6,675.5
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  consolidated balance sheets ( )





2006
    
    
    2005Liabilities and shareholders equityCurrent liabilities:Bank indebtedness
    
    $
    20.6
    
    
    $
    12.7Accounts payable and accrued charges
    
    
    592.4
    
    
    
    608.8Deferred revenue
    
    
    177.6
    
    
    
    155.2Income taxes
    
    
    8.8
    
    
    
    13.4Dividends payable
    
    
    
    
    
    
    60.0Amounts payable to parent company and companies under common control
    
    
    11.9
    
    
    
    Additional Amount payable (note 14)
    
    
    122.0
    
    
    
    111.5Current portion of long-term debt (note 15)
    
    
    23.1
    
    
    
    2.7956.4
    
    
    
    964.3Long-term debt (note 15)
    
    
    2,773.0
    
    
    
    2,530.5Other liabilities (note 16)
    
    
    356.5
    
    
    
    359.3Future income taxes (note 7)
    
    
    118.9
    
    
    
    227.0Non-controlling interest (note 17)
    
    
    142.1
    
    
    
    144.3Shareholders equity:Capital stock (note 18)
    
    
    1,752.4
    
    
    
    1,773.7Contributed surplus
    
    
    3,217.2
    
    
    
    3,216.8Deficit
    
    
    (2,731.5
    )
    
    
    (2,538.1
    )Translation adjustment
    
    
    (1.1
    )
    
    
    (2.3
    )2,237.0
    
    
    
    2,450.1Commitments and contingencies (note 20)Guarantees (note 21)$
    6,583.9
    
    
    $
    6,675.5






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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Segmented information
 
      2006
    
    
    2005
    
    
    2004Revenues:Cable
    
    $
    1,309.5
    
    
    $
    1,080.3
    
    
    $
    937.6Newspapers
    
    
    928.2
    
    
    
    915.6
    
    
    
    888.1Broadcasting
    
    
    393.3
    
    
    
    401.4
    
    
    
    358.0Leisure and Entertainment
    
    
    315.8
    
    
    
    255.4
    
    
    
    241.7Interactive Technologies and Communications
    
    
    73.9
    
    
    
    65.1
    
    
    
    51.9Internet/Portals
    
    
    64.9
    
    
    
    50.0
    
    
    
    34.5Head Office and inter-segment
    
    
    (74.7
    )
    
    
    (64.9
    )
    
    
    (49.4
    )$
    3,010.9
    
    
    $
    2,702.9
    
    
    $
    2,462.4
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Segmented information
 
 2006
    
    
    2005
    
    
    2004Income before amortization, financial expenses, reserve for restructuring of
operations, impairment of assets and other special charges, loss on debt
refinancing, gain on sale of businesses and other assets and impairment of
goodwill and intangible assets:Cable
    
    $
    512.5
    
    
    $
    413.3
    
    
    $
    363.8Newspapers
    
    
    207.6
    
    
    
    222.2
    
    
    
    227.8Broadcasting
    
    
    42.1
    
    
    
    53.0
    
    
    
    80.5Leisure and Entertainment
    
    
    19.3
    
    
    
    27.0
    
    
    
    22.7Interactive Technologies and Communications
    
    
    7.5
    
    
    
    3.9
    
    
    
    2.3Internet/Portals
    
    
    13.3
    
    
    
    10.5
    
    
    
    4.5802.3
    
    
    
    729.9
    
    
    
    701.6General corporate revenues (expenses)
    
    
    0.5
    
    
    
    3.7
    
    
    
    (4.4
    )$
    802.8
    
    
    $
    733.6
    
    
    $
    697.2
 2006
    
    
    2005
    
    
    2004Amortization:Cable
    
    $
    198.4
    
    
    $
    179.7
    
    
    $
    177.1Newspapers
    
    
    36.5
    
    
    
    30.3
    
    
    
    26.0Broadcasting
    
    
    14.3
    
    
    
    13.7
    
    
    
    11.9Leisure and Entertainment
    
    
    7.2
    
    
    
    4.3
    
    
    
    5.6Interactive Technologies and Communications
    
    
    2.3
    
    
    
    1.7
    
    
    
    1.7Internet/Portals
    
    
    1.1
    
    
    
    0.8
    
    
    
    0.7Head Office
    
    
    0.9
    
    
    
    1.4
    
    
    
    2.9$
    260.7
    
    
    $
    231.9
    
    
    $
    225.9
 2006
    
    
    2005
    
    
    2004Additions to property, plant and equipment:Cable
    
    $
    302.6
    
    
    $
    219.9
    
    
    $
    144.5Newspapers
    
    
    116.3
    
    
    
    74.0
    
    
    
    18.8Broadcasting
    
    
    9.0
    
    
    
    12.9
    
    
    
    10.1Leisure and Entertainment
    
    
    3.4
    
    
    
    7.9
    
    
    
    3.3Interactive Technologies and Communications
    
    
    1.8
    
    
    
    1.4
    
    
    
    1.2Internet/Portals
    
    
    1.9
    
    
    
    0.7
    
    
    
    0.8Head Office
    
    
    0.5
    
    
    
    3.0
    
    
    
    2.4$
    435.5
    
    
    $
    319.8
    
    
    $
    181.1
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Segmented information
 
 2006
    
    
    2005Assets:Cable
    
    $
    4,253.5
    
    
    $
    4,251.7Newspapers
    
    
    1,579.2
    
    
    
    1,503.5Broadcasting
    
    
    408.9
    
    
    
    585.3Leisure and Entertainment
    
    
    178.0
    
    
    
    183.1Interactive Technologies and Communications
    
    
    92.8
    
    
    
    71.0Internet/Portals
    
    
    59.8
    
    
    
    59.0Head Office
    
    
    11.7
    
    
    
    21.9$
    6,583.9
    
    
    $
    6,675.5
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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 are 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 26.
 (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 2005 and 2004 have been reclassified to conform
to the presentation adopted for the year ended December 31, 2006.(b)
    
    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 deferred and recorded in translation adjustment and are included in income
only when a reduction in the investment in these foreign operations is realized.Other foreign currency transactions are translated using the temporal method. Translation
gains and losses are included in financial expenses.(c)
    
    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 post-retirements benefits costs, key
economic assumptions used in determining the allowance for doubtful accounts, the allowance
for sales returns, reserves for the 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 fair value of assets acquired and liabilities assumed in
business combinations, implied fair value of goodwill, fair value of long-lived assets,
broadcasting licences and goodwill for impairment tests purposes, provisions for income
taxes and determination of future income tax assets and liabilities, and the determination
of fair value of financial instruments. Actual results could differ from these estimates.(d)
    
    Impairment of long-lived assets:The Company reviews long-lived assets 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 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 group
of assets carrying amount 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.
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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)
    
    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 unearned revenue 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, which
are comprised of two separate accounting units: one for subscriber services (cable
connecting fees and operating services) and the other for equipment sales to subscribers
including activation fees related to wireless phones.Cable connection fee revenues of the Cable segment are deferred and recognized as revenues
over the estimated average 30-month 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 30-month period. Operating revenues from cable and other services,
such as Internet access, telephony and wireless, are recognized when services are rendered.
Revenue from equipment sales to subscribers and their costs are recognized in income when
the equipment is delivered. Revenues from video rentals are recorded as revenue when
services are provided. Promotion offers are accounted for as a reduction in the related
service revenue when customers take advantage of the offer. 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 from
publishing activities, are recognized when the publication is delivered, net of provisions
for estimated returns. Revenue from the distribution of publications and products is
recognized upon delivery.Broadcasting segmentRevenues of the Broadcasting segment derived from the sale of advertising airtime are
recognized when the advertisement has been broadcast. Revenues derived from subscription
to speciality 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 publication is delivered.Revenues derived from the sale and distribution of film and from television program rights
are recognized when the following conditions are met: (a) persuasive evidence of a sale or
a licensing agreement with a customer exists and is provided solely by a contract or other
legally enforceable documentation that sets forth, at a minimum (i) the licence period,
(ii) the film or group of films affected, (iii) the consideration to be received for the
rights transferred; (b) the film is complete and has been delivered or is available for
delivery; (c) the licence period of the arrangement has begun and the customer can begin
its exploitation, exhibition, or sale; (d) the arrangement fee is fixed or determinable;
(e) the collection of the arrangement fee is reasonably assured.
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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)
    
    Revenue recognition (continued):Broadcasting segment (continued)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 sale of
video are recognized at the time of delivery of the videocassettes and DVDs, less a
provision for future 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 products return.(f)
    
    Barter transactions:In the normal course of operations, the Newspapers, the Broadcasting and the
Internet/Portals 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, 2006, the Company recorded $19.5 million of barter
advertising ($17.7 million in 2005 and $13.1 million in 2004).(g)
    
    Cash and cash equivalents:Cash and cash equivalents include highly liquid investments purchased three months or less
from maturity and are stated at cost, which approximates market value. As at December 31,
2006, these highly liquid investments consisted mainly of commercial paper and bankers
acceptance.(h)
    
    Temporary investments:Temporary investments are recorded at the lower of cost and market value and as at December
31, 2006, these temporary investments consisted mainly of commercial paper.(i)
    
    Trade receivable:The Company establishes an allowance for doubtful accounts based on the specific credit
risk of its customers and historical trends.(j)
    
    Tax credits and government assistanceThe Broadcasting and Leisure and Entertainment segments have access to several government
programs designed to support production and distribution of televisual products and movies
and magazine and book publishing in Canada. The financial aid for production is accounted
for as a reduction of expenses. The financial aid for broadcast rights is applied against
investments in televisual products or used directly to reduce operating expenses
during the year. The financial aid for magazine and book publishing is accounted for in
revenues when the conditions for acquiring the government assistance are met.
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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):
 (j)
    
    Tax credits and government assistance (continued):The Interactive Technologies and Communications and Leisure and Entertainment segments
receive tax credits mainly related to their research and development activities and
publishing activities. These tax credits are accounted for using the cost reduction
method. Under this method, tax credits related to eligible expenses are accounted for as a
reduction in related costs, whether they are capitalized or expensed, in the year the
expenses are incurred, as long as there is reasonable assurance of their realization.(k)
    
    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 market value for all inventories, except for raw materials and supplies, for
which it is replacement cost. Work in progress is valued at the pro-rata billing value of
the work completed.(l)
    
    Investments in televisual products and movies:
 (i)
    
    Programs produced and productions in progressPrograms produced and productions in progress related to broadcast 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 relating to
each production. The cost of each program is charged to cost of sales when the program
is broadcasted.(ii)
    
    Broadcast rightsBroadcast 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: the cost of each program, movies or series is known
or can be reasonably determined; the programs, movies or series have been accepted in
accordance with the conditions of the broadcast licence agreement; the programs, movies
or series are available for the 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 estimates
of the broadcast period. These rights are amortized when televisual products and movies
are broadcast over the contract period, based on the estimated number of showings, using
an amortization method based on future revenues. This amortization is presented 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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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (l)
    
    Investment in televisual products and movies (continued):
 (iii)
    
    Distribution rights:Distribution rights relate to the distribution of televisual products and movies. The
costs include costs for movies distribution rights and other operating costs incurred,
which provide 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 the
televisual product and movie has been accepted in accordance with the conditions of the
licence agreement, the televisual product or movie is available for broadcast and the
cost of the licence is known or can be reasonably estimated.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 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 presented in cost of sales and
selling and administrative expenses.
 (m)
    
    Income taxes:The Company follows the asset and 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 financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Future
income tax assets and liabilities are measured using enacted or 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 enactment or
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.(n)
    
    Long-term investments:Investments in joint ventures are accounted for using the proportionate consolidation
method. Joint ventures represent a negligible portion of the Companys operations.
Investments in companies subject to significant influence are accounted for by the equity
method. Portfolio investments are accounted for by the cost method. Carrying values of
investments accounted for by the equity or cost method are reduced to estimated market
values if there is other than a temporary decline in the value of the investment.(o)
    
    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, cost includes
equipment, direct labour and direct overhead costs. Projects under development may also be
comprised of 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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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (o)
    
    Property, plant and equipment (continued):Amortization is principally calculated on the straight-line basis over the following
estimated useful lives:
 EstimatedAsset
    
    useful lifeBuildings
    
    25 to 40 yearsMachinery and equipment
    
    3 to 20 yearsReceiving, distribution and telecommunications 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,
relating to these assets, undeterminable.(p)
    
    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, 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 statement of income for the excess, if any.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 period of 3 to 10 years.(q)
    
    Deferred start-up costs and financing fees:Deferred start-up costs are recorded at cost and include development costs related to new
specialty services and pre-operating expenditures and are amortized when commercial
operations begin using the straight-line method over periods of three to five years.
Financing fees related to long-term financing are amortized using the interest rate method
and the straight-line method over the term of the related long-term debt.
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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):
 (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
measurement of the liability and compensation cost. Other stock option awards to employees
are measured based on the fair value of the options at the grant date and a compensation
expense is recognized over the vesting period of the options, with a corresponding increase
to additional contrbuted surplus. When the stock options are exercised, capital stock is
credited by the sum of the consideration paid, together with the related portion previously
recorded to contributed surplus.In the case of the employee share purchase plans of the Companys subsidiaries, the
contribution paid by the subsidiary on behalf of its employees is considered a compensation
expense. The contribution paid by employees for the purchase of shares is credited to the
subsidiarys capital stock.(s)
    
    Derivative financial instruments: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 instruments for trading purposes. Under hedge accounting, the
Company documents all hedging relationships between derivatives and hedged items, its
strategy for using hedges and its risk-management objective. The Company assesses the
effectiveness of derivatives when the hedge is put in place and on an ongoing basis.The Company enters into foreign exchange forward contracts to hedge anticipated
foreign-denominated equipment purchases. Under hedge accounting, foreign exchange
translation gains and losses are recognized as an adjustment to the cost of property, plant
and equipment or inventories, when the transaction is recorded.The Company enters into foreign exchange forward contracts and cross-currency swaps to
hedge some of its long-term debt. Under hedge accounting, foreign exchange translation
gains and losses are deferred and recorded as derivative instruments under other assets or
other liabilities. The fees on forward foreign exchange contracts and on cross-currency
swaps are recognized as an adjustment to interest expenses over the term of the agreement.The Company also enters into interest rate swaps to manage the impact of fluctuations in
interest rates on its long-term debt. These swap agreements require the periodic exchange
of payments without the exchange of the notional principal amount on which the payments are
based. The Company designates its interest rate hedge agreements as hedges of the interest
cost on the underlying debt. Interest expense on the debt is adjusted to include payments
made or received under interest rate swaps.Some of the Companys cross-currency swap agreements repurchased in 2006 were subject to a
floor limit on negative fair market value, below which the Company was required to make
prepayments to reduce the lenders exposure. Such prepayments were reimbursed by
reductions in the Companys future payments under the agreements. The portion of these
reimbursements related to interest was accounted for as a reduction in financial
expenses. The prepayments were presented on the balance sheet as a reduction of the
derivative instrument liability.
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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):
 (s)
    
    Derivative financial instruments (continued):Realized and unrealized gains or losses associated with derivative instruments that have
been terminated or cease to be effective prior to maturity, are 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 is recognized. In the event a
designated hedged item is sold, extinguished or matures prior to the termination of the
related derivative instrument, any realized or unrealized gain or loss on such derivative
instrument is recognized in income.Derivative instruments that are ineffective or that are not designated as an hedge are
reported on a market-to-market basis in the consolidated financial statements. Any change
in the fair value of these derivative instruments is recorded in income.(t)
    
    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 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 at year-end 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.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 2.
    
    FINANCIAL EXPENSES:
 2006
    
    
    2005
    
    
    2004Interest on long-term debt
    
    $
    215.0
    
    
    $
    212.7
    
    
    $
    224.1Amortization of deferred financing costs and long-term debt discount
    
    
    7.3
    
    
    
    62.7
    
    
    
    56.9Net loss on derivative instruments and on foreign currency
translation on financial instruments 1
    
    
    1.2
    
    
    
    4.4
    
    
    
    8.0Loss on revaluation of the Additional Amount payable
    
    
    10.5
    
    
    
    10.1
    
    
    
    26.9Other
    
    
    1.3
    
    
    
    0.9
    
    
    
    3.6Investment income
    
    
    (1.5
    )
    
    
    (4.5
    )
    
    
    (4.9
    )233.8
    
    
    
    286.3
    
    
    
    314.6Interest capitalized to the cost of property, plant and equipment
    
    
    (9.2
    )
    
    
    (1.0
    )
    
    
    $
    224.6
    
    
    $
    285.3
    
    
    $
    314.6
 1
    
    During the year ended December 31, 2006, the Company recorded a loss of $4.1
million on derivative instruments for which hedge accounting is not used ($13.1 million in
2005 and $30.2 million in 2004).
 3.
    
    RESERVE FOR RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL CHARGES:2006
 (a)
    
    Newspapers segmentIn August 2005, the Company announced a plan to invest in two new printing facilities
located in Toronto (Ontario) and Saint-Janvier-de-Mirabel (Québec). As part of the plan,
Sun Media Corporation will outsource the printing of certain of its publications in Ontario
and Québec to the new facilities. In 2006, a charge for contractual termination benefits
of $11.0 million was recorded in connection with the elimination of production positions at
The London Free Press, The Toronto Sunand at The Ottawa Sun, and inserters positions at
Le Journal de Montréal, in relation to these projects.In June 2006, the Newspapers segment announced a plan to restructure its news production
operations by introducing new content management technologies, and streamlining the news
gathering process. The Newspapers segment expects the restructuring to be complete by
early 2007. In 2006, the Newspapers segment recorded severance costs of $2.8 million
relating to the elimination of editorial positions in operations across the organization.Finally, in 2006, Sun Media Corporation implemented a voluntary workforce reduction program
at The London Free Pressand several smaller involuntary workforce reduction programs,
namely at The Toronto Sunand Bowes Publishers. The Newspapers segment has recorded
termination benefits of $3.2 million relating to these workforce reduction initiatives.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 3.
    
    RESERVE FOR RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL CHARGES
(continued):
 2006 (continued)
 (a)
    
    Newspaper segment (continued)Continuity of reserve for restructuring and other special charges
 2006Balance at beginning of year
    
    $
    Work-force reduction initiatives
    
    
    17.0Payments
    
    
    (4.3
    )Balance at end of year
    
    $
    12.7
 (b)
    
    Other segmentsIn 2006, other segments recorded restructuring costs of $1.9 million mainly related to the
elimination of management positions in the Broadcasting segment.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 4.
    
    LOSS ON DEBT REFINANCING
 (a)
    
    Quebecor Media Inc.On January 17, 2006, the Company recorded a loss of $331.6 million as a result of the
refinancing of substantially all of its 11.125% Senior Notes and 13.75% Senior Discount
Notes. The loss represents the excess of the consideration paid of $1.3 billion, including
premiums and disbursements for unwinding hedging contracts, over the book value of the
notes and the hedging contracts, and the write-off of deferred 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 15 (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 15 (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 2009 (note 15 (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.
Total consideration offered per US$1,000.00 principal amount of Senior Notes was
US$1,083.49 and total consideration per US$1,000.00 principal amount at maturity of
Senior Discount Notes was US$1,042.64, which included an early tender premium of
US$30.00 per US$1,000.00 of principal, or principal amount at maturity in the case of
the 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.On July 19, 2005, as a result of the repurchase of a first portion of its 11.125% Senior
Notes and its 13.75% Discount Notes, the Company recorded a loss of $60.8 million,
comprised of the excess of the consideration paid of $215.3 million, including premiums and
disbursements for unwinding hedging contracts, over the carrying value of the notes and of
the hedging contracts, and the write-off of related deferred financing costs. The Company
repurchased US$128.2 million and US$12.1 million, respectively, in aggregate principal
amounts of its Senior Notes and Senior Discount Notes. The total consideration was a fixed
price of US$1,112.50 per US$1,000.00 principal amount for each Senior Note and a fixed
price of US$1,007.50 per US$1,000.00 principal amount at maturity for each Discount Note,
which included an early tender premium in the amount of US$30.00 per US$1,000.00 of
principal, or principal amount at maturity in the case of the Discount Notes.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 4.
    
    LOSS ON DEBT REFINANCING (continued):
 (b)
    
    Videotron Ltd.:On July 15, 2005, Videotron Ltd., Cable segment, repurchased the entire aggregate principal
amount of its subsidiary, CF Cable TV Inc., Senior Secured First Priority Notes, which bore
interest at 9.125%, for a total cash consideration of $99.3 million, including the cost of
unwinding a hedging contract. The repurchase resulted in a gain of $0.8 million.On November 19, 2004, the net proceeds from the issuance of a second series of the 6.875%
Senior Notes (note 15 (viii)) were used to repay in full Videotron Ltd.s term loan credit
facility C in place as at December 31, 2003. As a result of the refinancing of the term
loan, Videotron Ltd. recorded a loss of $4.8 million, comprised of a loss of $4.6 million
on the marked-to-market of a derivative instrument and the write-off of $0.2 million in
deferred financing costs.(c)
    
    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 (note 15 (x)) and settled a corresponding portion of its
hedging contracts. As a result, a loss of $0.5 million was recorded.
 5.
    
    IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS:During the fourth quarter of 2006, the Company completed its annual impairment test for its
broadcasting licenses and goodwill. Based on the results, the Company concluded that the
carrying values of the broadcasting licenses and goodwill of its Broadcasting segment were
impaired. Conventional television broadcasters are experiencing pressures on their advertising
revenues caused by the fragmentation of the television market. Accordingly, the Company
reviewed its business plan and recorded a total impairment charge of $179.2 million: $30.8
million for one of its broadcasting licenses and $148.4 million for the goodwill.In addition, during the third quarter of 2006, the Broadcasting segment recorded an impairment
charge of $0.8 million related to an operating licence co-owned with another entity.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 6.
    
    BUSINESS ACQUISITIONS:During the years ended December 31, 2006, 2005 and 2004, the Company acquired or increased its
interest in several businesses and has accounted for these by the purchase method. Certain
purchase price allocations related to the 2006 acquisitions are preliminary and should be
finalized as soon as Companys management has gathered all the significant information believed
to be available and considered necessary. The results of operations of these businesses have
been included in the Companys consolidated financial statements from the dates of their
respective acquisitions.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.
 2005
 
    
    A total of 3,739,599 Class B non-voting Common Shares of TVA Group Inc., Broadcasting
segment, were repurchased for a cash consideration of $81.9 million, resulting in
preliminary additional goodwill of $22.3 million, which was reduced by $7.3 million in
2006 when the purchase price allocation was finalized.
    
    On December 12, 2005, the Company acquired Sogides Ltée, a major book publishing and
distribution group in Quebec, for a cash consideration of $24.0 million and an additional
contingent payment of $5.0 million based on the achievement of specific conditions in
2008. This acquisition resulted in a preliminary additional goodwill of $7.8 million,
which was reduced by $2.9 million in 2006 when the purchase price allocation was
finalized.
    
    Other businesses were acquired for considerations including cash of $4.6 million and
the operating assets of the community newspaper Beauport Express, resulting in additional
goodwill of $3.5 million.
 2004
 
    
    A total of 1,892,500 Class B non-voting Common Shares of TVA Group Inc. were
repurchased for a cash consideration of $41.0 million, resulting in additional goodwill of
$10.2 million.
    
    All minority interests in Canoe Inc., Internet/Portals segment, directly owned by
minority shareholders, were acquired for a cash consideration of $25.2 million, resulting
in additional goodwill of $4.8 million.
    
    On December 2, 2004, TVA Group Inc. and Sun Media Corporation, two subsidiaries of the
Company, completed the acquisition of Sun TV (formerly Toronto 1). The purchase price paid
at the closing was $43.2 million, $32.4 million of which was paid in cash by TVA Group
Inc. for its 75% interest in Sun TV. Sun Media Corporation paid $2.8 million in cash and
transferred its 29.9% interest in CablePulse24 (CP24), a 24-hour news station in Toronto,
for its 25.0% interest in Sun TV. The balance payable of $3.6 million with respect to the
final purchase price adjustment was paid in January 2007. The transfer of Sun Media
Corporations interest in CP24 resulted in a gain on disposal of $8.0 million. The
acquisition resulted in goodwill of $10.7 million.
    
    Other businesses were acquired for cash considerations totalling $13.3 million,
resulting in additional goodwill of $8.8 million.
 F-24




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 6. BUSINESS ACQUISITIONS (continued):
  2006
    
    
    2005
    
    
    2004Assets acquired:Cash and cash equivalents
    
    $
    2.1
    
    
    $
    
    
    
    $
    2.2Non-cash current operating assets
    
    
    2.5
    
    
    
    13.0
    
    
    
    11.4Property, plant and equipment
    
    
    0.2
    
    
    
    8.0
    
    
    
    15.5Other assets
    
    
    4.4
    
    
    
    19.9
    
    
    
    32.8Future income taxes
    
    
    
    
    
    
    
    
    
    
    20.3Goodwill
    
    
    7.6
    
    
    
    22.9
    
    
    
    35.0Non-controlling interest
    
    
    1.2
    
    
    
    60.3
    
    
    
    31.818.0
    
    
    
    124.1
    
    
    
    149.0Liabilities assumed:Bank indebtedness
    
    
    
    
    
    
    (0.4
    )
    
    
    Non-cash current operating liabilities
    
    
    (3.1
    )
    
    
    (3.2
    )
    
    
    (15.2
    )Other liabilities
    
    
    
    
    
    
    
    
    
    
    Future income taxes
    
    
    (0.9
    )
    
    
    (5.3
    )
    
    
    (11.1
    )(4.0
    )
    
    
    (8.9
    )
    
    
    (26.3
    )Net assets acquired at fair value
    
    $
    14.0
    
    
    $
    115.2
    
    
    $
    122.7Consideration:Cash
    
    $
    12.6
    
    
    $
    110.5
    
    
    $
    114.7Issuance of Common Shares by Nurun Inc.
    
    
    1.4
    
    
    
    
    
    
    
    Balance payable
    
    
    
    
    
    
    3.6
    
    
    
    Community newspaper (Beauport Express)
    
    
    
    
    
    
    1.1
    
    
    
    Investment in CP24
    
    
    
    
    
    
    
    
    
    
    8.0$
    14.0
    
    
    $
    115.2
    
    
    $
    122.7
 F-25




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 7.
    
    INCOME TAXES:Income taxes on continuing operations are as follows:
 2006
    
    
    2005
    
    
    2004Current
    
    $
    5.4
    
    
    $
    19.0
    
    
    $
    20.9Future
    
    
    (58.0
    )
    
    
    25.0
    
    
    
    16.5$
    (52.6
    )
    
    $
    44.0
    
    
    $
    37.4
 The following table reconciles the difference between the domestic statutory tax rate and the
effective tax rate of the Company and its subsidiaries in the determination of consolidated net
(loss) income:
 2006
    
    
    2005
    
    
    2004Statutory tax rate
    
    
    32.0
    %
    
    
    31.0
    %
    
    
    31.0
    %Increase (reduction) resulting from:Effect of provincial and foreign tax rates differences
    
    
    
    
    
    
    (0.2
    )
    
    
    0.2Effect of non-deductible charges, non-taxable income
and tax rate variations
    
    
    4.4
    
    
    
    4.2
    
    
    
    4.4Change in valuation allowance
    
    
    3.5
    
    
    
    (4.8
    )
    
    
    (6.3
    )Change in future income tax balances due to a change in
enacted tax rates
    
    
    5.8
    
    
    
    7.6
    
    
    
    Tax consolidation transaction with the parent company
    
    
    
    
    
    
    (10.1
    )
    
    
    Impairment of goodwill
    
    
    (21.4
    )
    
    
    
    
    
    
    Other
    
    
    (0.5
    )
    
    
    0.4
    
    
    
    (5.7
    )Effective tax rate
    
    
    23.8
    %
    
    
    28.1
    %
    
    
    23.6
    %
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 7.
    
    INCOME TAXES (continued):The tax effects of significant items comprising the Companys net future income tax positions
are as follows:
 2006
    
    
    2005Loss carryforwards
    
    $
    336.1
    
    
    $
    296.0Accounts payable and accrued charges
    
    
    36.2
    
    
    
    32.2Deferred charges
    
    
    10.3
    
    
    
    (13.3
    )Property, plant and equipment
    
    
    (217.5
    )
    
    
    (226.0
    )Goodwill and other assets
    
    
    (27.5
    )
    
    
    (33.2
    )Other
    
    
    13.6
    
    
    
    25.8151.2
    
    
    
    81.5Valuation allowance
    
    
    (143.1
    )
    
    
    (152.3
    )Net future income tax assets (liabilities)
    
    $
    8.1
    
    
    $
    (70.8
    )
 The current and long-term future income tax assets and liabilities are as follows:
 2006
    
    
    2005Future income tax assets:Current
    
    $
    65.9
    
    
    $
    98.7Long-term
    
    
    61.1
    
    
    
    57.5127.0
    
    
    
    156.2Future income tax liabilities:Long-term
    
    
    (118.9
    )
    
    
    (227.0
    )Net future income tax assets (liabilities)
    
    $
    8.1
    
    
    $
    (70.8
    )
 Subsequent recognition of tax benefits relating to the valuation allowance as at December 31,
2006 will be mainly reported in the consolidated statement of income.As at December 31, 2006, the Company had loss carryforwards for income tax purposes available
to reduce future taxable income, including $599.1 million that will expire between 2007 and
2026 and $689.5 million that can be carried forward indefinitely. Of the latter amount, $665.7
million represent capital losses to be applied against future capital gains.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 7.
    
    INCOME TAXES (continued):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. Any such liability cannot reasonably be determined at
the present time.8.
    
    DISCONTINUED OPERATIONS AND BUSINESS DISPOSALS:Discontinued operationsOn May 25, 2004, 6.75 million Common Shares of Mindready Solutions Inc. held by Nurun Inc.,
Interactive Technologies and Communications segment, were sold for a cash consideration of $7.8
million, of which $4.4 million was received on the closing date of the bid and the balance of
$3.4 million in February 2005. In March 2005, Nurun Inc. sold its 9.6% remaining interest in
Mindready Solutions Inc. for cash proceeds of $0.4 million. The sale resulted in a loss on
disposal of $0.3 million (net of income taxes and non-controlling interest) in 2004.As of May 25, 2004, the results of this disposed business were reclassified and disclosed in
the consolidated statements of income as Income (loss) from discontinued operations, while
the cash flows related to the operations of this disposed business were reclassified and
disclosed in the consolidated statements of cash flows as Cash flows provided by discontinued
operations.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 9.
    
    ACCOUNTS RECEIVABLE:
 2006
    
    
    2005Trade
    
    $
    383.3
    
    
    $
    360.5Other
    
    
    42.9
    
    
    
    55.2$
    426.2
    
    
    $
    415.7
 10.
    
    INVENTORIES AND INVESTMENTS IN TELEVISUAL PRODUCTS AND MOVIES:
 2006
    
    
    2005Raw materials and supplies
    
    $
    42.0
    
    
    $
    32.0Work in progress
    
    
    12.8
    
    
    
    9.7Finished goods
    
    
    63.8
    
    
    
    68.7Investments in televisual products and movies
    
    
    40.1
    
    
    
    45.1$
    158.7
    
    
    $
    155.5
 11.
    
    PROPERTY, PLANT AND EQUIPMENT:
 2006AccumulatedCost
    
    
    amortization
    
    
    Net amountLand
    
    $
    26.4
    
    
    $
    
    
    
    $
    26.4Buildings and leasehold improvements
    
    
    185.2
    
    
    
    48.3
    
    
    
    136.9Machinery and equipment
    
    
    698.8
    
    
    
    409.1
    
    
    
    289.7Receiving, distribution and telecommunication networks
    
    
    1,952.2
    
    
    
    756.9
    
    
    
    1,195.3Projects under development
    
    
    181.8
    
    
    
    
    
    
    
    181.8$
    3,044.4
    
    
    $
    1,214.3
    
    
    $
    1,830.1
 2005AccumulatedCost
    
    
    amortization
    
    
    Net amountLand
    
    $
    32.7
    
    
    $
    
    
    
    $
    32.7Buildings and leasehold improvements
    
    
    176.6
    
    
    
    41.9
    
    
    
    134.7Machinery and equipment
    
    
    694.8
    
    
    
    352.7
    
    
    
    342.1Receiving, distribution and telecommunication networks
    
    
    1,648.3
    
    
    
    604.6
    
    
    
    1,043.7Projects under development
    
    
    78.3
    
    
    
    
    
    
    
    78.3$
    2,630.7
    
    
    $
    999.2
    
    
    $
    1,631.5
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 12.
    
    OTHER ASSETS:
 2006
    
    
    2005Broadcasting licenses
    
    $
    84.2
    
    
    $
    109.3Deferred financing costs, net of accumulated amortization
    
    
    33.6
    
    
    
    42.6Investments in televisual products and movies
    
    
    29.4
    
    
    
    28.0Customer relationships and non-competition agreements, net of accumulated amortization
    
    
    27.4
    
    
    
    21.9Deferred connection costs
    
    
    18.2
    
    
    
    15.5Derivative instruments
    
    
    16.7
    
    
    
    11.7Long-term investments
    
    
    13.0
    
    
    
    11.2Deferred pension charge (note 24)
    
    
    9.5
    
    
    
    8.2Other
    
    
    11.6
    
    
    
    11.0$
    243.6
    
    
    $
    259.4
 13.
    
    GOODWILL:For the years ended December 31, 2006, 2005 and 2004, the changes in the carrying amounts of
goodwill were as follows:
 2006Adjustment ofBalance as at
    
    
    Business
    
    
    
    
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    
    
    
    
    allocation and
    
    
    December 31,2005
    
    
    (disposals)
    
    
    Impairment
    
    
    other
    
    
    2006Cable
    
    $
    2,581.8
    
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,581.7Newspapers
    
    
    1,002.0
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    1,002.5Broadcasting
    
    
    207.1
    
    
    
    
    
    
    
    (148.4
    )
    
    
    (7.3
    )
    
    
    51.4Leisure and Entertainment
    
    
    46.9
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (2.9
    )
    
    
    43.4Interactive Technologies and Communications
    
    
    3.6
    
    
    
    6.7
    
    
    
    
    
    
    
    0.9
    
    
    
    11.2Internet/Portals
    
    
    30.5
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    30.9Total
    
    $
    3,871.9
    
    
    $
    6.9
    
    
    $
    (148.4
    )
    
    $
    (9.3
    )
    
    $
    3,721.1
 F-30




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 13. GOODWILL (continued):
 2005Adjustment ofBalance as at
    
    
    Business
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    allocation and
    
    
    December 31,2004
    
    
    (disposals)
    
    
    other
    
    
    2005Cable
    
    $
    2,581.8
    
    
    $
    
    
    
    $
    
    
    
    $
    2,581.8Newspapers
    
    
    1,011.2
    
    
    
    1.0
    
    
    
    (10.2
    )1
    
    
    1,002.0Broadcasting
    
    
    185.3
    
    
    
    22.3
    
    
    
    (0.5
    )
    
    
    207.1Leisure and Entertainment
    
    
    39.1
    
    
    
    7.8
    
    
    
    
    
    
    
    46.9Interactive Technologies and Communications
    
    
    3.1
    
    
    
    1.3
    
    
    
    (0.8
    )
    
    
    3.6Internet/Portals
    
    
    30.5
    
    
    
    
    
    
    
    
    
    
    
    30.5Total
    
    $
    3,851.0
    
    
    $
    32.4
    
    
    $
    (11.5
    )
    
    $
    3,871.9
 2004Adjustment ofBalance as at
    
    Business
    
    purchase price
    
    Balance as atDecember 31,
    
    acquisitions
    
    allocation and
    
    December 31,2003
    
    (disposals)
    
    other
    
    2004Cable
    
    $
    2,661.1
    
    
    $
    5.2
    
    
    $
    (84.5
    )1
    
    $
    2,581.8Newspapers
    
    
    1,010.8
    
    
    
    0.4
    
    
    
    
    
    
    
    1,011.2Broadcasting
    
    
    165.0
    
    
    
    20.3
    
    
    
    
    
    
    
    185.3Leisure and Entertainment
    
    
    43.6
    
    
    
    1.0
    
    
    
    (5.5
    )
    
    
    39.1Interactive Technologies and Communications
    
    
    
    
    
    
    2.8
    
    
    
    0.3
    
    
    
    3.1Internet/Portals
    
    
    25.7
    
    
    
    4.8
    
    
    
    
    
    
    
    30.5Total
    
    $
    3,906.2
    
    
    $
    34.5
    
    
    $
    (89.7
    )
    
    $
    3,851.0
 1
    
    Recognition of tax benefits not recognized as at the business acquisition date.
 F-31




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 14.
    
    ADDITIONAL AMOUNT PAYABLE:The value of the Additional Amount payable resulting from the repurchase of the redeemable
preferred shares of a subsidiary in 2003 fluctuates based on the market value of the Companys
Common Shares. Until the Company is listed on a stock exchange, the value of the Additional
Amount payable is based on a formula established as per the repurchase agreement. At the date
of the transaction, both parties had agreed to an initial value of $70.0 million. As at
December 31, 2006, the Additional Amount payable is valued at $122.0 million ($111.5 million as
at December 31, 2005). Changes in the amount payable are recorded as financial expenses in the
statement of income. The Additional Amount payable matures on December 15, 2008. The holder
has had the right to require payment at any time since December 15, 2004. If the Company files
a prospectus for an initial public offering, the holder has the right to require the Company to
pay the Additional Amount payable by delivering 3,740,682 Common Shares of the Company,
adjusted to take into account certain shareholders equity transactions. The Company holds an
option to pay this Additional Amount in cash, for a period of 30 days following each of June
15, 2007 and June 15, 2008. The Company may, under certain conditions and if its shares are
publicly traded at that time, pay the Additional Amount by delivering 3,740,682 Common Shares
to the holder.15.
    
    LONG-TERM DEBT:
 Effectiveinterest rate as at
    
    
    Year ofDecember 31, 2006
    
    
    maturity
    
    
    2006
    
    
    2005Quebecor Media Inc.:Bank credit facilities (i)
    
    
    7.09
    %
    
    
    2011-2013
    
    
    $
    520.6
    
    
    $
    Other credit facility (ii)
    
    
    4.77
    %
    
    
    2015
    
    
    
    59.2
    
    
    
    Senior Notes (iii)
    
    
    7.75
    %
    
    
    2016
    
    
    
    611.8
    
    
    
    Senior Notes (iv)
    
    
    
    %
    
    
    2011
    
    
    
    
    
    
    
    672.0Senior Discount Notes (v)
    
    
    
    %
    
    
    2011
    
    
    
    
    
    
    
    316.11,191.6
    
    
    
    988.1Videotron Ltd. and its subsidiaries (vi):Bank credit facility (vii)
    
    
    5.21
    %
    
    
    2009
    
    
    
    49.0
    
    
    
    Senior Notes (viii)
    
    
    6.59
    %
    
    
    2014
    
    
    
    769.1
    
    
    
    769.2Senior Notes (ix)
    
    
    6.44
    %
    
    
    2015
    
    
    
    203.1
    
    
    
    202.51,021.2
    
    
    
    971.7Sun Media Corporation and its subsidiaries (vi):Bank credit facilities (x)
    
    
    6.92
    %
    
    
    2008-2009
    
    
    
    250.8
    
    
    
    231.1Senior Notes (xi)
    
    
    7.88
    %
    
    
    2013
    
    
    
    236.0
    
    
    
    235.2486.8
    
    
    
    466.3TVA Group Inc. and its subsidiaries (vi):Revolving bank loan (xii)
    
    
    5.46
    %
    
    
    2010
    
    
    
    96.5
    
    
    
    107.12,796.1
    
    
    
    2,533.2Less current portion:Quebecor Media Inc.
    
    
    
    
    
    
    
    
    
    
    20.0
    
    
    
    Sun Media Corporation and its subsidiaries
    
    
    
    
    
    
    
    
    
    
    3.1
    
    
    
    2.7$
    2,773.0
    
    
    $
    2,530.5
 F-32




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 15.
    
    LONG-TERM DEBT (continued):
 (i)
    
    In January 2006, the Company entered into new bank credit facilities 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 US 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 new $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. Financing fees of $2.1 million were paid. These new 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 at December 31, 2006, the carrying value of the Companys
assets guaranteeing the credit facilities was $5,317.0 million. The Company shall repay
the term loan A in quarterly repayments equal to 2.5% of the principal amount during the
first three years term, 5.0% in the fourth year and 12.5% in the fifth year 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. The Company has fully hedged
the foreign currency risk associated with the new term B loan by using cross-currency
interest rate swaps, under which all payments have been set in Canadian dollars. As at
December 31, 2006, no amount had been drawn on the revolving credit facility, while $115.6
million and US$347.4 million were drawn down on the term A and B credit facilities,
respectively.(ii)
    
    In April 2006, the Company entered into a long-term committed credit facility with
Société Générale (Canada) for the Canadian dollar equivalent of 59.4 million, bearing
interest at bankers acceptance rate, plus a premium, and maturing 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 new Senior Notes of US$525.0 million in
aggregate principal amount, before issuance fees of $9.0 million. The notes bear interest
at 7.75% and mature in March 2016. These notes contain certain restrictions on the
Company, including limitations on its ability to incur additional indebtedness and 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. The Company
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.(iv)
    
    The Senior Notes were repurchased during the year (note 4 (a)).(v)
    
    The Senior Discount Notes were repurchased during the year (note 4 (a)).(vi)
    
    The debts of these subsidiaries are non-recourse to the parent company, Quebecor
Media Inc.(vii)
    
    The credit facility of $450.0 million is a revolving credit facility maturing in
November 2009 and 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 at December 31, 2006, the carrying
value of assets guaranteeing the credit facility of Videotron Ltd. was $4,253.5 million.
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-33




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 15.
    
    LONG-TERM DEBT (continued):
 (viii)
    
    In October 2003, a first series of Senior Notes was issued at discount for net proceeds
of US$331.9 million, before issuance fees of US$5.7 million. In November 2004, a second
series of Senior Notes was issued at premium on their face amount of US$315.0 million
resulting in gross proceeds of US$331.0 million before accrued interest and issuance fees
of US$6.2 million. These notes bear interest at a rate of 6.875%, 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. Videotron Ltd. has fully hedged the foreign currency risk
associated with the Senior Notes by using cross-currency interest rate swaps, under which
all payments were set in Canadian dollars. The notes are redeemable, in whole or in part,
at any time on or after January 15, 2009, at a decreasing premium.(ix)
    
    On September 16, 2005, Senior Notes were issued at discount for net proceeds of
US$174.1 million, before issuance fees of $3.8 million. These notes bear interest at a
rate of 6.375% payable every six months on December 15 and June 15, and mature on December
15, 2015. The notes contain certain restrictions for 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. Videotron Ltd. has fully hedged the
foreign currency risk associated with the Senior Notes by using cross-currency interest
rate swaps, under which all payments were set in Canadian dollars. The notes are
redeemable, in whole or in part, at any time on or after December 15, 2010, at a
decreasing premium.(x)
    
    The bank credit facilities amended on January 17, 2006, are comprised of (i) a
revolving credit facility amounting to $75.0 million, maturing in 2008, (ii) a term loan
B credit facility amounting to US$230.0 million maturing in 2009, and (iii) a new term
loan C credit facility amounting to $40.0 million entered into in January 2006 and
maturing in 2009. 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 and other
distributions. As at December 31, 2006, the carrying value of assets guaranteeing the bank
credit facilities was $1,579.2 million. 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 loan B credit
facility bear interest at LIBOR plus a margin of 1.75% per annum (margin was reduced by
0.25% to 1.75% on April 27, 2006), or at US prime rate plus a margin of 0.75% per annum,
while 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. Sun Media Corporation has fully hedged the foreign currency risk
associated with the term B loan by using cross-currency interest rate swaps, under which
all payments were set in Canadian dollars. As at December 31, 2006, no amount had been
drawn on the revolving credit facility, while US$181.4 million and $39.3 million were
drawn down on the term loans B and C credit facilities, respectively.(xi)
    
    The Senior Notes were issued at discount for net proceeds of US$201.5 million, before
issuance fees of US$4.1 million. These notes bear interest at a rate of 7.625% and mature
in 2013. The notes contain certain restrictions for Sun Media Corporation, including
limitations on its ability to incur additional indebtedness and to make other
distributions, and are unsecured. The Senior Notes are guaranteed by specific subsidiaries
of Sun Media Corporation Inc. Sun Media Corporation has fully hedged the foreign currency
risk associated with the Senior Notes by using cross-currency interest rate swaps and a
foreign exchange forward contract, under which all payments were set in Canadian dollars.
The notes are redeemable, in whole or in part, at any time on or after February 15, 2008,
at a decreasing premium.
 F-34




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated
financial statements
 
 15.
    
    LONG-TERM DEBT (continued):
 (xii)
    
    The revolving term bank loan of a maximum of $160.0 million bears interest at the
prime rate of a Canadian chartered bank or bankers acceptances rates, plus a variable
margin determined by certain financial ratios. In 2005, the revolving term loan maturity
as extended to June 15, 2010. The credit facility contains certain restrictions, including
the obligation to maintain certain financial ratios.
   2007
    
    $
    23.12008
    
    
    26.62009
    
    
    326.82010
    
    
    160.72011
    
    
    26.72012 and thereafter
    
    
    2,232.2
 16.
    
    OTHER LIABILITIES:
 2006
    
    
    2005Derivative instruments
    
    $
    231.3
    
    
    $
    261.0Accrued stock-based compensation
    
    
    57.2
    
    
    
    32.8Accrued post-retirement benefits liability (note 24)
    
    
    32.3
    
    
    
    30.3Deferred revenues
    
    
    24.0
    
    
    
    23.4Accrued pension benefits liability (note 24)
    
    
    4.7
    
    
    
    7.2Other
    
    
    7.0
    
    
    
    4.6$
    356.5
    
    
    $
    359.3
 17.
    
    NON-CONTROLLING INTEREST:Non-controlling interest represents the interest of non-controlling shareholders in the
participating shares of the Companys subsidiaries. As at December 31, 2006, the most
significant non-controlling interests were as follows:
 Non-controlling interestSubsidiary
    
    Segment
    
    % voting
    
    
    % equityTVA Group Inc.
    
    Broadcasting
    
    
    0.08
    %
    
    
    54.76
    %Nurun Inc.
    
    Interactive Technologies and Communications
    
    
    42.26
    %
    
    
    42.26
    %
 F-35




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated
financial statements
 
 18.
    
    CAPITAL STOCK:
 (a)
    
    Authorized capital stock:An unlimited number of Common Shares, without par value;An unlimited number of Cumulative First Preferred Shares, without par value; the number of
preferred shares in each series and the related characteristics, rights and privileges are
to be 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.
  (b)
    
    Issued capital stock:
 Common SharesNumber
    
    AmountBalance as at December 31, 2004 and 2005
    
    
    123,602,807
    
    
    $
    1,773.7Reduction of paid-up capital
    
    
    
    
    
    
    (21.3
    )Balance as at December 31, 2006
    
    
    123,602,807
    
    
    $
    1,752.4
   F-36




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 18.
    
    CAPITAL STOCK (continued):
 (c)
    
    Transactions during the year:2006On June 12 and December 28, 2006, the Company redeemed 255,000 and 500,000 Preferred A
Shares, respectively, owned by Sun Media Corporation and its subsidiaries, for a total
amount of $755.0 million. On the same respective days, the Company issued 120,000
Preferred F shares for an amount of $120.0 million and redeemed 55,000 Preferred F shares
for an amount of $55.0 million to Sun Media Corporation and its subsidiaries.On April 25, April 30, June 9 and June 29, 2006, the Company issued 25,000, 44,000, 50,000
and 40,000 Preferred C Shares respectively, for a total amount of $159.0 million, to
9101-0835 Québec Inc. On October 12, 2006, the Company redeemed 31,950 Preferred C Shares
owned by 9101-0835 Quebec inc. for an amount of $32.0 million.2005On January 14, 2005, the Company redeemed 150,000 Preferred A Shares for an amount of
$150.0 million from Sun Media Corporation and its subsidiaries and issued 255,000 Preferred
F Shares for an amount of $255.0 million to Sun Media Corporation and its subsidiaries.On March 9, 2005 and April 29, 2005, the Company issued 61,950 Preferred C Shares
respectively, to 9101-0835 Quebec inc. for a total amount of $61.9 million. On August 2,
2005, the Company redeemed 184,000 Preferred C Shares for an amount of $184.0 million.2004On January 14, 2004, the Company redeemed 450,000 Preferred A Shares owned by Sun Media
Corporation for an amount of $450.0 million.On January 16, June 1 and October 7, 2004, the Company issued 70,000, 100,000 and 100,000
Preferred C Shares respectively, for a total amount of $270.0 million, to 9101-0835 Québec
Inc.On January 16, 2004, the Company issued 1,100,000 Preferred D Shares, for an amount of
$1,100.0 million, to Vidéotron (1998) ltée. On December 16, 2004, the Company redeemed the
shares for an amount of $1,100.0 million.On November 30, 2004, the Company issued one Preferred E share, for an amount of $3.6
million to Sun Media Corporation and its subsidiaries. On the same day, the Company
redeemed the shares for an amount of $3.6 million.
 F-37




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 19.
    
    STOCK-BASED COMPENSATION PLANS:
 (a)
    
    Quebecor Media Inc. stock option plan:Under a stock option plan established by the Company, 6,185,714 Common Shares of the
Company were 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
closing price ending on the day preceding the date of grant of the Common Shares of the
Company on the stock exchanges where such shares are listed at the time of grant. Unless
authorized by the Company Compensation Committee in the context of a change of control, no
options may be exercised by an optionee if the shares of the Company have not been listed
on a recognized stock exchange. Should the Common Shares of Quebecor Media Inc. have not
been so listed on March 1, 2008, optionees may exercise 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 of each
year, starting March 1, 2008, their right to receive an amount in cash (equal to the
difference between 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, Common Shares of Quebecor Media Inc. 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
25.0% vesting on the second anniversary of the date of grant; and (iii) equally over three
years with the first 33.0% vesting on the third anniversary of the date of grant.The following table gives summary information on outstanding options granted as at December 31, 2006 and 2005:
 2006
    
    
    
    
    
    
    2005Weighted average
    
    
    
    
    
    
    Weighted averageOptions
    
    
    exercise price
    
    
    Options
    
    
    exercise priceBalance at beginning of year
    
    
    3,228,321
    
    
    $
    18.90
    
    
    
    3,135,040
    
    
    $
    17.99Granted
    
    
    795,393
    
    
    
    31.60
    
    
    
    255,630
    
    
    
    28.96Cancelled
    
    
    (241,947
    )
    
    
    21.86
    
    
    
    (162,349
    )
    
    
    17.13Balance at end of year
    
    
    3,781,767
    
    
    $
    21.38
    
    
    
    3,228,321
    
    
    $
    18.90Vested options at end of year
    
    
    1,639,460
    
    
    $
    17.59
    
    
    
    939,965
    
    
    $
    17.20
 F-38




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 19.
    
    STOCK-BASED COMPENSATION PLANS (continued):
 (a)
    
    Quebecor Media Inc. stock option plan (continued):The following table gives summary information on outstanding options as at December 31,
2006:
 Outstanding options
    
    
    
    
    
    
    Vested optionsWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    averageRange of
    
    
    
    
    
    average years
    
    
    exercise
    
    
    
    
    
    
    exerciseexercise price
    
    Number
    
    
    to maturity
    
    
    price
    
    
    Number
    
    
    price$15.19 to 21.77
    
    
    2,752,905
    
    
    
    6.00
    
    
    $
    17.96
    
    
    
    1,612,837
    
    
    $
    17.4322.98 to 33.41
    
    
    1,028,862
    
    
    
    9.04
    
    
    
    30.56
    
    
    
    26,623
    
    
    
    26.80$15.19 to 33.41
    
    
    3,781,767
    
    
    
    6.82
    
    
    $
    21.38
    
    
    
    1,639,460
    
    
    $
    17.59
  (b)
    
    TVA Group Inc. plans:
 (i)
    
    Stock option plan for senior executives and directorsUnder this stock option plan, 1,400,000 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 under the plan may generally vest over a five-year period on
the basis of 25% each year, starting on the second 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 opt to receive from TVA Group Inc. a cash
payment equal to the number of shares corresponding to the options exercised, multiplied
by the difference between the market value and the purchase price of the shares under
the option. The market value is defined by the average closing market price of the Class
B share for the last five trading days preceding the date on which the option was
exercised.On December 13, 2006, the Board of Directors adopted a resolution amending the stock
option plan. One of these amendments provides that, except under specific circumstances,
and unless the Compensation Committee decides otherwise, options will 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% vesting on the third anniversary
of the grant. The proposed amendments to the stock option plan are subject to the
approval of TVA Group Inc. shareholders and the Toronto Stock Exchange.
 F-39




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 19.
    
    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 details on changes to outstanding options for the years ended
December 31, 2006 and 2005:
 2006
    
    
    
    
    
    
    2005Weighted average
    
    
    
    
    
    
    Weighted averageOptions
    
    
    exercise price
    
    
    Options
    
    
    exercise priceBalance at beginning of year
    
    
    310,177
    
    
    $
    20.27
    
    
    
    215,000
    
    
    $
    19.81Granted
    
    
    503,684
    
    
    
    15.62
    
    
    
    115,630
    
    
    
    20.85Exercised
    
    
    (27,500
    )
    
    
    14.00
    
    
    
    (6,000
    )
    
    
    14.00Cancelled
    
    
    (296,666
    )
    
    
    17.36
    
    
    
    (14,453
    )
    
    
    20.85Balance at end of year
    
    
    489,695
    
    
    $
    17.59
    
    
    
    310,177
    
    
    $
    20.27Vested options at end of year
    
    
    31,625
    
    
    $
    20.75
    
    
    
    72,500
    
    
    $
    18.50
  Outstanding options
    
    
    
    
    
    
    Vested optionsWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    averageRange of
    
    
    
    
    
    average years
    
    
    exercise
    
    
    
    
    
    
    exerciseexercise price
    
    Number
    
    
    to maturity
    
    
    price
    
    
    Number
    
    
    price$14.00 to 18.85
    
    
    295,564
    
    
    
    9.34
    
    
    $
    15.44
    
    
    
    
    
    
    $
    18.86 to 25.20
    
    
    194,131
    
    
    
    7.85
    
    
    
    20.87
    
    
    
    31,625
    
    
    
    20.75$14.00 to 25.20
    
    
    489,695
    
    
    
    8.75
    
    
    $
    17.59
    
    
    
    31,625
    
    
    $
    20.75
 F-40




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 19.
    
    STOCK-BASED COMPENSATION PLANS (continued):
 (b)
    
    TVA Group Inc. plans (continued):
 (i)
    
    Stock option plan for senior executives and directors (continued)Had the vested options been exercised as at December 31, 2006, Quebecor Media Inc.s
interest in TVA Group Inc. would have decreased from 45.24% to 45.23% (45.23% to 45.11%
as at December 31, 2005).No charge was recorded for the TVA Group Inc. plan for the year ended December 31, 2006
(a charge reversal of $0.1 million in 2005 and a charge of $0.2 million in 2004).(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. The plans provide that 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 of TVA Group Inc. Class B shares.
The plans also provide financing terms free of interest. No Class B shares were issued
under the plans during the years ended December 31, 2006, 2005 and 2004. The remaining
balance that may be issued under the share purchase plan for executives is 332,643 TVA
Group Inc. Class B shares as at December 31, 2006 and 2005. The remaining balance that
may be issued under the share purchase plan for employees is 229,753 TVA Group Inc.
Class B shares as at December 31, 2006 and 2005.(iii)
    
    Deferred share unit planIn 2000, TVA Group Inc. introduced a long-term profit sharing plan for certain members
of senior management of TVA Group Inc., and its subsidiaries. The deferred share units
(DSUs) are redeemable only upon termination of the participants employment. The
redemption price is payable in cash or, at TVA Group Inc.s discretion, in Class B
shares of TVA Group Inc. or by a combination of cash and shares. Under this plan, a
maximum of 25,000 Class B shares of TVA Group Inc. can be issued. No DSUs were issued
under this plan during the years ended December 31, 2006, 2005 and 2004.
 F-41




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 20.
    
    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 $297.5 million. The minimum
payments for the coming years are as follows:
 OtherLeases
    
    
    commitments2007
    
    $
    39.6
    
    
    $
    103.12008
    
    
    33.6
    
    
    
    22.12009
    
    
    26.6
    
    
    
    10.92010
    
    
    20.6
    
    
    
    2.12011
    
    
    11.9
    
    
    
    0.52012 and thereafter
    
    26.5
    

    
    
    
  (b)
    
    Other commitments:As part of the acquisition of Group TVA Inc. in 2001 and Sun TV in 2004, the Company is
committed, over period ending in 2012, to invest $58.2 million in the Canadian TV industry
and in the Canadian communications industry to promote Canadian TV content and the
development of communications. As at December 31, 2006, $8.6 million remained to be
invested.(c)
    
    Contingencies:On March 13, 2002, legal action was initiated by the shareholders of a cable company
against Videotron Ltd., Cable segment. They contend that Videotron Ltd. did not honor its
commitment related to a stock purchase agreement signed in August 2000. The plaintiffs are
requesting compensation totalling $26.0 million. Videotron Ltd.s management claims the
suit is not justified and intends to vigorously defend its case in Court.A number of other legal proceedings against the Company and its subsidiaries are still
outstanding. 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 its financial position.
 F-42




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 21.
    
    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 premise leases, with expiry dates through 2015. Should the lessee default
under the agreement, the Company must, under certain conditions, compensate the lessor. As at
December 31, 2006, the maximum exposure with respect to these guarantees is $16.2 million and
no liability has been recorded in the consolidated balance sheet since the Company does not
expect to make any payments pertaining 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.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 financial statements with respect to these indemnifications.
 F-43




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 22.
    
    FINANCIAL INSTRUMENTS:The Company is exposed to risks relating to foreign exchange fluctuations and is as well as
risks relating to interest rate fluctuations. To reduce these risks, the Company and its
subsidiaries use derivative financial instruments. None of these instruments is held or issued
for speculative purposes.
 (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
    
    
    1.4459
    
    
    $
    25.1$/CHF
    
    Less than 1 year
    
    
    0.9265
    
    
    
    14.9Sun Media Corporation$/ US$
    
    February 15, 2013
    
    
    1.5227
    
    
    
    312.2Videotron Ltd. and its subsidiaries:$/ US$
    
    Less than 1 year
    
    
    1.1152
    
    
    
    50.4
 F-44




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 22.
    
    FINANCIAL INSTRUMENTS (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii)
    
    Cross-currency interest rate swaps:
 CDN dollarexchange rateAnnual
    
    
    Annual
    
    
    of interesteffective
    
    
    nominal
    
    
    and capitalPeriod
    
    
    Notional
    
    
    interest
    
    
    interest
    
    
    payments percovered
    
    
    amount
    
    
    rate
    
    
    rate
    
    
    one US dollarQuebecor Media Inc.:Senior Notes
    
    
    2006 to 2016
    
    
    US$
    525.0
    
    
    
    7.39
    %
    
    
    7.75
    %
    
    
    1.1600Term loan B
credit facilities
    
    
    2006 to 2009
    
    
    US$
    198.9
    
    
    
    6.27
    %
    
    LIBOR + 2.00%
    
    
    1.1625Term loan B
credit facilities
    
    
    2009 to 2013
    
    
    US$
    198.9
    
    
    Bankers acceptances 3 months
+ 2.22
    %
    
    LIBOR + 2.00%
    
    
    1.1625Term loan B
credit facilities
    
    
    2006 to 2013
    
    
    US$
    148.9
    
    
    
    6.44
    %
    
    LIBOR + 2.00%
    
    
    1.1625Videotron Ltd. and
its subsidiaries: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
    %
    
    
    1.1781
 F-45




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 22.
    
    FINANCIAL INSTRUMENTS (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii)
    
    Cross-currency interest rate swaps (continued):
 CDN dollarexchange rateAnnual
    
    
    Annual
    
    
    of interesteffective
    
    
    nominal
    
    
    and capitalPeriod
    
    
    Notional
    
    
    interest
    
    
    interest
    
    
    payments percovered
    
    
    amount
    
    
    rate
    
    
    rate
    
    
    one US dollarSun Media Corporation
and its subsidiaries:Senior Notes
    
    
    2003 to 2008
    
    
    US$
    155.0
    
    
    
    8.17
    %
    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    
    2008 to 2013
    
    
    US$
    155.0
    
    
    Bankers acceptances 3 months + 3.70
%
    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    
    2003 to 2013
    
    
    US$
    50.0
    
    
    Bankers acceptances 3 months + 3.70
%
    
    
    7.625
    %
    
    
    1.5227Term-loan B credit
facility
    
    
    2003 to 2009
    
    
    US$
    181.4
    
    
    Bankers acceptances 3 months + 2.29
%
    
    LIBOR plus 1.75%
    
    
    1.5175
 F-46




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 22.
    
    FINANCIAL INSTRUMENTS (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii)
    
    Cross-currency interest rate swaps (continued):The cross-currency swap agreements settled as part of the refinancing of the Companys
debts on January 17, 2006, were subject to a floor limit on negative fair market value,
below which the Company was required to make prepayments to limit the exposure of the
counterparties. Such prepayments were offset by equal reductions in the Companys
commitments under the agreements. The Company was required to make prepayments of $75.9
million in 2005 and $197.7 million in 2004 under this provision.Also, 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-market value.
 (b)
    
    Fair value of financial instruments:The carrying amount of cash and cash equivalents, temporary investments, accounts
receivable, bank indebtedness, accounts payable and accrued charges, dividend payable,
amounts payable to the parent company and companies under common control and the Additional
Amount payable approximates their fair value since these items will be realized or paid
within one year or are due on demand.
 F-47




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 22.
    
    FINANCIAL INSTRUMENTS (continued):
 (b)
    
    Fair value of financial instruments (continued):Carrying value and fair value of other financial instruments as at December 31, 2006 and
2005 are as follows:
 2006
    
    
    
    
    
    
    2005Carrying
    
    
    
    
    
    
    Carryingvalue
    
    
    Fair value
    
    
    value
    
    
    Fair valueQuebecor Media Inc.Long-term debt
    
    $
    (1,191.6
    )
    
    $
    (1,206.3
    )
    
    $
    (988.1
    )
    
    $
    (1,078.8
    )Cross-currency interest rate swaps
    
    
    3.8
    
    
    
    (17.8
    )
    
    
    (21.5
    )
    
    
    (261.3
    )Foreign exchange forward contracts
    
    
    2.2
    
    
    
    2.2
    
    
    
    
    
    
    
    (1.8
    )Videotron Ltd. and its subsidiariesLong-term debt
    
    
    (1,021.2
    )
    
    
    (1,010.6
    )
    
    
    (971.7
    )
    
    
    (967.4
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.9
    )Cross-currency interest rate swaps
    
    
    (71.8
    )
    
    
    (141.1
    )
    
    
    (73.7
    )
    
    
    (135.0
    )Foreign exchange forward contract
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    (0.2
    )Sun Media Corporation and its subsidiariesLong-term debt
    
    
    (486.8
    )
    
    
    (492.9
    )
    
    
    (466.3
    )
    
    
    (476.1
    )Cross-currency interest rate swaps and
foreign exchange forward contract
    
    
    (148.8
    )
    
    
    (176.1
    )
    
    
    (154.1
    )
    
    
    (186.5
    )TVA Group Inc. and its subsidiariesLong-term debt
    
    
    (96.5
    )
    
    
    (96.5
    )
    
    
    (107.1
    )
    
    
    (107.1
    )
  (c)
    
    Credit risk management:
    F-48




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 22.
    
    FINANCIAL INSTRUMENTS (continued):
 (C)
    
    Credit risk management (continued):The Company believes that its product-lines and the geographic diversity of its customer
base is 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.
 23.
    
    RELATED PARTY TRANSACTIONS:During the year, the Company made purchases and incurred rent charges from companies under
common control and from affiliated companies in the amount of $86.9 million ($88.4 million in
2005 and $75.1 million in 2004), included in the cost of sales and selling and administrative
expenses. The Company made sales to companies under common control and to an affiliated
company in the amount of $18.1 million ($21.7 million in 2005 and $11.1 million in 2004). These
transactions were concluded and accounted for at the exchange value.In 2005, the Company acquired certain assets from Quebecor World Inc., a company under common
control, for a cash consideration of $3.3 million. The transaction was recorded at the carrying
value of the assets transferred.In 2004, the Cable segment purchased some of the Quebecor World Inc.s information technology
(IT) infrastructure equipment of Quebecor World Inc., a company under common control, at a cost
of $3.0 million, as part of an IT outsourcing long-term agreement signed between the parties.
Both the price of the equipment transferred and revenues from this outsourcing agreement are
accounted for at the exchange value.Quebecor Inc. (the parent company) has entered into management arrangements with the Company.
Under these management arrangements, the parent company and the Company provide each other
management services 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. Also, in connection with the Companys previous credit facility, which
was secured by the Companys shareholders, an annual security fee equivalent to 1% of the
credit facility was charged to the Company by its shareholders. The new credit facilities,
entered into in January 2006, are not secured by the Companys shareholders. In 2006, the
Company received an amount of $3.0 million, which is included as a reduction in selling and
administrative expenses ($3.0 million in 2005 and 2004) and the Company has incurred management
and security fees of $1.1 million ($2.2 million in 2005 and $1.8 million in 2004) with the
shareholders.In addition, the Company incurred rent expense with a subsidiary of a shareholder and with a
shareholder of the parent company for an amount of $2.7 million ($2.6 million in 2005 and $3.7
million in 2004).During the year ended December 31, 2006, Nurun Inc., Interactive Technologies and
Communications segment, received interest of $0.9 million ($0.8 million in 2005 and $0.7
million in 2004) from Quebecor Inc. As at December 31, 2006, cash and cash equivalents
totalling $20.2 million ($22.3 million as at December 31, 2005) 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%.During the years ended December 31, 2006 and 2004, some of the Companys subsidiaries acquired
tax benefits amounting to $6.5 million and $12.9 million, respectively, from Quebecor World
Inc., a company under common control, that were recorded as income taxes receivable. These
transactions allowed the Company to realize a gain of $0.4 million and $0.1 million (net of
non-controlling interest), respectively, which was recorded as contributed surplus.On December 14, 2005, the Company entered into a tax consolidation transaction by which the
Company has transferred to its parent company $192.0 million of capital losses for a cash
consideration of $15.9 million. In addition, in 2006, Quebecor Inc., the parent company,
transferred to the Companys subsidiary, Sun Media Corporation, $74.2 million of non-capital
losses in exchange of a cash consideration of $16.1 million. These transactions were recorded
at the exchange amounts. As a result, the Company has recorded a reduction of $15.9 million of
its income tax expense in 2005 and expects to reduce its income tax expense by $8.4 million in
the future.
 F-49




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS:The Company maintains various flat-benefit plans, final-pay plans with indexation features from
none 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 once at least in the last three years and the next
required valuations will be performed at least over the next three years.The Company provides postretirement benefits to eligible employees. The costs of these
benefits, which are principally health care, are accounted for during the employees active
service period.The following tables give a reconciliation of the changes in the plans benefit obligations and
the fair value of plan assets for the years ended December 31, 2006 and 2005, and a statement
of the funded status as at those dates:
 Pension benefits
    
    
    Postretirement benefits2006
    
    
    2005
    
    
    2006
    
    
    2005Change in benefit obligations:Benefit obligations at beginning of year
    
    $
    555.9
    
    
    $
    444.9
    
    
    $
    40.4
    
    
    $
    35.5Service costs
    
    
    22.1
    
    
    
    15.3
    
    
    
    1.3
    
    
    
    1.8Interest costs
    
    
    29.0
    
    
    
    27.7
    
    
    
    1.9
    
    
    
    2.2Plan participants contributions
    
    
    11.7
    
    
    
    10.4
    
    
    
    
    
    
    
    Actuarial loss
    
    
    1.8
    
    
    
    68.7
    
    
    
    1.3
    
    
    
    4.5Benefits and settlements paid
    
    
    (25.6
    )
    
    
    (16.7
    )
    
    
    (1.7
    )
    
    
    (1.2
    )Plan amendments
    
    
    0.7
    
    
    
    5.6
    
    
    
    (3.1
    )
    
    
    Curtailment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.4
    )Other
    
    
    0.2
    
    
    
    
    
    
    
    0.6
    
    
    
    Benefit obligations at end of year
    
    $
    595.8
    
    
    $
    555.9
    
    
    $
    40.7
    
    
    $
    40.4
 Pension benefits
    
    
    Postretirement benefits2006
    
    
    2005
    
    
    2006
    
    
    2005Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    480.8
    
    
    $
    421.8
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    68.5
    
    
    
    47.2
    
    
    
    
    
    
    
    Employer contributions
    
    
    25.0
    
    
    
    18.1
    
    
    
    1.7
    
    
    
    1.2Plan participants contributions
    
    
    11.7
    
    
    
    10.4
    
    
    
    
    
    
    
    Benefits and settlements paid
    
    
    (25.6
    )
    
    
    (16.7
    )
    
    
    (1.7
    )
    
    
    (1.2
    )Fair value of plan assets at end of year
    
    $
    560.4
    
    
    $
    480.8
    
    
    $
    
    
    
    $
    
  2006
    
    
    2005Equity securities
    
    
    59.8
    %
    
    
    55.8
    %Debt securities
    
    
    36.5
    
    
    
    43.4Other
    
    
    3.7
    
    
    
    0.8100.0
    %
    
    
    100.0
    %
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):As at December 31, 2006, plan assets included shares of the parent company and of a company
under common control representing an amount of $2.5 million ($2.7 million as at December 31,
2005).
 Pension benefits
    
    
    Postretirement benefits2006
    
    
    2005
    
    
    2006
    
    
    2005Reconciliation of funded status:Excess of benefit obligations over fair
value of plan assets at end of year
    
    $
    (35.4
    )
    
    $
    (75.1
    )
    
    $
    (40.7
    )
    
    $
    (40.4
    )Unrecognized actuarial loss
    
    
    47.9
    
    
    
    81.1
    
    
    
    13.0
    
    
    
    12.3Unrecognized net transition (asset) obligation
    
    
    (5.2
    )
    
    
    (5.7
    )
    
    
    0.5
    
    
    
    0.5Unrecognized prior service cost (benefit)
    
    
    17.0
    
    
    
    18.1
    
    
    
    (5.1
    )
    
    
    (2.7
    )Valuation allowance
    
    
    (19.5
    )
    
    
    (17.4
    )
    
    
    
    
    
    
    Net amount recognized
    
    $
    4.8
    
    
    $
    1.0
    
    
    $
    (32.3
    )
    
    $
    (30.3
    )
  Pension benefits
    
    
    Postretirement benefits2006
    
    
    2005
    
    
    2006
    
    
    2005Benefit obligations
    
    $
    (585.5
    )
    
    $
    (549.5
    )
    
    $
    (40.7
    )
    
    $
    (40.4
    )Fair value of plan assets
    
    
    548.8
    
    
    
    473.6
    
    
    
    
    
    
    
    Funded status  plan deficit
    
    $
    (36.7
    )
    
    $
    (75.9
    )
    
    $
    (40.7
    )
    
    $
    (40.4
    )
  Pension benefits
    
    
    Postretirement benefits2006
    
    
    2005
    
    
    2006
    
    
    2005Accrued benefit liability
    
    $
    (4.7
    )
    
    $
    (7.2
    )
    
    $
    (32.3
    )
    
    $
    (30.3
    )Deferred pension charge
    
    
    9.5
    
    
    
    8.2
    
    
    
    
    
    
    
    Net amount recognized
    
    $
    4.8
    
    
    $
    1.0
    
    
    $
    (32.3
    )
    
    $
    (30.3
    )
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):Components of the net benefit costs are as follows:
 Pension benefits
    
    
    Postretirement benefits2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Service costs
    
    $
    22.1
    
    
    $
    15.3
    
    
    $
    11.9
    
    
    $
    1.3
    
    
    $
    1.8
    
    
    $
    1.5Interest costs
    
    
    29.0
    
    
    
    27.7
    
    
    
    26.2
    
    
    
    1.9
    
    
    
    2.2
    
    
    
    1.9Actual return on plan assets
    
    
    (68.5
    )
    
    
    (47.2
    )
    
    
    (38.6
    )
    
    
    
    
    
    
    
    
    
    
    Current actuarial loss
    
    
    1.8
    
    
    
    68.7
    
    
    
    6.6
    
    
    
    1.3
    
    
    
    4.5
    
    
    
    2.6Current prior service costs (benefits)
    
    
    0.7
    
    
    
    5.6
    
    
    
    0.3
    
    
    
    (3.1
    )
    
    
    
    
    
    
    Curtailment (gain) loss and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.6
    )
    
    
    1.9Elements of net benefit
costs before adjustments to
recognize the long-term nature
and valuation allowance
    
    
    (14.9
    )
    
    
    70.1
    
    
    
    6.4
    
    
    
    1.4
    
    
    
    6.9
    
    
    
    7.9Difference between actual and
expected return on plan assets
    
    
    33.0
    
    
    
    15.1
    
    
    
    9.2
    
    
    
    
    
    
    
    
    
    
    
    Deferral of amounts arising
during the period:Actuarial loss
    
    
    (1.8
    )
    
    
    (68.7
    )
    
    
    (6.6
    )
    
    
    (1.3
    )
    
    
    (4.5
    )
    
    
    (2.6
    )Prior service costs
    
    
    (0.7
    )
    
    
    (5.6
    )
    
    
    (0.3
    )
    
    
    3.1
    
    
    
    
    
    
    
    Amortization of previously
deferred amounts:Actuarial loss
    
    
    2.0
    
    
    
    (0.2
    )
    
    
    1.3
    
    
    
    0.6
    
    
    
    (0.1
    )
    
    
    Prior service costs (benefits)
    
    
    1.8
    
    
    
    1.6
    
    
    
    1.2
    
    
    
    (0.7
    )
    
    
    (0.3
    )
    
    
    (0.3
    )Transitional obligations
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    0.1
    
    
    
    0.1Total adjustments to recognize the
long-term nature of benefit costs
    
    
    33.8
    
    
    
    (58.3
    )
    
    
    4.3
    
    
    
    1.7
    
    
    
    (4.8
    )
    
    
    (2.8
    )Valuation allowance
    
    
    2.1
    
    
    
    1.0
    
    
    
    2.6
    
    
    
    
    
    
    
    
    
    
    
    Net benefit costs
    
    $
    21.0
    
    
    $
    12.8
    
    
    $
    13.3
    
    
    $
    3.1
    
    
    $
    2.1
    
    
    $
    5.1
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 24.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):The weighted average rates used in the measurement of the Companys benefit obligations as at
December 31, 2006, 2005 and 2004 and current periodic costs are as follows:
 Pension benefits
    
    
    
    
    
    
    Postretirement benefits2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Benefit obligationsRates as at year-end:Discount rate
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    6.00
    %Rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50Current periodic costsRates as at preceding year-end:Discount rate
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    6.25
    %
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    6.25
    %Expected return on plan assets 1
    
    
    7.25
    
    
    
    7.50
    
    
    
    7.75
    
    
    
    
    
    
    
    
    
    
    
    Rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
 
 1
    
    After management and professional fees.
  Postretirementbenefits1%
    
    
    1%Sensitivity analysis
    
    increase
    
    
    decreaseEffect on service and interest costs
    
    $
    0.6
    
    
    $
    (0.4
    )Effect on benefit obligations
    
    
    6.6
    
    
    
    (5.1
    )
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 25.
    
    RATES SUBJECT TO CRTC REGULATIONThe 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.
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 would differ from GAAP, even though the Company is subject to these regulations.26.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES:The Companys consolidated financial statements are prepared in accordance with GAAP in Canada,
which differ in some respects from those applicable in the United States. The following tables
set forth the impact of material differences between GAAP in Canada and in the United States on
the Companys consolidated financial statements:
 (a)
    
    Consolidated statements of income:
 2006
    
    
    2005
    
    
    2004Net (loss) income, as reported in the consolidated statements of income per GAAP in Canada
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2Adjustments:Development, pre-operating and start-up costs (i)
    
    
    (0.7
    )
    
    
    (1.3
    )
    
    
    (2.1
    )Pension and postretirement benefits (ii)
    
    
    0.9
    
    
    
    2.1
    
    
    
    0.9Change in fair value and ineffective portion
of derivative instruments (iii)
    
    
    82.1
    
    
    
    11.3
    
    
    
    6.6Stock-based compensation (iv)
    
    
    (4.8
    )
    
    
    
    
    
    
    Income taxes (v), (vi)
    
    
    (43.1
    )
    
    
    31.1
    
    
    
    (4.4
    )Non-monetary transactions (vii)
    
    
    
    
    
    
    1.5
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    6.9Net (loss) income, as adjusted per GAAP in the
United States (in Canadian dollars)
    
    $
    (135.3
    )
    
    $
    141.2
    
    
    $
    96.1
 (b)
    
    Comprehensive (loss) income:The application of GAAP in the United States requires the disclosure of comprehensive (loss)
income in a separate financial statement, which includes net (loss) income as well as
revenues, charges, gains and losses recorded directly to equity. The details of the
comprehensive loss are as follows:
 2006
    
    
    2005
    
    
    2004Net (loss) income, as adjusted per GAAP in the United States
    
    $
    (135.3
    )
    
    $
    141.2
    
    
    $
    96.1Pension and post-retirement benefits (ii)
    
    
    17.6
    
    
    
    (18.8
    )
    
    
    (4.4
    )Derivative instruments (iii)
    
    
    132.0
    
    
    
    (22.0
    )
    
    
    (105.7
    )Translation adjustment 1
    
    
    1.2
    
    
    
    (1.3
    )
    
    
    0.5Income taxes (v), (vi)
    
    
    (64.4
    )
    
    
    73.3
    
    
    
    2.2Comprehensive (loss) income per GAAP in the United States
    
    $
    (48.9
    )
    
    $
    172.4
    
    
    $
    (11.3
    )
 1
    
    Change for the year.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements
 
 26.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (b)
    
    Comprehensive (loss) income (continued):Accumulated other comprehensive loss as at December 31, 2006, 2005 and 2004 is as follows:
 2006
    
    
    2005
    
    
    2004Pension and post-retirement benefits (ii)
    
    $
    (52.3
    )
    
    $
    (30.2
    )
    
    $
    (11.4
    )Derivative instruments (iii)
    
    
    (44.4
    )
    
    
    (176.4
    )
    
    
    (154.4
    )Translation adjustment
    
    
    (1.1
    )
    
    
    (2.3
    )
    
    
    (1.0
    )Income taxes (ii), (v), (vi)
    
    
    25.8
    
    
    
    77.8
    
    
    
    4.5Accumulated other comprehensive loss at end of year
    
    $
    (72.0
    )
    
    $
    (131.1
    )
    
    $
    (162.3
    )
 (c)
    
    Consolidated balance sheets:
 2006
    
    
    
    
    
    
    2005Canada
    
    
    United States
    
    
    Canada
    
    
    United StatesGoodwill
    
    $
    3,721.1
    
    
    $
    3,717.1
    
    
    $
    3,871.9
    
    
    $
    3,868.0Other assets
    
    
    243.6
    
    
    
    197.1
    
    
    
    259.4
    
    
    
    251.9Current liabilities
    
    
    (956.4
    )
    
    
    (945.9
    )
    
    
    (964.3
    )
    
    
    (964.3
    )Long-term debt
    
    
    (2,773.0
    )
    
    
    (2,700.1
    )
    
    
    (2,530.5
    )
    
    
    (2,465.8
    )Other liabilities
    
    
    (356.5
    )
    
    
    (470.9
    )
    
    
    (359.3
    )
    
    
    (684.5
    )Future income tax liabilities
    
    
    (118.9
    )
    
    
    (90.1)
    )
    
    
    (227.0
    )
    
    
    (103.8
    )Non-controlling interest
    
    
    (142.1
    )
    
    
    (137.1
    )
    
    
    (144.3
    )
    
    
    (144.0
    )Contributed surplus (vi), (viii)
    
    
    (3,217.2
    )
    
    
    (3,395.2
    )
    
    
    (3,216.8
    )
    
    
    (3,386.4
    )Deficit
    
    
    2,731.5
    
    
    
    2,886.3
    
    
    
    2,538.1
    
    
    
    2,727.3Accumulated other comprehensive loss
    
    
    1.1
    
    
    
    72.0
    
    
    
    2.3
    
    
    
    131.1
 
 (i)
    
    Under GAAP in Canada, certain development and pre-operating costs that
satisfy specified criteria for recoverability are deferred and amortized. Also, under
GAAP in Canada, 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 GAAP in the United
States, these costs must be included in income as incurred.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 26. SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c) Consolidated balance sheets (continued):
 (ii)
    
    Under GAAP in the United States, Statement No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans (SFAS 158) was issued in 2006
and requires the recognition in the balance sheet of the over or under funded
positions of defined benefit pension and other postretirement plans, along with a
corresponding non-cash adjustment, which will be recorded in the accumulated other
comprehensive loss. The SFAS 158 was adopted prospectively on
December 31, 2006 and did not have an impact on the Companys consolidated
statement of income.Under GAAP in the United States, for 2006 and prior years, if the accumulated benefit
obligation exceeded the fair value of a pension plans assets, the Company was required
to recognize a minimum accrued liability equal to the unfunded accumulated benefit
obligation, which was recorded in accumulated other comprehensive loss. The additional
minimum liability concept has been eliminated with the adoption of SFAS 158.On the adoption of SFAS 158, an adjustment of $27.3 million (net of income tax of $12.4
million and non-controlling interest of $14.5 million) was recorded as a component of
the ending balance of accumulated other comprehensive loss as at December 31, 2006 to
reflect the unfunded status of benefit plans and the reversal of the minimum pension
liability that was recognized in accordance with SFAS 87.Under GAAP in Canada, a company is not required to recognize the 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 the plan asset. GAAP in the United States does not
provide for a valuation allowance against pension assets.(iii)
    
    Under GAAP in United States, Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133)
establishes accounting and reporting standards for derivative instruments and hedging
activities and requires that all derivatives be recorded as either assets or
liabilities in the balance sheet at fair value. In accordance with SFAS 133, for
derivative instruments designated as fair value hedges, such as certain cross-currency
interest rate swaps of Videotron Ltd. and Sun Media Corporation, changes in the fair
value of the derivative instrument are substantially offset in the statement of income
by changes in the fair value of the hedged item. For derivative instruments designated
as cash flow hedges, such as the Companys cross-currency interest rate swaps and
certain cross-currency interest rate swaps or forward exchange contracts of Videotron
Ltd. and Sun Media Corporation, the effective portion of any hedge is reported in
other comprehensive income (loss) until it is recognized in income during the same
period in which the hedged item affects income, while the current ineffective portion
of hedges is recognized in the statement of income each period.Under GAAP in Canada, derivative financial instruments are accounted for on an accrual
basis. Realized and unrealized gains and losses are deferred and recognized in income
in the same period and in the same financial statement category as the income or
expense arising from the corresponding hedged positions.Further differences result from the different transition rules and timing of the
adoption of the current standards in Canada and in the United States for derivative
financial instruments and hedge accounting.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 26. SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c) Consolidated balance sheets (continued):
 (iv)
    
    Under U.S. GAAP, the Company adopted the new standards of FASB No. 123(R),
Share-Based Payment (SFAS 123(R)) in 2006. In accordance with SFAS 123(R), the
liability related to stock-based awards that call for settlement in cash or other
asset, must be measured at its fair value based on the fair value of stock options
awards, and shall be remeasured at the end of each reporting period through
settlement. Under Canadian GAAP, the liability is measured and remeasured based on the
intrinsic value of the stocks options awards instead of the fair value.(v)
    
    This adjustment represents the tax impact of United States GAAP adjustments.
Furthermore, the Company concluded, in 2005, that the realization of future income tax
assets related to its derivative financial instruments was now considered more likely
than not. Consequently, the tax benefits are recognized since that period in the
statement of income and in the statement of comprehensive income.(vi)
    
    The Company entered into a tax consolidation transactions by which in 2006,
the parent company transferred to the Companys subsidiary, Sun Media Corporation,
non-capital losses in exchange of a cash consideration of $16.1 million and by which
in 2005, the Company has transferred to its parent company capital losses for a cash
consideration of $15.9 million (note 7). Under GAAP in Canada, these transactions were
recorded in accordance with CICA Handbook 3840, Related Party Transactions. It
resulted in the recognition of a deferred credit of $8.4 million in 2006 and in a
reduction of $15.9 million of the Companys income tax expense in 2005. Under GAAP in
the United States, since these transactions related to assets transfer between a
subsidiary and its parent company, the difference between the carrying value of the
tax benefits transferred and the cash consideration received or paid were recognized
in contributed surplus.(vii)
    
    In April 2005, Sun Media Corporation, Newspaper segment, exchanged a
community publication for another community publication. Under U.S GAAP, this exchange
of businesses is recorded in accordance with FASB Statement No. 141, Business
Combinations and the cost of the purchase should be determined as the fair value of
the consideration given or the fair value of the net assets or equity interest
received, whichever is more reliably measurable. Under Canadian GAAP, since this
exchange of businesses is a non-monetary transaction, it is accounted for in
accordance with CICA Handbook 3830, Non-monetary Transactions, and recorded at the
carrying value of the asset or service given up in the exchange adjusted by any
monetary consideration received or given.Accordingly, under US GAAP, this transaction resulted in a gain on disposal of a
publication and also resulted in an increase of the purchase price of the publication
acquired.(viii)
    
    Under GAAP in Canada, in 2003, the Company recorded a gain on repurchase of
redeemable preferred shares of a subsidiary of $153.7 million in the statement income.
Under GAAP in the United States, this gain is recognized in contributed surplus.
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 27.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY:The Company has access to the cash flow 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
could 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 as follows:Non-consolidated and condensed statements of income
 2006
    
    
    2005
    
    
    2004RevenuesManagement fees
    
    $
    41.8
    
    
    $
    30.0
    
    
    $
    20.4Interest on loan to subsidiaries
    
    
    0.7
    
    
    
    6.9
    
    
    
    6.0Other
    
    
    7.3
    
    
    
    28.0
    
    
    
    20.849.8
    
    
    
    64.9
    
    
    
    47.2ExpensesGeneral and administrative
    
    
    (49.1
    )
    
    
    (53.7
    )
    
    
    (46.4
    )Depreciation and amortization
    
    
    (0.8
    )
    
    
    (1.2
    )
    
    
    (1.4
    )Financial
    
    
    (106.4
    )
    
    
    (171.3
    )
    
    
    (181.0
    )Loss before undernoted items
    
    
    (106.5
    )
    
    
    (161.3
    )
    
    
    (181.6
    )Gain on disposal of investments and other assets
    
    
    0.1
    
    
    
    
    
    
    
    1.4Loss on debt refinancing
    
    
    (342.1
    )
    
    
    (60.8
    )
    
    
    Loss before income taxes
    
    
    (448.5
    )
    
    
    (222.1
    )
    
    
    (180.2
    )Income taxes
    
    
    (93.6
    )
    
    
    (24.9
    )
    
    
    (48.2
    )(354.9
    )
    
    
    (197.2
    )
    
    
    (132.0
    )Equity income from subsidiaries
    
    
    185.2
    
    
    
    293.7
    
    
    
    220.2Net (loss) income
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
 F-58




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 27. NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):
  2006
    
    
    2005
    
    
    2004Cash flows related to operationsNet (loss) income
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2Amortization of plant, property and equipment
    
    
    0.8
    
    
    
    1.2
    
    
    
    1.4Gain on disposal of investments and other assets
    
    
    (0.1
    )
    
    
    
    
    
    
    (1.4
    )Loss on debt refinancing
    
    
    342.1
    
    
    
    60.8
    
    
    
    Repayment of accrued interest on Senior Discount Notes
    
    
    (197.3
    )
    
    
    (3.0
    )
    
    
    Amortization of deferred financing costs and of long
term debt discount
    
    
    4.8
    
    
    
    61.2
    
    
    
    55.0Loss on revaluation of the Additional Amount payable
    
    
    13.8
    
    
    
    
    
    
    
    Future income taxes
    
    
    (93.3
    )
    
    
    (25.7
    )
    
    
    (48.5
    )Excess of equity income over equity distributions
from subsidiaries
    
    
    (86.3
    )
    
    
    (111.2
    )
    
    
    (76.1
    )Net change in non-cash balances related to operations
    
    
    21.2
    
    
    
    (29.7
    )
    
    
    9.4Cash flows (used in) provided by operations
    
    
    (164.0
    )
    
    
    50.1
    
    
    
    28.0Cash flows related to investing activitiesNet acquisitions of investments in subsidiaries
    
    
    (100.3
    )
    
    
    (39.9
    )
    
    
    (26.3
    )Dividends received in excess of accumulated equity income
from subsidiaries
    
    
    10.0
    
    
    
    210.0
    
    
    
    205.2Reduction to paid-up capital of subsidiaries
    
    
    164.6
    
    
    
    
    
    
    
    Proceeds from disposal of a business to a subsidiary
    
    
    7.7
    
    
    
    
    
    
    
    Proceeds from disposal of tax deductions to a subsidiary
    
    
    
    
    
    
    35.2
    
    
    
    Net decrease (increase) in temporary investments
    
    
    
    
    
    
    78.4
    
    
    
    (59.9
    )Other
    
    
    8.3
    
    
    
    (1.6
    )
    
    
    1.4Cash flows provided by investing activities
    
    
    90.3
    
    
    
    282.1
    
    
    
    120.4Cash flows related to financing activitiesProceeds from issuance of redeemable preferred shares
    
    
    279.0
    
    
    
    316.9
    
    
    
    1,370.0Repurchases of redeemable preferred shares
    
    
    (842.0
    )
    
    
    (334.0
    )
    
    
    (1,550.0
    )Net increase in bank indebtedness
    
    
    1.9
    
    
    
    
    
    
    
    Net repayments of revolving credit facilities
    
    
    
    
    
    
    
    
    
    
    (97.0
    )Repayments of long-term debt and unwinding of
hedging contracts
    
    
    (1,174.2
    )
    
    
    (212.7
    )
    
    
    Issuance of long-term debt, net of financing fees
    
    
    1,186.5
    
    
    
    
    
    
    
    Net decrease (increase) in prepayments under cross-currency
swap agreements
    
    
    21.6
    
    
    
    (34.1
    )
    
    
    (184.4
    )Dividends and reduction of Common Shares paid-up capital
    
    
    (105.0
    )
    
    
    (45.0
    )
    
    
    (20.0
    )Net decrease (increase) in advances to or from subsidiaries
    
    
    687.9
    
    
    
    (19.8
    )
    
    
    254.3Cash flows provided by (used in) financing activities
    
    
    55.7
    
    
    
    (328.7
    )
    
    
    (227.1
    )Net (decrease) increase in cash and cash equivalents
    
    
    (18.0
    )
    
    
    3.5
    
    
    
    (78.7
    )Cash and cash equivalents at beginning of year
    
    
    18.0
    
    
    
    14.5
    
    
    
    93.2Cash and cash equivalents at end of year
    
    $
    
    
    
    $
    18.0
    
    
    $
    14.5
 F-59




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to consolidated financial statements
 
 27. NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):
  2006
    
    
    2005AssetsCurrent assets
    
    $
    101.4
    
    
    $
    153.6Advances to subsidiaries
    
    
    216.3
    
    
    
    175.9Investments in subsidiaries
    
    
    3,448.7
    
    
    
    3,372.9Convertible obligation and notes receivable  subsidiaries
    
    
    830.0
    
    
    
    1,392.9Other assets
    
    
    155.5
    
    
    
    84.8$
    4,751.9
    
    
    $
    5,180.1Liabilities and Shareholders equityCurrent liabilities
    
    $
    199.4
    
    
    $
    207.8Long-term debt
    
    
    1,171.4
    
    
    
    988.2Advances from subsidiaries
    
    
    245.3
    
    
    
    77.7Other liabilities
    
    
    68.8
    
    
    
    63.4Redeemable preferred shares issued to subsidiaries
    
    
    830.0
    
    
    
    1,392.9Shareholders equity
    
    
    2,237.0
    
    
    
    2,450.1$
    4,751.9
    
    
    $
    5,180.1
 F-60