##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2009



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to

OR



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report

For the transition period from              to

Commission file number: 333-13792

QUEBECOR MEDIA INC.

(Exact name of Registrant as specified in its
charter)

Province of Quebec, Canada

(Jurisdiction of incorporation or organization)

612 St-Jacques Street

Montreal, Quebec, Canada H3C 4M8

(Address of principal executive offices)

Securities registered or to be registered
pursuant to Section 12(b) of the Act.



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which
registered
|None                |  | None                                     

Securities registered or to be
registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act.

73/4% Senior Notes due March 2016 (issued January 17, 2006)

73/4% Senior Notes due March 2016 (issued October 5, 2007)

(Title of Class)

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.

123,602,807 Common Shares

1,260,000 Cumulative First Preferred Shares, Series G

Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      ̈  Yes    x  No

If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.     ̈  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition
of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated
filer   ̈                Accelerated filer   ̈                Non-accelerated filer  x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:



|             |  |                                                                                                          |  |         
|------------ |  | -------------------------------------------------------------------------------------------------------- |  | --------
|U.S. GAAP   ̈ |  | International Financial Reporting Standards as issued by the International Accounting Standards Board   ̈ |  | Other  x

If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    x  Item 17     ̈  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      ̈  Yes    x  No









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TABLE OF CONTENTS



|                                                                                       |  |     
|-------------------------------------------------------------------------------------- |  | ----
|                                                                                       |  | Page
|                                                                                       | 
|Explanatory Notes                                                                      |  | ii  
|                                                                                       | 
|Industry and Market Data                                                               |  | ii  
|                                                                                       | 
|Presentation of Financial Information                                                  |  | ii  
|                                                                                       | 
|Exchange Rate Information                                                              |  | iii 
|                                                                                       | 
|Cautionary Statement Regarding Forward-Looking Statements                              |  | iv  
|                                                                                       | 
|PART I                                                                                 |  |     
|                                                                                       | 
|ITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         |  | 1   
|                                                                                       | 
|ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE                                       |  | 1   
|                                                                                       | 
|ITEM 3  KEY INFORMATION                                                               |  | 1   
|                                                                                       | 
|ITEM 4  INFORMATION ON THE COMPANY                                                    |  | 23  
|                                                                                       | 
|ITEM 4A  UNRESOLVED STAFF COMMENTS                                                    |  | 78  
|                                                                                       | 
|ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  | 78  
|                                                                                       | 
|ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  | 133 
|                                                                                       | 
|ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             |  | 143 
|                                                                                       | 
|ITEM 8  FINANCIAL INFORMATION                                                         |  | 148 
|                                                                                       | 
|ITEM 9  THE OFFER AND LISTING                                                         |  | 150 
|                                                                                       | 
|ITEM 10  ADDITIONAL INFORMATION                                                       |  | 151 
|                                                                                       | 
|ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 171 
|                                                                                       | 
|ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 173 
|                                                                                       | 
|PART II                                                                                |  |     
|                                                                                       | 
|ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 174 
|                                                                                       | 
|ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS |  | 174 
|                                                                                       | 
|ITEM 15  CONTROLS AND PROCEDURES                                                      |  | 174 
|                                                                                       | 
|ITEM 16  [RESERVED]                                                                   |  | 175 
|                                                                                       | 
|ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT                                            |  | 175 
|                                                                                       | 
|ITEM 16B  CODE OF ETHICS                                                              |  | 175 
|                                                                                       | 
|ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      |  | 175 
|                                                                                       | 
|ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  |  | 176 
|                                                                                       | 
|ITEM 16E  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS      |  | 176 
|                                                                                       | 
|ITEM 16F  CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANT                               |  | 176 
|                                                                                       | 
|ITEM 16G  CORPORATE GOVERNANCE                                                        |  | 177 
|                                                                                       | 
|PART III                                                                               |  |     
|                                                                                       | 
|ITEM 17  FINANCIAL STATEMENTS                                                         |  | 178 
|                                                                                       | 
|ITEM 18  FINANCIAL STATEMENTS                                                         |  | 178 
|                                                                                       | 
|ITEM 19  EXHIBITS                                                                     |  | 178 
|                                                                                       | 
|Signature                                                                              |  | 185 
|                                                                                       | 
|Index to Consolidated Financial Statements                                             |  | F-1 





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EXPLANATORY NOTES

In this annual report, unless otherwise specified, the terms we, our, us, the Company and
Quebecor Media refer to Quebecor Media Inc., a company constituted under Part 1A of the Companies Act (Quebec) and its consolidated subsidiaries, collectively. All references in this annual report to Videotron are
references to our wholly-owned subsidiary Videotron Ltd. and its subsidiaries; all references to Sun Media are references to our indirect wholly-owned subsidiary Sun Media Corporation and its subsidiary; all references in this annual
report to Osprey Media are references to our wholly-owned subsidiary Osprey Media Publishing Inc. and its subsidiary; all references to Le SuperClub Videotron are references to our indirect wholly-owned subsidiary Le
SuperClub Videotron ltée; all references in this annual report to TVA Group are references to our public subsidiary TVA Group Inc. and its subsidiaries; all references to Archambault Group are references to our
wholly-owned subsidiary Archambault Group Inc. and its subsidiaries; all references in this annual report to Nurun are references to our wholly-owned subsidiary Nurun Inc. and its subsidiaries; all references to Quebecor Media
Printing are to our wholly-owned subsidiary Quebecor Media Printing Inc.; and all references in this annual report to Canoe are references to our subsidiary Canoe Inc. All references to Videotron Telecom are references
to Videotron Telecom Ltd., which prior to its merger with Videotron on January 1, 2006, had been our indirect wholly-owned subsidiary. All references in this annual report to Quebecor are references to Quebecor Inc., and all
references to Capital CDPQ are refererences to CDP Capital dAmérique Investissements inc.

In this
annual report, all references to the CRTC are references to the Canadian Radio-television and Telecommunications Commission.

In this annual report, all references to our Senior Notes are references to, collectively, our 73/4% Senior Notes due 2016 originally issued on January 17, 2006
and our 73/4% Senior Notes due 2016 originally
issued on October 5, 2007.

INDUSTRY AND MARKET DATA

Industry statistics and market data used throughout this annual report were obtained from internal surveys, market
research, publicly available information and industry publications, including the CRTC, A.C. Nielsen Media Research, the Bureau of Broadcast Management, Kagan Research LLC, the Canadian Newspaper Association (CNA), the Audit
Bureau of Circulations, the Canadian Circulations Audit Board, NADbank® Inc. and ComScore Media Metrix. Industry
publications generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of this information is not guaranteed.

Information contained in this document concerning the media industry, our general expectations concerning this industry and our market
positions and market shares may also be based on estimates and assumptions made by us based on our knowledge of the industry and which we believe to be reliable. We believe, however, that this data is inherently imprecise, although generally
indicative of relative market positions and market shares. Industry and company data is approximate and may reflect rounding in certain cases.

PRESENTATION OF FINANCIAL INFORMATION

Our
consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in Canada (Canadian GAAP). For a discussion of the significant differences between Canadian GAAP and the
accounting principles generally accepted in the United States (U.S. GAAP), as they relate to our consolidated financial statements, see Note 26 to our audited consolidated financial statements for the years ended December 31,
2007 and 2009 and see Note 27 to our audited consolidated financial statements for the year ended December 31, 2008, included under Item 17. Financial Statements of this annual report. We prepare our financial statements in Canadian
dollars. In this annual report, references to Canadian dollars, Cdn$ or $ are to the currency of Canada, and references to U.S. dollars or US$ are to the currency of the United States.

We use certain financial measures that are not calculated in accordance with Canadian GAAP or U.S. GAAP to assess our financial performance.
We use these non-GAAP financial measures, such as operating income, cash flows from segment operations, free cash flows from continuing operations and average monthly revenue per user, because we believe that they are meaningful measures of our
performance. Our method of calculating these non-GAAP financial measures may differ from the methods used by other companies and, as a result, the non-GAAP financial measures



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presented in this annual report may not be comparable to other similarly titled measures disclosed by other companies. We provide a definition of the non-GAAP financial measures used in this
annual report under Item 5. Operating and Financial Review and Prospects. We provide a definition of operating income, and a reconciliation of operating income to the most directly comparable financial measure under Canadian GAAP and
under U.S. GAAP in footnote 1 to the tables under Item 3. Key Information  A. Selected Financial Data. When we discuss cash flow from segment operations in this annual report, we provide the detailed calculation of the measure in
the same section. When we discuss free cash flow from continuing operations in this annual report, we provide a reconciliation to the most directly comparable GAAP financial measure in the same section.

Unless otherwise indicated, information provided in this annual report, including all operating data presented, is as of December 31,
2009.

EXCHANGE RATE INFORMATION

The following table sets forth, for the periods indicated, the average, high, low and end of period noon rates published by the Bank of
Canada. Such rates are set forth as U.S. dollars per Cdn$1.00 and are the rates published by the Bank of Canada for Canadian dollars per US$1.00. On March 11, 2010, the noon rate was Cdn$1.00 equals US$0.9742. We do not make any representation
that Canadian dollars could have been converted into U.S. dollars at the rates shown or at any other rate.



|                  |  |             |  |        |  |        |  |           
|----------------- |  | ----------- |  | ------ |  | ------ |  | ----------
|Year Ended:       |  | Average (1) |  | High   |  | Low    |  | Period End
|December 31, 2009 |  | 0.8757      |  | 0.9716 |  | 0.7692 |  | 0.9555    
|December 31, 2008 |  | 0.9381      |  | 1.0289 |  | 0.7711 |  | 0.8166    
|December 31, 2007 |  | 0.9304      |  | 1.0905 |  | 0.8437 |  | 1.0120    
|December 31, 2006 |  | 0.8818      |  | 0.9099 |  | 0.8528 |  | 0.8581    
|December 31, 2005 |  | 0.8253      |  | 0.8690 |  | 0.7872 |  | 0.8577    



|                                    |  |             |  |        |  |        |  |           
|----------------------------------- |  | ----------- |  | ------ |  | ------ |  | ----------
|Month Ended:                        |  | Average (2) |  | High   |  | Low    |  | Period End
|March 2010 (through March 11, 2010) |  | 0.9711      |  | 0.9763 |  | 0.9596 |  | 0.9742    
|February 28, 2010                   |  | 0.9462      |  | 0.9597 |  | 0.9316 |  | 0.9500    
|January 31, 2010                    |  | 0.9588      |  | 0.9755 |  | 0.9384 |  | 0.9390    
|December 31, 2009                   |  | 0.9484      |  | 0.9611 |  | 0.9334 |  | 0.9555    
|November 30, 2009                   |  | 0.9438      |  | 0.9560 |  | 0.9282 |  | 0.9457    
|October 31, 2009                    |  | 0.9480      |  | 0.9716 |  | 0.9221 |  | 0.9282    
|September 30, 2009                  |  | 0.9244      |  | 0.9422 |  | 0.9038 |  | 0.9327    



|(1) | The average of the exchange rates for all days during the applicable year.
|--- | --------------------------------------------------------------------------

|(2) | The average of the exchange rates for all days during the applicable month.
|--- | ---------------------------------------------------------------------------



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements with respect to our financial condition, results of operations,
business and certain of our plans and objectives. These forward-looking statements are made pursuant to the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate as well as beliefs and assumptions made by our management. Such statements include, in particular, statements about our
plans, prospects, financial position and business strategies. Words such as may, will, expect, continue, intend, estimate, anticipate, plan,
foresee, believe or seek or the negatives of these terms or variations of them or similar terminology are intended to identify such forward-looking statements. Although we believe that the expectations reflected
in these forward-looking statements are reasonable, these statements, by their nature, involve risks and uncertainties and are not guarantees of future performance. Such statements are also subject to assumptions concerning, among other things: our
anticipated business strategies; anticipated trends in our business; and our ability to continue to control costs. We can give no assurance that these estimates and expectations will prove to have been correct. Actual outcomes and results may, and
often do, differ from what is expressed, implied or projected in such forward-looking statements, and such differences may be material. Some important factors that could cause actual results to differ materially from those expressed in these
forward-looking statements include, but are not limited to:



| |  |  | our ability to successfully build and deploy our new wireless services network on the timeline that we are currently targeting, and to implement
successfully our strategy of becoming a facilities-based wireless provider;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | general economic, financial or market conditions and variations in the businesses of our local, regional or national newspapers and broadcasting
advertisers;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the intensity of competitive activity in the industries in which we operate, including competition from other communications and advertising media and
platforms;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unanticipated higher capital spending required to address continued development of competitive alternative technologies or the inability to obtain
additional capital to continue the development of our business;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to implement successfully our business and operating strategies and manage our growth and expansion;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | our ability to successfully restructure our newspapers operations to optimize their efficiency in the context of the changing newspaper industry;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | disruptions to the network through which we provide our digital television, Internet access and telephony services, and our ability to protect such
services from piracy;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | labour disputes or strikes;
| | - |  | ---------------------------



| |  |  | changes in our ability to obtain services and equipment critical to our operations;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | changes in laws and regulations, or in their interpretations, which could result in, among other things, the loss (or reduction in value) of our
licenses or markets or in an increase in competition, compliance costs or capital expenditures;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our substantial indebtedness, the tightening of credit markets, and the restrictions on our business imposed by the terms of our debt; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest rate fluctuations that affect a portion of our interest payment requirements on long-term debt.
| | - |  | --------------------------------------------------------------------------------------------------------



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We caution you that the above list of cautionary statements is not exhaustive. These and
other factors are discussed in further detail elsewhere in this annual report, including under Item 3. Key Information  Risk Factors of this annual report. Each of these forward-looking statements speaks only as of the date of this
annual report. We disclaim any obligation to update these statements unless applicable securities laws require us to do so. We advise you to consult any documents we may file or furnish with the U.S. Securities and Exchange Commission
(SEC), as described under Item 10. Additional Information  Documents on Display.



v



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PART I

ITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3  KEY INFORMATION

A - Selected Financial Data

The following table presents selected
consolidated financial information for our business for each of the years 2005 through 2009. We derived this selected financial information from our consolidated financial statements. Our consolidated balance sheets as at December 31, 2009 and
2008 and consolidated statements of income, comprehensive income, shareholders equity and cash flows for each of the years in the three year period ended December 31, 2009 are included in this annual report. Our consolidated financial
statements, as at December 31, 2009 and 2008 and for the years ended December 31, 2009 and 2008 have been audited by Ernst & Young LLP, an independent registered public accounting firm. Ernst & Young LLPs report on
these consolidated financial statements is included in this annual report. Our consolidated financial statements (before the effects of the adjustments to retrospectively apply the change in accounting described in footnote five and six below), for
the year ended December 31, 2007 have been audited by KPMG LLP, an independent registered public accounting firm. KPMG LLPs report on these consolidated financial statements is included in this annual report. Our selected historical
financial data presented below under the captions Statement of Income Data for the years ended December 31, 2009, 2008 and 2007 and under Balance Sheet Data as at December 31, 2009 and 2008 are derived from our
audited consolidated financial statements included in this annual report. Our selected historical financial data presented below under the captions Statement of Income Data for the years ended December 31, 2006 and 2005 and under
Balance Sheet Data as at December 31, 2007, 2006 and 2005 are derived from our consolidated financial statements, audited by KPMG LLP (before the effects of the adjustments to retrospectively apply the change in accounting described
in footnote five and six below), not included in this annual report. The information presented under the caption Ratio of earnings to fixed charges or coverage deficiency is unaudited. The selected historical financial data presented
below should be read in conjunction with the information contained in Item 5. Operating and Financial Review and Prospects and our audited consolidated financial statements and notes thereto contained in Item 17. Financial
Statements of this annual report (beginning on page F-1). Our historical results are not necessarily indicative of our future financial condition or results of operations.

Our consolidated financial statements have been prepared in accordance with Canadian GAAP. For a discussion of the principal differences
between Canadian GAAP and U.S. GAAP as they relate to our consolidated financial statements, see Note 26 to our audited consolidated financial statements contained in Item 17. Financial Statements of this annual report.





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CANADIAN GAAP DATA



|                                                                           |  |                             |          |   |                |   |          |                |  |   |                |   |  |                |          |   |  |   |          |  
|-------------------------------------------------------------------------- |  | --------------------------- | -------- | - | -------------- | - | -------- | -------------- |  | - | -------------- | - |  | -------------- | -------- | - |  | - | -------- | -
|                                                                           |  | Year Ended December 31,     |         
|                                                                           |  | 2009                        |          |   | 2008           |   |          | 2007           |  |   | 2006           |   |  | 2005           |         
|                                                                           |  |                             |          |   | (restated) (5) |   |          | (restated) (5) |  |   | (restated) (5) |   |  | (restated) (5) |         
|                                                                           |  | (in millions, except ratio) |         
|STATEMENT OF INCOME DATA:                                                  |  |                             |          |   |                |   |          |                |  |   |                |   |  |                |          |   |  |   |          |  
|Revenues                                                                   |  |                             |          |   |                |   |          |                |  |   |                |   |  |                |          |   |  |   |          |  
|Telecommunications                                                         |  | $                           | 2,001.2  |   |                | $ | 1,804.2  |                |  | $ | 1,552.6        |   |  | $              | 1,309.5  |   |  | $ | 1,080.3  |  
|News Media                                                                 |  |                             | 1,029.5  |   |                |   | 1,181.4  |                |  |   | 1,073.9        |   |  |                | 966.0    |   |  |   | 948.2    |  
|Broadcasting                                                               |  |                             | 439.0    |   |                |   | 436.7    |                |  |   | 415.5          |   |  |                | 393.3    |   |  |   | 401.4    |  
|Leisure and Entertainment                                                  |  |                             | 307.8    |   |                |   | 301.9    |                |  |   | 329.8          |   |  |                | 315.8    |   |  |   | 255.4    |  
|Interactive Technologies and Communications                                |  |                             | 91.0     |   |                |   | 89.6     |                |  |   | 82.0           |   |  |                | 73.9     |   |  |   | 65.1     |  
|Inter-segment                                                              |  |                             | (87.5    | ) |                |   | (83.7    | )              |  |   | (87.9          | ) |  |                | (59.9    | ) |  |   | (55.0    | )
|                                                                           |  |                             |          |   |                |   |          |                |  |   |                |   |  |                |          |   |  |   |          |  
|                                                                           |  |                             | 3,781.0  |   |                |   | 3,730.1  |                |  |   | 3,365.9        |   |  |                | 2,998.6  |   |  |   | 2,695.4  |  
|                                                                           |  |                             |          |   |               
|Operating expenses                                                         |  |                             | (2,496.3 | ) |                |   | (2,610.5 | )              |  |   | (2,402.5       | ) |  |                | (2,202.0 | ) |  |   | (1,966.6 | )
|Amortization                                                               |  |                             | (341.5   | ) |                |   | (316.7   | )              |  |   | (287.7         | ) |  |                | (258.0   | ) |  |   | (229.8   | )
|Financial expenses                                                         |  |                             | (238.2   | ) |                |   | (276.0   | )              |  |   | (230.1         | ) |  |                | (212.9   | ) |  |   | (270.8   | )
|Gain (loss) on valuation and translation of financial instruments          |  |                             | 61.5     |   |                |   | (3.7     | )              |  |   | (9.9           | ) |  |                | (11.7    | ) |  |   | (14.5    | )
|Restructuring of operations, impairment of assets and other special items  |  |                             | (29.6    | ) |                |   | (54.6    | )              |  |   | (11.2          | ) |  |                | (16.7    | ) |  |   | 0.3      |  
|Loss on debt refinancing                                                   |  |                             |         |   |                |   |         |                |  |   | (1.0           | ) |  |                | (342.6   | ) |  |   | (60.0    | )
|Impairment of goodwill and intangible assets                               |  |                             | (13.6    | ) |                |   | (671.2   | )              |  |   | (5.4           | ) |  |                | (180.0   | ) |  |   |         |  
|Income taxes                                                               |  |                             | (177.3   | ) |                |   | (155.2   | )              |  |   | (75.7          | ) |  |                | 53.8     |   |  |   | (43.0    | )
|Non-controlling interest                                                   |  |                             | (23.8    | ) |                |   | (23.2    | )              |  |   | (19.3          | ) |  |                | (0.7     | ) |  |   | (16.3    | )
|Income from discontinued operations                                        |  |                             | 2.9      |   |                |   | 2.3      |                |  |   | 5.2            |   |  |                | 2.0      |   |  |   | 1.0      |  
|                                                                           |  |                             |          |   |                |   |          |                |  |   |                |   |  |                |          |   |  |   |          |  
|                                                                           |  |                             |          |   |               
|Net income (loss)                                                          |  | $                           | 525.1    |   |                | $ | (378.7   | )              |  | $ | 328.3          |   |  | $              | (170.2   | ) |  | $ | 95.7     |  
|                                                                           |  |                             |          |   |                |   |          |                |  |   |                |   |  |                |          |   |  |   |          |  
|                                                                           |  |                             |          |   |               
|OTHER FINANCIAL DATA AND RATIO:                                            |  |                             |          |   |                |   |          |                |  |   |                |   |  |                |          |   |  |   |          |  
|Operating income(1)                                                        |  | $                           | 1,284.7  |   |                | $ | 1,119.6  |                |  | $ | 963.4          |   |  | $              | 796.6    |   |  | $ | 728.8    |  
|Additions to intangible assets and property, plant and equipment           |  |                             | 602.6    |   |                |   | 1,103.2  |                |  |   | 468.7          |   |  |                | 435.5    |   |  |   | 319.8    |  
|Comprehensive income (loss)                                                |  |                             | 555.2    |   |                |   | (438.3   | )              |  |   | 374.3          |   |  |                | (169.0   | ) |  |   | 94.4     |  
|Ratio of earnings to fixed charges or coverage deficiency(2)(4)(unaudited) |  |                             | 3.3      | x |                | $ | 212.4    |                |  |   | 2.7            | x |  | $              | 232.5    |   |  |   | 1.5      | x
|                                                                           | 
|                                                                           |  | At December 31,             |         
|                                                                           |  | 2009                        |          |   | 2008           |   |          | 2007           |  |   | 2006           |   |  | 2005           |         
|                                                                           |  |                             |          |   | (restated)(5)  |   |          | (restated) (5) |  |   | (restated)(5)  |   |  | (restated)(5)  |         
|                                                                           |  | (in millions)               |         
|BALANCE SHEET DATA:                                                        |  |                             |          |   |                |   |          |                |  |   |                |   |  |                |          |   |  |   |          |  
|Cash and cash equivalents                                                  |  | $                           | 300.0    |   |                | $ | 22.5     |                |  | $ | 26.1           |   |  | $              | 34.1     |   |  | $ | 97.4     |  
|Total assets                                                               |  |                             | 8,293.0  |   |                |   | 7,994.4  |                |  |   | 7,557.2        |   |  |                | 6,578.0  |   |  |   | 6,669.8  |  
|Total debt (current and long-term portions)                                |  |                             | 3,761.2  |   |                |   | 4,335.8  |                |  |   | 3,027.5        |   |  |                | 2,796.1  |   |  |   | 2,533.2  |  
|Capital stock                                                              |  |                             | 1,752.4  |   |                |   | 1,752.4  |                |  |   | 1,752.4        |   |  |                | 1,752.4  |   |  |   | 1,773.7  |  
|Shareholders equity                                                       |  |                             | 2,430.8  |   |                |   | 1,942.0  |                |  |   | 2,448.0        |   |  |                | 2,183.1  |   |  |   | 2,447.1  |  
|Dividends                                                                  |  |                             | 75.0     |   |                |   | 65.0     |                |  |   | 110.0          |   |  |                | 23.7     |   |  |   | 105.0    |  
|Number of common shares outstanding                                        |  |                             | 123.6    |   |                |   | 123.6    |                |  |   | 123.6          |   |  |                | 123.6    |   |  |   | 123.6    |  



2



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##### Table of Contents

U.S. GAAP DATA



|                                                                           |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|-------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ------------- | - | -------- | ------------- |  | - | ------------- | - |  | ------------- | -------- | - |  | - | -------- | -
|                                                                           |  | Year Ended December 31,     |         
|                                                                           |  | 2009                        |          |   | 2008          |   |          | 2007          |  |   | 2006          |   |  | 2005          |         
|                                                                           |  |                             |          |   | (restated)(6) |   |          | (restated)(6) |  |   | (restated)(6) |   |  | (restated)(6) |         
|                                                                           |  | (in millions, except ratio) |         
|STATEMENT OF INCOME DATA:                                                  |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Revenues                                                                   |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Telecommunications                                                         |  | $                           | 2,010.6  |   |               | $ | 1,804.7  |               |  | $ | 1,552.0       |   |  | $             | 1,312.2  |   |  | $ | 1,086.5  |  
|News Media                                                                 |  |                             | 1,029.5  |   |               |   | 1,181.4  |               |  |   | 1,073.9       |   |  |               | 966.0    |   |  |   | 948.2    |  
|Broadcasting                                                               |  |                             | 439.0    |   |               |   | 436.7    |               |  |   | 415.5         |   |  |               | 393.3    |   |  |   | 401.4    |  
|Leisure and Entertainment                                                  |  |                             | 307.8    |   |               |   | 301.9    |               |  |   | 329.8         |   |  |               | 315.8    |   |  |   | 255.4    |  
|Interactive Technologies and Communications                                |  |                             | 91.0     |   |               |   | 89.6     |               |  |   | 82.0          |   |  |               | 73.9     |   |  |   | 65.1     |  
|Inter-segment                                                              |  |                             | (87.5    | ) |               |   | (83.7    | )             |  |   | (87.9         | ) |  |               | (59.9    | ) |  |   | (55.0    | )
|                                                                           |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|                                                                           |  |                             | 3,790.4  |   |               |   | 3,730.6  |               |  |   | 3,365.3       |   |  |               | 3,001.3  |   |  |   | 2,701.6  |  
|                                                                           |  |                             |          |   |              
|Operating expenses                                                         |  |                             | (2,526.0 | ) |               |   | (2,605.3 | )             |  |   | (2,406.5      | ) |  |               | (2,207.8 | ) |  |   | (1,967.5 | )
|Amortization                                                               |  |                             | (341.5   | ) |               |   | (316.5   | )             |  |   | (287.7        | ) |  |               | (257.9   | ) |  |   | (229.6   | )
|Financial expenses                                                         |  |                             | (238.2   | ) |               |   | (276.0   | )             |  |   | (230.1        | ) |  |               | (212.9   | ) |  |   | (270.8   | )
|Gain (loss) on valuation and translation of financial instruments          |  |                             | 18.6     |   |               |   | 0.1      |               |  |   | 1.0           |   |  |               | (7.1     | ) |  |   | (33.2    | )
|Restructuring of operations, impairment of assets and other special items  |  |                             | (29.6    | ) |               |   | (54.6    | )             |  |   | (11.2         | ) |  |               | (16.7    | ) |  |   | 1.8      |  
|Loss on debt refinancing                                                   |  |                             |         |   |               |   |         |               |  |   | (1.0          | ) |  |               | (275.7   | ) |  |   | (48.5    | )
|Impairment of goodwill and intangible assets                               |  |                             | (13.6    | ) |               |   | (667.4   | )             |  |   | (5.4          | ) |  |               | (180.0   | ) |  |   |         |  
|Income taxes                                                               |  |                             | (162.8   | ) |               |   | (165.1   | )             |  |   | (99.7         | ) |  |               | 13.3     |   |  |   | (7.6     | )
|Income from discontinued operations                                        |  |                             | 2.9      |   |               |   | 2.5      |               |  |   | 5.4           |   |  |               | 1.9      |   |  |   | 1.0      |  
|                                                                           |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Net income (loss)                                                          |  | $                           | 500.2    |   |               | $ | (351.7   | )             |  | $ | 330.1         |   |  | $             | (141.6   | ) |  | $ | 147.2    |  
|                                                                           |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Net income (loss) attributable to:                                         |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Equity shareholders                                                        |  |                             | 475.1    |   |               |   | (376.7   | )             |  |   | 312.9         |   |  |               | (142.8   | ) |  |   | 128.8    |  
|Non-controlling interest                                                   |  |                             | 25.1     |   |               |   | 25.0     |               |  |   | 17.2          |   |  |               | 1.2      |   |  |   | 18.4     |  
|                                                                           |  |                             |          |   |              
|OTHER FINANCIAL DATA AND RATIO:                                            |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Operating income(1)                                                        |  | $                           | 1,264.4  |   |               | $ | 1,125.3  |               |  | $ | 958.8         |   |  | $             | 793.5    |   |  | $ | 734.1    |  
|Additions to intangible assets and property, plant and equipment           |  |                             | 602.6    |   |               |   | 1,103.2  |               |  |   | 468.7         |   |  |               | 435.5    |   |  |   | 319.8    |  
|Comprehensive income (loss)                                                |  |                             | 495.0    |   |               |   | (376.4   | )             |  |   | 376.1         |   |  |               | (49.7    | ) |  |   | 173.1    |  
|Comprehensive income (loss) attributable to:                               |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Equity shareholders                                                        |  |                             | 474.0    |   |               |   | (401.2   | )             |  |   | 356.9         |   |  |               | (56.4    | ) |  |   | 160.0    |  
|Non-controlling interest                                                   |  |                             | 21.0     |   |               |   | 24.8     |               |  |   | 19.2          |   |  |               | 6.7      |   |  |   | 13.1     |  
|                                                                           |  |                             |          |   |              
|Ratio of earnings to fixed charges or coverage deficiency(3)(4)(unaudited) |  |                             | 3.1      | x |               | $ | 198.9    |               |  |   | 2.7           | x |  | $             | 163.0    |   |  |   | 1.5      | x
|                                                                           | 
|                                                                           |  | At December 31,             |         
|                                                                           |  | 2009                        |          |   | 2008          |   |          | 2007          |  |   | 2006          |   |  | 2005          |         
|                                                                           |  | (in millions)               |         
|                                                                           |  |                             |          |   |              
|BALANCE SHEET DATA:                                                        |  |                             |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Cash and cash equivalents                                                  |  | $                           | 300.0    |   |               | $ | 22.5     |               |  | $ | 26.1          |   |  | $             | 34.1     |   |  | $ | 97.4     |  
|Total assets                                                               |  |                             | 8,231.3  |   |               |   | 7,967.6  |               |  |   | 7,523.4       |   |  |               | 6,533.4  |   |  |   | 6,664.1  |  
|Total debt (current and long-term portions)                                |  |                             | 3,782.6  |   |               |   | 4,318.6  |               |  |   | 3,016.1       |   |  |               | 2,766.3  |   |  |   | 2,501.1  |  
|Capital stock                                                              |  |                             | 1,752.4  |   |               |   | 1,752.4  |               |  |   | 1,752.4       |   |  |               | 1,752.4  |   |  |   | 1,773.7  |  
|Shareholders equity                                                       |  |                             | 2,363.4  |   |               |   | 1,953.1  |               |  |   | 2,407.9       |   |  |               | 2,155.3  |   |  |   | 2,275.2  |  
|Dividends                                                                  |  |                             | 75.0     |   |               |   | 65.0     |               |  |   | 110.0         |   |  |               | 23.7     |   |  |   | 105.0    |  
|Number of common shares outstanding                                        |  |                             | 123.6    |   |               |   | 123.6    |               |  |   | 123.6         |   |  |               | 123.6    |   |  |   | 123.6    |  



|(1) | Quebecor Media defines operating income, reconciled to net income (loss) under Canadian GAAP, as net income (loss) before amortization, financial
expenses, gain (loss) on valuation and translation of financial instruments, restructuring of operations, impairment of assets and other special items, loss on debt refinancing, impairment of goodwill and intangible assets, income taxes,
non-controlling interests and income from discontinued operations. Quebecor Media defines operating income, reconciled to net income (loss) under U.S. GAAP, as net income (loss) before amortization, financial expenses, gain (loss) on valuation and
translation of financial instruments, restructuring of operations, impairment of assets and other special items, loss on debt refinancing, impairment of goodwill and intangible assets, income taxes, and income 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 intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a
measure of liquidity and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP or U.S. GAAP. Our parent company, Quebecor, considers the media segment as a whole and uses
operating income in order to assess the performance of its investment in Quebecor Media. Our management and Board of Directors use this measure in evaluating Quebecor Medias consolidated results as well as results of Quebecor
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



3



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##### Table of Contents

| | Medias operating segments. As such, this measure eliminates the significant level of non-cash depreciation of tangible assets and amortization of certain intangible assets, and it is
unaffected by the capital structure or investment activities of Quebecor Media and of its segments. Operating income is also relevant because it is a significant component of Quebecor Medias annual incentive compensation programs. A limitation
of this measure, however, is that it does not reflect the periodic costs of capitalized tangible and intangible assets used in generating revenues in Quebecor Medias segments. Quebecor Media uses other measures that do reflect such costs, such
as cash flows from segment operations and free cash flows from continuing operations. In addition, measures like operating income are commonly used by the investment community to analyze and compare the performance of companies in the industries in
which we are engaged. Our definition of operating income may not be the same as similarly titled measures reported by other companies. The following table provides a reconciliation under Canadian GAAP of operating income to net income (loss) as
presented in our consolidated financial statements:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                          |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ------------- | - | ------- | ------------- |  | - | ------------- | - |  | ------------- | ------ | - |  | - | ------ | -
|                                                                                                          |  | Year Ended December 31, |        
|                                                                                                          |  | 2009                    |         |   | 2008          |   |         | 2007          |  |   | 2006          |   |  | 2005          |       
|                                                                                                          |  |                         |         |   | (restated)(5) |   |         | (restated)(5) |  |   | (restated)(5) |   |  | (restated)(5) |       
|Reconciliation of operating income to net income (loss) (Canadian GAAP) (in millions of Canadian dollars) |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|                                                                                                          |  |                         |         |   |              
|Operating Income                                                                                          |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|Telecommunications                                                                                        |  | $                       | 972.9   |   |               | $ | 797.9   |               |  | $ | 642.3         |   |  | $             | 509.8  |   |  | $ | 411.4  |  
|News Media                                                                                                |  |                         | 199.5   |   |               |   | 227.1   |               |  |   | 232.8         |   |  |               | 217.7  |   |  |   | 231.2  |  
|Broadcasting                                                                                              |  |                         | 80.0    |   |               |   | 66.0    |               |  |   | 59.4          |   |  |               | 41.8   |   |  |   | 52.3   |  
|Leisure and Entertainment                                                                                 |  |                         | 25.9    |   |               |   | 20.2    |               |  |   | 26.9          |   |  |               | 19.3   |   |  |   | 26.3   |  
|Interactive Technologies and Communications                                                               |  |                         | 4.1     |   |               |   | 5.1     |               |  |   | 2.8           |   |  |               | 7.5    |   |  |   | 3.9    |  
|Head office                                                                                               |  |                         | 2.3     |   |               |   | 3.3     |               |  |   | (0.8          | ) |  |               | 0.5    |   |  |   | 3.7    |  
|                                                                                                          |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|                                                                                                          |  |                         | 1,284.7 |   |               |   | 1,119.6 |               |  |   | 963.4         |   |  |               | 796.6  |   |  |   | 728.8  |  
|Amortization                                                                                              |  |                         | (341.5  | ) |               |   | (316.7  | )             |  |   | (287.7        | ) |  |               | (258.0 | ) |  |   | (229.8 | )
|Financial expenses                                                                                        |  |                         | (238.2  | ) |               |   | (276.0  | )             |  |   | (230.1        | ) |  |               | (212.9 | ) |  |   | (270.8 | )
|Gain (loss) on valuation and translation of financial instruments                                         |  |                         | 61.5    |   |               |   | (3.7    | )             |  |   | (9.9          | ) |  |               | (11.7  | ) |  |   | (14.5  | )
|Restructuring of operations, impairment of assets and other special items                                 |  |                         | (29.6   | ) |               |   | (54.6   | )             |  |   | (11.2         | ) |  |               | (16.7  | ) |  |   | 0.3    |  
|Loss on debt refinancing                                                                                  |  |                         |        |   |               |   |        |               |  |   | (1.0          | ) |  |               | (342.6 | ) |  |   | (60.0  | )
|Impairment of goodwill and intangible assets                                                              |  |                         | (13.6   | ) |               |   | (671.2  | )             |  |   | (5.4          | ) |  |               | (180.0 | ) |  |   |       |  
|Income taxes                                                                                              |  |                         | (177.3  | ) |               |   | (155.2  | )             |  |   | (75.7         | ) |  |               | 53.8   |   |  |   | (43.0  | )
|Non-controlling interest                                                                                  |  |                         | (23.8   | ) |               |   | (23.2   | )             |  |   | (19.3         | ) |  |               | (0.7   | ) |  |   | (16.3  | )
|Income (loss) from discontinued operations                                                                |  |                         | 2.9     |   |               |   | 2.3     |               |  |   | 5.2           |   |  |               | 2.0    |   |  |   | 1.0    |  
|                                                                                                          |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|Net income (loss)                                                                                         |  | $                       | 525.1   |   |               | $ | (378.7  | )             |  | $ | 328.3         |   |  | $             | (170.2 | ) |  | $ | 95.7   |  
|                                                                                                          |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  



4



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##### Table of Contents

The following table provides a reconciliation under U.S. GAAP of operating income to net
income (loss) as disclosed in our consolidated financial statements:



|                                                                                                      |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ------------- | - | ------- | ------------- |  | - | ------------- | - |  | ------------- | ------ | - |  | - | ------ | -
|                                                                                                      |  | Year Ended December 31, |        
|                                                                                                      |  | 2009                    |         |   | 2008          |   |         | 2007          |  |   | 2006          |   |  | 2005          |       
|                                                                                                      |  |                         |         |   | (restated)(6) |   |         | (restated)(6) |  |   | (restated)(6) |   |  | (restated)(6) |       
|Reconciliation of operating income to net income (loss) (U.S. GAAP) (in millions of Canadian dollars) |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|                                                                                                      |  |                         |         |   |              
|Operating Income                                                                                      |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|Telecommunications                                                                                    |  | $                       | 967.1   |   |               | $ | 799.0   |               |  | $ | 640.4         |   |  | $             | 508.8  |   |  | $ | 411.4  |  
|News Media                                                                                            |  |                         | 187.8   |   |               |   | 228.0   |               |  |   | 231.7         |   |  |               | 217.0  |   |  |   | 230.6  |  
|Broadcasting                                                                                          |  |                         | 79.9    |   |               |   | 67.1    |               |  |   | 62.1          |   |  |               | 43.4   |   |  |   | 58.3   |  
|Leisure and Entertainment                                                                             |  |                         | 25.9    |   |               |   | 20.5    |               |  |   | 26.9          |   |  |               | 19.3   |   |  |   | 26.2   |  
|Interactive Technologies and Communications                                                           |  |                         | 4.1     |   |               |   | 5.1     |               |  |   | 2.8           |   |  |               | 7.5    |   |  |   | 3.9    |  
|Head office                                                                                           |  |                         | (0.4    | ) |               |   | 5.6     |               |  |   | (5.1          | ) |  |               | (2.5   | ) |  |   | 3.7    |  
|                                                                                                      |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|                                                                                                      |  |                         | 1,264.4 |   |               |   | 1,125.3 |               |  |   | 958.8         |   |  |               | 793.5  |   |  |   | 734.1  |  
|Amortization                                                                                          |  |                         | (341.5  | ) |               |   | (316.5  | )             |  |   | (287.7        | ) |  |               | (257.9 | ) |  |   | (229.6 | )
|Financial expenses                                                                                    |  |                         | (238.2  | ) |               |   | (276.0  | )             |  |   | (230.1        | ) |  |               | (212.9 | ) |  |   | (270.8 | )
|Gain (loss) on valuation and translation of financial instruments                                     |  |                         | 18.6    |   |               |   | 0.1     |               |  |   | 1.0           |   |  |               | (7.1   | ) |  |   | (33.2  | )
|Restructuring of operations, impairment of assets and other special items                             |  |                         | (29.6   | ) |               |   | (54.6   | )             |  |   | (11.2         | ) |  |               | (16.7  | ) |  |   | 1.8    |  
|Loss on debt refinancing                                                                              |  |                         |        |   |               |   |        |               |  |   | (1.0          | ) |  |               | (275.7 | ) |  |   | (48.5  | )
|Impairment of goodwill and intangible assets                                                          |  |                         | (13.6   | ) |               |   | (667.4  | )             |  |   | (5.4          | ) |  |               | (180.0 | ) |  |   |       |  
|Income taxes                                                                                          |  |                         | (162.8  | ) |               |   | (165.1  | )             |  |   | (99.7         | ) |  |               | 13.3   |   |  |   | (7.6   | )
|Income from discontinued operations                                                                   |  |                         | 2.9     |   |               |   | 2.5     |               |  |   | 5.4           |   |  |               | 1.9    |   |  |   | 1.0    |  
|                                                                                                      |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|Net income (loss)                                                                                     |  | $                       | 500.2   |   |               | $ | (351.7  | )             |  | $ | 330.1         |   |  | $             | (141.6 | ) |  | $ | 147.2  |  
|                                                                                                      |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|Net income (loss) attributable to:                                                                    |  |                         |         |   |               |   |         |               |  |   |               |   |  |               |        |   |  |   |        |  
|Equity shareholders                                                                                   |  |                         | 475.1   |   |               |   | (376.7  | )             |  |   | 312.9         |   |  |               | (142.8 | ) |  |   | 128.8  |  
|Non-controlling interest                                                                              |  |                         | 25.1    |   |               |   | 25.0    |               |  |   | 17.2          |   |  |               | 1.2    |   |  |   | 18.4   |  



|(2) | For the purpose of calculating the ratio of earnings to fixed charges under Canadian GAAP, (i) earnings consist of net income (loss), plus non-controlling
interest, income taxes, fixed charges, amortized capitalized interest, less interest capitalized and (ii) fixed charges consist of interest expensed and capitalized, plus amortized premiums, discounts and capitalized expenses relating to
indebtedness and an estimate of the interest within rental expense.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | For the purpose of calculating the ratio of earnings to fixed charges under U.S. GAAP, (i) earnings consist of net income (loss), plus 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Coverage deficiencies are expressed in millions of Canadian dollars. Our 2008 coverage deficiency was significant due to the non cash charge related to an impairment of
goodwill and intangible assets in the amount of $671.2 million pursuant to Canadian GAAP ($667.4 million pursuant to U.S. GAAP). Our 2006 coverage deficiency was significant due to the non-cash charge related to an impairment of goodwill and
intangible assets in the amount of $180.0 million and to our loss on debt refinancing in the amount of $342.6 million pursuant to Canadian GAAP ($275.7 million pursuant to U.S. GAAP). We believe cash flows from continuing operating activities and
available sources of financing will be sufficient to cover our operating, investing and financing needs during the twelve months following December 31, 2009.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | On January 1, 2009, the Company adopted Canadian Institute of Chartered Accountants (CICA) Section 3064, Goodwill and Intangible Assets,
and restated prior year figures to reflect the adoption of these new rules. The adoption of Section 3064 eliminated the deferral of start-up costs, which are now recognized as an expense when they are incurred. Please refer to Note 1(b) of the
2009 consolidated financial statements included in this annual report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | On January 1, 2009, the Company adopted SFAS 141R, Business Combinations, and SFAS 160, Non-controlling Interestsin its consolidated financial
statements, now contained in Codification Topic 805, Business Combinations, and in Codification Topic 810, Consolidation, respectively. SFAS 160 requires that non-controlling interest be presented as a separate component of
shareholders equity. In the statement of income, net income is calculated before non-controlling interest and is then attributed to shareholders and non-controlling interest. Please refer to Note 26 (ix) of the 2009 consolidated financial
statements included in this annual report.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B - Capitalization and Indebtedness

Not applicable.

C - Reasons for the Offer and Use of Proceeds

Not applicable.



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D - Risk Factors

This section describes some of the risks that could materially affect our business, revenues, results of operations and financial
condition, as well as the market value of our issued and outstanding Senior Notes. The risks below are not the only ones that we face. Some risks may not yet be known to us and some that we do not currently believe to be material could later turn
out to be material. The factors below should be considered in connection with any forward-looking statements in this document and with the cautionary statements contained in the section Cautionary Statement Regarding Forward-Looking
Statements at the forepart of this annual report.

Risks Relating to Our Business

Our cable and telecommunications businesses operate in highly competitive industries with emerging technological developments, and our inability to
compete successfully could have a material adverse effect on our business, prospects, revenues, financial condition and results of operations.

In our cable operations, we compete against direct broadcast satellite providers (or DBS, which is also called DTH in Canada, for direct-to-home satellite), multi channel
multipoint distribution systems (or MDS), satellite master antenna television systems and over-the-air television broadcasters. In addition, we compete against incumbent local exchange carriers (or ILECs) which
have secured licenses to launch video distribution services using video digital subscriber line (or VDSL), technology (also known as IPTV). The main ILEC in our market holds a regional license to provide terrestrial broadcasting
distribution in Montreal and several other communities in the Province of Quebec. The same ILEC has also acquired a cable network in our main service area, and we believe that this main ILEC will be ready to launch its IPTV service in 2010. We also
face competition from illegal providers of cable television services and illegal access to non-Canadian DBS (also called grey market piracy) as well as from signal theft of DBS that enables customers to access programming services from U.S. and
Canadian DBS without paying any fees (also called black market piracy). Competitors in the video business also include the video stores industry (rental & sale) and other alternative entertainment media. In addition, the Internet, as well
as distribution over mobile devices, will become competitive broadcast distribution platforms over the coming years.

In our
Internet access business, we compete against other Internet service providers (or ISPs) offering residential and commercial Internet access services as well as open Wi-Fi networks in some cities. The CRTC also requires us to offer
access to our high speed Internet system to our ISP competitors and several third party ISPs have access or have requested access to our network. CRTC rules also require that we allow third party ISPs to provide voice or telephony applications in
addition to retail Internet access services.

Our Voice-over-IP (or VoIP) telephony service has numerous
competitors, including ILECs, competitive local exchange carriers (or CLECs), wireless telephony service operators and other providers of telephony, VoIP and internet communications, including competitors that are not
facilities-based and therefore have a much lower infrastructure cost. Competition from ILECs has increased in recent years, particularly as a result of the Canadian federal governments decision in 2007 to lift winback restrictions on ILECs and
to change the criteria for forbearance from regulation of local exchange services. Since this decision, the CRTC has approved numerous applications for local forbearance submitted by Bell Aliant, Bell Canada, Télébec and
TELUS-Québec, in both the residential and business local exchange markets. As a result, Videotrons incumbent local service competitors are free from regulation of local exchange services in the vast majority of residential markets in
which Videotron competes, as well as in a large number of business markets, including all of the largest metropolitan markets in Quebec. These rulings granting the ILECs forbearance applications enable ILECs to adjust their local exchange
service prices for the approved exchanges without approval from the CRTC. Such price flexibility for local exchange services could have an adverse effect on our ability to compete successfully with ILECs in the local telephony market.

With our current Mobile Virtual Network Operator (or MVNO)-based wireless telephony service, we compete against a mix of
corporations, some of them being active in some or all the products we offer, while others only offer mobile wireless telephony services in our market. In addition, users of wireless voice and data systems may find their communications needs
satisfied by other current or developing technologies, such as Wi-Fi, WiMax, hotspots or trunk radio systems, which have the technical capability to handle wireless data communication and mobile telephone calls. There can be no assurance
that current or future competitors will not provide services comparable or superior to those we



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provide or may in the future provide, or at lower prices, adapt more quickly to evolving industry trends or changing market requirements, or introduce competing services. The cost of implementing
or competing against future technological innovations may be prohibitive to us, and we may lose customers if we fail to keep pace with these changes. Any of these factors could adversely affect our ability to operate our MVNO-based wireless business
successfully and profitably.

We may not be able to compete successfully in the future against existing or potential
competitors, and increased competition could have a material adverse effect on our business, prospects, revenues, financial condition and results of operations.

Delays in the launch of our facilities-based wireless services, including delays due to issues relating to infrastructure buildout and tower-sharing requirements, could impair our ability to gain
market share and could adversely affect our ability to deploy and operate our wireless operations successfully and profitably.

In July 2008, in the context of Canadas spectrum auction for third generation Advanced Wireless Services (3G or AWS), we acquired spectrum licenses for AWS covering all regions of the Province of
Quebec and certain areas of Ontario. We were the successful bidder for 40 MHz spectrum licenses in all parts of the Province of Quebec, except the Outaouais region where we obtained 20 MHz spectrum licenses and certain regions of Quebec where we
obtained 50 MHz spectrum licenses. We also acquired 20 MHz spectrum licenses in Eastern Ontario and 10 MHz spectrum licenses in the city of Toronto. These licenses, the control of which was transferred from Quebecor Media to Videotron subsequent to
the completion of the auction, were issued by Industry Canada on December 23, 2008. The spectrum enables us to pursue the buildout of an AWS network infrastructure and to become a facilities-based provider offering advanced wireless services,
including high-speed Internet, mobile television and a variety of other advanced functions that can be accessed through mobile devices referred to as smartphones. The build-out of Videotrons AWS project  a greenfield investment 
has gained significant momentum since the acquisition of spectrum. Videotron anticipates launching its AWS offering in the summer of 2010, when Videotrons new High Speed Packet Access network is expected to be operational.

We are a new entrant in the wireless business in Canada, and, since the end of the AWS spectrum auction, most of the incumbent carriers, as
well as at least one other new entrant, have launched lower cost services in order to acquire additional market share and increase their wireless telephony penetration rate in our territory. Delays in the launch of our wireless services could result
in a more challenging market to penetrate. Any such delays could therefore also require us to deploy additional efforts and marketing expenses to meet our customer acquisition objectives, and there is a risk that we will be unable to meet our
customer acquisition objectives on the timeline that we are targeting or at all.

Under Industry Canadas policy
concerning mandatory roaming and antenna site and tower sharing, parties are required to consider tower-sharing arrangements in respect of existing towers prior to proposing the construction of new antenna tower structures. We are therefore
dependent on the participation of incumbent operators to satisfy this requirement. Although incumbent carriers are required to respond to tower-sharing requests, there can be no assurance that they will accede to such requests or otherwise negotiate
tower-sharing rates and terms that are economically or technologically acceptable to new entrants, such as Videotron. Industry Canada has established an arbitration process to encourage commercially reasonable outcomes, but such a process may prove
lengthy and burdensome, and could further delay the launch of our wireless services network, which could adversely affect our ability to operate our wireless business successfully and profitably. In addition, even though we have entered into
tower-sharing arrangements with certain incumbent operators, the installation and deployment of our related systems and antennae may be further delayed by negotiations with them.

Industry Canadas policy concerning antenna site and tower-sharing includes requirements with respect to land-use authority and public
consultation regarding proposed tower installations or modifications. We must therefore undertake public notification and address local and neighborhood concerns before building a new tower structure. These procedures could lead to delays in
acquiring and developing new sites for cellular towers and could make it more costly to pursue our strategy of building an AWS network, which could adversely affect our ability to deploy and operate our wireless operations successfully and
profitably.

In order to build our wireless network infrastructure in a timely manner, Videotron has entered into commercial
relationships with certain key suppliers. The inability of our key suppliers to meet our procurement and timing requirements could result in delays in the launch of our wireless network and in additional expenses, which could adversely affect our
ability to deploy and operate our wireless business successfully and profitably.



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We may encounter difficulties in reaching roaming agreements with incumbent wireless operators.

Under Industry Canadas policy concerning mandatory roaming and antenna site and tower sharing, incumbent
wireless operators are required, for a period of at least ten years from the effective date of new entrants wireless licenses (December 23, 2008, in the case of Videotron), to permit new wireless entrants customers to roam on their
networks outside the regions where such entrants won licenses in the 2008 AWS auction. Incumbents are also required to permit new entrants customers to roam on their networks within the regions where such new entrants have won licenses for a
period of five years.

In July 2009, we entered into a roaming agreement with Rogers Wireless Inc. (Rogers
Wireless) which will allow us to provide nationwide wireless service. Under this roaming agreement, we will provide roaming outside our coverage area exclusively on the Rogers Wireless network (within the Rogers Wireless service area
across Canada). With respect to roaming agreements for outside of Canada, we have already signed an agreement with T-Mobile USA Inc. (T-Mobile) for the United States coverage, and with multiple other carriers around the world, as
we are seeking to establish a worldwide coverage. However, there can be no assurance that we will succeed in negotiations with other carriers to provide worldwide coverage, and our inability to provide such coverage may place us at a competitive
disadvantage when we launch our service, which could adversely affect our ability to operate our wireless business successfully and profitably.

In addition, various aspects of wireless communications operations, including the ability of wireless providers to enter into interconnection agreements with traditional wireline telephone companies, are
subject to regulation by the CRTC. The government agencies having jurisdiction over any wireless business that we may develop could adopt regulations or take other actions that could adversely affect our wireless business and operations, including
actions that could increase competition or that could increase our costs.

Videotron is using a new technology for which only a
limited number of handsets might be available at the time of commercial launch.

AWS in the 2GHz range is a spectrum
that has not been broadly used until recently for wireless telephony. While certain wireless device suppliers in the United States have recently begun to offer their products on the AWS technology, there are still a limited number of handsets
available. As a result, the handset portfolio for AWS we will offer at the time of the commercial launch of our wireless services may not be as broad as that of certain other providers and we could potentially incur higher costs of customer
acquisition due to a smaller market for this type of technology, which could adversely affect our ability to operate our wireless business profitably.

We are regularly required to make capital expenditures to remain technologically and economically competitive. We may not be able to obtain additional capital to implement our business strategies and make certain capital expenditures.

Our strategy of maintaining a leadership position in the suite of products and services we offer and launching new
products and services requires capital investments in our network and infrastructure to support growth in our customer base and demands for increased bandwidth capacity and other services. In this regard, we have in the past required substantial
capital for the upgrade, expansion and maintenance of our network and the launch and expansion of new or additional services, and we expect additional capital expenditures in the short and medium term to expand and maintain our systems and services,
including our expenditures relating to advancements in Internet access and high definition television (or HDTV), as well as the cost of our wireless services infrastructure buildout. There can be no assurance that we will be able
to obtain the funds necessary to finance our capital improvement programs, new strategies and services or other capital expenditure requirements in addition to our wireless services infrastructure buildout, whether through internally generated
funds, additional borrowings or other sources. If we are unable to generate sufficient funds or obtain additional financing on acceptable terms, we may not be able to implement our business strategies or proceed with the capital expenditures and
investments required to maintain our leadership position, and our business, financial condition, results of operations, reputation and prospects could be materially adversely affected. Even if we are able to obtain adequate funding, the period of
time required to upgrade our network could have a material adverse effect on our ability to successfully compete in the future.



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See also the following risk factors in this section:  Our cable and
telecommunications businesses operate in highly competitive industries with emerging technological developments, and our inability to compete successfully could have a material adverse effect on our business, prospects, revenues, financial condition
and results of operations, Delays in the launch of our wireless services, including due to issues relating to infrastructure buildout and tower-sharing requirements, could impair our ability to gain market share and could adversely
affect our ability to deploy and operate our wireless operations successfully and profitably,  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 and  We may need to refinance certain of our indebtedness. Our inability to do so on favourable terms, or at all, could have a material adverse effect on
us.

We may need to support increasing costs in securing access to support structures needed for our cable network.

We require access to the support structures of hydro-electric and telephone utilities and to municipal rights of way
to deploy our cable network. Where access to the structures of telephone utilities cannot be secured, we may apply to the CRTC to obtain a right of access under the Telecommunications Act (Canada) (the Telecommunications
Act). We have entered into comprehensive support structure access agreements with all of the major hydro-electric companies and all of the major telecommunications companies in our service territory. Our agreement with Hydro-Quebec, by far
the largest of the hydro-electric companies, expires in December 2010. An increase in rates charged by Hydro-Quebec could have a significant impact on Videotrons cost structure.

On July 21, 2009, pursuant to an initial application from TELUS Corporation, the CRTC initiated a new proceeding to review the large
ILECs support structure service rates. The CRTC simultaneously declared all current support structure service rates to be interim, opening up the possibility that any new rates that emerge from the proceeding may be applied retroactively to
July 21, 2009. To date, the cable carriers, including Videotron, have successfully challenged attempts by the ILECs to modify the costing methodology employed by the CRTC when rates were last reviewed in 1995. A decision on new rates is
expected toward the end of summer 2010. If this review results in an increase in rates, it may have a significant impact on Videotrons network cost structure.

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.

The media industry is experiencing rapid and significant technological change, which has resulted in
alternative means of program and content transmission. The continued growth of the Internet has presented alternative content distribution options that compete with traditional media. Furthermore, in each of our broadcasting markets, industry
regulators have authorized DTH, microwave services and VDSL services and may authorize other alternative methods of transmitting television and other content with improved speed and quality. We may not be able to successfully compete with existing
or newly developed alternative technologies, such as IPTV or we may be required to acquire, develop or integrate new technologies ourselves. The cost of the acquisition, development or implementation of new technologies could be significant and our
ability to fund such implementation may be limited and could have a material adverse effect on our ability to successfully compete in the future. Any such difficulty or inability to compete could have a material adverse effect on our business,
reputation, prospects, financial condition or results of operations.

We may not successfully implement our business and operating
strategies.

Our business strategies are based on leveraging an integrated platform of media assets. Our strategies
include offering multi-platform advertising solutions, launching and deploying additional value-added products and services such as AWS, pursuing cross-promotional opportunities, maintaining our advanced broadband network, pursuing enhanced content
development to reduce costs, further integrating the operations of our subsidiaries, leveraging geographic clustering and maximizing customer satisfaction. We may not be able to implement these strategies fully or realize their anticipated results
without incurring significant costs or at all. In addition, our ability to successfully implement these strategies could be adversely affected by a number of factors beyond our control, including operating difficulties, increased ongoing operating
costs, regulatory developments, general or local economic conditions, increased competition, technological change and the other factors described in this Risk Factors section. While the centralization of certain



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business operations and processes has the advantage of standardizing our practices thus reducing costs and increasing our effectiveness, it also represents a risk in itself should a business
solution implemented by a centralized office throughout the organization fail to produce the intended results. We may also be required to make capital expenditures or other investments in addition to, or on an accelerated timeframe compared to,
those originally planned for the buildout of our AWS operations, which may affect our ability to implement our business strategy should we not be able to secure additional financing on acceptable terms or generate sufficient internally generated
funds to cover these requirements. Any material failure to implement our strategies could have a material adverse effect on our reputation, business, financial condition, prospects and results of operations and on our ability to meet our
obligations, including our ability to service our indebtedness.

We have grown rapidly and are seeking to continue our growth. This
rapid growth presents significant strains on our management. If we do not effectively manage our growth, our business, results of operations and financial condition could be adversely affected.

We have experienced substantial growth in our business and have significantly expanded our operations in recent years. We have in the past
and may in the future seek to make opportunistic or strategic acquisitions and further expand the types of businesses in which we participate, such as our expansion into facilities-based wireless telephony operations, under appropriate conditions.
This growth has placed, and will continue to place, a significant demand on our management. We can provide no assurance that we will be successful in either developing or fulfilling the objectives of any such acquisition or business expansion.

In addition, our expansion and acquisitions may require us to incur significant costs or divert significant resources, and
may limit our ability to pursue other strategic and business initiatives, which could have an adverse effect on our business, financial condition, prospects or results of operations. Furthermore, if we are not successful in managing and integrating
any acquired businesses, or if we are required to incur significant or unforeseen costs, our business, results of operations and financial condition could be adversely affected.

We depend on key personnel.

Our success depends to a large extent
upon the continued services of our senior management and our ability to retain skilled employees. There is intense competition for qualified management and skilled employees, and our failure to recruit, train and retain such employees could have a
material adverse effect on our business, financial condition or operating results. In addition, to implement and manage our businesses and operating strategies effectively, we must maintain a high level of efficiency, performance and content
quality, continue to enhance our operational and management systems, and continue to effectively attract, train, motivate and manage our employees. In connection with our current expansion as a facilities-based wireless services provider, Videotron
currently anticipates a near-term need to attract and train a substantial number of new employees, including many skilled employees, to staff this operation. In addition, Videotron will need to efficiently integrate these employees into its existing
operations. If we are not successful in these efforts, it may have a material adverse effect on our business, prospects, results of operations and financial condition.

Our News Media and Broadcasting businesses face substantial competition for advertising. In addition, advertising spend is being affected by the deterioration in certain economic conditions in the
past months as well as the continuing fragmentation of the media landscape.

Advertising revenue is the primary source
of revenue for our News Media business and our Broadcasting business. Our revenues and operating results in these businesses depend on the relative strength of the economy in our principal News Media and television markets as well as the strength or
weakness of local, regional and national economic factors, since these economic factors affect the levels of retail, national and classified News Media advertising revenue, as well as television advertising revenue. Since a significant portion of
our advertising revenue is derived from retail and automotive sector advertisers, weakness in these sectors and in the real estate industry has had, and may continue to have, an adverse impact on the revenues and results of operations of our News
Media business. Continuing or deepening softness in the Canadian or U.S. economy could further adversely affect key national advertising revenue.



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In addition to the impact of economic cycles, the newspaper industry is seeing secular
changes, including the growing availability of free access to media, shifting readership habits, digital transferability, the advent of real-time information and secular changes in the advertising market. As a result, competition in the advertising
market comes not only from other newspapers (including other national, metropolitan (both paid and free) and suburban newspapers), magazines and more traditional media platforms, such as broadcasters, cable systems and networks, satellite television
and radio, direct marketing and solo and shared mail programs, but also from digital media technologies, which have introduced a wide variety of media distribution platforms (including, most significantly, the Internet and distribution over wireless
devices and e-readers) to consumers and advertisers. While we continue to pursue initiatives to offer value-added advertising solutions to our advertisers, such as the publication of e-editions of a number of our newspapers, we may not be successful
in retaining our historical share of advertising revenues. The ability of our News Media business to grow and succeed over the long-term depends on various factors, including our ability to attract advertisers to our online sites, which depends
partly on our ability to generate online traffic and partly on the rate at which users click through on advertisements, which may be adversely affected by the development of new technologies to block the display of our advertisements. There can be
no assurance that we will be successful in attracting online traffic or advertisers to our internet sites.

In broadcasting,
the proliferation of cable and satellite channels, advances in mobile and wireless technology, the migration of television audiences to the Internet and the viewing publics increased control over the manner, content and timing of their media
consumption through personal video recording devices, have resulted in greater fragmentation of the television viewing audience and a more challenging advertising sales environment.

These factors could have a material adverse effect on our revenues, results of operations, financial condition, business and prospects.
See also the risk factor  Our News Media business and our Broadcasting business each face substantial competition for readership and audience share, respectively. Our newspapers circulation levels and broadcasting audience share may
continue to decline as consumers migrate to other media alternatives, which could have a material adverse effect on our revenues, results of operations, financial condition, business and prospects and Item 4. Information on the Company
 Regulation  Canadian Broadcast Programming (Off the Air and Thematic Television)  Advertising.

Our News
Media and Broadcasting businesses face substantial competition for readership and audience share, respectively. Our newspapers circulation levels and broadcasting audience share may continue to decline as consumers migrate to other media
alternatives, which could have a material adverse effect on our revenues, results of operations, financial condition, business and prospects.

Revenue generation in the newspapers business depends in large part on advertising revenues, which are in turn driven by readership and circulation levels, as well as market demographics, price, service
and advertiser results. Readership and circulation levels tend to be based upon the content of the newspaper, service, availability and price. For several years, we, along with the newspaper industry as a whole, have experienced difficulty
maintaining circulation volume and revenues because of, among other things, competition from other newspapers and other media platforms (often free to the user), such as the Internet and wireless devices, as well as the declining frequency of
regular newspaper buying, particularly among young people, who increasingly rely on non-traditional media as a source of news. A prolonged decline in readership and circulation levels in our newspapers business would have a material effect on the
rate and volume of our newspaper advertising revenues (as rates reflect circulation and readership, among other factors), and it could also affect our ability to institute circulation price increases for our print products, all of which could have a
material adverse effect on our results of operations, financial condition, business and prospects. To maintain our circulation base and online traffic, we may incur additional costs, and we can provide no assurance that we will be able to recover
these costs through increased circulation and advertising revenues.

In our Broadcasting business, audience share and ratings
information, as well as audience demographics and price, are the principal drivers in the competition for television advertising. As with the newspapers industry, the conventional television audience has grown increasingly fragmented, due in large
part to the proliferation and growth in popularity of cable and satellite channels, and the migration to alternative content delivery sources, such as the Internet and wireless devices, which are increasingly being used for distribution of (and
access to) news, entertainment and other information. If the broadcasting market continues to fragment, our audience share levels and our advertising revenues, results of operations, financial condition, business and prospects could be materially
adversely affected.



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Our content may not attract a large audiences/readership, which may limit our ability to generate
advertising and circulation revenue.

A significant portion of the revenues at our News Media operations and our
Broadcasting operations are derived from advertising and circulation revenues. Advertising and circulation revenues are largely dependent upon audience acceptance or readership, which is in large part a function of the content and quality offered,
and is influenced by factors such as reviews by critics, promotions, quality and popularity of other competing content in the marketplace, availability of alternative forms of entertainment, general economic conditions, shifting consumer
preferences, public tastes generally and other intangible factors. In addition, the increase in narrowcast programming or specialty services in Canada has caused the conventional television audience to become increasingly fragmented. These factors
continue to evolve rapidly and many are beyond our control.

Lack of audience acceptance for our content or shrinking or
fragmented audiences or readership could limit our ability to generate advertising and circulation revenue. If our ability to generate advertising revenue through our Broadcasting operations or our News Media business is limited, we may need to
develop new or alternative revenue sources, and we may incur additional costs in order to be able to continue providing attractive television programming or to maintain our newspapers circulation base and online traffic, which costs we might
not be able to recover through advertising and/or circulation revenues. There can be no assurance that we would be able to develop any such new revenue or financing sources or maintain our circulation base, and any such limitation of our ability to
generate revenue together with an inability to generate new financing sources could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our financial performance could be materially adversely affected if we cannot continue to distribute a wide range of television programming on
reasonable terms.

The financial performance of our cable service business depends in large part on our ability to
distribute a wide range of appealing, conveniently-scheduled television programming at reasonable rates. We obtain television programming from suppliers pursuant to programming contracts. The quality and amount of television programming we offer
affect the attractiveness of our services to customers and, accordingly, the rates we can charge. We may be unable to maintain key programming contracts at commercially reasonable rates for television programming. Loss of programming contracts, or
our inability to obtain programming at reasonable rates, or our inability to pass on rate increases to our customers could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, our ability to attract and retain cable customers depends, to a certain extent, upon our capacity to offer quality content and
a variety of programming choices and packages. If the number of specialty channels being offered decreases significantly or if the content offered on such channels does not receive audience acceptance, it may have a significant negative impact on
revenues from our cable operations.

We may be adversely affected by variations in our costs, quality and variety of our television
programming.

The most significant cost in our Broadcasting business is television programming. Our Broadcasting
operations may be exposed to volatile or increased television programming costs which may adversely affect our operating results. To that effect, we have, for instance, in the past requested that our regulator lift certain obligations imposed on TVA
Group to buy an earmarked percentage of programs from independent producers that are all members of a single union. This request was denied, since the central issue of a potential distribution fee for TV stations had not been resolved.

Developments in cable, satellite, Internet, wireless and other forms of content distribution could also affect both the availability and
the cost of programming and increase competition for advertising revenue. The production and distribution costs of television and other forms of entertainment may also increase in the future. Moreover, programs may be purchased for broadcasting two
to three years in advance, making it difficult to predict how such programs will perform. In some instances, programs must be replaced before their costs have been fully amortized, resulting in accounting adjustments that would accelerate the
recognition of expenses.



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We may be adversely affected by variations in the cost of newsprint. In addition, our newspaper
operations are labour-intensive, resulting in a relatively high fixed-cost structure.

Newsprint, which is the basic
raw material used to publish newspapers, has historically been and may continue to be subject to significant price volatility. During 2009, our newspaper operations total newsprint consumption was approximately 145,000 metric tonnes.
Newsprint represents our single largest raw material expense and one of our most significant operating costs. Newsprint expense represented approximately 10.1% ($83.6 million) of our News Media segments operating expenses for the year
ended December 31, 2009. Changes in the price of newsprint could significantly affect our income, and volatile or increased newsprint costs have had, and may in the future have, a material adverse effect on our results of operations.

In order to obtain more favourable pricing, we source substantially all of our newsprint from a single newsprint producer,
AbitibiBowater Inc. (AbitibiBowater). Pursuant to the terms of our agreement with AbitibiBowater, we obtain newsprint at a discount to market prices, receive additional volume rebates for purchases above certain thresholds, and
benefit from a ceiling on the unit cost of newsprint. Our agreement with AbitibiBowater is a short-term agreement, and there can be no assurance that we will be able to renew this agreement or that AbitibiBowater will continue to supply newsprint to
us on favourable terms or at all after the expiry of our agreement. Moreover, our newsprint producer AbitibiBowater voluntarily filed for protection from its creditors in Canada and the United States, meaning that our supply agreement could be
repudiated by or on behalf of AbitibiBowater pursuant to Chapter 11 of the United States Bankruptcy Code and the Companies Creditors Arrangement Act in Canada (CCAA). If we are unable to continue to source
newsprint from AbitibiBowater on favourable terms, or if we are unable to otherwise source sufficient newsprint on terms acceptable to us, our costs could increase materially, which could materially adversely affect the profitability of our
newspaper business and our results of operations. We also rely on AbitibiBowater for deliveries of newsprint. The availability of our newsprint supply, and therefore our operations, may be adversely affected by various factors, including labor
disruptions affecting AbitibiBowater, the repudiation of our contract or the cessation of operations by our newsprint producer AbitibiBowater.

In addition, since newspaper publishing is labour intensive and our operations are located across Canada, our newspaper business has a relatively high fixed cost structure. During periods of economic
contraction, our revenue may decrease while certain costs remain fixed, resulting in decreased earnings.

We provide our digital
television, Internet access and cable telephony services through a single clustered network, which may be more vulnerable to widespread disruption.

We provide our digital television, Internet access and telephony services through a primary headend and our analog television services through twelve additional regional headends in our single clustered
network. Despite available emergency backup or replacement sites, a failure in our primary headend could prevent us from delivering some of our products and services throughout our network until we have resolved the failure, which may result in
significant customer dissatisfaction.

We are dependent upon our information technology systems and those of certain third-parties and
the inability to enhance our systems, or to protect them from a security breach or disaster, could have an adverse impact on our financial results and operations.

The day-to-day operation of our business is highly dependent on information technology systems, including those of certain third-party suppliers. An inability to maintain and enhance our existing
information technology systems or obtain new systems to accommodate additional customer growth or to support new products and services could have an adverse impact on our ability to acquire new subscribers, retain existing customers, produce
accurate and timely billing, generate revenue growth and manage operating expenses, all of which could adversely impact our financial results and position. In addition, although we use industry standard network and information technology security
and survivability/disaster recovery practices, a security breach or disaster could have a material adverse effect on our reputation, business, prospects, financial condition and results of operations.



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We may not be able to protect our services from piracy, which may have an adverse effect on our
customer base and lead to a possible decline in revenues.

In our cable, Internet access and telephony operations, we
may not be able to protect our services from piracy. We may be unable to prevent unauthorized access to our analog and digital programming, as well as our Internet access services. We use encryption technology to protect our cable signals from
unauthorized access and to control programming access based on subscription packages. We may not be able to develop or acquire adequate technology to prevent unauthorized access to our services, which may have an adverse effect on our customer base
and lead to a possible decline in our revenues.

Malicious and abusive Internet practices could impair our cable data services.

Our cable data customers utilize our network to access the Internet and, as a consequence, we or they may become victim of
common malicious and abusive Internet activities, such as unsolicited mass advertising (or spam) and dissemination of viruses, worms and other destructive or disruptive software. These activities could have adverse consequences on our network
and our customers, including degradation of service, excessive call volume to call centers and damage to our customers equipment and data or ours. Significant incidents could lead to customer dissatisfaction and, ultimately, loss of customers
or revenue, in addition to increased costs to us to service our customers and protect our network. Any significant loss of cable data customers or revenue or significant increase in costs of serving those customers could adversely affect our
reputation, growth, financial condition and results of operations.

We depend on third-party suppliers and providers for services,
information and other items critical to our operations.

We depend on third-party suppliers and providers for certain
services and other items that are critical to our operations. These materials and services include set-top boxes, cable and telephony modems, servers and routers, fiber-optic cable, telephony switches, inter city links, support structures, software,
the backbone telecommunications network for our Internet access and telephony service, and construction services for expansion and upgrades of our network. These services and equipment are available from a limited number of suppliers. If
no supplier can provide us with the equipment or services that we require or that comply with evolving Internet and telecommunications standards or that are compatible with our other equipment and software, our business, financial condition and
results of operations could be materially adversely affected. In addition, if we are unable to obtain critical equipment, software, services or other items on a timely basis and at an acceptable cost, our ability to offer our products and services
and roll out our advanced services may be delayed, and our business, financial condition and results of operations could be materially adversely affected. See also the risk factor Delays in the launch of our wireless services, including
due to issues relating to infrastructure buildout and tower-sharing requirements, could impair our ability to gain market share and could adversely affect our ability to deploy and operate our wireless operations successfully and profitably
above. In addition, we obtain significant information through licensing arrangements with content providers. Some providers may seek to increase fees for providing their proprietary content. If we are unable to renegotiate commercially acceptable
arrangements with these content providers or find alternative sources of equivalent content, our News Media operations may be adversely affected.

We may be adversely affected by strikes and other labour protests.

At December 31, 2009,
approximately 47% of our employees were represented by collective bargaining agreements. Through our subsidiaries, we are currently party to 107 collective bargaining agreements:



| |  |  | Videotron is party to five collective bargaining agreements representing approximately 3,750 unionized employees. All collective agreements have
been renewed during the year 2009. The two most important collective bargaining agreements, covering unionized employees in the Montreal and Quebec City regions, have terms extending to December 31, 2013. There are also two collective
bargaining agreements covering unionized employees in the Chicoutimi and Hull regions, with terms running through December 31, 2014 and August 31, 2015, respectively, and one other collective bargaining agreement, covering approximately 40
employees of our SETTE inc. subsidiary, which will expire on December 31, 2012.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sun Media (including Osprey Media) is party to 79 collective bargaining agreements, representing approximately 2,030 unionized employees. 40 collective
bargaining agreements have expired, representing approximately 810 unionized employees, or 40% of its unionized workforce. Negotiations regarding these collective bargaining agreements are either in progress or will be undertaken in 2010. The other
collective bargaining agreements are scheduled to expire on various dates through August 2013.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | TVA Group is party to 13 collective bargaining agreements, representing approximately 1,200 unionized employees. Of this number, three collective
bargaining agreements, representing approximately 550 unionized employees, or 46% of its unionized workforce, have expired. Negotiations regarding these collective bargaining agreements are either in progress or will be undertaken in 2010. The other
collective bargaining agreements will expire between April 30, 2011 and December 31, 2013.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Of the other ten collective bargaining agreements, representing approximately 540 unionized employees or 7% of the unionized workforce, three
collective bargaining agreements representing approximately 180 unionized employees have expired and negotiations are ongoing or will be undertaken in 2010. The other collective bargaining agreements will expire between April 2010 and May 2011.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have, in the past, experienced labour disputes which have disrupted our operations, resulted in damage
to our network or equipment and impaired our growth and operating results. We currently have a labour dispute affecting the editorial, classified, sales support and business office staff of the Journal de Montréal.

We cannot predict the outcome of this work stoppage, although we currently anticipate that any prolonged work stoppage would have an adverse
effect on operations at the newspaper despite our current ability to continue its circulation. We can neither predict the outcome of current or future negotiations relating to other labour disputes, union representation or renewal of collective
bargaining agreements, nor guarantee that we will not experience further work stoppages, strikes or other forms of labour protests pending the outcome of any current or future negotiations. If our unionized workers engage in a strike or any other
form of work stoppage, we could experience a significant disruption to our operations, damage to our property and/or interruption to our services, which could adversely affect our business, assets, financial position, results of operations and
reputation. Even if we do not experience strikes or other forms of labour protests, the outcome of labour negotiations could adversely affect our business and results of operations. Such could be the case if current or future labour negotiations or
contracts were to further restrict our ability to maximize the efficiency of our operations. In addition, our ability to make short-term adjustments to control compensation and benefits costs is limited by the terms of our collective bargaining
agreements.

With regard to the work stoppage at Les Éditions du Réveil, an agreement has been reached and a
three-year collective agreement was signed on February 24, 2010.

We may be adversely affected by litigation and other claims.

In the normal course, we are involved in various legal proceedings and other claims relating to the conduct of our
business. Although, in the opinion of our management, the outcome of current pending claims and other litigation is not expected to have a material adverse effect on our reputation, results of operations, liquidity or financial position, a negative
outcome in respect of any such claim or litigation could have such an adverse effect. Moreover, the cost of defending against lawsuits and diversion of managements attention could be significant. See also Item 8. Financial Information
 Legal Proceedings in this annual report.

Our auditors are not required to issue a report on our internal control over
financial reporting in this annual report.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our
management is responsible for establishing and maintaining adequate internal control structures and procedures for financial reporting, and to prepare a report which contains an assessment of the effectiveness of our internal control over financial
reporting. Managements report on our internal controls over financial reporting is included in Item 15. Controls and Procedures of this annual report. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and
related temporary SEC rules, this annual report does not include a report of the Companys registered public accounting firm on our internal control over financial reporting.

While we have concluded that our internal control over financial reporting was effective as of December 31, 2009, we cannot be certain
that, when our auditors are required to perform an audit of our internal control over financial reporting, they will deliver their report without identifying areas for further attention or improvement, including material weaknesses.



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We will adopt new accounting standards in 2011, and this adoption may have a material impact on our
consolidated financial statements.

In February 2008, Canadas Accounting Standards Board confirmed that Canadian
GAAP, as used by publicly accountable enterprises, will be fully converged to International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). For our
2011 interim and annual financial statements, we will be required to report under IFRS and to provide IFRS comparative information for the 2010 fiscal year.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and disclosures. In order to prepare for the transition to IFRS, we have
established an IFRS implementation team which includes senior levels of management from all relevant departments and subsidiaries, and have engaged an external expert advisor.

We have developed implementation solutions for most of the important topics and are continuing to execute our project implementation
strategy. We have also assessed the exemptions from full retrospective application available under the transitional provisions. Management is in the process of quantifying the expected material differences on transition between IFRS and the current
accounting treatment under Canadian GAAP and is preparing for parallel recording of financial information in accordance with IFRS beginning in 2010. Comprehensive training has been provided to key employees and further investment in training and
resources will be made throughout the transition to facilitate a timely and efficient changeover to IFRS. We continue to monitor and assess the impact of evolving differences between Canadian GAAP and IFRS. At this time, the impact of this
changeover on our future financial position and results of operations is not yet determinable.

The adoption will result in
changes to our reported financial position and results of operations, and these changes may be material. Moreover, the restatement of our 2010 financial statements for comparative purposes may be significant. In addition, IFRS could have an effect
on the computation of our debt covenants and of certain other contractual obligations. In particular, although the adoption IFRS will not change our actual cash flows, our covenants linked to financial ratios may be affected by the adoption of IFRS
in ways that are difficult to predict at this time. See also Item 5. Operating and Financial Review and Prospects  Recent Accounting Developments in Canada for a discussion of certain differences between IFRS and Canadian GAAP with
respect to recognition, measurement, presentation and disclosure of financial information in respect of our consolidated financial statements.

Risks Relating to Our Industries

We are subject to extensive government regulation.
Changes in government regulation could adversely affect our business, financial condition, prospects and results of operations.

Our operations are subject to extensive government regulation in Canada. Laws and regulations govern the issuance, amendment, renewal, transfer, suspension, revocation and ownership of broadcast
programming and distribution licenses. With respect to distribution, regulations govern, among other things, the distribution of Canadian and non-Canadian programming services and the maximum fees to be charged to the public in certain
circumstances. In addition, there are significant restrictions on the ability of non-Canadian entities to own or control broadcasting licenses in Canada. However, on March 3, 2010, the Throne Speech opening the new Parliament session
reintroduced the government objective to relax the foreign ownership restrictions. Our broadcasting distribution and telecommunications operations (including Internet access service) are regulated respectively by the Broadcasting Act (Canada)
(the Broadcasting Act) and the Telecommunications Act and regulations thereunder. The CRTC which administers the Broadcasting Act and the Telecommunications Act, has the power to grant, amend, suspend, revoke and renew
broadcasting licenses, approve certain changes in corporate ownership and control, and make regulations and policies in accordance with the Broadcasting Act and the Telecommunications Act, subject to certain directions from the Federal Cabinet. Our
cable operations are also subject to technical requirements and performance standards under the Radiocommunication Act(Canada) (the Radiocommunication Act) administered by Industry Canada.

In addition, laws relating to communications, data protection, e-commerce, direct marketing and digital advertising and the use of public
records have become more prevalent in recent years. Existing and proposed legislation and regulations, including changes in the manner in which such legislation and regulations are interpreted by courts in Canada, the United States and other
jurisdictions may impose limits on our collection and use of certain kinds of information. For a more extensive description of the regulatory environment affecting our business, see Item 4. Information on the Company  Regulation.



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Changes to the laws, regulations and policies governing our operations, the introduction of
new laws, regulations, policies or terms of license or changes in the treatment of the tax deductibility of advertising expenditures could have a material effect on our business (including how we provide products and services), financial condition,
prospects and results of operations. In addition, we may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. It is difficult to predict in what form laws and
regulations will be adopted or how they will be construed by the relevant courts, or the extent to which any changes might adversely affect us.

The CRTC may not renew our existing distribution licenses or grant us new licenses on acceptable terms, or at all.

Our CRTC distribution licenses must be renewed from time to time, typically every seven years, and cannot be transferred without regulatory approval. While CRTC regulations and policies do not require
CRTC approval before a broadcaster purchases an unregulated media entity, such as a newspaper, the CRTC may consider the issue of our cross-media ownership at license renewal proceedings, and may also consider the issue in deciding whether to grant
new licenses to us. The CRTC further has the power to prevent or address the emergence of undue competitive advantage on behalf of one licensee where it is found to exist.

The CRTC may require us to take measures which could have a material adverse effect on the integration of our assets, our employees and our
ability to realize certain of the anticipated benefits of our acquisitions. Our inability to renew any of our licenses or acquire new interests or licenses on acceptable terms, or at all, could have a material adverse effect on our business,
financial condition or results of operations.

Industry Canada may not renew Videotrons AWS licenses on acceptable terms, or at
all.

Videotrons AWS licenses were issued in December, 2008 for a term of ten years. At least two years before
the end of this term, and any subsequent terms, Videotron may apply for license renewal for a renewed license term of up to ten years. AWS license renewal, including whether license fees should apply for a subsequent license term, will be subject to
a public consultation process initiated in year eight of the license.

We are required to provide third-party ISPs with access to our
cable systems, which may result in increased competition.

The four largest cable operators in Canada, including
Videotron, have been required by the CRTC to provide third-party ISPs with access to their cable systems at mandated cost-based rates. The CRTC has further directed us to file, at the same time we offer any new retail Internet service speed,
proposed revisions to our third-party internet access (or TPIA) tariff to include this new speed offering. TPIA tariff items have been filed and approved for all Internet service speeds that we offer. Several third-party ISPs are now
interconnected to our cable network and are thereby providing retail Internet access services.

The CRTC also requires large
cable carriers, such as us, to allow third party ISPs to provide voice or telephony applications in addition to retail Internet access services.

As a result of these requirements, we may experience increased competition for retail cable Internet and residential telephony customers. In addition, because our third-party Internet access rates are
regulated by the CRTC, we could be limited in our ability to recover our costs associated with providing this access.

On
March 3, 2008, the CRTC released a decision affirming that cable TPIA services are not essential services, yet mandated that they continue to be provided at cost-based rates until such time as it has been demonstrated that a
functionally equivalent, practical and feasible wholesale alternative exists.

On May 8, 2009, the CRTC initiated a new
proceeding to consider the appropriateness of mandating certain wholesale high-speed access services by local exchange carriers and cable carriers including, in the case of cable carriers: (i) the actual or virtual collocation of competitor
equipment at a headend or equivalent, and (ii) the dedication of 6 MHz



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channels for competitor use. The cable carriers, including Videotron, have argued that the first proposal closely resembles the existing TPIA regime, while the second proposal is technically
infeasible and would unduly restrict their ability to offer an innovative and expanding range of services to their own retail customers. A public hearing on this subject is to be held in early 2010.

Long-Distance Equal Access could adversely affect our revenues.

The CRTCs current three-year Work Plan includes a review of the regulatory treatment of Wireless Service Providers (WSPs), which could encompass a review of the issue
of long-distance equal access for WSPs. Equal access would permit wireless customers to choose their long distance provider rather than relying on the long distance services of their contracted wireless carrier. This could result in lower revenues
for long-distance services, which could adversely affect the profitability of our wireless telephony business.

We are subject to a
variety of environmental laws and regulations.

We are subject to a variety of environmental laws and regulations.
Certain of our facilities are subject to federal, provincial, state and municipal laws and regulations concerning, among other things, emissions to the air, water and sewer discharge, the handling and disposal of hazardous materials and waste,
recycling, the soil remediation of contaminated sites, or otherwise relating to the protection of the environment. In addition, laws and regulations relating to workplace safety and worker health, which, among other things, regulate employee
exposure to hazardous substances in the workplace, also govern our operations. Failure to comply with present or future laws or regulations could result in substantial liability to us. Environmental laws and regulations and their interpretation have
changed rapidly in recent years and may continue to do so in the future. Our properties, as well as areas surrounding those properties, particularly those in areas of long-term industrial use, may have had historic uses, or may have current uses, in
the case of surrounding properties, which may affect our properties and require further study or remedial measures. We are not currently conducting or planning any material study or remedial measure, and none has been required by regulatory
authorities. However, we cannot provide assurance that all environmental liabilities have been determined, that any prior owner of our properties did not create a material environmental condition not known to us, that a material environmental
condition does not otherwise exist as to any such property, or that expenditure will not be required to deal with known or unknown contamination.

Risks Relating to our Senior Notes and our Capital Structure

Our indebtedness and
significant interest payment requirements could adversely affect our financial condition and therefore make it more difficult for us to fulfill our obligations, including our obligations under our Senior Notes.

We currently have a substantial amount of debt and significant interest payment requirements. As of December 31, 2009, we had
$3.8 billion of consolidated long-term debt. Our substantial indebtedness could have significant consequences, including the following:



| |  |  | increase our vulnerability to general adverse economic and industry conditions;
| | - |  | -------------------------------------------------------------------------------



| |  |  | require us to dedicate a substantial portion of our cash flow from operations to making interest and principal payments on our indebtedness, thereby
reducing the availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | place us at a competitive disadvantage compared to our competitors that have less debt or greater financial resources; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | 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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Although we are leveraged, the respective indentures governing our outstanding Senior Notes,
as well as our existing credit facilities, permit us to incur additional substantial indebtedness in the future. If we or our subsidiaries incur additional debt, the risks we now face as a result of our leverage could intensify. For more information
regarding our long-term debt and its maturities, as well as our latest financing transactions, see Notes 15 and 28 of our audited consolidated financial statements for the year ended December 31, 2009 included under Item 17. Financial
Statements of this annual report. See also the risk factor,  Restrictive covenants in our outstanding debt instruments may reduce our operating and financial flexibility, which may prevent us from capitalizing on certain business
opportunities below.

Restrictive covenants in our outstanding debt instruments may reduce our operating and financial
flexibility, which may prevent us from capitalizing on certain business opportunities.

Our Senior Secured Credit
Facilities and the respective indentures governing our outstanding Notes contain a number of operating and financial covenants restricting our ability to, among other things:



| |  |  | 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.
| | - |  | -------------------------------------------------------------------------------------------

If we are unable to comply with these covenants and are unable to obtain waivers from our creditors, we would be unable to make additional
borrowings under our credit facilities, our indebtedness under these agreements would be in default and could, if not cured or waived, result in an acceleration of our debt and cause cross-defaults under our other debt, including our Senior Notes.
If our indebtedness is accelerated, we may not be able to repay our indebtedness or borrow sufficient funds to refinance it, and any such prepayment or refinancing could adversely affect our financial condition. In addition, if we incur additional
debt in the future, we may be subject to additional covenants, which may be more restrictive than those to which we are currently subject. Even if we are able to comply with all applicable covenants, the restrictions on our ability to manage our
business in our sole discretion could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us.

We are a holding company and depend on our subsidiaries to generate sufficient cash flow to meet our debt service obligations,
including payments on our Senior Notes.

We are a holding company and a substantial portion of our assets are the
capital stock of our subsidiaries. As a holding company, we conduct substantially all of our business through our subsidiaries, which generate substantially all of our revenues. Consequently, our cash flow and ability to service our debt
obligations, including our outstanding notes, are dependent upon the earnings of our subsidiaries and the distribution of those earnings to us, or upon loans, advances or other payments made by these entities to us. The ability of these entities to
pay dividends or make other loans, advances or payments to us will depend upon their operating results and will be subject to applicable laws and contractual restrictions contained in the instruments governing their debt. Each of Videotron and Sun
Media has outstanding publicly held notes and each of Videotron, Sun Media and Osprey Media has credit facilities that limit the ability of each to distribute cash to us.



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The ability of our subsidiaries to generate sufficient cash flow from operations to allow us
to make scheduled payments on our debt obligations, will depend on their future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our or their control. We can provide
no assurance that the cash flow and earnings of our operating subsidiaries and the amount that they are able to distribute to us as dividends or otherwise will be sufficient for us to satisfy our debt obligations. If we are unable to satisfy our
obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We can provide no assurance that any
such alternative refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all,
or that additional financing would be permitted under the terms of our various debt instruments then in effect. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially
reasonable terms, could have a material adverse effect on our business, financial condition and results of operations.

We or our
subsidiaries may need to refinance certain of our indebtedness. The inability to do so on favourable terms, or at all, could have a material adverse effect on us.

We or our subsidiaries may need to refinance certain of our respective existing debt instruments at their term. The ability to obtain additional financing to repay such existing debt at maturity will
depend upon a number of factors, including prevailing market conditions and our operating performance. The tightening of credit availability and the well-publicized challenges affecting global capital markets could also limit our or our
subsidiaries ability to refinance existing maturities. There can be no assurance that any such financing will be available to us on favourable terms or at all. See also the risk factor  The volatility and disruptions in the capital
and credit markets could adversely affect our business, including affecting the cost of new capital, our ability to refinance our scheduled debt maturities and meet our other obligations as they come due below.

The volatility and disruptions in the capital and credit markets could adversely affect our business, including affecting the cost of new capital, our
ability to refinance our scheduled debt maturities and meet our other obligations as they come due.

The capital and
credit markets have experienced significant volatility and disruption over the last two years, resulting in periods of extreme upward pressure on the cost of new debt capital and severe restrictions in credit availability for many companies. The
disruptions in the capital and credit markets have also resulted in higher interest rates or greater credit spreads on issuance of debt securities and increased costs under credit facilities. Continuation of these disruptions could increase our
interest expense, adversely affecting our results of operations and financial position.

Our access to funds under our
existing credit facilities is dependent on the ability of the financial institutions that are parties to those facilities to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they
experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our credit facilities are several and not joint
and, as a result, a funding default by one or more institutions does not need to be made up by the others.

Longer term
volatility and continued disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation of financial institutions, reduced alternatives or failures of significant financial institutions could adversely
affect our access to the liquidity needed for our businesses in the longer term. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our
business needs can be arranged. Continued market disruptions and broader economic challenges may lead to lower demand for certain of our products and increased incidence of customers inability to pay or timely pay for the services or products
that we provide. Events such as these adversely impact our results of operations, cash flows and financial position.



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We may be adversely affected by exchange rate fluctuations.

Most of our revenues and expenses are received or denominated in Canadian dollars. However, certain expenditures, such as the purchase of
set-top boxes and cable modems and certain capital expenditures, including certain costs related to the buildout of our wireless network, are paid in U.S. dollars. Also, a substantial portion of our debt is denominated in U.S. dollars, and
interest, principal and premium, if any, thereon is payable in U.S. dollars. For the purposes of financial reporting, any change in the value of the Canadian dollar against the U.S. dollar during a given financial reporting period would
result in a foreign exchange gain or loss on the translation of any unhedged U.S. dollar-denominated debt into Canadian dollars. Consequently, our reported earnings and debt could fluctuate materially as a result of foreign exchange gains or
losses. Although we have entered into transactions to hedge the exchange rate risk with respect to 100% of our U.S. dollar-denominated debt outstanding at December 31, 2009, and we intend in the future to enter into such transactions for
new U.S. dollar-denominated debt, these hedging transactions could, in certain circumstances, prove economically ineffective and may not be successful in protecting us against exchange rate fluctuations, or we may in the future be required to
provide cash and other collateral to secure our obligations with respect to such hedging transactions, or we may in the future be unable to enter into such transactions on favorable terms or at all.

In addition, 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-fair value.

The fair value of the derivative financial
instruments we are party to is estimated using period-end market rates and reflect the amount we would receive or pay if the instruments were terminated and settled at those dates, as adjusted for counterparties non-performance risk. At
December 31, 2009, the net aggregate fair value of our cross-currency interest rate swaps and forward foreign-exchange swap agreements was in a net liability position of $373.4 million. See also Item 11. Quantitative and Qualitative
Disclosures About Market Risk of this annual report.

Certain of the commodities we consume in our daily operations are
traded on commodities exchanges or are negotiated on their respective markets in U.S. dollars, and, therefore, although we pay our suppliers in Canadian dollars, the prices we pay for such commodities may be affected by fluctuations in the
exchange rate. We have entered into or may in the future enter into transactions to hedge the exchange rate risk related to the prices of some of those commodities. However, fluctuations of the exchange rate for the portion of our commodities
purchases that are not hedged could affect the prices we pay for such commodities and could have an adverse effect on our results of operations.

There is no public market for our Senior Notes.

There is currently no established trading market for
our issued and outstanding Senior Notes and we do not intend to apply for listing of any of our notes on any securities exchange or on any automated dealer quotation system. No assurance can be given as to the prices or liquidity of, or trading
markets for, any series of our Senior Notes. The liquidity of any market for our notes will depend upon the number of holders of our Senior Notes, the interest of securities dealers in making a market in our Senior Notes, prevailing interest rates,
the market for similar securities and other factors, including general economic conditions, our financial condition and performance and our prospects. The absence of an active market for our Senior Notes could adversely affect their market price and
liquidity.

In addition, the market for non-investment grade debt has historically been subject to disruptions that caused
volatility in prices. It is possible that the market for our Senior Notes will be subject to disruptions. Any such disruptions may have a negative effect on a holders ability to sell our notes regardless of our prospects and financial
performance.

Non-U.S. holders of our Senior Notes are subject to restrictions on the transfer or resale of our notes.

Although we have registered our Senior Notes under the Securities Act, we did not, and we do not intend to, qualify
our notes by prospectus in Canada, and, accordingly, the notes remain subject to restrictions on resale and transfer in Canada. In addition, non-U.S. holders remain subject to restrictions imposed by the jurisdiction in which the holder is resident.



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We may not be able to finance an offer to purchase our Senior Notes in the event of a change of
control as required by the respective indentures governing our notes because we may not have sufficient funds at the time of the change of control or our Senior Secured Credit Facilities may not allow the repurchases.

If we experience a change of control, as that term is defined in the indenture governing our Senior Notes, or if we or our subsidiaries
dispose of significant assets under specified circumstances, we may be required to make an offer to repurchase all of our notes prior to maturity. We can provide no assurance that we will have sufficient funds or be able to arrange for additional
financing to repurchase the notes following such change of control or asset sale. There is no sinking fund with respect to our outstanding Senior Notes.

In addition, under our Senior Secured Credit Facilities, a change of control would be an event of default. Any future credit agreement or other agreements relating to our senior indebtedness to which we
become a party may contain similar provisions. Our failure to offer to repurchase our Senior Notes upon a change of control would, pursuant to the terms of the respective indentures governing our outstanding notes, constitute an event of default
under the indentures. Any such default could, in turn, constitute an event of default under future senior indebtedness, any of which may cause the related debt to be accelerated after the expiry of any applicable notice or grace periods. If debt
were to be accelerated, we may not have sufficient funds to repurchase the notes and repay the debt.

Canadian bankruptcy and insolvency
laws may impair the trustees ability to enforce remedies under our Senior Notes.

The rights of the trustees,
who represent the holders of our Senior Notes, to enforce remedies could be delayed by the restructuring provisions of applicable Canadian federal bankruptcy, insolvency and other restructuring legislation if the benefit of such legislation is
sought with respect to us. For example, both the Bankruptcy and Insolvency Act(Canada) and the CCAA contain provisions enabling an insolvent person to obtain a stay of proceedings against its creditors and to file a proposal to be voted
on by the various classes of its affected creditors. A restructuring proposal, if accepted by the requisite majorities of each affected class of creditors, and if approved by the relevant Canadian court, would be binding on all creditors within each
affected class, including those creditors that did not vote to accept the proposal. Moreover, this legislation, in certain instances, permits the insolvent debtor to retain possession and administration of its property, subject to court oversight,
even though it may be in default under the applicable debt instrument, during the period that the stay against proceedings remains in place.

The powers of the court under the Bankruptcy and Insolvency Act (Canada) and particularly under the CCAA have been interpreted and exercised broadly so as to protect a restructuring entity from
actions taken by creditors and other parties. Accordingly, we cannot predict whether payments under our outstanding notes would be made during any proceedings in bankruptcy, insolvency or other restructuring, whether or when the trustees could
exercise their respective rights under the respective indentures governing our Senior Notes or whether and to what extent holders of our Senior Notes would be compensated for any delays in payment, if any, of principal, interest and costs, including
the fees and disbursements of the respective trustees.

U.S. investors in our Senior Notes may have difficulties enforcing civil
liabilities.

We are incorporated under the laws of the Province of Quebec. Substantially all of our directors,
controlling persons and officers, are residents of Canada or other jurisdictions outside the United States, and all or a substantial portion of their assets and substantially all of our assets are located outside the United States. We have
agreed, under the terms of the respective indentures governing our Senior Notes, to accept service of process in any suit, action or proceeding with respect to the indentures or the Senior Notes brought in any federal or state court located in
New York City by an agent designated for such purpose, and to submit to the jurisdiction of such courts in connection with such suits, actions or proceedings. Nevertheless, it may be difficult for holders of our Senior Notes to effect service
of process upon us or such persons within the United States or to enforce against us or them in the United States, judgments of courts of the United States predicated upon the civil liability provisions of the U.S. federal or
state securities laws or other laws of the United States. In addition, there is doubt as to the enforceability in Canada of liabilities predicated solely upon U.S. federal or state securities law against us and our directors, controlling
persons and officers who are not residents of the United States, in original actions or in actions for enforcement of judgments of U.S. courts.



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ITEM 4  INFORMATION ON THE COMPANY

A - History and Development of Quebecor Media

Our legal and commercial name is Quebecor Media Inc. Our registered office is located at 612 St-Jacques Street, Montreal, Quebec, Canada H3C 4M8, and our telephone number is (514) 380-1999. Our
corporate website may be accessed through the URL http://www.quebecor.com. The information found on our corporate website does not, however, form part of this annual report and is not incorporated herein by reference. In respect of our issued and
outstanding notes, our agent for service of process in the United States is CT Corporation System, 111 Eighth Avenue, New York, New York 10011.

Quebecor Media was incorporated in Canada on August 8, 2000 under Part 1A of the Companies Act (Quebec). In connection with our formation, our parent company, Quebecor, transferred all the
shares of its wholly owned subsidiary Quebecor Communications Inc. (QCI), to us, which made QCI our wholly-owned subsidiary. The assets of QCI, as of the date of the transfer in October 2000, included a 70% interest in Sun Media
(which was subsequently increased to 100%); a 57.3% interest in Nurun (which was subsequently increased to 100%); all the assets of the Canoe network; and all the assets of our Leisure and Entertainment segment. Concurrently with that transfer, we
sold our interest in our subsidiary TQS Inc. to Quebecor, which subsequently sold such interest to a private consortium. In addition, Quebecor and Capital CDPQ contributed $0.9 billion and $2.8 billion, respectively, in cash in exchange for common
shares of the capital stock of Quebecor Media. On December 31, 2001, QCI was liquidated into Quebecor Media.

In October
2000, we acquired all of the outstanding shares of Groupe Videotron for $5.3 billion. At the time of the acquisition, the assets of Groupe Videotron included all of the shares of Videotron, a 99.9% voting interest in TVA Group, all of the shares of
Le SuperClub Videotron, a 66.7% voting interest in Videotron Telecom (which was merged with Videotron on January 1, 2006), a 54.0% voting interest (which was subsequently increased to 100%) in Netgraphe Inc. (which changed its name, effective
December 31, 2004, to Canoe, and other assets.

Since December 31, 2006, we have completed several business
acquisitions, combinations, divestiture projects and financing transactions through our direct and indirect subsidiaries, including, among others, the following:



| |  |  | On January 14, 2010, Quebecor Media obtained from its credit agreement lenders the extension of the maturity date of its $100 million revolving
credit facility from January 2011 to January 2013 and certain other favourable amendments to the covenants contained in its credit facilities.
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| |  |  | On January 13, 2010, Videotron issued $300 million aggregate principal amount of its 7 1/8 % Senior Notes due 2020 for net proceeds of $293.9
million (net of financing expenses). Videotron used the proceeds to repay the drawings under its Senior Secured Credit Facility and for general corporate purposes.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On November 13, 2009, Videotron amended its Senior Secured Credit Facility to create thereunder a separate $75.0 million secured term facility
having a maturity date expiring in June 2018 (Export Financing Facility). In addition, on November 13, 2009, Videotron entered into a separate credit agreement with a group of lenders and HSBC Bank plc acting as agent
for the lenders, providing for an unsecured term credit facility (Facility B) in a maximum amount equal to the difference between US$100 million and the aggregate of the US dollar equivalent of each drawing made under the
Export Financing Facility. Facility B has a maturity expiring in April 2016. The proceeds of each of the Export Financing Facility and Facility B may be used, inter alia, for payments and/or reimbursement of payments of export
equipment and local services in relation to the contract for wireless infrastructure equipment entered into by Videotron with an affiliate of Nokia Corporation.
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| |  |  | On May 12, 2009, Quebecor Media announced the integration of Internet portals operations into Sun Media. This integration reflects Quebecor
Medias determination to seize the opportunities available on the new media landscape by combining the strengths of its assets from its Internet and newspaper operations under a unified leadership.
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| |  |  | On March 5, 2009, Videotron issued US$260.0 million aggregate principal amount of its 91/8% Senior Notes due 2018 for net proceeds of $332.4 million
(including accrued interest and net of financing expenses). Videotron used the proceeds to repay drawings on its Senior Secured Credit Facility and for general corporate purposes.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In July 2008, in the context of Canadas spectrum auction for third generation AWS, we acquired spectrum licenses for AWS covering all regions of
the Province of Quebec and certain areas of Ontario. We were the successful bidder for 40 MHz spectrum licenses in all parts of the Province of Quebec, except the Outaouais region where we obtained 20 MHz spectrum licenses and certain regions of
Quebec where we obtained 50 MHz spectrum licenses. We also acquired 20 MHz spectrum licenses in Eastern Ontario and 10 MHz spectrum licenses in the city of Toronto. These licenses, the control of which was transferred from Quebecor Media to
Videotron subsequent to the completion of the auction, were issued by Industry Canada on December 23, 2008. The spectrum enables Videotron to pursue the buildout of an AWS network infrastructure and become a facilities-based provider offering
advanced wireless services, including high-speed Internet, mobile television and a variety of other advanced functions that can be accessed through mobile devices referred to as smartphones. The build-out of Videotrons AWS project  a
greenfield investment  has gained significant momentum since the acquisition of spectrum. Videotron anticipates launching its AWS offering in the summer of 2010, when Videotrons new High Speed Packet Access network is expected to be
operational. It also intends to finance future AWS project disbursement from cash on hand, funds generated by operations and, if necessary, available unused lines of credit.
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| |  |  | On June 2, 2008, TVA Group repurchased 3,000,642 Class B shares under the Substantial Issuer Bid filed on March 31, 2008 and amended on
May 14, 2008, for an aggregate cash consideration of $51.4 million. In 2009, 253,300 Class B shares were repurchased under a Normal Course Issuer Bid for a cash consideration of $2.6 million. As a result of these repurchases, Quebecor
Medias interest in TVA Group increased by 6.2%, from 45.24% on January 1, 2007 to 51.44% as of December 31, 2009.
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| |  |  | On April 15, 2008, Videotron issued US$455.0 million aggregate principal amount of its 91/8% Senior Notes due 2018 for net proceeds of $447.8 million.
Videotron used the proceeds to repay drawings on its Senior Secured Credit Facility and for general corporate purposes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On April 7, 2008, Videotron amended its Senior Secured Credit Facility to increase its commitments under the facility from $450.0 million to
$575.0 million and extend the maturity date to April 2012.
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| |  |  | On February 26, 2008, Quebecor Media, through a wholly-owned subsidiary, completed its acquisition, pursuant to a public offer and subsequent
compulsory acquisition procedure, of all of the issued and outstanding common shares of Nurun (including common shares issuable upon the exercise of outstanding options, conversion or exchange rights) not already held by Quebecor Media and its
affiliates, at a price of $4.75 per common share. The Nurun common shares were delisted from the Toronto Stock Exchange on February 27, 2008. The aggregate cash consideration paid by Quebecor Media pursuant to this public offer was
approximately $75.2 million.
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| |  |  | On October 31, 2007, Sun Media entered into a Fifth Amending Agreement to its credit agreement. The agreement extends the term to October 31,
2012 and modifies covenants related to leverage and interest coverage ratios, removes the fixed charge ratio and modifies certain definitions.
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| |  |  | On October 5, 2007, Quebecor Media completed a placement of US$700.0 million aggregate principal amount of its 73/4% senior notes due 2016. Quebecor Media used the net proceeds of
$672.2 million (including accrued interest of $16.6 million and before financing costs of $9.8 million) from the placement, as well as its cash and cash equivalents, to repay in full the $420.0 million drawn on the senior bridge credit facility
entered into to finance the acquisition of Osprey Media (which facility was then terminated), to repay US$179.7 million outstanding under Sun Medias Term Loan B, and to settle the $106.0 million liability related to derivative financial
instruments connected to the Sun Media Term Loan B.
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| |  |  | In early August 2007, Quebecor Media completed its acquisition of Osprey Media for an aggregate purchase price of approximately $414.4 million
(excluding assumed Osprey Media debt of $161.8 million). The purchase price was financed through a senior bridge credit facility that Quebecor Media fully repaid with a portion of the proceeds of the offering of its Senior Notes in October 2007.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B - Business Overview

Overview

We
are one of Canadas leading media companies, with activities in cable distribution, residential and mobile wireless telecommunications, newspaper publishing, television broadcasting, book, magazine and video retailing, publishing and
distribution, music recording, production and distribution and new media services. Through our operating subsidiaries, we hold leading positions in the creation, promotion and distribution of news, entertainment and Internet related services that
are designed to appeal to audiences in every demographic category.

Through our Videotron operating subsidiary, we are the
largest cable operator in the Province of Quebec and the third largest in Canada, in each case based on the number of cable customers, a major ISP and a provider of telephony services in the Province of Quebec. Through our Sun Media and Osprey Media
operating subsidiaries, we are the largest newspaper publisher in the Province of Quebec and in Canada, based on total paid and unpaid circulation. We have established the number one or two market position, in terms of paid circulation, in each of
our eight urban daily markets. Through our public TVA Group operating subsidiary, of which we own 51.44% of the equity and control 99.9% of the voting power, we are the largest private sector television broadcaster in Quebec in terms of market
share, the largest private sector French language television broadcaster in North America in terms of market share, and one of the largest private sector producers of French language television programming in Quebec in terms of number of hours of
production and broadcasting of French language programming. We are also engaged in book publishing and distribution; magazine publishing and production; the distribution and retailing of cultural products through companies such as Archambault Group,
which owns one of the largest chains of music, book, video and musical instruments stores in Quebec and is one of the largest producers of French language music products in Quebec and one of the largest independent distributors of music (traditional
distribution and digital download) and video products in Canada; film and television distribution through TVA Films; and video and video game rental and retailing through Le SuperClub Videotrons chain of corporate and franchised video rental
stores, which is the largest chain of video stores in Quebec. In the new media sector, we have developed, through Canoe, two of Canadas leading English and French language Internet news and information portals, as well as leading Internet
sites dedicated to automobiles, employment, personals, social communities, web search, real estate and classifieds. Through our Nurun subsidiary, we provide global and local clients with consulting services, which include strategic planning and
online branding, design and development of websites, intranets, extranets as well as user interfaces for new interactive media (mobile telephones, interactive television), the integration of technical platforms, the design and management of
marketing programs, online media buys and eCRM campaigns, as well as the analysis of data collected through these various interactive channels.

Through our direct and indirect interests in several businesses, we operate in the following industry segments: Telecommunications, News Media, Broadcasting, Leisure and Entertainment and Interactive
Technologies and Communications.

Competitive Strengths

We believe that our diversified portfolio of media assets provides us with a number of competitive advantages, including the ability to:



| |  |  | cross promote our brands, programs and other content across multiple media platforms;
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| |  |  | provide advertisers with an integrated solution for local, regional and national multi platform advertising;
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| |  |  | offer a differentiated, bundled suite of entertainment, information and communication services and products, including digital television, cable
Internet access, video-on-demand and other interactive television services, as well as residential and commercial cable telephony services using VoIP technology, and mobile wireless telephony services, which we currently offer on an MVNO-basis
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| | (utilizing wireless voice and data services provided by Rogers Wireless, a subsidiary of Rogers Communications Inc.(Rogers)), but will offer as a facilities-based wireless
provider when our AWS wireless network is operational. Our new wireless service offering plays an integral part of our strategic vision for our combined platform and quadruple play technology offering;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 (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;
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| |  |  | extend our market reach by leveraging our multimedia platform and cross marketing expertise and experience to enhance our national media platform;
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| |  |  | leverage our single hybrid fiber coaxial clustered network that covers approximately 80% of Quebecs total addressable market and five of the
provinces top six urban areas. We believe that our single cluster and network architecture provides many benefits, including a higher quality and more reliable network, the ability to launch and deploy new products and services, and a lower
cost structure through reduced maintenance and technical support costs; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | leverage our advanced broadband network, 99% of which is bi-directional which allows us to offer a wide range of advanced services on the same media,
such as digital television, video-on-demand, cable Internet access and cable telephony services. We are committed to maintaining and upgrading our network capacity and, to that end, we currently anticipate that future capital expenditures over the
next five years will be required to accommodate the evolution of our products and services and to meet the demand for increased capacity resulting from the growth of our telephony service and the offering of our other advanced products and services.
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We have a strong, market-focused management team that has extensive experience and expertise in a range of
areas, including marketing, finance, telecommunications, publishing and technology. Under the leadership of our senior management team, we have, despite intense competition, successfully increased sales of our digital television products, improved
penetration of our high-speed Internet access and cable products and successfully launched our VoIP telephony services and are now in the buildout phase of becoming a facilities-based wireless provider.

Our Strategy

Our objective is to increase our revenues and profitability by leveraging the integration and growth opportunities presented by our portfolio of leading media assets. We attribute our strong historical results and positive outlook for
growth and profitability to an ability to develop and execute forward looking business strategies. The key elements of our strategy include:



| |  |  | Strengthen our position as a telecommunications leader with our new AWS wireless services. With our new AWS licenses, Videotron plans to bring
consumers and small businesses an offering of advanced wireless telecommunications services that is based on effective, reliable technology, diverse and convergent content and unambiguous business policies. Our new wireless service offering plays an
integral part of our strategic vision for our combined platform and quadruple play technology offering.
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| |  |  | Introduce new and enhanced products and services. We expect a significant portion of our revenue growth in our Telecommunications segment revenues to
be driven by the introduction of new products and services (such as Wideband internet technology) and by the continuing penetration of our existing suite of products and services such as digital cable services, cable Internet access, cable telephony
services, high-definition television, video-on-demand and interactive television. Our objective is also to increase our revenue per subscriber by focusing sales and marketing efforts on the bundling of these value added products and services.
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| |  |  | Leverage growth opportunities and convergence opportunities. We are the largest private sector French language programming broadcaster, a leading
producer of French language programming, the largest newspaper publisher based on total paid and unpaid circulation, and a leading English and French language Internet news and information portal in Canada. As a result, we are able to generate and
distribute content across a spectrum of media properties and platforms. In addition, these multi platform media assets enable us to provide advertisers with integrated advertising solutions. We are able to provide flexible, bundled advertising
packages that allow advertisers to reach local, regional and national markets, as well as special interest and specific demographic groups. We continue to explore and implement initiatives to leverage growth and convergence opportunities, including
efforts to accelerate the migration of content generated by our various publications and broadcasters to our other media platforms, the integration of our newspaper operations and internet/portal operations under a unified executive leadership, the
transfer of the printing of several of our publications to two state-of-the-art facilities owned by Quebecor Media Printing, the creation of Quebecor Media Network, the sharing of editorial content between our News Media business and QMI News
Agency, and the integration of advertising assets and expertise with the merge of four sales team, the Sun Media Newspaper across Canada, Canoe, TVA broadcast and TVA publication into one vertically integrated solutions team.
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| |  |  | 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.
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| |  |  | Leverage geographic clustering. Our Videotron subsidiary holds cable licenses that cover approximately 80% of Quebecs approximately
3.1 million homes and commercial premises passed by cable. Geographic clusters facilitate bundled service offerings and, in addition, allow us to tailor our offerings to certain demographic markets. We aim to leverage the highly clustered
nature of our systems to enable us to use marketing dollars more efficiently and to enhance customer awareness, increase use of products and services and build brand support.
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| |  |  | 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.
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| |  |  | Manage expenses through success driven capital spending and technology improvements. In our Telecommunications 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 News Media 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.
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Telecommunications

Through Videotron we are the largest cable operator in the Province of Quebec and the third largest in Canada, in each case based on the
number of cable customers, a major ISP and a provider of telephony services in the Province of Quebec. We offer pay television, Internet access, cable telephony and mobile wireless telephony services. Our cable network covers approximately 80% of
Quebecs approximately 3.1 million residential and commercial premises passed by cable. Our cable licenses include licenses for the greater Montreal area, the second largest urban area in Canada. The



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greater Montreal area represents one of the largest contiguous clusters in Canada and is among the largest in North America as measured by the number of cable customers. This concentration
provides us with improved operating efficiencies and is a key element in the development and launch of our bundled service offerings.

As of December 31, 2009, we had 1,777,025 basic cable customers (which we define as customers receiving basic cable service, including analog and digital customers), representing a basic penetration rate of 69.0% of total homes passed.
Through our extensive broadband coverage, we also offer digital television and cable Internet access services to approximately 99% of our total homes passed. We have rapidly grown our digital customer base in recent years, and as of
December 31, 2009, we had 1,084,100 digital customers, representing 61.0% of our basic customers and 42.1% of our total homes passed. We have also rapidly grown our cable Internet access customer base, and as of December 31, 2009, we had
1,170,570 cable Internet access customers, representing 65.9% of our basic customers and 45.5% of our total homes passed.

Our
bi-directional hybrid fiber coaxial (HFC) network also allows us to offer a telephony service using VoIP technology to our residential and commercial customers. As of December 31, 2009, we had 1,014,038 cable telephony customers, representing
57.1% of our basic customers and 39.4% of our total homes passed. In addition, as of December 31, 2009, approximately 99% of all of our cable customers were in areas in which our cable telephony service was available. We believe that the
continued increase in the penetration rate of our digital television, cable Internet access, telephony and wireless voice and data services will result in increased average revenue per user (ARPU).

Our wireless business, which we launched in the third quarter of 2006, continues to experience subscriber growth (reaching 82,813
subscribers as of December 31, 2009). We launched our MVNO-based service to help us understand the dynamics of the wireless business. We lease the network from Rogers Wireless, but perform all other operational functions such as billing,
handsets procurement, call centers, order management systems and so on. Therefore, the backoffice system infrastructure necessary to efficiently manage our own facilities-based service is already operational.

In 2008, we qualified as a new market entrant in the spectrum auction for third generation AWS and acquired spectrum licenses for AWS
covering all regions of the Province of Quebec and certain areas of Ontario. Specifically, we acquired all 40 MHz spectrum licenses set aside for new entrants in all parts of the Province of Quebec, except the Outaouais region where it obtained 20
MHz spectrum licenses, and certain regions of Quebec where it obtained 50 MHz spectrum licenses. We also acquired 20 MHz spectrum licenses in Eastern Ontario and 10 MHz spectrum licenses in the city of Toronto. The control of these licenses was
transferred from Quebecor Media to Videotron subsequent to the completion of the auction.

Videotron completed several key
stages in the build-out of its 3G wireless network during 2009. As of December 31, 2009, all services and switching platforms had been installed and were operational. Interconnections with Videotrons existing fiber optic network were in
place and incorporated into Videotrons integrated service. Videotron had conducted multi-phase testing to maintain the reliability of its platforms. Siting and tower-sharing agreements for nearly 60% of the antenna sites needed to launch the
service had been reached. The equipment has been or is being installed at most of the sites for which an agreement has been signed.

On July 22, 2009, Videotron reached a roaming agreement with wireless service provider Rogers. Under this agreement, Videotron will use Rogers network exclusively in Rogers service area across Canada to serve
Videotrons future wireless telephone service customers outside Videotrons coverage area. Videotron has also reached a similar roaming agreement in the United States with wireless service provider T-Mobile. These agreements will enable
Videotron to provide advanced wireless services across Canada and the U.S. Videotron is still planning to launch its advanced wireless services in summer 2010.

As work on the build-out and roll-out of Videotrons advanced wireless services progressed during the past year, changes in the project led to corresponding changes in the investment profile compared
with Videotrons original estimates. Videotron does not expect, however, that this will have any material effect on its operating results or financial position, as Videotron is confident that the project will enable it to achieve its objectives
for penetration, revenue generation, and free cash flow generation. Videotron still expect to finance future expenditures related to its Advanced Wireless Services project from cash and cash equivalents, cash flows generated by operations and, if
necessary, unused lines of credit.



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Videotron offers its advanced products and services, which include video-on-demand and
selected interactive television services, as a bundled package that is unique among the competitors in its market. Videotron differentiates its services by offering a higher speed Internet access product, the widest range of French-language
programming in Canada and exclusive content on its video-on-demand service. We believe that Videotrons bundled packages of products and services, together with its focus on customer service and the breadth of its French-language offerings,
have resulted in improved customer satisfaction, increased use of its services and higher customer retention.

In addition,
through our Le SuperClub Videotron subsidiary, we are also the franchisor of the largest chain of video and video game rental stores in Quebec and among the largest of such chains in Canada, with a total of 236 retail locations as of
December 31, 2009.

We own a 100% voting and 100% equity interest in Videotron.

For the year ended December 31, 2009, our Telecommunications operations generated revenues of $2.0 billion and operating income of
$972.9 million. For the year ended December 31, 2008, our Telecommunications operations generated revenues of $1.80 billion and operating income of $797.9 million.

Cable Television Industry Overview

Cable television has been
available in Canada for more than 50 years and is a well developed market. Competition in the cable industry was first introduced in Canada in 1997. As of August 31, 2008, the most recent date for which data is available, there were
approximately 7.9 million cable television customers in Canada, representing a basic cable penetration rate of approximately 57.2% of homes passed. For the twelve months ended August 31, 2008 (the most recent data available), total
industry revenue was estimated to be over $8.2 billion and is expected to grow in the future because Canadian cable operators have aggressively upgraded their networks and have begun launching and deploying new products and services, such as cable
Internet access, digital television services and, more recently, telephony services.

The following table summarizes the most
recent available annual key statistics for the Canadian and U.S. cable television industries.



|                         |  |                                                                           |       |   |      |     |       |      |  |     |       |   |  |      |       |   |         |     |       |   |  |      |  
|------------------------ |  | ------------------------------------------------------------------------- | ----- | - | ---- | --- | ----- | ---- |  | --- | ----- | - |  | ---- | ----- | - | ------- | --- | ----- | - |  | ---- | -
|                         |  | Twelve Months Ended August 31,                                            |      
|                         |  | 2008(1)                                                                   |       |   | 2007 |     |       | 2006 |  |     | 2005  |   |  | 2004 |       |   | CAGR(2) |    
|                         |  | (Homes passed and basic cable customers in millions, dollars in billions) |      
|Canada                   |  |                                                                           |       |   |      |     |       |      |  |     |       |   |  |      |       |   |         |     |       |   |  |      |  
|Industry Revenue         |  | $                                                                         | 8.2   |   |      | $   | 7.1   |      |  | $   | 6.1   |   |  | $    | 5.0   |   |         | $   | 4.7   |   |  | 14.9 | %
|Homes Passed(3)          |  |                                                                           | 13.8  |   |      |     | 13.6  |      |  |     | 13.0  |   |  |      | 11.2  |   |         |     | 10.5  |   |  | 7.1  | %
|Basic Cable Customers(4) |  |                                                                           | 7.9   |   |      |     | 7.7   |      |  |     | 7.5   |   |  |      | 6.9   |   |         |     | 6.9   |   |  | 3.4  | %
|Basic Penetration        |  |                                                                           | 57.2  | % |      |     | 56.6  | %    |  |     | 57.7  | % |  |      | 61.6  | % |         |     | 65.7  | % |  | -3.4 | %
|                         | 
|                         |  | Twelve Months Ended December 31,                                          |      
|                         |  | 2009                                                                      |       |   | 2008 |     |       | 2007 |  |     | 2006  |   |  | 2005 |       |   | CAGR(5) |    
|                         |  | (Homes passed and basic cable customers in millions, dollars in billions) |      
|U.S.                     |  |                                                                           |       |   |      |     |       |      |  |     |       |   |  |      |       |   |         |     |       |   |  |      |  
|Industry Revenue         |  | US$                                                                       | 90.2  |   |      | US$ | 86.3  |      |  | US$ | 78.8  |   |  | US$  | 71.9  |   |         | US$ | 65.7  |   |  | 6.5  | %
|Homes Passed(3)          |  |                                                                           | 125.7 |   |      |     | 124.2 |      |  |     | 123.0 |   |  |      | 111.6 |   |         |     | 110.8 |   |  | 2.6  | %
|Basic Cable Customers    |  |                                                                           | 62.6  |   |      |     | 63.7  |      |  |     | 64.9  |   |  |      | 65.4  |   |         |     | 65.4  |   |  | -0.9 | %
|Basic Penetration        |  |                                                                           | 49.8  | % |      |     | 51.3  | %    |  |     | 52.8  | % |  |      | 58.6  | % |         |     | 59.0  | % |  | -3.3 | %



Source of Canadian data: CRTC.

Source of
U.S. data: NCTA, A.C. Nielsen Media Research and SNL Kagan.



|(1) | Source : CRTC Industry Monitoring Report 2009.
|--- | ----------------------------------------------

|(2) | Compounded annual growth rate from 2004 through 2008.
|--- | -----------------------------------------------------

|(3) | 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Including IPTV in some Provinces for the 2008 figure.
|--- | -----------------------------------------------------

|(5) | Compounded annual growth rate from 2005 through 2009.
|--- | -----------------------------------------------------



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The traditional cable business, which is the delivery of video via hybrid fiber coaxial
network, is fundamentally similar in the U.S. and Canada. Different economic and regulatory conditions, however, have given rise to important differences between the two markets. Canadian operators have more limited revenue sources than U.S.
operators due to Canadian regulations which prevent cable operators from generating revenue from local advertising. However, the lack of local advertising revenues allows Canadian cable operators to benefit from lower programming costs as compared
to U.S. cable operators.

A significant portion of Canadas cable television customers are based in Quebec. As of
August 31, 2009, Quebec is home to approximately 23.2% of Canadas population and approximately 24.0% of its basic cable customers. Based on the CRTC statistics, basic cable penetration in Quebec, which was approximately 53.7% as of
August 31, 2008, has traditionally been lower than in other provinces in Canada, principally due to the higher concentration of French-speaking Canadians in Quebec. It is estimated that over 80% of Quebecs population is French-speaking.
Contrary to the English-speaking provinces of Canada, where programming in English comes from all over North America, programming in French is available over-the-air in most of Quebecs French-speaking communities. The arrival of a variety of
French-language specialty channels not available over-the-air and, more recently, the introduction of HD content, contributed to a penetration increase.

Expansion of Digital Distribution and Programming

In recent years, digital
technology has significantly expanded the range of services that may be offered to our customers. We are now offering to our digital cable customers more than 360 channels, including 175 English-language channels, 54 French-language channels, 44
HDTV channels, 10 time-shifting channels and 63 radio/music channels.

Many programming services have converted to
high-definition format and HDTV programming is steadily increasing. We believe that the availability of HDTV programming will continue to increase significantly in the coming years and will result in a higher penetration level of digital
distribution.

Our strategy, in the coming years, will be to try to continue the expansion in our offering and maintain the
quality of our programming. Our cable television service depends in large part on our ability to distribute a wide range of appealing, conveniently-scheduled television programming at reasonable rates and will be an important factor in our success
to maintain the attractiveness of our services to customers.

Products and Services

We currently offer our customers analog cable television services and programming as well as new and advanced high-bandwidth products and
services such as cable Internet access, digital television, premium programming and selected interactive television services. We continue to focus on our cable Internet access, digital television and telephony services, which are increasingly
desired by customers. With our advanced broadband network, our objective is to increase penetration of value-added services such as video-on-demand, high-definition television, as well as interactive programming and advertising.

We also offer cable telephony service in Quebec, a product that leverages our customer base with our telecommunications network and
expertise, and wireless telephony through an MVNO-based service.

Traditional Cable Television Services

Customers subscribing to our traditional analog basic and analog extended basic services generally receive a line-up
of 44 channels of television programming, depending on the bandwidth capacity of their local cable system. Customers who pay additional amounts can also subscribe to additional channels, either individually or in packages. We aim to tailor our
channel packages to satisfy the specific needs of the different customer segments we serve.



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Our analog cable television service offerings include the following:



| |  |  | 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 17 channels, includes a package of
French- and English-language specialty television programming and U.S. cable channels in addition to the basic service channel line-up described above. Branded as Telemax, this service was introduced in almost all of our markets largely
to satisfy customer demand for greater flexibility and choice.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Advanced Cable-Based Products and
Services

Cables large bandwidth is a key factor in the successful delivery of advanced products and services.
Several emerging technologies and increasing Internet usage by our customer base have presented us with significant opportunities to expand our sources of revenue. We currently offer a variety of advanced products and services, including cable
Internet access, digital television, cable telephony and selected interactive services. We intend to continue to develop and deploy additional services to further broaden our service offering.



| |  |  | 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. Since 2008, we offer Wideband services, which offer speeds of up to 900 times the speed of a conventional
telephone modem. As of December 31, 2009, we had 1,170,570 cable Internet access customers, representing 65.9% of our basic customers and 45.5% of our total homes passed. Based on internal estimates, we are the largest provider of Internet
access services in the areas we serve with an estimated market share of 55.5% as of December 31, 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Digital Television. We have installed headend equipment capable of delivering digitally encoded transmissions to a two-way digital capable set-top box
in the customers home. This digital connection provides significant advantages. In particular, it increases channel capacity, which allows us to increase both programming and service offerings while providing increased flexibility in packaging
our services. Our basic digital package includes 29 television channels, 41 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 offering, branded as sur mesure (i.e., individual channel selections), offers customers the ability to select more than 200 additional channels of their choice, including U.S. super-stations and other special
entertainment programs, allowing them to customize their choices. This also offers customers significant programming flexibility including the option of French-language only, English-language only or a combination of French- and English-language
programming, as well as many foreign-language channels. We also offer pre-packaged themed service tiers in the areas of news, sports and discovery. Customers who purchase basic service and one customized package can also purchase channels on a
sur mesure 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, 2009, we had 1,084,100 customers for
our digital television service, representing 61.0% of our basic customers and 42.1% 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, 2009, we had 1,484,065 set-top boxes deployed, of which approximately 97% were owned by customers and 3% were leased.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cable Telephony. In January 2005, we launched our cable telephony service using VoIP technology in selected areas of the Province of Quebec, and since
then we have been progressively rolling-out this offering among our other residential and commercial customers in the Province of Quebec. As of December 31, 2009, our cable telephony service is available to 99% of our homes passed. Our cable
telephony service includes both local and long-distance calling, and permits all of our telephony
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | customers, both residential and commercial, to access all service features mandated by CRTC Decision 97-8 and other regulatory decisions and orders, including: enhanced 911 Emergency service;
number portability from and to any local exchange carrier; a message relay service allowing subscribers to communicate with the hearing impaired; and a variety of personal privacy features including universal call tracing. We also offer free basic
listings in local telephone directories, as well as full operator assistance, including: operator-assisted calls; collect and third-party calls; local, national and international directory assistance; person-to-person calls; and busy-line
verification. Finally, we offer as part of our telephony service a host of convenient, optional features, including: name and number caller ID; call waiting with long-distance distinctive ring and audible indicator tone; name and number caller ID on
call waiting; visual indicator of a full voice mail box and audible message waiting indicators; automatic call forwarding; three-way conference calling; automatic recalling; and last incoming call identification and recall. VoIP allows us to deliver
new cutting-edge features, such as voice-mail to e-mail functionality, which allows customers to access their voice-mail via e-mail in the form of audio-file attachments. We offer discounts to our bundled customers, when compared to the sum of the
prices of the individual services provided to these customers. We also offer discounts for a second telephone line subscription. In addition, we offer a Softphone service, a computer-based service providing users with more flexibility when
traveling, the ability to make local calls anywhere in the world, and new communications management capabilities. As of December 31, 2009, we had 1,014,038 subscribers to our cable telephony service, representing a penetration rate of 57.1% of
our basic cable subscribers and 39.4% of our homes passed.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Video-On-Demand. Video-on-demand service enables digital cable customers to rent from a library of movies, documentaries and other programming through
their digital set-top box. Our digital cable customers are able to rent their video-on-demand selections for a period of 24 hours, which they are then able to watch at their convenience with full stop, rewind, fast forward, pause and replay
functionality during that period. Our video-on-demand service is available to 99% of the homes passed by us. We sometimes group movies, events or TV programs available on video-on-demand and offer them on a weekly basis. Regulations prevent us from
offering such blocks of programs for a longer period. We also offer a substantial amount of video-on-demand content free of charge to our digital cable customers, comprised predominantly of previously aired television programs and youth-oriented
programming. In addition, we offer pay television channels on a subscription basis that permits our customers to access and watch most of the movies available on the linear Pay TV channels these clients subscribe to.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pay-per-view (Canal Indigo). On December 1, 2009, Videotron acquired from TVA Group the licence to operate Canal Indigo, a
pay-per-view channel where our digital customers can order live events and movies based on a pre-determined schedule.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other Products and Services. To maintain and enhance our market position, we are focused on increasing penetration of high-definition television and
personal video recorders, as well as other high-value products and services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Wireless Telephony

Our wireless business, which we launched in the third quarter of 2006, continues to experience subscriber growth (reaching
82,813 subscribers as of December 31, 2009). We launched our MVNO-based service to help us understand the dynamics of the wireless business. We lease the network from Rogers Wireless but perform all other operational functions such as billing,
handsets procurement, call centers, order management systems and so on. We therefore have developped the backoffice system infrastructure necessary to efficiently manage our own facilities-based service is already operational.

Following our participation in Canadas spectrum auction for third generation AWS, we are currently pursuing the buildout of a network
infrastructure to become a facilities-based provider offering advanced wireless telephony services. The build-out of our AWS project  a greenfield investment  has gained significant momentum since the acquisition of spectrum in the third
quarter of 2008. As of December 31, 2009, all services and switching platforms have been installed and are operational, and interconnections have been established with our existing fiber network,



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underpinning the delivery of a unique, integrated customer experience. Multi-phase reliability testing of these platforms is currently underway. As of December 31, 2009, we have successfully
entered into several site access agreements or had tower-sharing requests accepted in respect of nearly 60% of all antenna sites required for the AWS launch. Furthermore, the equipment for most of the contracted sites has been installed or is in the
process of being installed.

We anticipate launching our AWS offering in the summer of 2010, when our new High Speed Packet
Access network is expected to be operational. Our objective is to bring consumers and small businesses an offering of advanced wireless telecommunications services that is based on effective, reliable technology, diverse and convergent content and
unambiguous business policies. See  Business Overview  Telecommunications and Operating and Financial Review and Prospects.

Customer Statistics Summary

The following table summarizes our customer
statistics for our analog and digital cable and advanced products and services:



|                                |  |                    |   |  |           |   |  |           |   |  |           |   |  |           |  
|------------------------------- |  | ------------------ | - |  | --------- | - |  | --------- | - |  | --------- | - |  | --------- | -
|                                |  | As of December 31, |  
|                                |  | 2009               |   |  | 2008      |   |  | 2007      |   |  | 2006      |   |  | 2005      |  
|                                |  |                    |   |  |          
|Homes passed(1)                 |  | 2,575,315          |   |  | 2,542,859 |   |  | 2,497,403 |   |  | 2,457,213 |   |  | 2,419,335 |  
|Cable                           |  |                    |   |  |           |   |  |           |   |  |           |   |  |           |  
|Basic customers(2)              |  | 1,777,025          |   |  | 1,715,616 |   |  | 1,638,097 |   |  | 1,572,411 |   |  | 1,506,113 |  
|Penetration(3)                  |  | 69.0               | % |  | 67.5      | % |  | 65.6      | % |  | 64.0      | % |  | 62.3      | %
|Digital customers               |  | 1,084,100          |   |  | 927,322   |   |  | 768,211   |   |  | 623,646   |   |  | 474,629   |  
|Penetration(4)                  |  | 61.0               | % |  | 54.1      | % |  | 46.9      | % |  | 39.7      | % |  | 31.5      | %
|Number of digital set-top boxes |  | 1,484,065          |   |  | 1,209,595 |   |  | 953,393   |   |  | 738,530   |   |  | 537,364   |  
|Dial-up Internet Access         |  |                    |   |  |           |   |  |           |   |  |           |   |  |           |  
|Dial-up customers               |  | 4,988              |   |  | 6,533     |   |  | 9,052     |   |  | 13,426    |   |  | 18,034    |  
|Cable Internet Access           |  |                    |   |  |           |   |  |           |   |  |           |   |  |           |  
|Cable modem customers           |  | 1,170,570          |   |  | 1,063,847 |   |  | 932,989   |   |  | 791,966   |   |  | 637,971   |  
|Penetration(3)                  |  | 45.5               | % |  | 41.8      | % |  | 37.4      | % |  | 32.2      | % |  | 26.4      | %
|Telephony Services              |  |                    |   |  |           |   |  |           |   |  |           |   |  |           |  
|Cable telephony customers       |  | 1,014,038          |   |  | 851,987   |   |  | 636,352   |   |  | 397,860   |   |  | 162,979   |  
|Penetration(3)                  |  | 39.4               | % |  | 33.5      | % |  | 25.5      | % |  | 16.2      | % |  | 6.7       | %
|Wireless telephony lines        |  | 82,813             |   |  | 63,402    |   |  | 45,077    |   |  | 11,826    |   |  |          |  



|(1) | Homes passed means the number of residential premises, such as single dwelling units or multiple dwelling units, and commercial premises passed by the cable
television distribution network in a given cable system service area in which the programming services are offered.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Basic customers are customers who receive basic cable service in either the analog or digital mode.
|--- | ---------------------------------------------------------------------------------------------------

|(3) | Represents customers as a percentage of total homes passed.
|--- | -----------------------------------------------------------

|(4) | Represents customers for the digital service as a percentage of basic customers.
|--- | --------------------------------------------------------------------------------

In the year ended December 31, 2009, we recorded a net increase of 61,409 basic cable customers. During the same period, we also
recorded net additions of: 106,723 subscribers to our cable Internet access service; 156,778 customers to our digital television service, the latter of which includes customers who have upgraded from our analog cable service; and 162,051 customers
to our cable telephony services. In 2009, we activated 19,411 lines on our mobile wireless telephony services.

Business
Telecommunications Services

Our Business Solution segment provides a wide range of network solutions, Internet services,
application/server hosting, local and long-distance telephone service, and studio-quality audio-video services to large and medium-sized businesses, ISPs, application service providers, broadcasters and carriers in both Quebec and Ontario.



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Video Stores

Through Le SuperClub Videotron, we are the franchisor of the largest chain of video and video game rental stores in Quebec and among the
largest of such chains in Canada, with a total of 236 retail locations. With 157 of these retail locations offering our suite of services and products, Le SuperClub Videotron is both a showcase and a valuable and cost-effective distribution network
for Videotrons growing array of advanced products and services, such as cable Internet access, digital television and mobile wireless telephony.

Pricing of our Products and Services

Our revenues are derived
principally from the monthly fees our customers pay for cable services. The rates we charge vary based on the market served and the level of service selected. Rates are usually adjusted annually. We also offer discounts to our bundled customers,
when compared to the sum of the prices of the individual services provided to these customers. As of December 31, 2009, the average monthly fees for basic and extended basic service were $25.43 and $39.56, respectively, and the average monthly
fees for basic and extended basic digital service were $14.99 and $43.67, respectively. A one-time installation fee, which may be waived in part during certain promotional periods, is charged to new customers. Monthly fees for rented equipment, such
as set-top boxes, are also charged to customers.

Although our service offerings vary by market, because of differences in the
bandwidth capacity of the cable systems in each of our markets and competitive and other factors, our services are typically offered at monthly price ranges, which reflect discounts for bundled service offerings, as follows:



|                                     |  |                
|------------------------------------ |  | ---------------
|Service                              |  | Price Range    
|                                     | 
|Basic analog cable                   |  | $15.07  $30.88
|Extended basic analog cable          |  | $29.50  $43.19
|Basic digital cable                  |  | $13.98  $15.98
|Extended basic digital cable         |  | $28.98  $77.98
|Pay-television                       |  | $2.00  $29.99 
|Pay-per-view (per movie or event)    |  | $4.49  $59.99 
|Video-on-demand (per movie or event) |  | $0.99  $29.99 
|Dial-up Internet access              |  | $9.95  $19.95 
|Cable Internet access                |  | $27.95  $89.95
|Cable telephony                      |  | $16.95  $22.95
|Mobile wireless telephony            |  | $22.65  $78.35

Our Network Technology

As of December 31, 2009, our cable systems consisted of 21,394 km of fiber
optic cable and 37,640 km of coaxial cable, passing approximately 2.6 million homes and serving approximately 2.0 million customers. Our network is the largest broadband network in Quebec covering approximately 80% of cable homes passed
and, according to our estimates, more than 80% of the businesses located in the major metropolitan areas of Quebec. Our extensive network supports direct connectivity with networks in Ontario, Eastern Quebec, the Maritimes and the United States.

The following table summarizes the current technological state of our systems, based on the percentage of our customers who
have access to the bandwidths listed below and two-way (or bi-directional) capability:



|                  |  |                  |   |  |                |   |  |                |   |  |                   |  
|----------------- |  | ---------------- | - |  | -------------- | - |  | -------------- | - |  | ----------------- | -
|                  |  | 450 MHz andUnder |   |  | 480 to 625 MHz |   |  | 750 to 860 MHz |   |  | Two-WayCapability |  
|                  |  |                  |   | 
|December 31, 2005 |  | 2                | % |  | 23             | % |  | 75             | % |  | 98                | %
|December 31, 2006 |  | 2                | % |  | 23             | % |  | 75             | % |  | 98                | %
|December 31, 2007 |  | 1                | % |  | 2              | % |  | 97             | % |  | 99                | %
|December 31, 2008 |  | 1                | % |  | 0              | % |  | 99             | % |  | 99                | %
|December 31, 2009 |  | 1                | % |  | 0              | % |  | 99             | % |  | 99                | %



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Our cable television networks are comprised of four distinct parts including signal
acquisition networks, main headends, distribution networks and subscriber drops. The signal acquisition network picks up a wide variety of television, radio and multimedia signals. These signals and services originate from either a local source or
content provider or are picked up from distant sites chosen for satellite or over-the-air reception quality and transmitted to the main headends by way of over-the-air links, coaxial links or fiber optic relay systems. Each main headend processes,
modulates, scrambles and combines the signals in order to distribute them throughout the network. Each main headend is connected to the primary headend in order to receive the digital MPEG2 signals and the IP Backbone for the Internet services. The
first stage of this distribution consists of a fiber optic link which distributes the signals to distribution or secondary headends. After that, the signal uses the hybrid fiber coaxial cable network made of wide-band optical nodes, amplifiers and
coaxial cables capable of serving up to 30 km in radius from the distribution or secondary headends to the subscriber drops. The subscriber drop brings the signal into the customers television set directly or, depending on the area or the
services selected, through various types of customer equipment including set top boxes and cable modems.

We have adopted the
hybrid fiber coaxial (HFC) network architecture as the standard for our ongoing system upgrades. Hybrid fiber coaxial network architecture combines the use of fiber optic cable with coaxial cable. Fiber optic cable has excellent broadband frequency
characteristics, noise immunity and physical durability and can carry hundreds of video and data channels over extended distances. Coaxial cable is less expensive and requires greater signal amplification in order to obtain the desired transmission
levels for delivering channels. In most systems, we deliver our signals via fiber optic cable from the headend to a group of nodes to the homes passed served by that node. Our system design provides for cells of approximately 500 homes each to be
served by fiber optic cable. To allow for this configuration, secondary headends were put into operation in the greater Montreal area and in the greater Quebec City area. Remote secondary headends must also be connected with fiber optic links. The
loop structure of the two-way networks brings reliability through redundancy, the cell size improves flexibility and capacity, while the reduced number of amplifiers separating the home from the headend improves signal quality and reliability. Our
network design provides us with significant flexibility to offer customized programming to individual cells of approximately 500 homes, which is critical to our advanced services, such as video-on-demand, Switched Digital Video Broadcast and the
continued expansion of our interactive services. Our network design also allows for further segmentation from 500 to 250 or 125 homes where cable, Internet and telephony service penetration requires higher network capacity. We also believe that our
network design provides high capacity and superior signal quality that will enable us to provide to our current and future customers new advanced products and services in addition to those currently offered by us.

Our strategy of maintaining a leadership position in respect of the suite of products and services that we offer and launching new products
and services requires investments in our network to support growth in our customer base and increases in bandwidth requirements. Approximately 99% of our network in Quebec has been upgraded to a bandwidth of 750 MHz or greater. Also, in light of the
greater availability of HDTV programming, the ever increasing speed of Internet access and increasing demand for our cable telephony service, further investment in the network will be required.

Following our participation in Canadas spectrum auction for third generation AWS, we are currently pursuing the buildout of a network
infrastructure to become a facilities-based provider offering advanced wireless telephony services. The build-out of our AWS project  a greenfield investment  has gained significant momentum since the acquisition of spectrum in the third
quarter of 2008. Videotron anticipates launching its AWS offering in the summer of 2010, when its new High Speed Packet Access network is expected to be operational.

Marketing and Customer Care

Our long term marketing objective is to
increase our cash flow through deeper market penetration of our services, development of new services and continued growth in revenue per customer. We believe that customers will come to view their cable connection as the best distribution channel
to the home for a multitude of services. To achieve this objective, we are pursuing the following strategies:



| |  |  | develop attractive bundle offers to encourage our customers to subscribe to two or more products, which increases ARPU and customer retention as well
as increasing our operating margin;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continue to rapidly deploy advanced products and services such as cable Internet access, digital television, cable telephony and mobile wireless
telephony services;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | design product offerings that provide greater opportunity for customer entertainment and information choices;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | target marketing opportunities based on demographic data and past purchasing behavior;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | develop targeted marketing programs to attract former customers, households that have never subscribed to our services and customers of alternative or
competitive services;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | enhance the relationship between customer service representatives and our customers by training and motivating customer service representatives to
promote advanced products and services;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | leverage the retail presence of Le SuperClub Videotron and third-party commercial retailers;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | cross-promote the wide variety of content and services offered within the Quebecor Media group (including, for example, the content of TVA Group
productions and the 1-900 service for audience voting during reality television shows popular in Quebec) in order to distribute our cable, data transmission, cable telephony and mobile wireless telephony services to our existing and future
customers;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | introduce new value-added packages of products and services, which we believe increases ARPU and improves customer retention; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | leverage our business market, using our 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We continue to invest time, effort
and financial resources in marketing new and existing services. To increase both customer penetration and the number of services used by our customers, we use coordinated marketing techniques, including door-to-door solicitation, telemarketing,
media advertising, e-marketing and direct mail solicitation.

Maximizing customer satisfaction is a key element of our
business strategy. In support of our commitment to customer satisfaction, we provide a 24-hour customer service hotline seven days a week for nearly all of our systems, in addition to our web-based customer service capabilities. All of our customer
service representatives and technical support staff are trained to assist our customers with respect to all products and services we offer, which in turn allows our customers to be served more efficiently and seamlessly. Our customer care
representatives continue to receive extensive training to develop customer contact skills and product knowledge, which are key contributors to high rates of customer retention as well as to selling additional products and services and higher levels
of service to our customers. To assist us in our marketing efforts, we utilize surveys, focus groups and other research tools as part of our efforts to determine and proactively respond to customer needs.

Programming

We believe that offering a wide variety of conveniently scheduled programming is an important factor in influencing a customers decision to subscribe to and retain our cable services. We devote resources to obtaining access to a wide
range of programming that we believe will appeal to both existing and potential customers. We rely on extensive market research, customer demographics and local programming preferences to determine our channel and package offerings. The CRTC
currently regulates the distribution of foreign content in Canada and, as a result, we are limited in our ability to provide such programming to our customers. We obtain basic and premium programming from a number of suppliers, including TVA Group.

Our programming contracts generally provide for a fixed term of up to seven years, and are subject to negotiated renewal.
Programming tends to be made available to us for a flat fee per customer. Our overall programming costs have increased in recent years and may continue to increase due to factors including, but not limited to, additional programming being provided
to customers as a result of system rebuilds that increase channel capacity, increased costs to produce or purchase specialty programming and inflationary or negotiated annual increases.



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Competition

We operate in a competitive business environment in the areas of price, product and service offerings and service reliability. We compete
with other providers of television signals and other sources of home entertainment. In addition, as we expand into additional services such as Internet, cable telephony and mobile wireless telephony services, we may face additional competition. Our
principal competitors include over-the-air television and providers of other entertainment, DBS, DSL, private cable, other cable distribution, ILECs and wireless distribution. We also face competition from illegal providers of cable television
services and illegal access to both foreign DBS (also called grey market piracy) as well as from signal theft of DBS that enables customers to access programming services from U.S. and Canadian DBS services without paying any fee (also called black
market piracy).



| |  |  | 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 digital 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. 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 DSL technology provides customers with Internet access at data transmission speeds greater than that available over conventional
telephone lines. DSL service is comparable to cable-modem Internet access over cable systems. We also face competition from other providers of DSL service.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | VDSL. The penetration of IPTV has increased steadily since the CRTC and Industry Canada authorized VDSL services. VDSL technology increases the
available capacity of DSL lines, thereby allowing the distribution of digital video. Multi-system operators are now facing competition from ILECs, which have been granted licenses to launch video distribution services using this technology, which
operates over copper phone lines. In Canada, VDSL is offered in urban areas by Bell Aliant in Atlantic Canada, SaskTel in Saskatchewan, Manitoba Telecom Services Inc. in Manitoba, TELUS Corporation in Alberta and British Columbia, Bell Internet in
Ontario and Bell TVs service in some large multi-residential buildings in certain urban centres, and, in our markets ILECs have been installing this new technology. The transmission capabilities of VDSL will be significantly boosted with the
deployment of technologies such as vectoring (the reduction or elimination of the effects of far-end crosstalk) and twisted pair bonding (use of additional twisted pairs to increase data carriage capacity). Certain ILEC have already started
replacing many of their main feeds with fibre optic cable and positioning VDSL transceivers, a VDSL gateway, in larger multiple-dwelling units, in order to overcome the initial distance limitations of VDSL. With this added capacity, along with the
evolution of compression technology, VDSL-2 will offer significant opportunities for services and increase its competitive threat against other multi-system operators.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Other Cable Distribution. Currently, a cable operator offering television distribution and providing cable-modem Internet access service is serving the
greater Montreal area. This cable operator is owned by the regional ILEC.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Wireless Distribution. Cable television systems also compete with wireless program distribution services such as multi channel MDS. This technology
uses microwave links to transmit signals from multiple transmission sites to line-of-sight antennas located within the customers premises.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Grey and Black Market DBS Providers. Cable and other distributors of television signals continue to face competition from the use of access codes and
equipment that enable the unauthorized decoding of encrypted satellite signals, from unauthorized access to our analog and digital cable signals (black market) and from the reception of foreign signals through subscriptions to foreign satellite
television providers that are not lawful distributors in Canada (grey market).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Telephony Service. Our cable telephony service competes against other telephone companies, including both the incumbent telephone service provider in
Quebec, which used to control a significant portion of the telephony market in Quebec, as well as other VoIP telephony service providers and mobile wireless telephone service providers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mobile wireless telephony services. Our current MVNO-based mobile wireless telephony service competes against a mix of competitors, some of them being
active in all the products we offer, while others only offer mobile wireless telephony services in our market. As a facilities based wireless provider, we will compete primarily with established incumbent WSPs and MVNOs, and could in the future
compete with other new entrant companies, including other MVNOs. In addition, users of wireless voice and data systems may find their communications needs satisfied by other current or developing technologies, such as Wi-Fi, WiMax,
hotspots or trunk radio systems, which have the technical capability to handle wireless data communication and mobile telephone calls. Our wireless business will also compete with rivals for dealers and retail distribution outlets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other ISPs. In the Internet access business, cable operators compete against other ISPs 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 ISPs at mandated rates.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

News Media

Our newspaper publishing operations, which we operate through our Sun Media and Osprey Media operating subsidiaries, are the largest newspaper publisher in Canada based on total paid and unpaid circulation. With a 19.2% market share, Sun
Media itself is also the second largest newspaper publisher in Canada in terms of weekly paid circulation, according to statistics published by the CNA, for the average of the six months ended March 31, 2008 and September 31, 2008, which
is the most recent available data. Our News Media segment publishes 36 paid-circulation dailies and 198 community newspapers, magazines, weekly buyers guides, farm publications and other specialty publications. As of December 31, 2009, the
combined weekly circulation of our News Media segments paid newspapers was approximately 14.8 million copies, according to internal statistics.

Sun Media publishes 185 publications across Canada, both in urban markets, including nine of the top ten urban markets
in Canada, and in community markets. Sun Media publishes 17 paid daily newspapers, and according to the NADbank®
Study referred to below in section  Newspaper Operations  The Urban Daily Group  Paid daily newspapers of this annual report, each of Sun Medias eight urban daily newspapers ranks either first or second in its
market in terms of weekly readership. Sun Media also publishes 162 weekly newspapers, shopping guides and agricultural and other specialty publications, as well as six free daily commuter publications: 24 Hours in Toronto, Vancouver, Ottawa, Calgary
and Edmonton and 24 Heures in Montreal.

Osprey Media publishes local daily and non-daily newspapers in Ontario, together with
other print products including magazines. Osprey Medias publications are comprised of 19 daily newspapers and 30 non-daily newspapers, as well as numerous specialty publications, including shopping guides. The vast majority of Osprey
Medias revenues are



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generated from its newspapers. Osprey Medias publications have an established presence on the Internet and offer classified and local advertising, as well as other services for local
advertisers and readers. Osprey Media also engages in the distribution of inserts and flyers and commercial printing for third parties, and operates several trade shows.

Since the fourth quarter of 2008, Quebecor Medias News Media segment has included Internet portals operations consisting in e-commerce, information and communication services. Canoe operates the
Internet portal network of the same name, which logs over 8.9 million unique visitors per month in Canada, including more than 4.0 million in Quebec (according to ComScore Media Metrix figures for December 2009).

Our News Media segment is also engaged in the distribution of newspapers and magazines through Sun Medias Messageries Dynamiques
business, and it offers commercial printing and related services to other publishers through its national network of printing and production facilities. In June 2009, we have announced the creation of Quebecor Media Network, a new flyer-printing and
distribution division in Quebec. In September and October 2009, Sun Media entered into joint distribution agreements with Canwest Publishing Inc. (Canwest) and the National Post Company. Under these agreements, each party assumes
the home delivery and single copy delivery functions for some of the other partys publications in the respective markets of those publications. These distribution agreements will allow the companies to leverage their existing carrier forces
and improve operating income. Finally, through our Quebecor MediaPages division, launched in November 2007, our News Media segment also conducts a combination of print and online directory publishing operations.

Quebecor Media owns 100% of the voting and equity interests in each of Sun Media, Osprey Media and Canoe.

For the year ended December 31, 2009, our News Media operations generated revenues of $1.0 billion and operating income of $199.5
million, with 75.0% of these revenues derived from advertising, 17.9% from circulation, and 7.1% from commercial printing and other revenues. For the year ended December 31, 2008, our News Media operations generated revenues of $1.18 billion
and operating income of $227.1 million, with 78.6% of these revenues from advertising, 15.9% from circulation, and 5.5% from commercial printing and other revenues.

Canadian Newspaper Publishing Industry Overview

Newspaper
publishing is the oldest segment of the advertising based media industry in Canada. The industry is mature and is dominated by a small number of major newspaper publishers largely segmented in different markets and geographic areas, of which Sun
Media and Osprey Media combined are the largest, with a combined average weekly circulation (paid and unpaid) of approximately 14.8 million copies, according to internal statistics. According to the CNAs circulation data for the average
of the six months ended March 31, 2008 and September 31, 2008 (the CNAs Circulation Data), the most recent data available, Sun Medias and Osprey Medias combined 24.6% market share of paid weekly
circulation for Canadian daily newspapers is exceeded only by CanWest Media Inc., with a 30.3% market share, and is followed by Torstar Corporation (11.9%), Power Corporation (11.0%), and CTVglobemedia Inc. (7.1 %).

According to the CNA, there are approximately 98 paid circulation daily newspapers, numerous paid non-daily publications and
free-distribution daily and non-daily publications. Of the 98 paid circulation daily newspapers, 24 have average weekday circulation in excess of 50,000 copies. These include 18 English-language metropolitan newspapers, four French language daily
newspapers and two national daily newspapers. In addition to daily newspapers, both paid and unpaid non-daily newspapers are distributed nationally and locally across Canada. Newspaper companies may also produce and distribute niche publications
that target specific readers with customized editorial content and advertising. The newspaper market consists primarily of two segments, broadsheet and tabloid newspapers, which vary in format. With the exception of the broadsheet the London Free
Press, all of Sun Medias urban paid daily newspapers are tabloids.

Newspaper publishers derive revenue primarily from
the sale of retail, classified, national and insert advertising, and to a lesser extent through paid subscriptions and single copy sales of newspapers. The mature nature of the Canadian newspaper industry has resulted in limited growth, if any, for
traditional newspaper publishers, for many years, and the newspaper industry is now undergoing fundamental changes, including the growing availability of free access to media, shifting readership habits, digital transferability, the advent of
real-time information and secular changes in the advertising market. As a result of these changes in the market, competition in the newspaper industry now comes not only from other newspapers (including other national, metropolitan (both paid and
free) and suburban newspapers), magazines and more



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traditional media platforms, such as broadcasters, cable systems and networks, satellite television and radio, direct marketing and solo and shared mail programs, but also from digital media
technologies, which have introduced a wide variety of media distribution platforms (including, most significantly, the Internet and distribution over wireless devices) to consumers and advertisers. As a result, the newspapers industry is facing
challenges to retain its revenues and circulation/readership, as advertisers and readers become increasingly fragmented in the increasingly populated media landscape.

Advertising and Circulation

Advertising revenue is the largest
source of revenue for our newspaper operations, representing 75.0% of our newspaper operations total revenues in 2009. Advertising rates are based upon the size of the market in which each newspaper operates, circulation, readership,
demographic composition of the market and the availability of alternative advertising media. Our strategy is to maximize advertising revenue by providing advertisers with a range of pricing and marketing alternatives to better enable them to reach
their target audience. Our newspapers offer a variety of advertising alternatives, including full-run advertisements in regular sections of the newspaper targeted to different readers (including automotive, real estate and travel), geographically
targeted inserts, special interest pullout sections and advertising supplements.

The principal categories of advertising
revenues in our newspaper operations are classified, retail and national advertising. Classified advertising has traditionally accounted for the largest share of our advertising revenues in our urban daily newspapers for the year ended
December 31, 2009 (43.8% for the year) followed by retail advertising (35.0% for the year) and national advertising (17.9% for the year). Classified advertising is made up of four principal sectors: automotive, private party, recruitment and
real estate. Automotive advertising is the largest classified advertising category, representing approximately 52.3% of all of our classified advertising, in terms of revenue, for the year ended December 31, 2009. Retail advertising is display
advertising principally placed by local businesses and organizations. Most of our retail advertisers are department stores, electronics stores and furniture stores. National advertising is display advertising primarily from advertisers promoting
products or services on a national basis. Our national advertisers are principally in the retail automotive sector.

In the
smaller community papers, substantially all of the advertising revenues are derived from local retailers and classified advertisers. These newspapers publish advertising supplements with specialized themes such as agriculture, tourism, home
improvement and gardening to encourage advertisers to purchase additional linage in these special editions.

We believe our
advertising revenues are diversified not only by category (classified, retail and national), but also by customer and geography. For the year ended December 31, 2009, our top ten national advertisers accounted for approximately 7.5% of the
total advertising revenue and approximately 5.6% of the total revenue of our News Media segment. In addition, because we sell advertising in numerous regional markets in Canada, the impact of a decline in any one market can be offset by strength in
other markets.

Circulation sales are our newspaper operations second-largest source of revenue and represented 17.9% of
total revenues of our News Media segment in 2009. In the large urban markets, newspapers are available through newspaper boxes and retail outlets Monday through Sunday, except London Free Press, which discontinued on December 21, 2008
the publication of the Sunday edition of its newspaper. We offer daily home delivery in each of our newspaper markets. We derive our circulation revenues from single copy sales and subscription sales. Our strategy is to increase circulation revenue
by adding newspaper boxes and point-of-sale locations, as well as expanding home delivery. In order to increase readership, we are targeting editorial content to identified groups through the introduction of niche products, and in recent years we
have launched e-editions of a number of our newspapers.

In order to respond to the ongoing transformation of the newspaper
industry, which has affected advertising revenues and circulation levels in recent years, and to make adjustments in respect of the deterioration of economic conditions that have affected many of our advertisers in the past months (such as in the
automotive sector), we are undertaking initiatives to leverage synergies and convergence among our subsidiaries, including those which are part of our newspaper operations. These initiatives include the integration under a unified executive
leadership of Sun Medias operations and Canoes operations, as well as the launch of e-editions of a number of Sun Medias newspapers. This latter initiative provides our advertisers with added-value and exposure on the Internet
platform, which we hope will allow us to retain and secure certain advertising revenues. Furthermore, we have transferred the printing of several of our publications to two state-of-the-art facilities owned by Quebecor Media Printing (our
wholly-owned subsidiary), we have created Quebecor Media Network, and our News Media business is sharing editorial content with QMI News Agency.



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Newspaper Operations

We operate our newspaper business through two principal subsidiaries, namely Sun Media and Osprey Media. We operate in urban and community
markets through two groups of products:



| |  |  | the Urban Daily Group; and
| | - |  | --------------------------



| |  |  | the Community Newspaper Group.
| | - |  | ------------------------------

A majority of Sun Medias newspapers in the Community Newspaper Group are clustered around our eight paid urban dailies in the Urban Daily Group. Sun Media has strategically established its community
newspapers near regional printing facilities in suburban and rural markets across Canada. This geographic clustering enables us to realize operating efficiencies and economic synergies through sharing of management, production, printing, and
distribution, as well as accounting and human resources functions.

Through our wholly-owned subsidiary Quebecor Media
Printing, we operate two printing state-of-the-art facilities located in Islington, Ontario, and Mirabel, Quebec. 24 Hours in Toronto, the Toronto Sun, and a number of Ontario community publications are printed in Islington, Ontario.
The Journal de Montréal and 24 Heures (Montreal), as well as a number of our Quebec community publications are printed in Mirabel, Quebec.

The Urban Daily Group

Sun Medias Urban Daily Group is comprised of
eight paid daily newspapers, six free daily commuter publications and three free weekly publications.

Paid daily
newspapers

Sun Medias paid daily newspapers are published seven days a week and are all tabloids with the
exception of the broadsheet the London Free Press which, in addition, is no longer published on Sundays. These are mass circulation newspapers that provide succinct and complete news coverage with an emphasis on local news, sports and
entertainment. The tabloid format makes extensive use of color, photographs and graphics. Each newspaper contains inserts that feature subjects of interest such as fashion, lifestyle and special sections. In addition, Sun Medias Urban Daily
Group includes a distribution business, Messageries Dynamiques.

As of December 31, 2009, on a combined weekly basis, the
eight paid daily newspapers in Sun Medias Urban Daily Group have a circulation of approximately 5.6 million copies, according to internal statistics. These newspapers hold either the number one or number two position in each of their
respective markets in terms of weekly readership.

Paid circulation is defined as average sales of a
newspaper per issue. Readership (as opposed to paid circulation) is an estimate of the number of people who read or looked into an average issue of a newspaper and is measured by an independent survey conducted by NADbank Inc. According to the
NADbank® 2008 Study (the NADbank® Study), the most recent available survey, readership estimates are based upon the number of people responding to the Newspaper Audience Databank survey
circulated by NADbank Inc. who report having read or looked into one or more issues of a given newspaper during a given period equal to the publication interval of the newspaper.



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The following table lists Sun Medias paid daily newspapers and their respective
readership in 2008 as well as their market position by weekly readership during that period:



|                         |  |                         |  |                                 |     |  |           |  |  
|------------------------ |  | ----------------------- |  | ------------------------------- | --- |  | --------- |  | -
|                         |  | 2008 AVERAGE READERSHIP |  | MARKET POSITION BYREADERSHIP(1)
|NEWSPAPER                |  | SATURDAY                |  | SUNDAY                          |     |  | MON-FRI   | 
|Journal de Montréal      |  | 604,600                 |  | 376,200                         |     |  | 578,800   |  | 1
|Journal de Québec        |  | 166,100                 |  | 119,700                         |     |  | 167,400   |  | 1
|Toronto Sun              |  | 510,600                 |  | 686,900                         |     |  | 666,600   |  | 2
|London Free Press        |  | 170,700                 |  | 111,600                         | (2) |  | 167,000   |  | 1
|Ottawa Sun               |  | 72,700                  |  | 73,700                          |     |  | 119,200   |  | 2
|Winnipeg Sun             |  | 88,300                  |  | 87,000                          |     |  | 109,600   |  | 2
|Edmonton Sun             |  | 131,800                 |  | 153,600                         |     |  | 149,600   |  | 2
|Calgary Sun              |  | 126,000                 |  | 163,300                         |     |  | 161,000   |  | 2
|                         |  |                         |  |                                 |     |  |           |  |  
|                         |  |                         |  |                                
|Total Average Readership |  | 1,870,800               |  | 1,772,000                       |     |  | 2,119,200 |  |  
|                         |  |                         |  |                                 |     |  |           |  |  



|(1) | Based on paid weekly readership data published by the NADbank® Study.
|--- | ---------------------------------------------------------------------

|(2) | The Sunday edition of the London Free Press was discontinued after December 21, 2008.
|--- | -------------------------------------------------------------------------------------

Journal de Montréal.The Journal de Montréalis published seven days a week and is
distributed by Messageries Dynamiques, Sun Medias division that specializes in the distribution of publications. According to the CNAs Circulation Data, the Journal de Montréalranks second in paid circulation among
non-national dailies in Canada and first among French-language dailies in North America. The Journal de Montréalis the number one newspaper in its market in terms of weekly readership according to the NADbank® Study. The main competitors of the Journal de Montréalare La Presseand The Montreal
Gazette.

The following table presents the average daily circulation of the Journal de Montréalfor the
periods indicated:



|                    |  |                        |  |         |  |        
|------------------- |  | ---------------------- |  | ------- |  | -------
|                    |  | YEAR ENDED DECEMBER 31
|                    |  | 2009                   |  | 2008    |  | 2007   
|                    |  |                        | 
|Journal de Montréal |  |                        |  |         |  |        
|Saturday            |  | 274,700                |  | 302,500 |  | 303,700
|Sunday              |  | 247,900                |  | 257,600 |  | 260,600
|Monday to Friday    |  | 250,300                |  | 260,700 |  | 262,900



Source: Internal Statistics

Journal de Québec.The Journal de Québec is published seven days a week and is distributed by Messageries Dynamiques. The Journal de Québecis the
number one newspaper in its market in terms of weekly readership according to the NADbank® Study. The main
competitor of the Journal de Québecis Le Soleil.

The following table presents the average daily paid
circulation of the Journal de Québecfor the periods indicated:



|                  |  |                        |  |         |  |        
|----------------- |  | ---------------------- |  | ------- |  | -------
|                  |  | YEAR ENDED DECEMBER 31
|                  |  | 2009                   |  | 2008    |  | 2007   
|                  |  |                        | 
|Journal de Québec |  |                        |  |         |  |        
|Saturday          |  | 111,500                |  | 124,300 |  | 125,200
|Sunday            |  | 98,200                 |  | 104,100 |  | 107,000
|Monday to Friday  |  | 97,200                 |  | 103,100 |  | 104,300



Source: Internal Statistics

Toronto Sun.The Toronto Sun is published seven days a week throughout the greater metropolitan Toronto area. The Toronto Sunis the number two non-national daily newspaper in
its market in terms of weekly readership according to the NADbank® Study.

The Toronto newspaper market is very competitive. The Toronto Suncompetes with Canadas largest newspaper, the Toronto Starand to a lesser extent with the Globe & Mail and the National Post, which are national newspapers. As a



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tabloid newspaper, the Toronto Sun has a unique format compared to these broadsheet competitors. The competitiveness of the Toronto newspaper market is further increased by several free
publications and niche publications relating to, for example, entertainment and television.

The following table presents the
average daily circulation of the Toronto Sunfor the periods indicated:



|                 |  |                        |  |         |  |        
|---------------- |  | ---------------------- |  | ------- |  | -------
|                 |  | YEAR ENDED DECEMBER 31
|                 |  | 2009                   |  | 2008    |  | 2007   
|Toronto Sun      |  |                        |  |         |  |        
|Saturday         |  | 145,700                |  | 159,200 |  | 160,800
|Sunday           |  | 266,400                |  | 322,300 |  | 332,500
|Monday to Friday |  | 171,400                |  | 187,200 |  | 188,900



Source: Internal Statistics

London Free Press.The London Free Press, one of Canadas oldest daily newspapers, emphasizes national and local news, sports and entertainment and is distributed throughout the London area. It is the only local
daily newspaper in its market and is published six days a week, Monday through Saturday. On December 21, 2008, the London Free Pressdiscontinued the publication of the Sunday edition of its newspaper.

The following table reflects the average daily circulation of the London Free Press for the periods indicated:



|                  |  |                        |  |        |  |       
|----------------- |  | ---------------------- |  | ------ |  | ------
|                  |  | YEAR ENDED DECEMBER 31
|                  |  | 2009                   |  | 2008   |  | 2007  
|London Free Press |  |                        |  |        |  |       
|Saturday          |  | 87,000                 |  | 92,000 |  | 96,400
|Monday to Friday  |  | 74,900                 |  | 79,100 |  | 81,600



Source: Internal Statistics

The
London Free Press also publishes the London Pennysaver, a free weekly community shopping guide with circulation of approximately 148,900 as of December 31, 2009, according to internal statistics.

Ottawa Sun.The Ottawa Sun is published seven days a week and is distributed throughout the Ottawa region. The
Ottawa Sun is the number two newspaper in its market in terms of weekly readership according to the NADbank® Study. It competes daily with the English-language broadsheet, the Ottawa Citizen, and also with the French language
paper, Le Droit.

The following table reflects the average daily paid circulation of the Ottawa Sun for the
periods indicated:



|                 |  |                        |  |        |  |       
|---------------- |  | ---------------------- |  | ------ |  | ------
|                 |  | YEAR ENDED DECEMBER 31
|                 |  | 2009                   |  | 2008   |  | 2007  
|Ottawa Sun       |  |                        |  |        |  |       
|Saturday         |  | 39,000                 |  | 40,700 |  | 42,900
|Sunday           |  | 42,900                 |  | 45,500 |  | 49,700
|Monday to Friday |  | 46,600                 |  | 48,400 |  | 49,800



Source: Internal Statistics

The
Ottawa Sun also publishes the Ottawa Pennysaver, a free weekly community shopping guide with circulation of approximately 168,700 as of December 31, 2009, according to internal statistics.



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Winnipeg Sun.The Winnipeg Sun is published seven days a week and
serves the metropolitan Winnipeg area. The Winnipeg Sun is the number two newspaper in its market in terms of weekly readership according to the NADbank® Study, and it competes with the Winnipeg Free Press.

The following table reflects the average daily circulation of the Winnipeg Sun for the periods indicated:



|                 |  |                        |  |        |  |       
|---------------- |  | ---------------------- |  | ------ |  | ------
|                 |  | YEAR ENDED DECEMBER 31
|                 |  | 2009                   |  | 2008   |  | 2007  
|Winnipeg Sun     |  |                        |  |        |  |       
|Saturday         |  | 48,500                 |  | 37,000 |  | 38,000
|Sunday           |  | 45,500                 |  | 44,300 |  | 46,000
|Monday to Friday |  | 50,000                 |  | 38,500 |  | 39,000



Source: Internal Statistics

Edmonton Sun.The Edmonton Sun is published seven days a week and is distributed throughout Edmonton. The Edmonton Sun is the number two newspaper in its market in terms of weekly readership according to the
NADbank® Study, and it competes with Edmontons broadsheet daily, the Edmonton Journal.

The following table
presents the average daily circulation of the Edmonton Sun for the periods indicated:



|                 |  |                        |  |        |  |       
|---------------- |  | ---------------------- |  | ------ |  | ------
|                 |  | YEAR ENDED DECEMBER 31
|                 |  | 2009                   |  | 2008   |  | 2007  
|Edmonton Sun     |  |                        |  |        |  |       
|Saturday         |  | 50,500                 |  | 58,000 |  | 59,100
|Sunday           |  | 67,300                 |  | 77,800 |  | 83,100
|Monday to Friday |  | 56,200                 |  | 62,300 |  | 63,900



Source: Internal Statistics

Calgary Sun.The Calgary Sun is published seven days a week and is distributed throughout Calgary. The Calgary Sun is the number two newspaper in its market in terms of weekly readership according to the
NADbank® Study, and it competes with Calgarys broadsheet daily, the Calgary Herald.

The following table
presents the average daily circulation of the Calgary Sun for the periods indicated:



|                 |  |                        |  |        |  |       
|---------------- |  | ---------------------- |  | ------ |  | ------
|                 |  | YEAR ENDED DECEMBER 31
|                 |  | 2009                   |  | 2008   |  | 2007  
|Calgary Sun      |  |                        |  |        |  |       
|Saturday         |  | 48,300                 |  | 51,600 |  | 55,400
|Sunday           |  | 67,900                 |  | 74,900 |  | 82,100
|Monday to Friday |  | 47,300                 |  | 55,700 |  | 57,000



Source: Internal Statistics

Free daily newspapers

Sun Media publishes free daily commuter publications in six urban markets
including Toronto, Montreal, Vancouver, Ottawa, Calgary, and Edmonton. The editorial content of these free daily commuter publications concentrates on the greater metropolitan area of each of these cities, respectively.



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The following table reflects the average weekday circulation of our free daily commuter
publications:



|                                 |  |                         |  |         |  |        
|-------------------------------- |  | ----------------------- |  | ------- |  | -------
|                                 |  | YEAR ENDED DECEMBER 31,
|Free Daily Commuter Publications |  | 2009                    |  | 2008    |  | 2007   
|24 Hours - Toronto               |  | 296,900                 |  | 266,300 |  | 257,000
|24 Heures - Montreal             |  | 148,600                 |  | 145,000 |  | 144,900
|24 Hours - Vancouver             |  | 120,700                 |  | 138,900 |  | 137,100
|24 Hours - Calgary               |  | 40,300                  |  | 46,600  |  | 49,600 
|24 Hours - Edmonton              |  | 36,100                  |  | 45,500  |  | 47,600 
|24 Hours - Ottawa                |  | 32,800                  |  | 50,700  |  | 33,500 



Source: Internal Statistics

Competition

The newspaper industry is seeing secular changes, including the growing availability of
free access to media, shifting readership habits, digital transferability, the advent of real-time information and secular changes in the advertising market, all of which affect the nature of competition in the newspaper industry. Competition
increasingly comes not only from other newspapers (including other national, metropolitan (both paid and free) and suburban newspapers), magazines and more traditional media platforms, such as broadcasters, cable systems and networks, satellite
television and radio, direct marketing and solo and shared mail programs, but also from digital media technologies, which have introduced a wide variety of media distribution platforms (including, most significantly, the Internet, digital readers
(e-readers) and distribution over wireless devices) to consumers and advertisers.

The rate of development of opportunities
in, and competition from, these digital media services, including those related to the Internet, is increasing. Through internal development programs, joint initiatives among Quebecor Media and its subsidiaries, and acquisitions, our efforts to
explore new opportunities in news, information and communications businesses have expanded and will continue to do so. For instance, in order to leverage synergies and convergence among our subsidiaries, we have integrated Canoes operations
with Sun Medias operations under a unified executive leadership, we have launched e-editions of a number of Sun Medias newspapers, we have transferred the printing of several of our publications to two state-of-the-art facilities owned
by Quebecor Media Printing (our wholly-owned subsidiary), we have created Quebecor Media Network, and our News Media Business is sharing editorial content with QMI News Agency.

Through the Journal de Montréaland the Journal de Québec, Sun Media has established market leading positions in
Quebecs two main urban markets, Montreal and Quebec City. The Journal de Montréal ranks second in circulation after the Toronto Staramong non-national Canadian dailies and is first among French-language dailies in North
America. The Journal de Montréal competes directly with two other major dailies and also with two free dailies, one of which is owned by Sun Media.

The London Free Press is one of Canadas oldest daily newspapers and our only daily broadsheet newspaper. It is the only local daily newspaper in its market, although it competes with daily
newspapers from surrounding markets.

The Toronto Sun is the fourth largest non-national daily newspaper in Canada in
terms of circulation. The Toronto newspaper market is very competitive. The Toronto Sun competes with one other major daily newspaper and to a lesser extent with two national papers. There are also two free daily newspapers in Toronto: 24
Hours, which is owned by Sun Media, and Metro. As a tabloid newspaper, the Toronto Sun offers readers and advertisers an alternative format to the broadsheet format of other newspapers in the greater Toronto market.

Each of Sun Medias dailies in Edmonton, Calgary, Winnipeg and Ottawa competes against a broadsheet newspaper and has established a
number two position in its respective market.

We believe that the high cost associated with starting a major daily newspaper
operation represents a barrier to entry to potential new competitors of Sun Medias Urban Daily Group.

The Community
Newspaper Group

Sun Medias Community Newspaper Group consists of nine paid daily community newspapers, 146 community
weekly newspapers and shopping guides, and 13 agricultural and other specialty publications. The total average weekly circulation of the publications in Sun Medias Community Newspaper Group for the year ended December 31, 2009 was



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approximately 2.5 million free copies and approximately 0.5 million paid copies, according to internal statistics. The table below sets forth the average daily paid circulation and
geographic location of the daily newspapers published by Sun Medias Community Newspaper Group for the year ended December 31, 2009:



|                                     |  |                              |  |                              
|------------------------------------ |  | ---------------------------- |  | -----------------------------
|NEWSPAPER (1)                        |  | LOCATION                     |  | AVERAGE DAILY PAIDCIRCULATION
|                                     |  |                             
|Recorder and Times                   |  | Brockville, Ontario          |  | 9,700                        
|Beacon Herald                        |  | Stratford, Ontario           |  | 8,300                        
|Daily Herald Tribune                 |  | Grande Prairie, Alberta      |  | 6,300                        
|Simcoe Reformer                      |  | Simcoe, Ontario              |  | 5,800                        
|Sentinel-Review                      |  | Woodstock, Ontario           |  | 5,400                        
|St. Thomas Time-Journal              |  | St. Thomas, Ontario          |  | 4,300                        
|Miner & News                         |  | Kenora, Ontario              |  | 2,900                        
|Fort McMurray Today                  |  | Fort McMurray, Alberta       |  | 2,100                        
|The Daily Graphic                    |  | Portage La Prairie, Manitoba |  | 2,100                        
|                                     |  |                              |  |                              
|Total Average Daily Paid Circulation |  | 46,900                      



Source: Internal Statistics

|(1) | The listed newspapers are published at least five days per week, except for the Simcoe Reformer, Miner & News, and The Daily Graphic, which are published four
days per week.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Osprey Medias operations consist of 19 daily newspapers and 30 non-daily newspapers as
well as numerous specialty publications including shopping guides. The total average weekly circulation of the Osprey Media publications for the year ended December 31, 2009 was approximately 0.4 million free copies and approximately
2.0 million paid copies, according to internal statistics.

The table below sets forth the average daily paid circulation
and geographic location of the daily newspapers published by Osprey Media for the year ended December 31, 2009:



|                                     |  |                  |  |                              
|------------------------------------ |  | ---------------- |  | -----------------------------
|NEWSPAPER                            |  | LOCATION         |  | AVERAGE DAILY PAIDCIRCULATION
|                                     |  | (all in Ontario) |  |                              
|                                     |  |                 
|St. Catharines Standard              |  | St. Catharines   |  | 36,400                       
|Kingston Whig-Standard               |  | Kingston         |  | 26,000                       
|Peterborough Examiner                |  | Peterborough     |  | 25,000                       
|Brantford Expositor                  |  | Brantford        |  | 20,600                       
|Niagara Falls Review                 |  | Niagara Falls    |  | 20,600                       
|Sarnia Observer                      |  | Sarnia           |  | 18,200                       
|Sault Star                           |  | Sault Ste Marie  |  | 17,900                       
|Sudbury Star                         |  | Sudbury          |  | 16,900                       
|Owen Sound Sun Times                 |  | Owen Sound       |  | 15,700                       
|Cornwall Standard-Freeholder         |  | Cornwall         |  | 15,500                       
|Barrie Examiner                      |  | Barrie           |  | 14,800                       
|Welland Tribune                      |  | Welland          |  | 14,400                       
|North Bay Nuggett                    |  | North Bay        |  | 14,100                       
|Belleville Intelligencer             |  | Belleville       |  | 13,400                       
|Chatham Daily News                   |  | Chatham          |  | 10,700                       
|Timmins, The Daily Press             |  | Timmins          |  | 8,700                        
|Orillia Packet & Times               |  | Orillia          |  | 8,200                        
|Pembrooke, The Daily Observer        |  | Pembrooke        |  | 6,500                        
|                                     |  |                  |  |                              
|Total Average Daily Paid Circulation |  | 303,600         



Source: Internal Statistics



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Our Community Newspaper Group publications (comprised principally of non-daily newspapers
and shopping guides) are distributed throughout Canada. The number of non-daily publications on a regional basis is as follows:



|                   |  |                      
|------------------ |  | ---------------------
|Province           |  | Number ofPublications
|                   | 
|Ontario            |  | 88                   
|Quebec             |  | 47                   
|Alberta            |  | 37                   
|Manitoba           |  | 12                   
|Saskatchewan       |  | 4                    
|New Brunswick      |  | 1                    
|                   |  |                      
|Total Publications |  | 189                  

Our community newspaper
publications generally offer news, sports and special features, with an emphasis on local information. We believe that these newspapers cultivate reader loyalty and create franchise value by emphasizing local news, thereby differentiating themselves
from national newspapers.

Competition

Several of the Community Newspaper Groups publications maintain the number one position in the markets that they serve. Our community
publications are generally located in small towns and are typically the only daily or weekly newspapers of general circulation published in their respective communities, although some face competition from daily or weekly publications published in
nearby locations and circulated in the markets where we publish our daily or weekly publications. Historically, the Community Newspaper Groups publications have been a consistent source of cash flow, derived primarily from advertising revenue.

Other Operations

Commercial Printing and Distribution

Our national network of production
and printing facilities enables it to provide printing services for web press (coldset and heatset) and sheetfed products, and graphic design for print and electronic media. Web presses utilize rolls of newsprint, whereas sheetfed presses use
individual sheets of paper. Heatset web presses, which involve a more complex process than coldset web presses, are generally associated with printing on glossy paper. Sun Media owns 17 web press and four sheetfed press operations located throughout
Canada. These operations provide commercial printing services for both Sun Medias internal printing needs and for third parties. Sun Medias printing facilities include nine printing facilities for the daily publications and ten other
printing facilities operated by the Sun Medias Community Newspaper Group in five provinces. Osprey Media operates four web press and one sheetfed press operation in Ontario.

Through our wholly-owned subsidiary Quebecor Media Printing, we operate two printing state-of-the-art facilities located in Islington,
Ontario, and Mirabel, Quebec. 24 Hours in Toronto, the Toronto Sun, and a number of Ontario community publications are printed in Islington, Ontario. The Journal de Montréal and 24 Heures (Montreal), as well as a
number of our Quebec community publications are printed in Mirabel, Quebec.

We also offer third party commercial printing
services, which provides us with an additional revenue source that leverages existing equipment with excess capacity. In our third party commercial printing operations, we compete with other newspaper publishing companies as well as with commercial
printers. Our competitive strengths in this area include our modern equipment, our status in some of our markets as the only local provider of commercial printing services and our ability to price projects on a variable cost basis, as our core
newspaper business covers overhead expenses.

Sun Medias Urban Daily Group includes the distribution business of
Messageries Dynamiques, which distributes dailies, weeklies, magazines and other electronic and print media and reaches approximately 200,000 households and 14,000 retail outlets through its operations in Quebec. In June 2009, we have announced the
creation of Quebecor Media Network, a new flyer-printing and distribution division in Quebec. Also, in September and October 2009, Sun Media entered into joint distribution agreements with Canwest and the National Post Company. Under these
agreements, each party will assume the home delivery and single copy delivery functions for some of the other partys publications in the respective markets of those publications. These distribution agreements will allow the companies to
leverage their existing carrier forces and improve operating income.



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Television Station

Sun Media currently owns a 25.0% interest in SUN TV Company (SUN TV), a television station in Toronto, Canada. TVA Group,
also one of our subsidiaries, owns the remaining 75.0% of SUN TV. During the second quarter of 2009, as part of a corporate reorganization initiated by us, TVA Group entered into an agreement with Sun Media under which TVA Group has committed to
become the sole owner of SUN TVs licence and assets in the future. On December 1, 2009, the CRTC approved the transfer of SUN TVs broadcast license to TVA Group. The transaction is subject to the satisfaction of certain conditions,
which currently remain pending.

Internet/Portals

Canoe is an integrated company offering e-commerce, information and communication services. It owns the Canoe Network, which, according to
the ComScore December 2009 Media Metrix survey, attracts more than 8.9 million unique visitors per month in Canada, including more than 4.0 million in Quebec. Canoe also owns Jobboom Publishing, Quebecs leader in employment and
career publishing. Brought together, Canoes complementary operations form one of the most complete portfolios of Internet related properties in Canada.

The Canoe portals network includes all of Canoes information and service sites for the general public. As such, it is one of the most popular Internet destinations in Canada, in both the English and
French speaking markets, and a key vehicle for Internet users and advertisers alike. Advertising revenues constitute a large portion of Canoes annual revenues.

Media Properties

Canoes media properties include the
following portals and destination sites:



| |  |  | Canoe (canoe.ca), a bilingual, integrated media and Internet services network and one of Canadas leading Internet portals with more than
121 million page views in December 2009, according to Canoe internal statistics;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TVA Group and Le Canal Nouvelles TVA (LCN) (tva.canoe.comand lcn.canoe.com) dedicated websites for the TVA television
network and the LCN all-news channel (both owned by our subsidiary TVA Group), which has begun streaming TVA and LCN programming live on the websites; in addition, Canoe has developed and operates several websites for popular TVA Group programs,
such as Occupation Double(occupationdouble.com) and Star Académie(staracademie.ca);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sun Media dedicated websites for the weeklies and dailies newspapers (such as torontosun.com, edmontonsun.com, journaldequebec.com
and canoe.com/journaldemontreal), which provide local and national news;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Canoe.tv, the first Canadian web broadcaster with unique content commissioned by Canoe.tv in addition to video content from traditional sources
including Quebecor Media, the Sun Media network of newspapers and various external partners;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Argent and Canoe Money (argent.canoe.ca and money.canoe.ca), a financial website which offers, among other things, a variety of services
ranging from financial information to portfolio management tools (the Argent website (formerly Webfin) was redesigned in early 2005 in partnership with TVAs financial channel, Canal Argent, and is now owned by TVA Group but maintained
and operated by Canoe);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Petitmonde (petitmonde.com), a website dedicated to children and families that Canoe acquired in September 2007 and operates for and on behalf
of TVA Group; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | CanoeKlix (canoeklix.com), a pay-per-click advertising solution developed by Canoe and launched in 2006.
| | - |  | --------------------------------------------------------------------------------------------------------



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E-commerce Properties

Canoes e-commerce properties include the following sites:



| |  |  | Jobboom.com, a unique Web-based employment site with over 2.6 million members at December 31, 2009, which also includes Édition
Jobboom (careers book editors) and Jobboom Formation (an Internet directory of continuing education services);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Autonet.ca, one of Canadas leading Internet sites devoted entirely to automobiles;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | Canoeclassifieds.ca and Vitevitevite.ca (formerly canoeclassees.ca), classified ad sites through which visitors can view more than
75,000 classified ads, reaching potential purchasers across the country by integrating more than 250 dailies and community newspapers;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Micasa.ca, one of the leading real-estate listing sites in Quebec, providing comprehensive property listing services available to all real estate
brokers as well as individual homeowners;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ReseauContact.com, a French dating and friendship site with approximately 408,000 unique visitors per month, as of December 2009, according to
ComScore Media Metrix; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | EspaceCanoe.ca, an advanced technology platform for social communities that supports the sharing of videos, photos and opinions by users in an
innovative Web 2.0-type environment.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Seasonality and Cyclicality

Canadian newspaper publishing company operating results tend to follow a recurring seasonal pattern with higher advertising revenue in the
spring and in the fall. Accordingly, the second and fourth fiscal quarters are typically our strongest quarters, with the fourth quarter generally being the strongest. Due to the seasonal retail decline and generally poor weather, the first quarter
has historically been our weakest quarter.

Our newspaper business is cyclical in nature. Our operating results are sensitive
to prevailing local, regional and national economic conditions because of our dependence on advertising sales for a substantial portion of our revenue. Expenditures by advertisers tend to be cyclical reflecting overall economic conditions, as well
as budgeting and buying patterns and priorities. In addition, a substantial portion of our advertising revenue is derived from retail and automotive advertisers, who have historically been sensitive to general economic cycles, and our operating
results have in the past been materially adversely affected by extended downturns in the Canadian retail and automotive sectors. Similarly, since a substantial portion of our advertising revenue is derived from local advertisers, our operating
results in individual markets could be adversely affected by local or regional economic downturns.

Raw Materials

Newsprint, which is the basic raw material used to publish newspapers, has historically been and may continue to be
subject to significant price volatility. During 2009, the total newsprint consumption of our newspaper operations was approximately 145,000 metric tonnes. Newsprint represents our single largest raw material expense and one of our most significant
operating costs. Newsprint expense represented approximately 10.1% ($83.6 million) of our News Media segments operating expenses for the year ended December 31, 2009. Changes in the price of newsprint could significantly affect our
earnings, and volatile or increased newsprint costs have had, and may in the future have, a material adverse effect on our results of operations and our financial condition. We manage the effects of newsprint price increases through a combination
of, among other things, waste management, technology improvements, web width reduction, inventory management, and by controlling the mix of editorial versus advertising content.

In order to obtain more favourable pricing, we source substantially all of our newsprint from a single newsprint producer, AbitibiBowater.
Pursuant to the terms of our agreement with AbitibiBowater, we obtain newsprint at a discount to market prices, receive additional volume rebates for purchases above certain thresholds, and benefit from a ceiling on the unit cost of newsprint. Our
agreement with AbitibiBowater is a short-term agreement, and there can be no assurance that we will be able to renew this agreement or that AbitibiBowater will continue to supply newsprint to us on favourable



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terms or at all after the expiry of our agreement. Moreover, our newsprint producer AbitibiBowater voluntarily filed for protection from its creditors in Canada and the United States, meaning
that our supply agreement could be repudiated by or on behalf of AbitibiBowater pursuant to Chapter 11 of the United States Bankruptcy Code in the United States and the CCAA. If we are unable to continue to source newsprint from AbitibiBowater on
favourable terms, or if we are unable to otherwise source sufficient newsprint on terms acceptable to us, our costs could increase materially, which could materially adversely affect our liquidity, results of operations and financial condition. For
additional information see Key Information  Risk Factors  Risks Relating to Our Business  We may be adversely affected by variations in the cost of newsprint. In addition, our newspaper operations are labour intensive,
resulting in a relatively high fixed-cost structure.

Broadcasting

We are the largest private-sector broadcaster of French-language entertainment, information and public affairs programs in North America.
According to data published by the BBM People Meters (which data are based on a new measurement methodology using audimetry instead of surveys), we had a 27.1% market share of French-speaking viewers in the Province of Quebec in 2009 and according
to the Canadian TVB Report for the period from January 1, 2009 through November 30, 2009, we estimate that our share of the Quebecs French-language broadcast television advertising market was also 27.1%.

In 2009, we aired eight of the ten most popular TV programs in the Province of Quebec, including Star Académie: Le
variétés, Occupation Doubleand Le Banquier. In 2009, the Réseau TVA (TVA Network) had 23 of the top 30 French-language prime time television shows, according to BBM People Meter data. Since
May 1999, the TVA Network, which consists of ten stations, has been included in the basic channel line-up of most cable and satellite providers across Canada, enabling us to reach a significant portion of the French-speaking population of Canada.

Through various subsidiaries, we control or participate in the following 12 programming services: LCN, a French-language
headline news service, Canal Évasion, a French-language travel and tourism service, Télé Achats, a French-language infomercial and tele-shopping channel, Argent, an economic, business and personal finance
news service, Mystery, a national English-language Category One specialty television service devoted to mystery and suspense programming, Mystère, a national French-language Category One specialty television service devoted to
mystery and suspense programming, Prise 2, a French-language Category Two specialty television service devoted to Quebec and American television classics, MenTV, a national English-language Category One specialty television service
dedicated to the Canadian mans lifestyle and Les idées de ma maison, a French-language Category Two specialty television service devoted to renovation, do-it-yourself and cooking. Most of these programming licenses will expire on
August 31, 2011 and therefore, formal renewal applications will be filed in fall 2010. The more recently authorized programming services will have their license expire later. The CRTC allows analog specialty services to be
distributed both via conventional analog cable and digital distribution, whereas Category One and Category Two digital specialty services may be distributed through digital-only distribution.

Through TVA Group and Sun Media, we also control SUN TV, a television station in Toronto, Ontario. SUN TVs licence has been renewed
and is expiring on August 31, 2011 along with most private television networks in Canada. However, since some policy decisions tend to be reported, for example regarding a fee for carriage and the Canada-wide plan for digital over-the-air
television broadcasting, we expect the CRTC to issue administrative renewals in order to provide enough time to prepare and process the renewal applications.

In 2009, 253,300 Class B shares of TVA Group were repurchased under a Normal Course Issuer Bid for a total cash consideration of $2.6 million. In the year ended December 31, 2008, TVA Group
repurchased 3,000,642 Class B shares under the Substantial Issuer Bid dated April 1, 2008 and amended on May 14, 2008, for a total cash consideration of $51.4 million. As a result of these repurchases, Quebecor Medias interest in TVA
Group increased from 45.2% as of December 31, 2007 to 51.4% as of December 31, 2009.

As at December 31, 2009,
we own 51.4% of the equity and control 99.9% of the voting power in TVA Group.

For the year ended December 31, 2009, our
Broadcasting operations generated revenues of $439.0 million and operating income of $80.0 million. For the year ended December 31, 2008, our television operations generated revenues of $436.7 million and operating income of $66.0 million.



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Canadian Television Industry Overview

Canada has a well-developed television market that provides viewers with a range of viewing alternatives.

There are three main French language broadcast networks in the Province of Quebec: Société Radio Canada, V
(previously known as TQS Network) and TVA Network. In addition to French language programming, there are three English-language national broadcast networks in the Province of Quebec: the Global Television Network, CTV and the Canadian
Broadcasting Corporation, known as CBC. Global Television Network, V and CTV are privately held commercial networks. CBC and Société Radio Canada are government owned and financed by a combination of federal government grants and
advertising revenue. French language viewers in the Province of Quebec also have access to U.S. networks, either directly over the air or via broadcast distributors.

Drama and comedy programming are the most popular genres with French speaking viewers, followed by news and other information programming. Viewing trends by French speaking viewers are predominantly to
French Canadian programs in all genres, with the exception of drama and comedy programs where the viewing has remained evenly split between Canadian and foreign programs.

The following table sets forth the market share of French speaking viewers in the Province of Quebec in 2009:



|                                                 |  |                                       |  
|------------------------------------------------ |  | ------------------------------------- | -
|Network                                          |  | Share of Provinceof Quebec Television |  
|TVA Network                                      |  | 27.1                                  | %
|Societé Radio Canada                             |  | 13.0                                  | %
|V                                                |  | 6.7                                   | %
|Various French language specialty cable channels |  | 45.8                                  | %
|Others                                           |  | 7.4                                   | %



Source: BBM People Meters 2009 for the period between January 1, 2009 and December 31, 2009.

Transition of Over-the-air Television Broadcasting from Analog to Digital

On June 12, 2002, the CRTC announced a framework (Public Notice CRTC 2002-31) for the broadcast of digital, over-the-air television
services and the transition of over-the-air television broadcasting from analog to digital. The CRTC is prepared to give fast-track consideration to applications for broadcasting licenses to carry on digital television (DTV) based on the Advanced
Television Systems Committee transmission standard (A/53). The transition from analog to digital television in Canada is expected to take place before August 31, 2011. However, not all TV broadcasters will be able to install digital
transmitters outside large urban areas. TVA Group has committed to the CRTC to operate digital transmitters in Montreal, Quebec City, Sherbrooke and Trois-Rivières (Quebec) before August 2011. However, regarding the Saguenay and Rimouski
stations, the current deadline may not be met. These stations contours may not interfere outside Canada. A national task force has been created in order to find a solution for the reception of digital television outside large urban areas. Both TVA
Group and SUN TV hold licenses for digital television broadcasting and are currently available in digital. Applications for Sherbrooke and Trois-Rivières will be filed in 2010.

Television Broadcasting

French language Market

Our French language network of ten stations, which
consists of six owned and four affiliated stations, is available to a significant portion of the French speaking population in Canada.

Our owned and operated stations include: CFTM-TV in Montreal, CFCM-TV in Quebec City, CHLT-TV in Sherbrooke, CHEM-TV in Trois-Rivières, CFER-TV in Rimouski Matane-Sept-Iles and CJPM-TV in Saguenay. Our four affiliated stations are
CFEM-TV in Rouyn Noranda, CHOT-TV in Gatineau, CHAU-TV in Carleton and CIMT-TV in Rivière-du-Loup. We own a 45% interest of the latter two. Approximately 85% to 95% of our networks broadcast schedule is originated from our main station
in Montreal. Our signal is transmitted from transmission and retransmission sites authorized by Industry Canada and licensed by the CRTC and is also retransmitted by satellite elsewhere in Canada as a distant signal by various modes of authorized
distribution: cable, direct-to-home satellite distribution and multi channel MDS.



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English-language Market

We own, through TVA Group and Sun Media, the English-language television station SUN TV (CKXT-TV). SUN TV broadcasts in the Greater Toronto
area, Canadas largest market, as well as in Hamilton, Ontario. SUN TVs broadcast schedule includes a mixture of original local programming designed to reflect the diverse lifestyle, culture and sports interests of the Toronto Hamilton
market. The schedule also addresses the many tastes and preferences of its market with an appealing variety of well known acquired American programming such as 60 Minutes along with a blend of situation comedies, talk shows, and
primetime movies. SUN TVs signal is transmitted from a main transmitter on the CN Tower and a rebroadcast transmitter in Hamilton. In 2008, TVA Groups completed the implementation of digital retransmitters permitting SUN TV to be
rebroadcast for analog television and transitional digital television in the Ottawa and London (Ontario) markets, subject to national advertising only.

Advertising Sales and Revenue

We derive a majority of our revenues
from the sale of air-time to national, regional and local advertisers. For the twelve-month period ended December 31, 2009, we derived approximately 72% of our advertising revenues from national advertisers and 28% from regional and local
advertisers.

Programming

We produce a variety of French language programming, including a broad selection of entertainment, news and public affairs programming. We actively promote our programming and seek to develop viewer
loyalty by offering a consistent programming schedule.

A majority of our programming is produced by our wholly owned
subsidiary, TVA Productions Inc. Through TVA Productions Inc. (and its affiliate TVA Productions II inc.), we produced approximately 1591 hours of original programming, consisting primarily of soap operas, morning and general interest shows, variety
shows and quiz shows, from January 2009 through December 2009.

The remainder of our programming is comprised of foreign and
Canadian independently produced programming.

Specialty Broadcasting

Through various subsidiaries, Quebecor Media controls or participates in 12 programming services other than television over the air,
including the following:



|                                         |  |          |  |     |   |  |                 |  
|---------------------------------------- |  | -------- |  | --- | - |  | --------------- | -
|Type of Service                          |  | Language |  |     |   |  | Voting Interest |  
|                                         |  |          | 
|Analog Specialty Services:               |  |          |  |     |   |  |                 |  
|LCN  Le Canal Nouvelles                |  | French   |  | TVA | 1 |  | 99.9            | %
|Canal Évasion                           |  | French   |  | TVA |   |  | 8.3             | %
|Category One Digital Specialty Services: |  |          |  |     |   |  |                 |  
|MenTV                                   |  | English  |  | TVA |   |  | 51.0            | %
|Mystery                                 |  | English  |  | TVA |   |  | 50.0            | %
|Mystère                                 |  | French   |  | TVA | 1 |  | 99.9            | %
|Argent (LCN - Affaires)                 |  | French   |  | TVA | 1 |  | 99.9            | %
|Category Two Digital Specialty Services: |  |          |  |     |   |  |                 |  
|    Prise 2                             |  | French   |  | TVA | 1 |  | 99.9            | %
|    Les idées de ma maison              |  | French   |  | TVA | 1 |  | 99.9            | %
|Exempted Programming Service:            |  |          |  |     |   |  |                 |  
|    Canal Shopping TVA                  |  | French   |  | TVA | 1 |  | 99.9            | %



|(1) | TVA Group (TVA in the table) controls the programming services. Quebecor Media controls TVA Group.
|--- | ----------------------------------------------------------------------------------------------------



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LCN

LCN, is a 24-hour broadcast format comprised mainly of news, sports and weather components, updated on a regular basis. LCNwent on the air in 1997 and had approximately 2.3 million
subscribers as of December 2009, according to internal statistics. LCNs revenues are primarily derived from affiliate agreements and sale of air-time to national advertisers.

Argent

Argentbroadcasts economic, business and personal finance news. This channel benefits from the expertise and knowledge of TVA Groups news team, as well as TVA Groups presence in every Quebec region. Argent is
developing a unique niche by offering a business focused product that has never before been offered in Quebecs television market. Argent is providing an essential service in Quebecs economy by promoting businesses of all sizes and
explaining and commenting on the business and financial news that will impact Quebecs economic future. Argent began broadcasting in February 2005.

Canal Évasion

Canal Évasion is a national
French-language television specialty service that is dedicated exclusively to tourism, adventure and travel. Canal Évasion began broadcasting in January 2000.

MenTV

MenTV is a national English-language Category One specialty television service dedicated to the Canadian mans lifestyle with programming related to the luxury market, the gourmet market, mens beauty and fitness, the book
and music market, outdoor adventures and leisure sports. MenTV began broadcasting in September 2001.

Mystery

Mystery is a national English-language Category One specialty television service devoted to mystery and suspense
programming. The service nurtures and encourages short form Canadian mysteries. It provides a wide assortment of genre specific programs including movies, television series, short films and documentaries that focus exclusively on the delivery of
entertaining programming relating to suspense, espionage and classic mysteries. Mystery began broadcasting in September 2001.

Mystère

Mystère is a national French-language Category One specialty television service
devoted to mystery and suspense programming. This programming service is the French-language equivalent of Mystery, although it also offers reruns of well known Quebec series. Mystère began broadcasting in October 2004, and in
2008 was also launched in high-definition.

Prise 2

Prise 2 is a national French-language Category Two specialty television service devoted to Quebec and American classics. Prise
2 began broadcasting in February 2006.

Les idées de ma maison

Les idées de ma maison is a national French-language Category Two specialty television service devoted to renovation,
do-it-yourself and cooking. Les idées de ma maison began broadcasting in February 2008.

Canal Shopping TVA;
Home Shopping Service; Infomercials

TVA Group also owns 100% of home-shopping specialty channel Shopping TVA, a
programming service that the CRTC has exempted from licensing requirements. Through TVAchats Inc., we also operate Shopping TVA, a daily one-hour home tele-shopping service broadcast on the TVA Network, as well as Shopping TVA, a
24-hour infomercial and tele-shopping channel.



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Magazine Publishing

TVA Publications Inc. (TVA Publications) publishes more than 60 magazines (which include its regular publications, special
issues and seasonal publications). Its main publications focus on five main market niches: Decoration, Fashion and Beauty, Services, Teenagers, Arts and Entertainment. According to the Audit Bureau of Circulations, TVA Publications represents
approximately 72% of newsstand sales of French language magazines in Quebec as of June 30, 2009. TVA Publications is the leading magazine publisher in Quebec and we expect to leverage its focus on arts and entertainment across our television
and Internet programming.

Leisure and Entertainment

Our activities in the Leisure and Entertainment segment consist primarily of retailing CDs, books, DVDs, musical instruments, games and toys,
computer games, gifts and magazines through the Archambault chain of stores and the archambault.ca e-commerce site, online sales of downloadable music and books through the zik.ca and Jelis.ca services, distribution of CDs and
videos (through Select, a division of Archambault Group), online music distribution by way of file transfer (through Select Digital, a division of Archambault Group), music recording and video production (through Musicor, a division of Archambault
Group), the recording of live concerts and the production of live-event video shows and television advertising (through Les Productions Select TV, a subsidiary of Archambault Group) and the production of music shows and concerts (through Musicor
Spectacles, a division of Archambault Group). Through its new production capacity made possible with Musicor Spectacles and Les Productions Select TV, Archambault Group is now fully integrated in Canadas music industry, as a producer of a
wider offering of media solutions, and a growing participant in the live-event production industry.

We are also involved in
book publishing and distribution through academic publisher CEC Publishing Inc. (CEC Publishing), 13 general literature publishers under the Groupe Sogides Inc. (Sogides Group) umbrella, and Messageries A.D.P.
Inc. (Messageries A.D.P.), the exclusive distributor for approximately 160 Quebec and European French-language publishers.

For the year ended December 31, 2009, the revenues of our Leisure and Entertainment segment totalled $307.8 million and operating income totalled $25.9 million. For the year ended December 31,
2008, the revenues of the Leisure and Entertainment segment totalled $301.9 million and operating income totalled $20.2 million.

Cultural Products Production, Distribution and Retailing

Archambault Group is one of the largest chains
of music and book stores in Quebec with 16 retail locations, consisting of 15 Archambault megastores and one Paragraphe bookstore. Archambault Group also offers a variety of games, toys and other gift ideas. Archambault Groups products are
also distributed through its websites archambault.ca. Archambault Group also operates music and books downloading services, known as zik.ca and Jelis.ca, with per-item fees.

Archambault Group, through Select, is also one of the largest independent music distributors in Canada. Select control 30% of the Quebec
market and 73% of the Quebec French market. Select has a catalogue of over 5,513 different CDs, 1,565 DVDs and VHS videos, a large number of which are from French speaking artists. In addition, Archambault Group, through Select Digital, is a digital
aggregator of downloadable products with a selection of approximately 70,000 songs available through 192 retailers worldwide.

Book Publishing and Distribution

Through Sogides (which is comprised of 13 publishing houses: six in
Groupe Librex Inc., namely Éditions Libre Expression, Éditions Internationales Alain Stanké, Éditions Logiques, Éditions du Trécarré, Éditions Quebecor and Publistar, four in Groupe
lHomme, namely Les Éditions de lHomme, Le Jour, Utilis, Les Presses Libres and three in Groupe Ville-Marie Littérature inc., namely LHexagone, VLB Éditeur and Typo) and the academic publisher CEC Publishing, we
are involved in French-language book publishing and we form one of Quebecs largest book publishing groups. In 2009, we published or reissued a total of 537 titles.



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Through Messageries ADP, our book distribution company, we are the exclusive distributor for
160 Quebec and European French-language publishers. We distribute French-language books to approximately 2,400 retail outlets in Canada.

Ownership

We own 100% of the issued and outstanding capital stock
of Archambault Group, CEC Publishing and Groupe Sogides.

Interactive Technologies and Communications

Through Nurun, we provide interactive communication and technology services in North America, Europe and China. Nurun helps companies and
other organizations develop interactive strategies, including strategic planning and interface design, technical platform implementation, online marketing programs and client relationships. Nuruns clients include organizations and multi
national corporations such as LOréal, Groupe Danone, AT&T, Videotron, Home Depot, Pleasant Holidays, Ferrero, Gore, Volkswagen China, Equifax, Telecom Italia, Sears Canada and the Government of Quebec.

For the year ended December 31, 2009, our Interactive Technologies and Communications segment generated revenues of $91.0 million
and operating income of $4.1 million. For the year ended December 31, 2008, our Interactive Technologies and Communications segment generated revenues of $89.6 million and operating income of $5.1 million.

On February 26, 2008, Quebecor Media, through a wholly-owned subsidiary, completed its acquisition, pursuant to a public offer and
subsequent compulsory acquisition procedure, of all of the issued and outstanding common shares of Nurun (including common shares issuable upon the exercise of outstanding options, conversion or exchange rights) not already held by Quebecor Media
and its affiliates, at a price of $4.75 per common share. The Nurun common shares were delisted from the Toronto Stock Exchange on February 27, 2008. The aggregate cash consideration paid by Quebecor Media pursuant to this public offer was
approximately $75.2 million.

Ownership

We own 100% of the equity and voting interest in Nurun.

Intellectual Property

We use a number of trademarks for our products and
services. Many of these trademarks are registered by us in the appropriate jurisdictions. In addition, we have legal rights in the unregistered marks arising from their use. We have taken affirmative legal steps to protect our trademarks and we
believe our trademarks are adequately protected.

Television programming and motion pictures are granted legal protection
under the copyright laws of the countries in which we operate, and there are substantial civil and criminal sanctions for unauthorized duplication and exhibition. The content of our newspapers and websites is similarly protected by copyright. We own
copyright in each of our publications as a whole, and in all individual content items created by our employees in the course of their employment, subject to very limited exceptions. We have entered into licensing agreements with wire services,
freelancers and other content suppliers on terms that we believe are sufficient to meet the needs of our publishing operations. We believe we have taken appropriate and reasonable measures to secure, protect and maintain our rights or obtain
agreements from licensees to secure, protect and maintain copyright protection of content produced or distributed by us.

We
have registered a number of domain names under which we operate websites associated with our television, publishing and Internet operations. As every Internet domain name is unique, our domain names cannot be registered by other entities as long as
our registrations are valid.



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Insurance

Quebecor Media is exposed to a variety of operational risks in the normal course of business, the most significant of which are transferred
to third parties by way of insurance agreements. Quebecor Media has a policy of self-insurance when the foreseeable losses from self-insurance are low relative to the cost of purchasing third-party insurance. Quebecor Media maintains insurance
coverage through third parties for property and casualty losses. Quebecor Media believes that it has a combination of third-party insurance and self-insurance sufficient to provide adequate protection against unexpected losses, while minimizing
costs.

Environment

Our operations are subject to federal, provincial and municipal laws and regulations concerning, among other things, emissions to the air, water and sewer discharge, handling and disposal of hazardous
materials, the recycling of waste, the soil remediation of contaminated sites, or otherwise relating to the protection of the environment. Laws and regulations relating to workplace safety and worker health, which among other things, regulate
employee exposure to hazardous substances in the workplace, also govern our operations. Compliance with these laws has not had, and management does not expect it to have, a material effect upon our capital expenditures, net income or competitive
position. Environmental laws and regulations and the interpretation of such laws and regulations, however, have changed rapidly in recent years and may continue to do so in the future. We have monitored the changes closely and have modified our
practices where necessary or appropriate.

Our properties, as well as areas surrounding those properties, particularly those
in areas of long-term industrial use, may have had historic uses, or may have current uses, in the case of surrounding properties, which may affect our properties and require further study or remedial measures. We are not currently conducting or
planning any material study or remedial measure, and none is currently required by regulatory authorities. However, we cannot provide assurance that all environmental liabilities have been determined, that any prior owner of our properties did not
create a material environmental condition not known to us, that a material environmental condition does not otherwise exist as to any such property, or that expenditure will not be required to deal with known or unknown contamination.



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C - Organizational Structure

The following chart illustrates the relationship among Quebecor Media and its significant operating subsidiaries and holdings as of
January 1, 2010, and shows the jurisdiction of incorporation of each entity. In each case, unless otherwise indicated, Quebecor Media owns a 100% equity and voting interest in its subsidiaries (where applicable, the number on the top indicates
the percentage of equity owned directly and indirectly by Quebecor Media and the number on the bottom indicates the percentage of voting rights held).

LOGO

Quebecor, a communications holding company, owns 54.72% of Quebecor Media and CDP Capital,
a wholly-owned subsidiary of the Caisse de dépôt et placement du Québec, owns the other 45.28% of Quebecor Media. Quebecors primary asset is its interest in Quebecor Media. The Caisse de dépôt et
placement du Québec is one of Canadas largest pension fund managers.

D - Property, Plants and
Equipment

Our corporate offices are located in leased space at 612 St-Jacques Street, Montreal, Quebec, H3C 4M8,
Canada.

Telecommunications

Videotrons corporate offices are located in leased space at 612 St-Jacques Street, Montreal, Quebec, Canada, H3C 4M8, in the same building as Quebecor Medias head office.

Videotron also owns several buildings in the Province of Quebec. Videotrons largest building is located at 2155 Pie IX Street in
Montreal (approximately 112,000 square feet). Videotron also owns a building located at 150 Beaubien Street in Montreal (approximately 73,000 square feet). Videotron also leases approximately 52,000 square feet of office space in a building located
at 800 de la Gauchetière Street in Montreal to accommodate staffing growth. In Quebec City, Videotron owns a building of approximately 40,000 square feet where its regional headend for the Quebec City regions is located. Videotron also leases
a 24,000 square feet facility in Joliette, Quebec, in which it operates a new call center opened in 2009. Videotron also owns or leases a significant number of smaller locations for signal reception sites and customer service and business offices.
Videotron generally leases space for the business offices and retail locations for the operation of its video stores.



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News Media

Sun Medias and Osprey Medias principal business offices are located at 333 King Street East, Toronto, Ontario, Canada M5A 3X5,
and 100 Renfrew Drive, Suite 110, Markham, Ontario, Canada L3R 9R6.

The following table presents the addresses, the square
footage, primary use and current press capacity of the main facilities and other buildings of our newspaper operations. No other single property currently used in our News Media segment exceeds 50,000 square feet. Unless stated otherwise, we own all
of the properties listed below.



|                                            |  |                                                                                          |  |                                                               |  |                              
|------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- |  | -----------------------------
|Address                                     |  | Use of Property                                                                          |  | Press Capacity(1)                                             |  | Floor Space Occupied(sq. ft.)
|                                            |  |                                                                                          | 
|Islington, Ontario 2250 Islington Avenue(2) |  | Operations building, including printing plant  Toronto Sun 24 Hours (Toronto)           |  | 3 Colorman presses (14 towers
for a total of 56 units)        |  | 531,400                      
|                                            |  |                                                                                          | 
|Mirabel, Quebec 12800 Brault Street         |  | Operations building, including printing plant  Journal de Montréal 24 Heures (Montreal) |  | 3 Colorman presses (16 towers
for a total of 64 units)        |  | 235,000                      
|                                            |  |                                                                                          | 
|London, Ontario 369 York Street             |  | Operations building, including
printing plant  London Free Press                        |  | 2 Headliner presses (12 units)
and 1 Urbanite press (9
units) |  | 147,600                      
|                                            |  |                                                                                          | 
|Toronto, Ontario 333 King Street East       |  | Operations building  Toronto Sun                                                        |  | N/A(2)                                                        |  | 140,000                      
|                                            |  |                                                                                          | 
|Calgary, Alberta 2615-12 Street NE          |  | Operations building, including printing plant  Calgary Sun                              |  | 1 Headliner press (7 units)                                   |  | 90,000                       
|                                            |  |                                                                                          | 
|Montreal, Quebec 4545 Frontenac Street      |  | Operations building  Journal de Montréal                                                |  | N/A(3)                                                        |  | 81,000                       
|                                            |  |                                                                                          | 
|St. Catharines, Ontario 17 Queen Street     |  | Operations building  St. Catharines Standard                                            |  | N/A                                                           |  | 75,000                       
|                                            |  |                                                                                          | 
|Vanier, Quebec 450 Bechard Avenue           |  | Operations building, including printing plant  Journal de Québec                        |  | 2 Urbanite presses (24 units)                                 |  | 74,000                       
|                                            |  |                                                                                          | 
|Peterborough, Ontario 730 Kingsway          |  | Operations building, including printing plant  Peterborough Examiner                    |  | 1 Urbanite press (12 units)                                   |  | 63,500                       
|                                            |  |                                                                                          | 
|Winnipeg, Manitoba 1700 Church Avenue       |  | Operations building, including printing plant  Winnipeg Sun                             |  | 1 Urbanite press (12 units)                                   |  | 63,000                       
|                                            |  |                                                                                          | 
|Brantford, Ontario 53 Dalhousie Street      |  | Operations building  Brantford Expositor                                                |  | N/A                                                           |  | 57,300                       
|                                            |  |                                                                                          | 
|Edmonton, Alberta 9300-47 Street            |  | Printing plant  Edmonton Sun                                                            |  | 1 Metro press (8
units)                                       |  | 50,700                       
|                                            |  |                                                                                          | 
|Edmonton, Alberta 4990-92 Avenue            |  | Operations building  Edmonton Sun (leased until December 2013)                          |  | N/A                                                           |  | 45,200                       
|                                            |  |                                                                                          | 
|Gloucester, Ontario 4080 Belgreen Drive     |  | Printing plant  Ottawa Sun                                                              |  | 1 Urbanite press (14 units)                                   |  | 23,000                       



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|                                |  |                                                             |  |                   |  |                              
|------------------------------- |  | ----------------------------------------------------------- |  | ----------------- |  | -----------------------------
|Address                         |  | Use of Property                                             |  | Press Capacity(1) |  | Floor Space Occupied(sq. ft.)
|Ottawa, Ontario 6 Antares Drive |  | Operations building Ottawa Sun (leased until October 2013) |  | N/A               |  | 19,300                       



|(1) | A unit is the critical component of a press that determines color and page count capacity.
|--- | --------------------------------------------------------------------------------------------

|(2) | In 2008, printing of the Toronto Sun was fully transferred to Quebecor Media Printings facility in Islington, Ontario.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(3) | In 2008, printing of the Journal de Montréalwas fully transferred to Quebecor Media Printings facility in Mirabel, Quebec.
|--- | ---------------------------------------------------------------------------------------------------------------------------

Sun Medias Urban Daily Group operates from 17 owned and leased properties located in the urban cities in
which they serve, with building space totalling approximately 822,700 square feet. Sun Medias Urban Daily Group operates six web presses (86 units) and one sheetfed press operation across Canada.

Sun Medias Community Newspaper Group operates from 131 owned and leased facilities located in the respective communities that the
newspapers serve, with aggregate building space totalling approximately 680,000 square feet. Sun Medias Community Newspaper Group operates 11 web presses (120 units) and three sheetfed presses in 13 operations located throuhgout Canada. Osprey
Media operates from 62 owned or leased facilities located in the communities in which it serves. Osprey Media operates four web press operations and one sheetfed press operation in Ontario.

Through our wholly-owned subsidiary Quebecor Media Printing, we operate two printing state-of-the-art facilities located in Islington,
Ontario, and Mirabel, Quebec. 24 Hours in Toronto, the Toronto Sun, and a number of Ontario community publications are printed in Islington, Ontario. The Journal de Montréal and 24 Heures (Montreal), as well as a
number of our Quebec community publications are printed in Mirabel, Quebec.

Television Broadcasting

Our television broadcasting operations are mainly carried out in Montreal in a complex of four buildings owned by us which represent a total
of approximately 574,000 square feet. We also own buildings in Quebec City, Chicoutimi, Trois Rivières, Rimouski and Sherbrooke for local broadcasting and lease space in Montreal for TVA Publications.

Leisure and Entertainment segment and Interactive Technologies and Communications segment

We generally lease space for the business offices and retail outlets for the operation of our Leisure and Entertainment segment. Business
offices for our Interactive Technologies and Communications operations are also primarily leased.

Liens and charges

Borrowings under our 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 (chattels). Our subsidiaries credit facilities are generally secured by first-ranking charges over all of their respective assets.

E - Regulation

Foreign Ownership Restrictions Applicable under the Telecommunications Act (Canada) and the Broadcasting Act (Canada)

In November 2002, the Canadian federal Minister of Industry initiated a review of the existing foreign ownership restrictions applicable to telecommunications carriers. The House of Commons Standing
Committee on Industry, Science and Technology issued a report on April 28, 2003 recommending the removal of foreign ownership restrictions in the



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telecommunications industry and that any changes made to the Canadian ownership and control requirements applicable to telecommunications common carriers be applied equally to broadcasting
distribution undertakings. However, in June 2003, the House of Commons Standing Committee on Canadian Heritage instead recommended the status quo regarding foreign ownership levels for broadcasting and telecommunications companies. On April 4,
2005, the Canadian government released a response to the report of the latter committee wherein it stated, among other things, that the Government wishes to indicate that it is not prepared to modify foreign ownership limits on broadcasting or
content more generally. However, it acknowledged the appointment by Industry Canada of an independent panel of experts, the Telecommunications Policy Review Panel, to review Canadas telecommunications policy and regulation of
telecommunications, including consideration of Canadas foreign investment restrictions in telecommunications and whether those restrictions should be removed.

In March of 2006, the Telecommunications Policy Review Panel filed with Canadas Industry Minister its report regarding its review of the existing foreign ownership restrictions applicable to
telecommunications carriers. In the Afterword of the Report, the Panel proposed that the government adopt a phased and flexible approach to liberalization of restrictions on foreign investment in telecommunications service providers to the
extent that they are not subject to the Broadcasting Act. Ownership and control of Canadian telecommunications common carriers should be liberalized in two phases:



| |  |  | 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% of the revenues in any telecommunications service market are in the public interest. This presumption could be rebutted by evidence related to a particular
investor or investment. The presumption should apply to all investments in fixed or mobile wireless telephony markets as well as to investments in new entrants and smaller players (i.e., those below the 10% limit). To encourage longer-term
investment, foreign investors should remain exempt from the foreign investment restrictions if they are successful in growing the market share of their businesses beyond 10%.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The second phase of liberalization should be undertaken after completion of the review of broadcasting policy proposed by the Panel. At that time,
there should be a broader liberalization of the foreign investment rules in a manner that treats all telecommunications common carriers including the cable telecommunications industry in a fair and competitively neutral manner. The proposed
liberalization should apply to the carriage business of broadcasting distribution undertakings (or BDU), 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On July 12, 2007, the Canadian Minister of Industry announced the creation of a Competition Policy Review Panel. This Panel has been
mandated to review key elements of Canadas competition and investment policies to ensure that they function effectively. The fundamental task of the Panels review is to provide recommendations to the Government on how to enhance Canadian
productivity and competitiveness. Foreign ownership restrictions on broadcasting and telecommunications undertakings have been identified as an important issue. Quebecor Media, like several other interested parties, has filed a submission. In June
2008, the Panel filed its report. This report recommends that the federal government adopt a two-phased approach to foreign participation in the telecommunications and broadcast industry. In the first phase, it is suggested that the Minister of
Industry seek an amendment to the Telecommunications Act (Canada) to allow foreign companies to establish a new telecommunications business in Canada or to acquire an existing telecommunications company with a market share of up to 10% of the
telecommunications market in Canada. In the second phase, it is recommended that, following a review of broadcasting and cultural policies (including foreign investment), telecommunications and broadcasting foreign investment restrictions be
liberalized in a manner that is competitively neutral for telecommunications and broadcasting companies. The Prime Minister has indicated that the current government does not intend to change the existing ownership rules.



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However, on March 3, 2010, the Throne Speech opening the new Parliament session
reintroduced this Government objective to relax the foreign ownership restrictions.

Ownership and Control of Canadian
Broadcast Undertakings

Subject to any directions issued by the Governor in Council (effectively the Federal Cabinet), the
CRTC regulates and supervises all aspects of the Canadian broadcasting system.

The Governor in Council, through an
Order-in-Council referred to as the Direction to the CRTC (Ineligibility of Non-Canadians), has directed the CRTC not to issue, amend or renew a broadcasting license to an applicant that is a non-Canadian. Canadian, a defined term in the
Direction, means, among other things, a citizen or a permanent resident of Canada, a qualified corporation, a Canadian government, a non-share capital corporation of which a majority of the directors are appointed or designated by statute,
regulation or specified governmental authorities, or a qualified mutual insurance company, qualified pension fund society or qualified cooperative of which not less than 80% of the directors or members are Canadian. A qualified corporation is one
incorporated or continued in Canada, of which the chief executive officer (or if there is no chief executive officer, the person performing functions similar to those performed by a chief executive officer) and not less than 80% of the directors are
Canadian, and not less than 80% of the issued and outstanding voting shares and not less than 80% of the votes are beneficially owned and controlled, directly or indirectly, by Canadians. In addition to the above requirements, Canadians must
beneficially own and control, directly or indirectly, not less than 66.6% of the issued and outstanding voting shares and not less than 66.6% of the votes of the parent company that controls the subsidiary, and neither the parent company nor its
directors may exercise control or influence over any programming decisions of the subsidiary if Canadians beneficially own and control less than 80% of the issued and outstanding shares and votes of the parent corporation, if the chief executive
officer of the parent corporation is a non-Canadian or if less than 80% of the parent corporations directors are Canadian. There are no specific restrictions on the number of non-voting shares which may be owned by non-Canadians. Finally, an
applicant seeking to acquire, amend or renew a broadcasting license must not otherwise be controlled in fact by non-Canadians, a question of fact which may be determined by the CRTC in its discretion. Control is defined broadly in the Direction to
mean control in any manner that results in control in fact, whether directly through the ownership of securities or indirectly through a trust, agreement or arrangement, the ownership of a corporation or otherwise. Videotron, TVA Group, Archambault
Group and Sun Media are qualified Canadian corporations.

Regulations made under the Broadcasting Act require the prior
approval of the CRTC for any transaction that directly or indirectly results in (i) a change in effective control of the licensee of a broadcasting distribution undertaking or a television programming undertaking (such as a conventional
television station, network or pay or specialty undertaking service), (ii) a person or a person and its associates acquiring control of 30% or more of the voting interests of a licensee or of a person who has, directly or indirectly, effective
control of a licensee, or (iii) a person or a person and its associates acquiring 50% or more of the issued common shares of the licensee or of a person who has direct or indirect effective control of a licensee. In addition, if any act,
agreement or transaction results in a person or a person and its associates acquiring control of at least 20% but less than 30% of the voting interests of a licensee, or of a person who has, directly or indirectly, effective control of the licensee,
the CRTC must be notified of the transaction. Similarly, if any act, agreement or transaction results in a person or a person and its associates acquiring control of 40% or more but less than 50% of the voting interests of a licensee, or a person
who has directly or indirectly effective control of the licensee, the CRTC must be notified.

Diversity of
Voices

On April 13, 2007, in response to consolidation in the Canadian broadcasting industry, the CRTC
launched a public proceeding (Broadcasting Notice of Public Hearing CRTC 2007-5) to review various issues relating to the ownership of Canadian broadcasting companies and other issues related to the diversity of voices in Canada. As part of the
review, the CRTC was examining issues relating to, among other things, concentration of ownership, common ownership of broadcasting distribution undertakings, cross media ownership, vertical integration and the CRTCs relationship with the
Competition Bureau. A public hearing on this matter was held in mid-September 2007. On January 15, 2008, the CRTC issued its determination in Broadcasting Public Notice CRTC 2008-4, entitled Diversity of Voices. In this public
notice, the CRTC introduced new policies with respect to cross-media ownership; the common ownership of television services, including pay and specialty services; and the common ownership of broadcasting distribution undertakings. The CRTCs
existing policies with respect to the common ownership of over-the-air television and radio



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undertakings remain in effect. The CRTC will generally permit ownership by one person of no more than one conventional television station in one language in a given market. The CRTC, as a general
rule, will not approve applications for a change in the effective control of broadcasting undertakings that would result in the ownership or control, by one person, of a local radio station, a local television station and a local newspaper serving
the same market. Where a person that controls a local radio station and a local television station acquires a local newspaper serving the same market, the CRTC will, at the earliest opportunity, require the licensee to explain why, in light of this
policy, its radio or television license(s) should be renewed. The CRTC, as a general rule, will not approve applications for a change in effective control that would result in the control, by one person, of a dominant position in the delivery of
television services to Canadians that would impact on the diversity of programming available to television audiences. Specifically, as a general rule, the CRTC will not approve transactions that would result in the control by one person of more than
45% of the total television audience share  including audiences to both discretionary and OTA services. The CRTC will carefully examine transactions that would result in the control by one person of between 35% and 45% of the total television
audience share  including audiences to both discretionary and OTA services. Barring other policy concerns, the CRTC will process expeditiously transactions that would result in the control by one person of less than 35% of the total television
audience share  including audiences to both discretionary and OTA services. In terms of broadcasting distribution undertakings, the CRTC, as a general rule, will not approve applications for a change in the effective control of BDUs in a
market that would result in one person being in a position to effectively control the delivery of programming services in that market. The CRTC is not prepared to allow one person to control all BDUs in any given market.

Jurisdiction Over Canadian Broadcast Undertakings

Videotrons cable distribution undertakings and TVA Groups programming activities are subject to the Broadcasting Act and regulations made under the Broadcasting Act that empower the CRTC,
subject to directions from the Governor in Council, to regulate and supervise all aspects of the Canadian broadcasting system in order to implement the policy set out in that Act. Certain of Videotrons and TVA Groups undertakings are
also subject to the Radiocommunication Act, which empowers Industry Canada to establish and administer the technical standards that networks and transmission must respect, namely, maintaining the technical quality of signals.

The CRTC has, among other things, the power under the Broadcasting Act and regulations to issue, subject to appropriate conditions, amend,
renew, suspend and revoke broadcasting licenses, approve certain changes in corporate ownership and control, and establish and oversee compliance with regulations and policies concerning broadcasting, including various programming and distribution
requirements, subject to certain directions from the Federal Cabinet.

Canadian Broadcasting Distribution (Cable
Television)

Licensing of Canadian Broadcasting Distribution Undertakings

A cable distribution undertaking distributes broadcasting services to customers predominantly over closed transmission paths. A license to
operate a cable distribution undertaking gives the cable television operator the right to distribute television programming services in its licensed service area. Broadcasting licenses may be issued for periods not exceeding seven years and are
usually renewed, except in particular circumstances or in cases of a serious breach of the conditions attached to the license or the regulations of the CRTC. The CRTC is required to hold a public hearing in connection with the issuance, suspension
or revocation of a license. Videotron operates 52 cable systems pursuant either to the issuance of a license or of an order that exempts certain network operations from the obligation to hold a license.

Cable systems with 2,000 customers or fewer and operating their own local headend are exempted from the obligation to hold a license
pursuant to exemption orders issued by the CRTC. These cable systems are required to comply with a number of programming carriage requirements set out in the exemption order and comply with the Canadian ownership and control requirements in the
Direction to the CRTC. Videotron operates 17 of these exempted cable systems. On October 30, 2008, the CRTC issued a new distribution regulatory framework in which it announced that it determines to exempt, under a single exemption order, all
terrestrial distribution systems with fewer than 20,000 subscribers and to introduce a single class of license for those BDUs that not eligible for exemption. On August 31, 2009, the CRTC issued an Exemption order for terrestrial BDUs serving
fewer than 20,000 subscribers (Broadcasting Order CRTC 2009-544). In September 2009, Videotron submitted an application for relief from the obligation to be licensed for all its networks of 20,000 subscribers or less. We expect a decision from the
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In November 2003, the CRTC finalized the regulatory framework that will govern the
distribution of digital signals by over-the-air television stations (Broadcasting Public Notice CRTC 2003-61). The CRTC requires broadcasting distribution undertakings to distribute the primary digital signal of a licensed over-the-air television
service in accordance with the priorities that currently apply to the distribution of the analog version of the services. The CRTC expects all broadcasting distribution undertakings to implement the necessary upgrades. Analog carriage can be
phased-out only once 85% of a particular broadcasting distribution undertakings customers have digital receivers or set-top boxes that can convert digital signals to analog. Exempt undertakings will not be required to duplicate mandatory
services in digital format.

In Broadcasting Public Notice CRTC 2007-53, the CRTC has established August 31, 2011, as the
deadline for over-the-air television services to transition from analog to digital and HD broadcasting, with the possibility of limited exceptions in northern and remote regions.

The Digital Migration Framework for programming services that do not use airwaves was published in February 2006 (Broadcasting Public Notice
CRTC 2006-23). A cable BDU must continue to mirror any given analog tier until 85% of subscribers have a digital set-top box or until January 1, 2013, whichever occurs first. Some distribution priority status (dual and modified dual) is
abandoned in the digital environment but the CRTC considered the possibility that certain specialty services may still warrant carriage on basic in a digital environment. In decision CRTC 2007-246, the CRTC approved an application by the National
Broadcast Reading Service Inc. for a broadcasting license to operate a national, English-language digital specialty described video programming undertaking to be known as The Accessible Channel. The CRTC also approved the applicants request
for this service to be designated for mandatory distribution on digital basic by direct-to-home (DTH) satellite distribution undertakings and by Class 1 and Class 2 broadcasting distribution undertakings, excluding MDS undertakings. The CRTC
approved in part applications for the services CBC Newsworld and Le Réseau de linformation to be designated for mandatory distribution on digital basic by DTH satellite distribution undertakings and by Class 1 and Class 2 BDUs,
excluding MDS undertakings that do not currently carry the services. The CRTC approved in part an application for Avis de Recherche to be designated for mandatory distribution on digital basic by DTH satellite distribution undertakings and by
Class 1 and Class 2 BDUs, excluding MDS undertakings. The CRTC also approved amendments to the broadcasting license for Avis de Recherche, as requested by the applicant. On June 11, 2009, the CRTC issued a mandatory distribution order (CRTC
2009-340) requiring all Class 1 BDU to distribute The Weather Network and MétéoMédia on the digital basic service. The mandatory distribution order (issued by the CRTC under section 9(1)(h) of the Broadcasting Act)
will be effective September 1, 2010 and expire August 31, 2015.

A further framework governing the licensing and
distribution of pay and specialty services to high definition, or HD, signals was made public in June 2006 (Broadcasting Public Notice CRTC 2006-74). The CRTC expects that, over time, all or most pay and specialty services will upgrade their
programming to the new digital HD standard in order to meet the expectations of the marketplace. Under this framework, BDUs will be obliged to distribute those HD pay and specialty services that offer certain minimum amounts of HD programming
(subject to available channel capacity until distribution of analog signals ceases by that BDU entirely). Carriage of programming services in the analog mode, in the standard definition digital mode and in the HD digital mode creates stress on a
cable distributors capacity to serve the public with as much choice as competitors that generally do not have to distribute in the analog mode.

In order to conduct our business, we must maintain our broadcasting distribution undertaking licenses in good standing. Failure to meet the terms of our licenses may result in their short-term renewal,
suspension, revocation or non-renewal. We have never failed to obtain a license renewal for any cable systems.

Distribution of Canadian Content

The Broadcasting Distribution Regulations issued by the CRTC
pursuant to the Broadcasting Act mandate the types of Canadian and non-Canadian programming services that may be distributed by broadcasting distribution undertakings, including cable television systems. For example, Canadian television broadcasters
are subject to must carry rules which require terrestrial distributors, like cable and MDS systems, to carry the signals of local television stations and, in some instances, regional television stations as part of their basic service.
The guaranteed carriage enjoyed by local television broadcasters under the must carry rules is designed to ensure that the signals of local broadcasters reach cable households and enjoy advantageous channel placement. Furthermore, cable
operators, DBS operators and MDS operators must offer their customers more Canadian programming than non-Canadian programming services. In summary, each cable television system is required to distribute all of the Canadian programming services that
the CRTC



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has determined are appropriate for the market it serves, which includes local and regional television stations, certain specialty channels and pay television channels, and a pay-per-view service,
but does not include Category Two digital services and video-on-demand services.

The CRTC currently permits the linkage of up
to one non-Canadian service for one Canadian specialty service and up to five non-Canadian services for every one Canadian pay-television service. On October 30, 2008, the CRTC announced that, as of August 31, 2011, the CRTC will eliminate
these 1:1 and 5:1 packaging rules and BDUs will be permitted to offer a package consisting only of non-Canadian services. Most of these tiering and linkage rules will be replaced by rules providing that the number of Canadian services received by a
cable television customer must exceed the total number of non-Canadian services received. The CRTC has issued a list of non-Canadian programming services eligible for distribution in Canada on a discretionary user-pay basis to be linked along with
Canadian pay-television services or with Canadian specialty services. This list will be revised from time to time. The CRTC decided that it would not be in the interest of the Canadian broadcasting system to permit the distribution of certain
non-Canadian pay-television movie channels and specialty programming services that could be considered competitive with licensed Canadian pay-television and specialty services. Therefore, pay-television movie channels and certain specialty
programming services available in the United States and other countries are not approved for distribution in Canada. However, on October 30, 2008, the CRTC also announced that, with respect to non-Canadian news services, a more open-entry
approach should be adopted. Accordingly, absent clear evidence that non-Canadian news service will violate Canadian regulations (such as those regarding abusive comment), the CRTC will be predisposed to authorize such service for distribution in
Canada. Following recent CRTC policy statements, most foreign third language (other than English and French) programming services can be eligible for distribution in Canada if approved by the CRTC and if legacy Canadian services of the same language
are distributed as well.

Also important to broadcasting operations in Canada are the specialty (or thematic) programming
service access rules. Cable systems in a French-language market, such as Videotrons, with more than 6,000 customers are required to offer each analog French-language Canadian specialty and pay television programming service licensed, other
than religious specialty services, to the extent of available channels. Similarly, DBS satellite operators must, by regulation, distribute all Canadian specialty services other than Category Two digital specialty services and religious specialty
services. Moreover, all licensed specialty services, other than Category Two digital specialty services and religious specialty services, as well as at least one pay television service in each official language, must be carried by larger cable
operators, such as Videotron, when digital distribution is offered. These rules seek to ensure wider carriage for certain Canadian specialty services than might otherwise be secured through negotiation. However, Category Two digital specialty
services do not benefit from any regulatory assistance guaranteeing distribution other than a requirement that a cable operator distribute at least five (to be reduced to three as of August 31, 2011) unrelated Category Two digital specialty
services for each Category Two digital specialty service distributed by such cable operator in which such cable operator or its affiliates control more than 10% of the total shares. In French-language markets like the markets we serve, two of each
Category Two services must be French-language services. Cable systems (not otherwise exempt) and DBS satellite operators are also subject to distribution and linkage requirements for programming services set by the CRTC and amended from time to time
which include requirements that link the distribution of eligible non-Canadian satellite programming services with Canadian specialty and pay television services.

On October 30, 2008, as part of its new regulatory framework for BDUs to take effect on August 31, 2011, the CRTC has determined to retain access rights for Canadian analog and Category One pay
and specialty services (Category A Services) for digital distribution only. The requirement for BDUs to distribute Category A services on a digital basis will apply to either a standard definition (SD) or high definition (HD)
version of the service. BDUs will no longer be required to distribute Category A services on an analog basis after that date. To the extent that BDUs wish to continue to providing their subscribers with an analog offering, the CRTC will propose
rules to cover such offerings when it issues proposed amendments to the regulations governing BDUs.

Broadcasting
Distribution Regulations

The Broadcasting Distribution Regulations enacted in 1998, also called the 1998 Regulations,
apply to distributors of broadcasting services or broadcasting distribution undertakings in Canada. The 1998 Regulations promote competition between broadcasting distribution undertakings and the development of new technologies for the distribution
of such services while ensuring that quality Canadian programs are exhibited. The 1998 Regulations introduced important new rules, including the following:



| |  |  | 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.
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| |  |  | Signal Substitution. A significant aspect of television broadcasting in Canada is simultaneous program substitution, or simulcasting, a
regulatory requirement under which Canadian distribution undertakings, such as cable television systems with over 6,000 customers, are required to substitute the foreign programming service, with local Canadian signal, including Canadian
commercials, for broadcasts of identical programs by a U.S. station when both programs are exhibited at the same time. These requirements are designed to protect the program rights that Canadian broadcasters acquire for their respective local
markets. The CRTC, however, has suspended the application of these requirements to DTH satellite operators for a period of time, so long as they undertake certain alternative measures, including monetary compensation to a fund designed to help
finance regional television productions.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Canadian Programming and Community Expression Financing Rules. All distributors, except systems with fewer than 2,000 customers, are required to
contribute at least 5% of their gross annual broadcast revenues to the creation and presentation of Canadian programming including community programming. However, the allocation of these contributions between broadcast and community programming can
vary depending on the type and size of the distribution system involved. On October 30, 2008, the CRTC issued a new distribution regulatory framework in which it announced that a further 1% will be added to the 5% contribution in order to
finance a new national programming fund. Depending on the final terms of this regulatory framework, Videotron may institute proceedings challenging its validity.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inside Wiring Rules. The CRTC determined that the inside wiring portion of cable networks creates a bottleneck facility that could affect
competition if open access is not provided to other distributors. Incumbent cable companies may retain the ownership of the inside wiring but must allow usage by competitive undertakings to which the cable company may charge a just and reasonable
fee for the use of the inside wire. On September 3, 2002, the CRTC established a fee of $0.52 per customer per month for the use of cable inside wire in MDUs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On July 5, 2007, the CRTC announced a review of the regulatory framework for broadcasting distribution undertakings, as well as the
regulatory framework for discretionary programming services (Broadcasting Notice of Public Hearing CRTC 2007-10). As part of this review, the CRTC is considering reducing the amount of regulation for broadcasting distribution undertakings and
discretionary programming services to the minimum essential to achieve the objectives under the Broadcasting Act, relying instead on market forces wherever possible.

As a result of this review, on October 30, 2008, the CRTC issued a distribution regulatory framework entitled Regulatory frameworks for broadcasting distribution undertakings and
discretionary programming services. Pursuant to this new regulatory framework, the CRTC has decided to implement various changes to the regulatory frameworks for broadcasting distribution undertakings and discretionary programming
services. As described above under Distribution of Canadian Content, as of August 31, 2011, this new regulatory framework provides for the CRTC eliminating some of the existing distribution and linkage rules for discretionary
programming services carried by broadcasting distribution undertakings while continuing the existing preponderance requirement (i.e., that each subscriber receives more than 50% Canadian programming services). The CRTC has also decided to introduce
competition for those genres of Category A Services (which have generally licensed on a one-per-genre basis and to be complementary and not compete with one another) where it is convinced that a competitive environment will not significantly reduce
either the diversity of services available to viewers or their contribution to the creation of Canadian programming. At this time, the CRTC has decided to eliminate the current one per-genre policy for mainstream national news and mainstream sports
specialty services. Amendments to the BDU regulations to be introduced to take effect August 31, 2011, will require all licensed BDUs to first obtain the consent of over-the-air Canadian television stations (OTAs) prior to distributing their
local stations located in a distant market (Canadian distant signals). BDUs operating under an exemption order will not require consent from the



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broadcaster. These OTAs will be permitted to negotiate payment from BDUs for the retransmission of their local stations as distant signals. The distribution by BDUs of a second set of U.S. 4+1
signals to subscribers will be subject to subscribers also receiving at least one signal, originating from the same time zone as the U.S. signals, of each large multi-station Canadian broadcasting group. Finally, BDUs serving more than 20,000
subscribers will be required to contribute to a new fund created to help finance local television stations called the Local Production Improvement Fund (LPIF). As of September 1, 2009, this contribution is fixed
at 1.5% of these BDUs respective revenues from broadcast activities. The percentage of the LPIF contribution for 2010-2011 wil be determined in the first quarter of 2010.

On October 30, 2008, the CRTC also issued two requests for comments, one regarding the sales of advertising in local availabilities
(generally two minutes per hour of air time on non-Canadian cable channels) and the other regarding the video-on-demand regulatory framework. We expect, in both cases, relaxation of the current rules.

Rates

Our revenue related to cable television is derived mainly from (a) monthly subscription fees for basic cable service; (b) fees for premium services such as specialty services, pay-television, pay-per-view television and
video-on-demand; and (c) installation and additional outlets charges.

The CRTC does not regulate the fees charged by
non-cable broadcast distribution undertakings and does not regulate the fees charged by cable providers for non-basic services. The basic service fees charged by Class 1 (6,000 customers or more) cable providers are regulated by the CRTC until true
competition exists in a particular service area, which occurs when:



| | (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.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For all but two service areas, accounting for less than 6% of our subscribers, our basic
service fees for our customers have been deregulated. The new distribution policy issued on October 30, 2008 announced that all retail rate regulations will be withdrawn on August 31, 2011.

The CRTC further restricts installation fees to an amount that does not exceed the average actual cost incurred to install and connect the
outlet to a household situated in a residential area.

Subject to certain notice and other procedural requirements, for Class
1 cable systems still regulated, we may increase our basic service rates so as to pass through to customers increases, if the CRTC has authorized fees to be paid to specialty programming services distributed on our basic service. However, the CRTC
has the authority to suspend or disallow such an increase.

In the event that distribution services may be compromised as a
result of economic difficulties encountered by a Class 1 cable distributor, a request for a rate increase may be submitted to the CRTC. The CRTC may approve an increase if the distributor satisfies the criteria then in effect for establishing
economic need. In accordance with the new regulatory framework announced on October 30, 2008 and discussed above in the section  Canadian Broadcasting Distribution (Cable Television) Broadcasting Distribution
Regulations, all rates regulation will be eliminated on August 31, 2011.

Other recent changes to regulations
which have been announced

On December 2, 2009, the CRTC approved Videotrons application to acquire from its
subsidiary CF Cable TV Inc., as part of a corporate reorganization, the assets of all terrestrial BDUs partially serving Montreal and Laval (Quebec) (Decision CRTC 2009-745). This corporate reorganisation will allow the consolidation of all
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On December 1, 2009, pursuant to a decision of the CRTC (Decision CRTC 2009-738),
Videotron was granted the authority to acquire from TVA Group, as part of a corporate reorganization, the assets of Canal Indigo, the national French-language general interest pay-per-view television programming undertaking distributed by cable.
Videotron intends to leverage a more coordinated management of both pay-per-view and video-on-demand licenses.

On
October 22, 2009, the CRTC amended the Exemption Order applying to new media broadcasting undertakings (Appendix A to the Public Notice CRTC 1999-197). As such, the description of a new media broadcasting undertaking was
amended to encompass all Internet-based and mobile point-to-point broadcasting services, to introduce an undue preference provision for new media broadcasting undertakings, and to introduce a reporting requirement for such undertakings (Broadcasting
Order CRTC 2009-660).

On September 16, 2009, the Governor in Council issued an Order in Council (P.C. 2009-1569)
requesting that the CRTC hold hearings and provide a report on the implications and advisability of implementing a compensation regime for the value of local television signals (Broadcasting Notice of Consultation CRTC 2009-614). This is pursuant to
Broadcasting Notice of Consultation CRTC 2009-411 in which the CRTC announced a hearing regarding the terms and conditions for group-based licensing that would provide the necessary criteria to consider upcoming applications for group-based
seven-year license renewals and revenue support for conventional TV broadcasters that can be drawn from distributors like Videotron. Subject to the outcome of this hearing and of a Cabinet decision, Videotron might have to pay a fee to over-the-air
broadcasters such as TVA Group.

Pursuant to Broadcasting Regulatory Policy CRTC 2009-560 issued on
September 4, 2009, the CRTC now requires the owners of large broadcasting distribution undertakings, multi-system operators and conventional television ownership groups, such as Quebecor Media, to publicly disclose their annual aggregate
financial data. Therefore, we are now required to file on a yearly basis a new aggregated return form for Videotron and TVA Group (on or before November 30thof each year). This aggregated financial data is posted on the CRTC website.

Also on September 4, 2009, the CRTC announced the standard conditions of licenses for competitive Canadian mainstream sports and
national news specialty services (Broadcasting Regulatory Policy CRTC 2009-562). Therefore, LCN has applied to the CRTC for a license amendment so it can compete on a level playing field with the all news channel operated by the public broadcaster.
TVA Group applied for a Sports service license to compete with an existing sports channel. TVA Group also applied for a license in the regulated pre-school children programming niche and for a general interest pay TV license as an effort to obtain
from the regulator a deregulation of that programming niche. Both applications have been approved, the children programming licence on February 22, 2010 and the Sports programming licence on February 26, 2010.

On August 31, 2009, the CRTC announced that it had made amendments to the Broadcasting Distribution Regulations (the BDU Regulations),
the Television Broadcasting Regulations, 1987 (the Television Broadcasting Regulations), the Pay Television Regulations, 1990 (the Pay Television Regulations) and the Specialty Services Regulations, 1990 (the Specialty Services Regulations). These
amendments introduce a requirement that contributions to Canadian programming be remitted on a monthly basis and reconciled on an annual basis. More specifically, the amended regulations:



| |  |  | allow BDUs to make use of new forms of targeted advertising;
| | - |  | ------------------------------------------------------------



| |  |  | establish the evidentiary burden to be applied when assessing complaints of undue preference or disadvantage against BDUs;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | require BDUs of more than 20,000 subscribers to make a financial contribution of 1.5% (as of September 1, 2009, and revised periodically) of their
broadcast revenues to the LPIF;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | establish that contributions by BDUs to the LPIF and other funds are made on a monthly basis, with an annual adjustment;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | provide that pay television and specialty television undertakings whose programming services BDUs are required to distribute cannot withhold their
signals during a dispute resolution process before the CRTC;
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| |  |  | provide that pay television and specialty television services whose programming services are required to be distributed must ensure that their signals
are transmitted to distribution undertakings; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide that television broadcasting undertakings cannot give an undue preference to any person or subject any person to an undue disadvantage.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------

On July 28, 2009, in Review of broadcasting in new media, Broadcasting Regulatory Policy CRTC
2009-329, the CRTC set out its determinations in its proceeding on Canadian broadcasting in new media. However, the CRTC did not determine the legal issue as to whether Internet access providers carry on, in whole or in part, broadcasting
undertakings pursuant to the Broadcasting Act when they provide access to broadcasting through the Internet. Instead, the CRTC stated that it would refer the matter to the Federal Court of Appeal. Hence, the CRTC referred this question to the
Federal Court of Appeal Court for hearing and determination in its Broadcasting Order CRTC 2009-452. Subject to the outcome of this proceeding, it is possible that the CRTC may impose a regulatory financial contribution on cable and
telecommunications companies in order to create a national fund that would finance Canadian programming. The judgment is expected in the summer of 2010.

On July 6, 2009, the CRTC sets out its determinations relating to the LPIF, the appropriate contributions to Canadian programming, and the implementation of the new distant signal policy and digital
transition. With respect to the LPIF, the CRTC determined that for the upcoming broadcast year, the appropriate contribution level by BDU to the fund should be 1.5% of the annual gross revenues from their broadcasting activities (Broadcasting
Regulatory Policy CRTC 2009-406). The percentage of contribution for 2010-2011 is expected to be determined in the first quarter of 2010 pursuant to the hearing held on November 16, 2009 (Broadcasting Notice of Consultation CRTC 2009-411).

The CRTC renewed on July 6, 2009, the broadcasting licenses for the French-language national television network, TVA
Network, and the French-language television programming undertakings CFTM-TV Montréal, CFCM-TV Québec, CHEM-TV Trois-Rivières, CJPM-TV Saguenay, CHLT-TV Sherbrooke and CFER-TV Rimouski, from September 1, 2009 to
August 31, 2011. This short-term renewal will allow the CRTC to consider the next renewal for the licenses issued to TVA Group at the same time as it examines the license requirements for its competitors, TQS inc. and the French-language
television stations operated by the Canadian Broadcasting Corporation (Broadcasting Decision CRTC 2009-410).

On
March 27, 2009, the CRTC approved the application by Quebecor Media on behalf of TVA Group, to suspend conditions of license in order to be subject to the Journalistic Independence Code approved by the CRTC and established by the Canadian
Broadcast Standards Council (CBSC). This new journalistic code will allow cooperation between all of Quebecor Medias affiliates, including its newspapers, provided however that TVA Group remains a distinct editorial voice from the other
information organizations and that all editorial decisions for the TV programming are made by TVA Groups management (Broadcasting Decision CRTC 2009-162). The prohibition for newspapers and TV newsrooms to communicate is now removed.

On October 21, 2008, the CRTC published a new policy regarding disclosure of industry group financial results. Prior to
these changes, cable and telecommunications operators such as Videotron had their financial results aggregated with those of other similar companies in Canada for the purposes of certain CRTC disclosures. On and after November 30, 2008,
aggregated financial data for each of the following industry sub-groups will be disclosed by the CRTC: the large broadcasting distribution undertakings, multi-system operators and over-the-air television and radio ownership groups. This financial
data for each broadcasting year (September 1 to August 31) will be publicly available at: http://www.crtc.gc.ca/dcs/eng/current/dcs4_7.htm. Subject companies are required to post the same information on their respective websites. However, the
large broadcasting distribution undertakings, multi-system operators and over-the-air television and radio ownership groups received the CRTC form for reporting aggregated results on October 21, 2008 and are refusing to disclose figures that
would not be prepared according to GAAP and data that is not disclosed under Canadian and U.S. securities laws and regulations. On February 6, 2009, most large BDUs, multi-system operators and over-the-air television and radio ownership groups
requested that the CRTC initiate a new public consultation in order to allow the broadcasting industry to express its point of view on the specific financial data the CRTC would like to see disclosed. Pursuant to this process, the CRTC published
Regulatory Policy CRTC 2009-560 on September 4, 2009, pursuant to which it has required the public disclosure of certain aggregate financial data for owners of large BDUs, multi-system operators and conventional television and radio ownership
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On March 25, 2008, the CRTC authorized the transfer of the license for the
video-on-demand service Illico sur demand from Groupe Archambault Inc., one of our subsidiaries, to Videotron, another one of our subsidiaries. Videotron is now the operator of Quebecor Media groups video-on-demand service.

Copyright Board Proceedings

Certain copyrights in radio, television, internet and pay audio content are administered collectively and tariff rates are established by the Copyright Board of Canada. Tariffs set by the Copyright Board
are generally applicable until a public process is held and a decision of the Copyright Board is rendered for a renewed tariff. Renewed tariffs are often applicable retroactively.

Royalties for the Retransmission of Distant Signals

Following the implementation in 1989 of the Canada-U.S. Free Trade Agreement, the Copyright Act (Canada) was amended to require
retransmitters, including Canadian cable television operators, to pay royalties in respect of the retransmission of distant television and radio signals.

Since this legislative amendment, the Copyright Act (Canada) empowers the Copyright Board to quantify the amount of royalties payable to retransmit these signals and to allocate them among
collective societies representing the holders of copyright in the works thus retransmitted. Regulated cable television operators cannot automatically recover such paid retransmission royalties from their customers, although such charges might be a
component of an application for a basic cable service rate increase based on economic need.

In 2008, distant television
signal retransmission royalties varied from $0.35 to $0.85 per customer per month depending on the number of customers receiving the signal and whether the signal was transmitted by a small retransmission system, except in Francophone markets. In
Francophone markets, there is a 50% rebate. The same pricing structure, with lower rates, still applies for distant radio signal transmission. Most of Videotrons undertakings operate in Francophone markets. The collectives filed, for the
period 2009-2013, a proposed increase that would bring the royalties, at the end of 2013, to between $0.60 and $1.10 per customer per month depending on the number of customers receiving the signal. The new tariff has been contested by Videotron and
the industry.

Royalties for the Transmission of Pay and Specialty Services

In 1989, theCopyright Act (Canada) was amended, in particular, to define copyright as including the exclusive right to
communicate protected works to the public by telecommunication. Prior to the amendment, it was generally believed that copyright holders did not have an exclusive right to authorize the transmission of works carried on radio and
television station signals when these signals were not broadcast but rather transmitted originally by cable television operators to their customers. In 1996, at the request of the Society of Composers, Authors and Music Publishers of Canada (SOCAN),
the Copyright Board approved Tariff 17A, which required the payment of royalties by broadcasting distribution undertakings, including cable television operators, that transmit musical works to their customers in the course of transmitting television
services on a subscription basis. Through a series of industry agreements, this liability was shared with the pay and specialty programming services.

In March 2004, the Copyright Board changed the name of this tariff from Tariff 17A to Tariff 17 and rendered its decision setting Tariff 17 royalty rates for 2001 through 2004. The Copyright Board changed
the structure of Tariff 17 to calculate the royalties based on the revenues of the pay and specialty programming services (affiliation payments only in the case of foreign and pay services, and all revenues in the case of Canadian specialty
services) and set a basic royalty rate of 1.78% for 2001 and 1.9% for 2002 through 2004. The basic royalty rate is subject to reductions in certain cases, although there is no Francophone market discount. SOCAN has agreed, by filing proposed
tariffs, that the 2005 to 2010 tariffs will continue on the same basis as in 2004, the royalty rate remaining at 1.9%. The tariffs for 2009-2010 have yet to be certified by the Copyright Board.

Royalties for Commercial Television

SOCANs Tariff 2.A requires the payment of royalties by commercial television stations to SOCAN in compensation for the right to communicate to the public by telecommunication, in Canada, musical or
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works forming part of its repertoire. The tariff has been set at a percentage of a television stations revenues since 1959. In January 1998, the Copyright Board reduced the then applicable
rate from 2.1% to 1.8% and set up a modified blanket license, allowing television stations to opt out of the traditional blanket license for certain programs.

In March 2004, the Copyright Board certified SOCANs Tariff 2.A. for the years 1998 to 2004. According to the certified tariff, a
commercial television station pays, for the standard blanket license in 1998, 1999, 2000 and 2001, 1.8% of the stations gross income for the second month before the month for which the license is issued. For the year 2002 and thereafter, this
rate is increased to 1.9%.

SOCAN filed new proposed tariffs with the Copyright Board for the years 2008, 2009 and 2010. SOCAN
is not seeking any increase or modifications to the current tariff. The royalties are maintained at 1.9% for the years 2008 through 2010, and a station still has the option to opt out of the traditional blanket license, but on a monthly basis. This
election is allowed only twice in each calendar year.

SOCANs proposed Tariff 22.D would require television stations,
including TVA, to pay for communications of musical works as part of audiovisual works from Internet sites. Pursuant to the proposed Tariff 22.D, the royalty would be the greater of 15% of Internet gross revenues or 15% of Internet gross operating
expenses, with a minimum monthly fee of $200. The proposed tariff has been contested by the industry.

Royalties for Pay
Audio Services

The Copyright Board rendered a decision in March 2002 regarding two new tariffs for the years 1997-1998
to 2002, which provide for the payment of royalties by programming and distribution undertakings that broadcast pay audio services. The tariffs fix the royalties payable to SOCAN and to the Neighbouring Rights Collective of Canada, or NRCC,
respectively, during this period at 11.1% and 5.3% of the affiliation payments payable during a month by a distribution undertaking for the transmission for private or domestic use of a pay audio signal. The royalties payable to SOCAN and NRCC by a
small cable transmission system, an unscrambled low or very low power television station or by equivalent small transmission systems during this period were fixed by the Copyright Board at 5.6% and 2.6%, respectively, of the affiliation payments
payable during a year by the distribution undertaking for the transmission for private or domestic use of a pay audio signal. Royalties payable by a system located in a Francophone market during this period are calculated at a rate equal to 85.0% of
the rate otherwise payable.

In February 2005, the Copyright Board rendered its decision setting pay audio services royalties
for 2003 through 2006. The Copyright Board fixed the rate of royalties payable to SOCAN and NRCC during this period to 12.3% and 5.9%, respectively, of the affiliation payments payable during a month by a distribution undertaking for the
transmission for private or domestic use of a pay audio signal. In addition, the Copyright Board established the rate of royalties payable to SOCAN and NRCC during this period at 6.2% and 3.0%, respectively, for a small cable transmission system, an
unscrambled low or very low power television station or an equivalent small transmission system. The Copyright Board also eliminated the previously effective 15.0% discount to royalties payable by a system located in a Francophone market. We have
made interim royalty payments for 2003 and 2004 based on the lower royalty rate of the 2002 tariffs. The retroactive royalty obligations to SOCAN and NRCC owed since 2003 were paid in 2005.

Currently, the royalties payable by distribution undertakings for the communication to the public by telecommunication of musical works in
SOCANs repertoire in connection with the transmission of a pay audio signal other than retransmitted signals are as follows: a monthly fee of 12.35% of the affiliation payments payable by a distribution undertaking for the transmission for
private or domestic use of a pay audio signal, or an annual fee of 6.175% of the affiliation payments payable where the distribution undertaking is a small cable transmission system, an unscrambled low power or very low power television station or
an equivalent small transmission system. SOCAN has filed a proposed Pay Audio Tariff for the years 2008, 2009 and 2010 that proposes to maintain those rates.

For its part, NRCC filed a proposed Pay Audio Tariff for the period 2007-2011 asking for a monthly fee of 15% of the affiliation payments payable by a distribution undertaking for the transmission for
private or domestic use of a pay audio signal, or an annual fee of 7.5% of the affiliation payments payable where the distribution undertaking is a small cable transmission system, an unscrambled low power or very low power television station or an
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Royalties by Online Music Services

Archambault Group operates an online music downloading service, known as zik.ca, with per-track fees. In 2007, the Copyright Board
rendered two decisions on the tariffs proposed by, on one hand, CMRRA-SODRAC Inc. (CSI), an umbrella organization formed by the Canadian Musical Reproduction Rights Agency (CMRRA) and the Société du droit de reproduction des
auteurs, compositeurs et éditeurs du Canada Inc.(SODRAC), for the royalties to be paid by online music services for the reproduction of musical works in CSIs repertoire (CSI Tariff) and, on the other hand, SOCAN for the royalties
to be paid for the public performance of musical works in SOCANs repertoire (SOCAN Tariff) for the purposes of communicating and transmitting the musical works in a file to consumers in Canada via the Internet and authorizing consumers in
Canada to further reproduce the musical work for their own private use.

The certified tariffs, which resulted from those two
decisions, cover a number of years (2005 to 2006 for the CSI Tariff and 1996 to 2007 for the SOCAN Tariff) and establish different formulae for the calculation of royalties payable by online music services that only offer on-demand streams or
limited downloads with or without on-demand streams. With respect to services that offer permanent downloads, the combined royalty payable is 11% of the amount paid by the consumer for the download, subject to a minimum of 5.6¢ per
permanent download within a bundle of 13 or more files and a minimum of 7.4¢ per permanent download in all other cases. In June 2009, CSI and SOCAN filed proposed tariffs which would double the royalty. The new tariffs have been contested
by the industry.

Royalties for Online Music

It is expected that copyright collectives will try to certify tariffs for online music not part of an online music downloading service. This
could result in higher costs for operating websites containing online music content.

Royalties for Ringtones

In 2003, SOCAN filed a new proposed tariff, Tariff 24, for the communication of musical works incorporated into telephone or
other ringtones. Since 2006, Videotron sells ringtones directly to cellular phone users. In June 2006, the Copyright Board rendered its decision setting a ringtone royalty for 2003 through 2005. The Copyright Board fixed the rate of royalty payable
to SOCAN to 6% of the price paid for a ringtone by a cellular phone user, subject to a minimum royalty of 6.0¢ per ringtone. The minimum royalty only applies to the years 2004-2005. Following a judicial review, the Federal Court of Appeal
upheld the decision of the Copyright Board. For the years 2006-2009, SOCAN has filed a new Tariff 24 which would bring the royalty to 10% of the price paid for a ringtone by a cellular phone user, subject to a minimum royalty of 10.0¢ per
ringtone. The new tariffs have been contested by the industry.

ISP Liability

In 1996, SOCAN proposed a tariff to be applied against ISPs, in respect of composers/publishers rights in musical works
communicated over the Internet to ISPs customers. SOCANs proposed tariff was challenged by a number of industry groups and companies. In 1999, the Copyright Board decided that ISPs should not be liable for the communication of musical
works by their customers, although they might be liable if they themselves operated a musical website. In June 2004, the Supreme Court of Canada upheld this portion of the decision of the Copyright Board and determined that ISPs do not incur
liability for copyright content when they engage in normal intermediary activities, including web hosting for third parties and caching. As a consequence, ISPs may, however, be found liable if their conduct leads to the inference that they have
authorized a copyright violation. A proposed amendment to the Copyright Act (Canada) was introduced in June 2005 in Parliament to exempt ISPs for copyright liability for merely providing customers with access to the Internet and not operating
the website itself. Following the November 2005 election call, the June 2005 Bill to amend the Copyright Act (Canada) was not enacted. Although there are continuous discussions to reintroduce such a Bill, it is premature to predict whether
the amendment will be reintroduced in Parliament and enacted into law.



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Canadian Broadcast Programming (Off the Air and Thematic Television)

Programming of Canadian Content

CRTC regulations require licensees of television stations to maintain a specified percentage of Canadian content in their programming. Television broadcasters are subject to regulations requiring that,
over the broadcast year and over any six-month period specified in the license, a minimum of 60% of the aggregate programming shown during the broadcast day (a continuous 18-hour period between 6:00 a.m. and 1:00 a.m. the following day) must be of
Canadian origin. Canadian origin is most commonly achieved on the basis of a points system requiring that a number of creative and production staff be Canadian and that specified Canadian production expenditure levels be met. In addition, not less
than 50% of the aggregate programming between the hours of 6:00 p.m. and 12:00 midnight over the broadcast year must be of Canadian origin. Specialty or thematic television channels also have to maintain a specified percentage of Canadian content in
their programming generally set forth in the conditions of their license.

Since September 1, 2000, we have been subject
to a CRTC policy requiring the largest multi station ownership groups to broadcast over the broadcast year on average a minimum of eight hours per week of priority programming during prime time, from 7:00 p.m. to 11:00 p.m. To permit greater
flexibility in meeting these requirements, the definitions of priority programs and prime time have been expanded. Priority programming now includes Canadian produced drama, music and dance, variety and long-form documentaries, but does not include
news and information or sports programming. Quantitative commitments and fixed spending requirements have been eliminated.

Advertising

The CRTC also regulates the quantity and content of television advertising. A television
licensee shall not broadcast more than 12 minutes of advertising during any hour subject to certain exceptions for unpaid public service announcements and promotions for upcoming Canadian programs. In Public Notice 2007-53, Determinations
regarding certain aspects of the regulatory framework for over-the-air television issued on May 17, 2007, the CRTC decided to increase the number of advertising minutes that over-the-air television stations may broadcast.
Specifically, increased the 12 minute per hour limit on traditional advertising to 14 minutes per hour in peak viewing periods (7 p.m. to 11 p.m.) effective September 1, 2007. The limit will be increased to 15 minutes per hour for all viewing
periods effective September 1, 2008, and eliminated altogether as of September 1, 2009. In its Regulatory frameworks for broadcasting distribution undertakings and discretionary programming services published on October 30,
2008, the CRTC announced that the 12 minute per hour of advertising limit for pay and specialty services would remain in force.

Broadcasting License Fees

Broadcasting licensees are subject to annual license fees payable to the
CRTC. The license fees consist of two separate fees. One fee allocates the CRTCs regulatory costs for the year to licensees based on a licensees proportion of the gross revenue derived during the year from the licensed activities of all
licensees whose gross revenues exceed specific exemption levels. The other fee, also called the Part II license fee, for broadcasting undertakings, is 1.365% of the amount by which its gross revenue derived during the year from its licensed activity
exceeds $1,500,000. Our broadcasting activities are subject to both fees.

In February 2004, we filed a claim before the
Federal Court on the basis that the Part II license fee is similar to a tax levy and that the CRTC has no jurisdiction to impose a tax. This claim has been merged with a similar claim from the Canadian Association of Broadcasters. In December 2006,
the Federal Court rendered judgment in our favour declaring the Part II license fee a tax levy that the CRTC had no jurisdiction to impose. The court however denied us reimbursement of amounts paid by us on account of the Part II license fees. On
January 11, 2007, we filed an appeal of the Federal Courts decision that denied us reimbursement. The crown has also appealed the courts decision that the fee constitutes an illegal tax. On October 1, 2007, the CRTC issued a
letter to all broadcasters announcing that it will no longer require broadcasting licensees (including distribution undertakings) to pay Part II license fees. As a result of an out-of-court settlement reached in the Fall of 2009 between the
Government of Canada and members of the broadcasting industry with respect to the Part II broadcasting licence fees, the Government recommended that the CRTC develop a new fee regime that would cap the total annual Part II licence fees to be
paid by broadcasters to the lesser of the current Part II licence fees, calculated according to section 11 of the Regulations, and $100 million, adjusted annually after 2010 by changes in the Consumer Price Index. As part of the settlement, the
parties have also agreed not to seek refunds for past amounts



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owed. On December 22, 2009, the CRTC issued a Broadcasting Notice of Consultation (CRTC 2009-797) inviting the parties to comment on the proposed amendments, which implement the settlement,
to the Broadcasting Licence Fee Regulations, 1997 (the Regulations).

In a call for comments regarding certain aspects of the
regulatory framework for over-the-air television, we had asked the regulator to consider leaving off-the-air TV networks like TVA to negotiate a fee with broadcast distributors for the carriage of the signal. We have also asked to remove any
obligations to use independent producers so that TV broadcasters can more often own intellectual property of TV programs and become able to exhibit such programs on new platforms as much as possible. In Public Notice 2007-53, Determinations
regarding certain aspects of the regulatory framework for over-the-air television issued on May 17, 2007, the CRTC decided (i) not to allow a subscriber fee for the carriage of local conventional over-the-air stations by BDUs,
and (ii) not to eliminate the current quotas on programming to be produced by independent producers. The Chairman of the CRTC announced on November 5, 2007 that the CRTC was of the view that any further consideration of the
fee-for-carriage issue should take place within a broad context, such as that afforded by the upcoming review initiated by Broadcasting Notice of Public Hearing 2007-10. Accordingly, the CRTC found it appropriate to expand the scope of this
proceeding to include consideration of the fee-for-carriage issue. In October 2008, the CRTC denied the request made by over-the-air television stations (OTAs) with respect to imposing a subscriber fee for the carriage of their signals by
broadcaster distribution undertakings, such as cable and satellite. On September 16, 2009, the Governor in Council has issued an Order in Council (P.C. 2009-1569) requesting that the CRTC hold hearings and provide a report on the implications
and advisability of implementing a compensation regime for the value of local television signals (Broadcasting Notice of Consultation CRTC 2009-614). This is pursuant to Broadcasting Notice of Consultation CRTC 2009-411 in which the CRTC announced a
hearing regarding the modalities and conditions for group-based licensing that would provide the necessary criteria to consider upcoming applications for group-based seven-year license renewals and revenue support for conventional TV broadcasters
that can be drawn from distributors like Videotron. Subject to the outcome of this hearing and of a Cabinet decision, Videotron might have to pay a fee to over the air broadcasters like TVA Group.

In its Regulatory frameworks for broadcasting distribution undertakings and discretionary programming services published on
October 30, 2008, the CRTC announced that it rejects the request by OTA broadcasters for a general fee for carriage. However, the CRTC recognized that broadcasters should have the right to be compensated for the use of their signals when they
are retransmitted by a BDU outside the priority carriage market. Accordingly, the CRTCs policy with respect to Canadian distant signals will be to require all licensed BDUs to obtain the consent of OTA licensees prior to distributing their
local stations in a distant market.

The CRTC has also determined in as part of this new regulatory framework that it would be
appropriate to immediately introduce competition between Canadian specialty services operating in the genres of mainstream sports and mainstream national news. Once a genre has been opened for competition, the following rules will apply to all
services within the genre:



| |  |  | a common and standard nature of service definition;
| | - |  | ---------------------------------------------------



| |  |  | common Canadian programming exhibition and spending obligations;
| | - |  | ----------------------------------------------------------------



| |  |  | no access rights; and
| | - |  | ---------------------



| |  |  | no regulated wholesale fee.
| | - |  | ---------------------------

The CRTC set out proposed nature of service and contribution requirements in Broadcasting Public Notice 2008-103, issued on October 30, 2008. On September 4, 2009, the CRTC announced the
standard conditions of license for competitive Canadian mainstream sports and national news specialty services (Broadcasting Regulatory Policy CRTC 2009-562). Therefore, LCN has applied to the CRTC for a license amendment so it can compete on a
level playing field with the all news channel operated by the public television. TVA Group applied for a Sports service license to compete with an existing sports channel. TVA Group also applied for a license in the regulated pre-school children
programming niche and for a general interest pay TV license as an effort to obtain from the regulator a deregulation of that programming niche.



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Acquisition of a pay-per-view service

On July 18, 2008, the CRTC approved an application by TVA Group to acquire full ownership of Canal Indigo through the transfer to TVA
Group of the partnership interests held by the other partners in Canal Indigo, to authorize a corporate reorganization, to obtain a new broadcasting license to continue the operation of the national, French-language pay-per-view programming
undertaking Canal Indigo, and to amend one of the undertakings condition of license allowing more TVA production to be offered on the PPV service. On December 1, 2009, the CRTC approved the application made by Videotron to acquire from
TVA Group, as part of a corporate reorganization, the assets of Canal Indigo, a national French-language general interest pay-per-view television programming undertaking distributed by cable, and to obtain a new broadcasting licence to continue the
operation of the undertaking under the same terms and conditions as those in effect under the current licence (Decision CRTC 2009-738). The acquisition of Indigo by Videotron was realized the same day.

Canadian Telecommunications Services

Jurisdiction

The provision of telecommunications services in Canada
is regulated by the CRTC pursuant to the Telecommunications Act. With certain exceptions, companies that own or operate transmission facilities in Canada that are used to offer telecommunications services to the public for compensation are deemed
telecommunications common carriers under the Telecommunications Act administered by the CRTC and are subject to regulation. Cable operators offering telecommunications services are deemed Broadcast Carriers.

The Telecommunications Act, which came into force on October 25, 1993, as amended, provides for the regulation of facilities based
telecommunications common carriers under federal jurisdiction. Under the Telecommunications Act, the CRTC may exempt any class of Canadian telecommunications carriers from the application of the Telecommunications Act if the CRTC is satisfied that
such an exemption is consistent with implementation of the Canada telecommunications policy objectives. The CRTC must refrain from regulating certain telecommunications services or classes of services provided by Canadian carriers, if it finds that
such service or class is or will be subject to competition sufficient to protect the interests of users. The CRTC is prohibited from making a determination to refrain if refraining from regulation could likely impair unduly the establishment or
continuance of a competitive market for a particular service or class of services.

On December 18, 2006, the federal
government issued a policy direction to the CRTC which requires the CRTC to take a more market-based approach to implement the Telecommunications Act. This policy direction applies prospectively to the wide-variety of telecommunications-related
regulatory issues that the CRTC handles. Application of this policy could result in future material changes to telecommunications regulation.

In the Canadian telecommunications market, Videotron operates as a CLEC and a Canadian broadcast carrier. Videotron is also constructing its own 3G mobile wireless network and intends to offer services
over this network as a WSP.

The issuance of licenses for the use of radiofrequency spectrum in Canada is administered by
Industry Canada under the Radiocommunication Act. Use of spectrum is governed by conditions of license which address such matters as license term, transferability and divisibility, technical compliance, lawful interception, research and development
requirements, and requirements related to antenna site sharing and mandatory roaming.

Our AWS licenses were issued on
December 23, 2008, for a term of ten years. At a minimum of two years before the end of this term, and any subsequent terms, we may apply for license renewal for an additional license term of up to ten years. AWS license renewal, including
whether license fees should apply for a subsequent license term, will be subject to a public consultation process initiated in year eight.

Overview of the Telecommunications Competition Framework

Competition in the Canadian long-distance and local telephony markets is guided to a large extent by the principles set out in Telecom Decision CRTC 92-12, which removed the telephone companies monopoly in the provision



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of public long-distance voice telecommunications services, Review of Regulatory Framework, Telecom Decision CRTC 94-19, which sets out the principles for a new, pro-competitive regulatory
framework, and Local Competition Telecom Decision CRTC 97-8, which establishes the policy framework for local exchange competition. The CRTC has issued numerous follow-up rulings on matters of policy and inter carrier dispute. The CRTC
Interconnection Steering Committee, or CISC, also provides an ongoing forum for consensus based resolution of inter carrier technical and operational issues.

Application of Canadian Telecommunications Regulation

In a series
of decisions, the CRTC has determined that the carriage of non-programming services by cable companies results in that company being regulated as a carrier under the Telecommunications Act. This applies to a company serving its own
customers, or allowing a third party to use its distribution network to provide non-programming services to customers, such as providing access to cable Internet services.

In addition, the CRTC regulates the provision of telephony services in Canada. On May 1, 1997, the CRTC established the regulatory
framework for the provision of competitive local telephony services in Canada. Among the key elements of this framework are: a technical form of interconnection based on a co-carrier (i.e., peer-to-peer) relationship between the ILEC and
CLECs; mutual compensation for traffic termination (including Bill & Keep compensation at low levels of traffic imbalance); effective deregulation of CLEC retail service offerings with the exception of certain social obligations such as the
provision of enhanced 911 service; and the imposition of a series of regulatory safeguards on the ILECs to protect against anti-competitive conduct on their part, including retail tariffing requirements, service bundling restrictions and winback
restrictions. Most of the latter restrictions have since been removed or rendered moot as the ILECs have secured widespread regulatory forbearance for their local exchange services.

Elements of the CRTCs telecommunications regulatory framework to which Videotron is subject include: interconnection standards and
inter-carrier compensation arrangements; the mandatory provision of equal access (i.e. customer choice of long distance provider); standards for the provision of 911 service, message relay service and certain privacy features; and the
obligation not to prevent other local exchange carriers from accessing end-users on a timely basis under reasonable terms and conditions in multi dwelling units where Videotron provides service; and the payment of contribution on VoIP revenues for
the purposes of the revenue-based contribution regime established by the CRTC to subsidize residential telephone services in rural and remote parts of Canada.

Generally speaking, the CRTC has pursued a policy of favoring facilities based competition in telecommunications. Key to the CRTCs framework are decisions issued on January 25, 2001 and
June 30, 2003, respectively, regarding access to municipal rights of way and access to multi dwelling units. In both cases, the CRTC adopted a policy of open access, with fees generally limited to recovering costs reasonably incurred.
Application of the framework principles to individual access cases, however, has encountered resistance from certain municipalities and building owners. It remains to be determined whether any of these access cases will need to be brought before the
CRTC for resolution.

On February 3, 2005, the CRTC issued a decision re-affirming and expanding a tariff regime
initially established in June 2002 whereby competitive carriers may purchase certain digital network services from the ILECs at reduced cost-based rates. This regime had undermined Videotrons position in the wholesale market for business
telecommunications services. To remain competitive with the ILECs in the wholesale market, Videotron has substantially reduced the rates it charges other competitive carriers for certain digital network services that would be eligible under the new
tariff regime were they purchased from the ILEC.

On March 3, 2008, the CRTC released a decision in which it ruled that
most mandated wholesale digital network services will be phased out over a period of three to five years. This decision is expected to have the effect of improving Videotrons position in the wholesale market.

On April 6, 2006, the CRTC issued its framework for the forbearance from regulation of local telephone services offered by the ILECs.
On April 4, 2007, in response to a petition filed by Bell Canada and the other ILECs, the Governor in Council issued an order varying this framework. The order eliminated forthwith all restrictions on local telephone winback and promotional
activities in all geographic markets, and further established a local forbearance framework whereby: (i) residential local exchange services and business local exchange services are in different relevant markets; (ii)



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the relevant geographic market for local forbearance analysis is the telephone exchange; and (iii) the incumbent carrier must demonstrate that a competitor presence test has been satisfied,
in addition to satisfying certain criteria related to the availability and quality of provision of services to competitors, before forbearance can be sought in any given market. For residential services, the competitor presence test requires the
existence of two independent facilities based service providers, other than the incumbent, each of which is capable of serving 75% of the lines in the exchange, and one of which is a fixed-line provider. In business markets, the competitor presence
test requires the existence of one independent facilities based fixed-line service provider, other than the incumbent, capable of serving 75% of the lines in the exchange.

The CRTC has since approved numerous applications for local forbearance submitted by Bell Aliant, Bell Canada, Télébec and
TELUS-Quebec, in both the residential and business local exchange markets. As a result, Videotrons incumbent local service competitors are now free from regulation of local exchange services in the vast majority of residential markets in which
Videotron competes, as well as in a large number of business markets, including all of the largest metropolitan markets in the Province of Quebec. These rulings granting the ILECs forbearance applications enable the ILECs to adjust their local
exchange service prices for the approved exchanges without approval from the CRTC. Such price flexibility by our ILECs competitors for local exchange services could have an adverse impact on our ability to compete successfully with them in the local
telephony market.

On December 20, 2007, the CRTC granted conditional approval to a new telecommunications consumer
agency, to which Videotron had previously adhered voluntarily. The major Canadian cable operators, including Videotron, challenged certain elements of this ruling, and the CRTC issued a revised decision on May 30, 2008. Among other things, the
CRTC ruled that all telecommunications service providers with annual revenues in excess of $10 million must become members of the agency for a period of three years. Videotron remains a member in good standing of the agency. A three-year review of
the agency and its activities is expected to begin in 2010.

Right to Access to Telecommunications and Support
Structures

The CRTC has concluded that some provisions of the Telecommunications Act may be characterized as
encouraging joint use of existing support structures of telephone utilities to facilitate efficient deployment of cable distribution undertakings by Canadian carriers. We access these support structures in exchange for a tariff that is regulated by
the CRTC. If it were not possible to agree on the use or conditions of access with a support structure owner, we could apply to the CRTC for a right of access to a supporting structure of a telephone utility. The Supreme Court of Canada, however,
held on May 16, 2003 that the CRTC does not have jurisdiction under the Telecommunications Act to establish the terms and conditions of access to the support structure of hydro-electricity utilities. Terms of access to the support structures of
hydro-electricity utilities must therefore be negotiated with those utilities.

Videotron has entered into comprehensive
support structure access agreements with all of the major hydro-electric companies and all of the major telecommunications companies in its service territory. Videotrons agreement with Hydro-Quebec, by far the largest of the hydro-electric
companies, expires in December 2010.

On July 21, 2009, pursuant to an initial application from TELUS Corporation, the
CRTC initiated a new proceeding to review the large ILECs support structure service rates. The CRTC simultaneously declared all current support structure service rates to be interim, opening up the possibility that any new rates that emerge
from the proceeding may be applied retroactively to July 21, 2009. To date, the cable carriers, including Videotron, have successfully challenged attempts by the ILECs to modify the costing methodology employed by the CRTC when rates were last
reviewed in 1995. A decision on new rates is expected toward the end of summer 2010. If this review results in an increase in rates, it may have a significant impact on Videotrons network cost structure.

Access by Third Parties to Cable Networks

In Canada, access to the Internet is a telecommunications service. While Internet access services are not regulated on a retail (price and terms of service) basis, Internet access for third-party ISPs is
mandated and tariffed according to conditions approved by the CRTC for cable operators.

On July 6, 1999, the CRTC
required certain of the largest cable operators in Canada, including Videotron, to submit cost-based tariffs for cable Internet access services, known as open access or third party access, in order to allow competing retail ISPs, to offer such
services over a cable infrastructure. The CRTC has further directed us to file, at the



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same time we offer any new retail Internet service speed in the future, proposed revisions to our TPIA tariff to include this new speed offering. TPIA tariff items have been filed and approved
for all Videotron Internet service speeds. Several third party ISPs are now interconnected to our cable network and so providing retail Internet access services to the general public.

The CRTC also requires the large cable carriers, such as us, to allow third party ISPs to provide voice or telephony applications services
in addition to retail Internet access services.

On March 3, 2008, the CRTC released a decision affirming that cable TPIA
services are not essential services, yet mandated that they continue to be provided at cost-based rates until such time as it has been demonstrated that a functionally equivalent, practical and feasible wholesale alternative exists.

On May 8, 2009, the CRTC initiated a new proceeding to consider the appropriateness of mandating certain wholesale
high-speed access services by local exchange carriers and cable carriers including, in the case of cable carriers: (i) the actual or virtual collocation of competitor equipment at a headend or equivalent, and (ii) the dedication of six MHz
channels for competitor use. The cable carriers, including Videotron, have argued that the first proposal closely resembles the existing TPIA regime, while the second proposal is technically infeasible and would unduly restrict their ability to
offer an innovative and expanding range of services to their own retail customers. On December 23, 2009, in response to a December 10, 2009 Order in Council from the federal government, the CRTC expanded the scope of the proceeding to
consider, among other things, whether the application of the existing essential services framework on a forward-looking basis provides appropriate incentives for continued investment in broadband infrastructure. A public hearing on this subject is
scheduled to begin in May 2010.

Telemarketing

On September 30, 2008, a comprehensive reform of the CRTCs telemarketing rules came into force, including the establishment of a
new National Do Not Call List (DNCL). In accordance with new legislative powers granted under Bill C 37, which came into force on June 30, 2006, the CRTC has the authority to fine violators of its telemarketing rules up to $1,500 per violation
in the case of an individual and $15,000 per violation in the case of a corporation. Videotron has established internal controls to minimize the risk of breaching these rules and to provide any required investigative assistance in relation to
alleged third party violations.

Internet Traffic Management Practices

On October 21, 2009, the CRTC issued a new regulatory policy regarding the Internet traffic management practices (ITMPs) of ISPs. The
policy attempts to balance the freedom of Canadians to use the Internet for various purposes with the legitimate interests of ISPs to manage the traffic thus generated on their networks, consistent with legislation, including privacy legislation.
Among other things, the policy sets rules for ensuring transparency in the use of economic and technical ITMPs, and establishes an ITMP framework that provides a structured approach to evaluating whether existing and future ITMPs are in compliance
with the prohibition on unjust discrimination (e.g. as against specific applications or content) found in the Telecommunications Act. Specific rules are also established to ensure that wholesale customers are not subjected to unjust discrimination.
While we consider Videotrons current ITMPs to be fully compliant with the policy, we note that it may limit the range of ITMPs Videotron could choose in the future, thereby potentially constraining our ability to recover the costs of our
access network.

Regulatory Framework for Mobile Wireless Services

On July 21, 2008, Quebecor Media was declared the provisional winner of 17 AWS spectrum and operating licenses allocated at auction by
Industry Canada. These licenses cover the entirety of the Province of Quebec, as well as Eastern and Southern Ontario. These licenses, the control of which was transferred from Quebecor Media to Videotron subsequent to the completion of the auction,
were issued by Industry Canada on December 23, 2008.

Industry Canadas policy framework for the AWS auction
contained several measures intended to promote new facilities-based entry into the wireless industry. Among these measures were proposed rules to mandate inter-carrier roaming and the sharing of wireless antenna sites. On November 29, 2008,
Industry Canada published the final rules for mandated roaming and site sharing, as well as the final arbitration procedure for resolving commercial disputes related to roaming and site sharing. These rules and procedures are now in effect.



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The CRTC also regulates mobile wireless services under the Telecommunications Act. On
August 12, 1994, the CRTC released a decision forbearing from the exercise of most of its powers under the Telecommunications Act as they relate to mobile wireless service. However, the CRTC did maintain its ability to require conditions
governing customer confidential information and to place other general conditions on the provision of mobile wireless service. Since 1994, the CRTC has since exercised this power, for example, to mandate wireless number portability.

On February 2, 2009, the CRTC issued a decision requiring all WSPs to upgrade their networks by February 1, 2010, to more
precisely determine the location of a person using a mobil phone to call 911. New entrants that launch services, after February 1, 2010, are to have the required functionality in place at the time of launch. This decision will add to
Videotrons initial costs of network deployment.

Canadian Publishing

General

Federal and provincial laws do not directly regulate the publication of newspapers in Canada. There are, however, indirect restrictions on the foreign ownership of Canadian newspapers by virtue of certain provisions of the Income Tax
Act (Canada), which limits the deductibility by Canadian taxpayers of advertising expenditures which are made in a newspaper other than, subject to limited exceptions, a Canadian issue of a Canadian newspaper. For any
given publication to qualify as a Canadian issue of a Canadian newspaper, the entity that publishes it, if publicly traded on a prescribed stock exchange in Canada, must ultimately be controlled, in law and in fact, by Canadian citizens and, if a
private company, must be at least 75% owned, in vote and in value, and controlled in fact by Canadians. In addition, the publication must be printed and published in Canada and edited in Canada by individuals resident in Canada. All of our
newspapers qualify as Canadian issues of Canadian newspapers (or otherwise fall outside of the limitation on deductibility of advertising expenses) and, as a result, our commercial advertisers generally have the right to
deduct their advertising expenditures with us for Canadian tax purposes.

Broadcasting Undertakings 
Diversity of Voices

In Broadcasting Public Notice CRTC 2008-4 issued on January 15, 2008, the CRTC
has published a new policy on Diversity of Voices stating that, as a general rule, the CRTC will not approve applications for a change in the effective control of broadcasting undertakings that would result in the ownership or control,
by one person, of a local radio station, a local television station and a local newspaper serving the same market. Where a person that controls a local radio station and a local television station acquires a local newspaper serving the same market,
the CRTC will, at the earliest opportunity, require the licensee to explain why, in light of this policy, its radio or television license(s) should be renewed. For the purpose of that policy, local market is determined using the
BBM/Nielsen definition of the local radio market, local newspaper is defined as a newspaper that is published at least five days per week with no less than 50% of its total circulation is within the relevant radio market and no less than
50% of its total circulation is paid. local radio station means a commercial radio station licensed to operate in a market where the licensee is expected to provide local news and information and Local television station
means a commercial television station licensed to operate in a market where the licensee is expected to provide local news and information. However indirect, this constitutes a new limitation on ownership of Canadian newspapers.

ITEM 4A  UNRESOLVED STAFF COMMENTS

None.

ITEM 5  OPERATING AND FINANCIAL REVIEW AND
PROSPECTS

The following discussion and analysis provides information concerning our operating results and financial
condition. This discussion should be read in conjunction with our consolidated financial statements and accompanying notes. Our consolidated financial statements have been prepared in accordance with Canadian GAAP, which differs from the U.S. GAAP
in certain respects. For a discussion of the principal differences between Canadian GAAP and U.S. GAAP



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as they relate to our financial statements, 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, 2007 and 2009 and see Note 27 to our audited consolidated financial statements for the year ended December 31, 2008. This discussion contains forward-looking statements, which are subject to a
variety of factors that could cause actual results to differ materially from those contemplated by these statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed under Cautionary
Statement Regarding Forward-Looking Statements and in Item 3. Key Information  Risk Factors.

Overview

Quebecor Media is one of Canadas leading media companies, with activities in cable
distribution, residential and business telecommunications, newspaper publishing, production and distribution of printing products, television broadcasting, book, magazine and video retailing, publishing and distribution, music recording, production
and distribution, and new media services. Through its operating subsidiaries, Quebecor Media holds leading positions in the creation, promotion and distribution of news, entertainment and Internet-related services that are designed to appeal to
audiences in every demographic category. Quebecor Media continues to pursue a convergence strategy to capture synergies within its portfolio of media properties.

Quebecor Medias operating subsidiaries primary sources of revenues include: subscriptions for cable television, Internet access and telephony services; newspaper advertising, circulation and
internet/portal services; television broadcasting advertising, distribution and subscription; book and magazine publishing and distribution; retailing, distribution (traditional distribution and digital download) and production of music products
(compact discs, or CDs, digital video discs, or DVDs, musical instruments, music recording and live event promotion and production); rental and sale of videos and games. Its broad portfolio of media assets includes businesses that have historically
tended to provide stable revenues with relatively low sensitivity to general economic conditions, such as cable television, and businesses that have tended to be more cyclical and sensitive to economic conditions and fluctuations, such as newspaper
publishing. While some of Quebecor Medias businesses are relatively stable or mature, it continues to develop, acquire or leverage capabilities and assets with growth potential, such as cable and wireless telephony service and digital cable.

Quebecor Medias principal direct costs consist of television programming costs, including royalties, Internet bandwidth
and transportation costs, newsprint and publishing costs, and set-top box and modem costs. Major components of its operating expenses include salaries and benefits, subcontracting costs, advertising, and regulatory expenses.

Trend Information

Some of Quebecor Medias businesses are cyclical in nature. They are dependent on advertising and, in the News Media segment in particular, circulation sales. Operating results are therefore
sensitive to prevailing economic conditions, especially in Quebec, Ontario and Alberta. In the News Media segment, circulation, measured in terms of copies sold, has been generally declining in the industry over the past several years. Also, in the
News Media segment, the traditional run of press advertising for major multi-market retailers has been declining over the past few years due to consolidation in the retail industry combined with a shift in marketing strategy toward other media.

Competition continues to be intense in the cable and alternative multichannel broadcast distribution industry and in the
broadcasting and newspaper industries. In order to respond to such competition, our News Media operations continue to expand their Internet presence through branded websites, including French- and English-language portals and specialized sites. Sun
Media, and our other News Media operations, will also continue to seek opportunities to grow their businesses by leveraging their existing brands.

Changes in the price of newsprint can have a significant effect on the News Media segments operating results as newsprint is its principal expense besides wages and benefits and represented
approximately 10.1% ($83.6 M) of our News Media segments operating expenses for the year ended December 31, 2009. The newsprint industry is highly cyclical, and newsprint prices have historically experienced significant volatility.
We currently anticipate that the market price of newsprint will increase in 2010, based on recent announcements from our supplier citing higher manufacturing costs. Changes in the price of newsprint could significantly affect our earnings, and
volatile or increased newsprint costs have had, and may in the future have, a material adverse effect on our financial condition and results of operations. Our News Media segment aims to manage the effects of newsprint price increases through a
combination of, among other



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things, waste management, technology improvements, web width reduction, inventory management, and by controlling the mix of editorial versus advertising content. In addition, in order to obtain
more favourable pricing, we source substantially all of our newsprint from a single newsprint producer, AbitibiBowater. We currently obtain newsprint from this supplier at a discount to market prices, and receive additional volume rebates for
purchases above certain thresholds. On April 16, 2009, AbitibiBowater and some of its Canadian subsidiaries placed themselves under the protection of the CCAA. On the same date, AbitibiBowater and some of its U.S. and Canadian subsidiaries
placed themselves under the protection of Chapter 11 of the United States Bankruptcy Code. These proceedings have had no material impact on the operations of Quebecor Media to date. Quebecor Media continues to monitor the situation.
There can be no assurance that this supplier will continue to supply newsprint to us on favourable terms or at all. If we are unable to continue to source newsprint from this supplier on favourable terms, or if we are unable to otherwise source
sufficient newsprint on terms acceptable to us, our costs could increase materially, which could have a significant negative impact on our results (see also  Item 3 : Key Information  Risk Factors).

The television industry is undergoing a period of significant change. Television audiences are fragmenting as viewing habits shift not only
towards specialty channels but also towards content delivery platforms that allow users greater control over content and timing, such as the Internet, Video-on-Demand and mobile devices. Audience fragmentation has prompted many advertisers to review
their strategies. The Broadcasting segment is taking steps to adjust to the profound changes occurring in its industry so as to maintain its leadership position and offer audiences and advertisers alike the best available content, when they want and
on the media they want.

In addition, Quebecor Medias business has experienced, and is expected to continue to
experience significant fluctuations in operating results due to, among other things, seasonal advertising patterns and seasonal influences on reading and viewing habits.

Our Segments

Quebecor Medias subsidiaries operate in the
following business segments: Telecommunications, News Media, Broadcasting, Leisure and Entertainment and Interactive Technologies and Communications.

In the second quarter of 2009, Quebecor Media adopted new names for two of its business segments. To reflect the Cable segments comprehensive range of cable television, Internet access and telephone
services, as well as the future roll-out of its AWS, its name was changed to the Telecommunications segment. At the same time, in view of the incorporation of Canoe content into the operations of Sun Media, the Newspapers segment has been renamed
News Media, reflecting the creation of an integrated news and related products organization that provides diverse, original content of high quality for all of Quebecor Medias platforms.

Quebecor Medias Interest in Subsidiaries

The table below shows Quebecor Medias equity interest in its main subsidiaries at of December 31, 2009.

Quebecor Medias interest (direct and indirect) in its main subsidiaries

as of
December 31, 2009



|                             |  |                      |   |  |                     |  
|---------------------------- |  | -------------------- | - |  | ------------------- | -
|                             |  | Percentage of Equity |   |  | Percentage of Votes |  
|Videotron Ltd.               |  | 100                  | % |  | 100                 | %
|Sun Media Corporation        |  | 100                  | % |  | 100                 | %
|Osprey Media Publishing Inc. |  | 100                  | % |  | 100                 | %
|Canoe Inc.                   |  | 100                  | % |  | 100                 | %
|TVA Group Inc.               |  | 51.4                 | % |  | 99.9                | %
|Archambault Group Inc.       |  | 100                  | % |  | 100                 | %
|Sogides Group Inc.           |  | 100                  | % |  | 100                 | %
|CEC Publishing Inc.          |  | 100                  | % |  | 100                 | %
|Nurun Inc.                   |  | 100                  | % |  | 100                 | %

Quebecor
Medias interest in its subsidiaries has not varied significantly over the past three years, with the exception of the acquisition of all outstanding units of Osprey Media for a total cash consideration of $414.4 million (excluding assumed
liabilities) in 2007, the acquisition of the outstanding Common Shares of Nurun that were not already held for a total cash consideration of $75.2 million in the first quarter of 2008, and the repurchase by TVA Group of 3,000,642 Class B
shares for a cash consideration of $51.4 million in the second quarter of 2008. Over the past three years, Quebecor Medias equity interest in TVA Group has increased from 45.2% at January 1, 2007 to 51.4% as of December 31,
2009. During the same period, Quebecor Medias interest in Canoe increased from 92.4% to 100.0%.



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Highlights Since End of 2008



| |  |  | On January 14, 2010, Quebecor Media made a US$170.0 million early payment on drawings on its term loan B and settled a
corresponding portion of its hedge agreements for $30.9 million, for a total cash disbursement of $206.7 million. On January 14, 2010, Quebecor Media also extended the maturity date of its $100.0 million revolving credit facility
from January 2011 to January 2013 and obtained certain other advantageous amendments to the covenants attached to its credit facilities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On January 13, 2010, Videotron completed a placement of $300.0 million aggregate principal amount of its 71/8% Senior Notes maturing in 2020, for net proceeds of
$293.9 million (net of financing fees). This transaction marks Videotrons inaugural offering on the Canadian high yield market, adding to its established presence in the US high yield market.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Restructuring and cost-reduction initiatives in the News Media segment generated total savings of approximately $66.0 million in 2009. These
initiatives included staff cuts, consolidation of prepress, shipping and press room operations, centralization of administrative processes, consolidation of distribution networks, and other initiatives across the News Media segments operations
in all regions of Canada.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During 2009, Videotron completed several key stages in the build-out of its AWS network during 2009. As of December 31, 2009, all switching
services and platforms had been installed and were operational. Interconnections with the existing fibre optic network were in place and incorporated into the companys integrated service, and siting and tower-sharing agreements for nearly 60%
of the antenna sites needed to launch the service had been reached.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On December 2, 2009, Videotrons cable telephone service passed the million-subscriber mark, less than five years after its launch. As
of December 31, 2009, Videotron had recorded overall customer growth for its cable television services for 18 consecutive quarters, i.e. since the end of the second quarter of 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On November 16, 2009, Quebecor Media combined four of its national sales teams, those for Sun Medias newspapers, the canoe.ca Internet
portal, the TVA Network and its publications. The new integrated national approach to advertising solutions will make us more responsive to customer needs by offering solutions that deliver maximum value for advertising dollars.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On November 13, 2009, Videotron closed a term export credit agreement for a total of US$100.0 million, including $75.0 million maturing in 2018
and another credit agreement maturing in 2016 for US$100.0 million less the drawings, in U.S. dollars, on the $75.0 million credit facility. The credit facilities may be used to pay or reimburse foreign purchases of equipment and services.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On August 26, 2009, Videotrons illico Digital TV service passed the million-subscriber mark. Videotron is maintaining its leadership
position in digital cable television service in Quebec.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On August 26, 2009, Archambault Group launched the jelis.ca digital ebook download site, the first French-language service of its kind in North
America. Archambault Group is carrying out this project in collaboration with Sony Canada Ltd., provider of the Sony Reader® line of digital book devices.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On July 22, 2009, Videotron reached a roaming agreement with wireless service provider Rogers. Videotron also reached a similar roaming agreement
in the United States with wireless service provider T-Mobile. These agreements will enable Videotron to offer AWS services across Canada and the United States.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On June 18, 2009, Quebecor Media created the Quebecor Media Network, a new flyer printing and distributing division. The capabilities of
subsidiaries Alex Media Services Inc., Messageries Dynamiques, the community newspaper distribution network, the Mirabel printing plant in Quebec and the Islington printing plant in Ontario were pooled to create the new entity. The merger will
solidify Quebecor Medias leadership in flyer printing and distribution services.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | On March 30, 2009, Videotron reached an agreement to renew its collective agreements encompassing all of its 2,822 unionized employees, including
those in Montreal, Sherbrooke and Québec City until December 31, 2013, SaguenayLac-St-Jean until January 31, 2014, and Gatineau until August 31, 2015. The agreement covers all of Videotrons unionized employees. It
will support Videotrons continued growth going forward and the implementation of its business plan.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On March 5, 2009, Videotron issued US$260.0 million aggregate principal amount of Senior Notes for net proceeds of $332.4 million
(including accrued interest and net of financing fees). The Notes bear 91/8% interest (effective rate of 9.35%) and mature on April 15, 2018. Videotron used the proceeds to repay all drawings under its revolving credit facility and the remainder for general purposes.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Non-GAAP Financial Measures

We use certain supplemental financial measures that are not calculated in accordance with or recognized by Canadian GAAP or U.S. GAAP to
assess our financial performance. We use these non-GAAP financial measures, such as operating income, cash flows from segment operations, free cash flows from continuing operating activities and average revenue per user, which we refer to as ARPU,
because we believe that they are meaningful measures of our performance. Our method of calculating these non-GAAP financial measures may differ from the methods used by other companies and, as a result, the non-GAAP financial measures presented in
this annual report may not be comparable to other similarly titled measures disclosed by other companies.

In the second
quarter of 2009, Quebecor Media made changes to the definitions of the non-GAAP measures it uses. Additions to intangible assets (excluding initial amount disbursed for the acquisition of AWS licences) are now deducted in the calculation of Cash
flow from segment operations and of Free cash flow from continuing operating activities.

Operating Income

We define operating income, as reconciled to net income under Canadian GAAP, as net income (loss) before amortization, financial expenses,
gain (loss) on valuation and translation of financial instruments, restructuring of operations, impairment of assets and other special items, loss on debt refinancing, impairment of goodwill and intangible assets, income taxes, non-controlling
interest and income from discontinued operations. Operating income as defined above is not a measure of results that is recognized under Canadian GAAP or U.S. GAAP. It is not intended to be regarded as an alternative to other financial
operating performance measures or to the statement of cash flows as a measure of liquidity and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP or U.S. GAAP. Our
parent company, Quebecor, considers Quebecor Media 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 our consolidated
results as well as the results of our operating segments. As such, this measure eliminates the effect of significant levels of non-cash charges related to 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 its segments. Operating income is also relevant because it is a significant component of our 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 our segments. Quebecor Media uses other measures that do reflect such costs, such as cash flows from segment
operations and free cash flows from continuing operating activities. 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
table below presents a reconciliation of operating income to net income (loss) as presented in our consolidated financial statements. The consolidated income statement data for the three-month periods ended December 31, 2009 and 2008 presented
in the table below is derived from our unaudited consolidated financial statements for such periods not included in this annual report.



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Reconciliation of the operating income measure used in this annual report and the net (loss) income as
presented in our consolidated financial statements (in millions of Canadian dollars)



|                                                                          |  |                        |         |   |                               |   |         |      |  |   |        |   |  |      |        |   |      |   |        |      |  |   |       |   |  |   |        |  
|------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ----------------------------- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | - |  | - | ------ | -
|                                                                          |  | Year Ended December 31 |         |   | Three months endedDecember 31 |  
|                                                                          |  | 2009                   |         |   | 2008                          |   |         | 2007 |  |   | 2006   |   |  | 2005 |        |   | 2009 |   |        | 2008 | 
|Operating Income                                                          |  |                        |         |   |                               |   |         |      |  |   |        |   |  |      |        |   |      |   |        |      |  |   |       |   |  |   |        |  
|Telecommunications                                                        |  | $                      | 972.9   |   |                               | $ | 797.9   |      |  | $ | 642.3  |   |  | $    | 509.8  |   |      | $ | 411.4  |      |  | $ | 280.9 |   |  | $ | 218.1  |  
|News Media                                                                |  |                        | 199.5   |   |                               |   | 227.1   |      |  |   | 232.8  |   |  |      | 217.7  |   |      |   | 231.2  |      |  |   | 69.3  |   |  |   | 54.8   |  
|Broadcasting                                                              |  |                        | 80.0    |   |                               |   | 66.0    |      |  |   | 59.4   |   |  |      | 41.8   |   |      |   | 52.3   |      |  |   | 32.2  |   |  |   | 22.5   |  
|Leisure and Entertainment                                                 |  |                        | 25.9    |   |                               |   | 20.2    |      |  |   | 26.9   |   |  |      | 19.3   |   |      |   | 26.3   |      |  |   | 8.4   |   |  |   | 11.0   |  
|Interactive Technologies and Communications                               |  |                        | 4.1     |   |                               |   | 5.1     |      |  |   | 2.8    |   |  |      | 7.5    |   |      |   | 3.9    |      |  |   | 1.4   |   |  |   | 3.0    |  
|Head Office                                                               |  |                        | 2.3     |   |                               |   | 3.3     |      |  |   | (0.8   | ) |  |      | 0.5    |   |      |   | 3.7    |      |  |   | (0.9  | ) |  |   | 1.0    |  
|                                                                          |  |                        |         |   |                               |   |         |      |  |   |        |   |  |      |        |   |      |   |        |      |  |   |       |   |  |   |        |  
|                                                                          |  |                        | 1,284.7 |   |                               |   | 1,119.6 |      |  |   | 963.4  |   |  |      | 796.6  |   |      |   | 728.8  |      |  |   | 391.3 |   |  |   | 310.4  |  
|Amortization                                                              |  |                        | (341.5  | ) |                               |   | (316.7  | )    |  |   | (287.7 | ) |  |      | (258.0 | ) |      |   | (229.8 | )    |  |   | (86.9 | ) |  |   | (82.8  | )
|Financial Expenses                                                        |  |                        | (238.2  | ) |                               |   | (276.0  | )    |  |   | (230.1 | ) |  |      | (212.9 | ) |      |   | (270.8 | )    |  |   | (64.9 | ) |  |   | (66.2  | )
|Gain (Loss) on valuation and translation of financial instruments         |  |                        | 61.5    |   |                               |   | (3.7    | )    |  |   | (9.9   | ) |  |      | (11.7  | ) |      |   | (14.5  | )    |  |   | 2.5   |   |  |   | (26.7  | )
|                                                                          |  |                        |         |   |                               |   |        
|Restructuring of operations, impairment of assets and other special items |  |                        | (29.6   | ) |                               |   | (54.6   | )    |  |   | (11.2  | ) |  |      | (16.7  | ) |      |   | 0.3    |      |  |   | (21.5 | ) |  |   | (50.3  | )
|Loss on debt refinancing                                                  |  |                        |        |   |                               |   |        |      |  |   | (1.0   | ) |  |      | (342.6 | ) |      |   | (60.0  | )    |  |   |      |   |  |   |       |  
|Impairment of goodwill and intangible assets                              |  |                        | (13.6   | ) |                               |   | (671.2  | )    |  |   | (5.4   | ) |  |      | (180.0 | ) |      |   |       |      |  |   |      |   |  |   | (671.2 | )
|Income taxes                                                              |  |                        | (177.3  | ) |                               |   | (155.2  | )    |  |   | (75.7  | ) |  |      | 53.8   |   |      |   | (43.0  | )    |  |   | (61.3 | ) |  |   | (41.3  | )
|Non-controlling interest                                                  |  |                        | (23.8   | ) |                               |   | (23.2   | )    |  |   | (19.3  | ) |  |      | (0.7   | ) |      |   | (16.3  | )    |  |   | (10.7 | ) |  |   | (7.3   | )
|Income (loss) from discontinued operations                                |  |                        | 2.9     |   |                               |   | 2.3     |      |  |   | 5.2    |   |  |      | 2.0    |   |      |   | 1.0    |      |  |   |      |   |  |   |       |  
|                                                                          |  |                        |         |   |                               |   |         |      |  |   |        |   |  |      |        |   |      |   |        |      |  |   |       |   |  |   |        |  
|Net (loss) income                                                         |  | $                      | 525.1   |   |                               | $ | (378.7  | )    |  | $ | 328.3  |   |  | $    | (170.2 | ) |      | $ | 95.7   |      |  | $ | 148.5 |   |  | $ | (635.4 | )
|                                                                          |  |                        |         |   |                               |   |         |      |  |   |        |   |  |      |        |   |      |   |        |      |  |   |       |   |  |   |        |  

Cash Flows from Segment Operations

We use cash flows from segment operations as a measure of the liquidity generated by our segment operations. Cash flows from segment
operations represents funds available for interest and income tax payments, disbursements related to restructuring programs, business acquisitions, the payment of dividends and the repayment of long-term debt. Cash flows from segment operations is
not a measure of liquidity that is consistent with Canadian GAAP or U.S. GAAP. It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity.
Cash flows from segment operations is considered to be an important indicator of liquidity and is used by our management and Board of Directors to evaluate cash flows generated by our segment operations. This measure is unaffected by the capital
structure of Quebecor Media and its segments. Cash flows from segment operations represents operating income as defined above, less additions to property, plant and equipment and additions to intangible assets (excluding initial amount disbursed for
the acquisition of AWS licences), plus proceeds from the disposal of assets. When we discuss cash flows from segment operations in this annual report, we provide the detailed calculation of the measure in the same section.

Free Cash Flows from Continuing Operating Activities

We use free cash flows from continuing operating activities as a measure of total liquidity generated on a consolidated basis. Free cash flows from continuing operating activities represents funds
available for business acquisitions, the payment of dividends and the repayment of long-term debt. Free cash flows from continuing operating activities is not a measure of liquidity that is consistent with Canadian GAAP or U.S. GAAP. It is not
intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. Free cash flows from continuing operating activities is considered to be an important indicator
of our liquidity and is used by our management and Board of Directors to evaluate cash flows generated by our consolidated operations. We provide a reconciliation of free cash flows from continuing operating activities to cash flows provided by
continuing operating activities measure reported in the consolidated financial statements in the table below.



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Reconciliation between free cash flows from continuing operating activities and the cash flows provided
by continuing operating activities measure reported in the financial statements

(in millions of Canadian dollars)



|                                                                    |  |      |       |   |      |   |       |      |  |   |       |  
|------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                    |  | 2009 |       |   | 2008 |   |       | 2007 | 
|Free cash flows from continuing operations (see the relevant table) |  | $    | 350.5 |   |      | $ | 243.2 |      |  | $ | 289.0 |  
|Additions to property, plant and equipment(1)                       |  |      | 491.1 |   |      |   | 465.6 |      |  |   | 430.1 |  
|Additions to intangible assets                                      |  |      | 111.5 |   |      |   | 83.0  |      |  |   | 38.6  |  
|Proceeds from disposal of assets                                    |  |      | (3.6  | ) |      |   | (5.7  | )    |  |   | (6.1  | )
|                                                                    |  |      |       |   |      |   |       |      |  |   |       |  
|Cash flows provided by continuing operating activities              |  | $    | 949.5 |   |      | $ | 786.1 |      |  | $ | 751.6 |  
|                                                                    |  |      |       |   |      |   |       |      |  |   |       |  



|(1) | Excluding initial disbursement in 2008 for acquisition of AWS network licences.
|--- | -------------------------------------------------------------------------------

Average Monthly Revenue per User

ARPU is an industry metric that the Company uses to measure its average cable, Internet, cable telephone and wireless telephone revenues per month per customer. ARPU is not a measurement that is
consistent with Canadian or U.S. GAAP and the Companys definition and calculation of ARPU may not be the same as identically titled measurements reported by other companies. The Company calculates ARPU by dividing its combined cable
television, Internet access, cable telephone and wireless telephone revenues by the average number of customers during the applicable period, and then dividing the resulting amount by the number of months in the applicable period.

2009/2008 Financial Year Comparison

Revenues:$3.78 billion, an increase of $50.9 million (1.4%).



| |  |  | Revenues increased in Telecommunications (by $197.0 million or 10.9% of segment revenues) mainly due to customer growth for all services, Leisure
and Entertainment ($5.9 million or 2.0%), Broadcasting ($2.3 million or 0.5%) and Interactive Technologies and Communications ($1.4 million or 1.6%).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues decreased in News Media ($151.9 million or -12.9%) as a result of lower advertising revenues.
| | - |  | ------------------------------------------------------------------------------------------------------

Operating income: $1.28 billion, an increase of $165.1 million (14.7%).



| |  |  | Operating income increased in Telecommunications (by $175.0 million or 21.9% of segment operating income), Broadcasting ($14.0 million or
21.2%) and Leisure and Entertainment ($5.7 million or 28.2%).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating income decreased in News Media ($27.6 million or -12.2%) and Interactive Technologies and Communications ($1.0 million or -19.6%).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The increase in operating income includes a $61.5 million favourable variance (including $47.9 million in the Telecommunications segment and
$13.6 million in the Broadcasting segment) resulting from adjustments related to the provision for CRTC Part II licence fees (for more details, see Part II licence fees in the discussion of the results of the
Telecommunications and Broadcasting segments).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The changes in the fair value of Quebecor Media generated an $18.4 million unfavourable variance in the consolidated stock option expense in 2009
compared with 2008. The fair value of Quebecor Media, based on market comparables, increased during 2009, compared with a decrease in 2008.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impact of the consolidated stock option expense and the operating income of Osprey Media, acquired in 2007, and if the figures for all
prior periods were restated to retroactively reflect the CRTC Part II licence fee adjustment, the increase in operating income in 2009 would have been 11.2%, compared with 11.5% in 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net income:$525.1 million in 2009, compared with a net loss of $378.7 million in 2008, a $903.8 million improvement.



| |  |  | The variance was mainly due to:
| | - |  | -------------------------------



| |  |  | recognition in the fourth quarter of 2008 of a non-cash charge totalling $671.2 million, including $631.0 million without any tax
consequences, for impairment of goodwill and intangible assets, primarily in the News Media segment, compared with a $13.6 million charge in 2009;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | $165.1 million increase in operating income;
| | - |  | --------------------------------------------



| |  |  | $65.2 million favourable variance in gains on valuation and translation of financial instruments;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | $37.8 million decrease in financial expenses;
| | - |  | ---------------------------------------------



| |  |  | $25.0 million decrease in the charge for restructuring of operations, impairment of assets and other special items.
| | - |  | -------------------------------------------------------------------------------------------------------------------

Partially offset by:



| |  |  | $24.8 million increase in amortization charge.
| | - |  | ----------------------------------------------

Amortization charge:$341.5 million, a $24.8 million increase due mainly to significant capital expenditures in 2008 and 2009 in the Telecommunications segment.

Financial expenses: $238.2 million, a decrease of $37.8 million.



| |  |  | The decrease was mainly due to:
| | - |  | -------------------------------



| |  |  | $27.3 million increase in interest capitalized to additions to property, plant and equipment;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | lower base interest rates;
| | - |  | --------------------------



| |  |  | $9.6 million favourable variance in exchange rates on operating items.
| | - |  | ----------------------------------------------------------------------

Partially offset by:



| |  |  | impact of higher indebtedness.
| | - |  | ------------------------------



| |  |  | The interest increase caused by higher indebtedness was largely capitalized to additions to property, plant and equipment and acquisitions of
intangible assets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Gain on valuation and translation of financial instruments:$61.5 million in
2009, compared with a $3.7 million loss in 2008. The $65.2 million improvement resulted primarily from the fluctuation in the fair value of early settlement options due to interest rate fluctuations.

Charge for restructuring of operations, impairment of assets and other special items:$29.6 million in 2009, compared with
$54.6 million in 2008, a favourable variance of $25.0 million.



| |  |  | In 2009, a $26.3 million charge for restructuring of operations was recorded in the News Media segment. Faced with dramatic
newspaper-industry-wide changes in the past several years and the troubled economic environment, which is affecting its advertising revenues, the News Media segment implemented new restructuring and cost-reduction initiatives across Canada in 2009.
A $2.0 million charge for restructuring of operations was also recorded in 2009 in other segments.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2008, the News Media segment recognized a $33.3 million charge for restructuring of operations. In December 2008, the segment introduced a
staff reduction program as part of a major restructuring of its operations across Canada. Quebecor Media also recognized charges for restructuring totalling $2.3 million in some other segments in 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Quebecor Media concluded that the restructuring initiatives and the loss of a major printing contract in 2008 were a triggering event for impairment
tests and that write-downs of some long-lived assets would be necessary. As a result, a non-cash impairment charge totalling $19.1 million was recorded against buildings, machinery and equipment in 2008, compared with $0.4 million in 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2009, Quebecor Media recorded a $0.9 million charge for loss on sales of businesses and other special items ($0.1 million gain in 2008).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

Non-cash charge for impairment of goodwill and intangible assets:total $13.6 million in 2009,
compared with $671.2 million in 2008.



| |  |  | In the fourth quarter of 2008, Quebecor Media determined that the adverse financial and economic environment was a triggering event for goodwill
impairment tests in the News Media, Leisure and Entertainment and Interactive Technologies and Communications segments. As a result, Quebecor Media concluded that the goodwill of these segments was impaired. Based on preliminary results of this
test, a $631.0 million non-cash charge for goodwill impairment, without any tax consequences, was recorded, including $595.0 million in the News Media segment, $10.0 million in the Leisure and Entertainment segment, and
$26.0 million in the Interactive Technologies and Communications segment. Quebecor Media also recorded a masthead impairment charge of $40.2 million with respect to its publications in the fourth quarter of 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In the second quarter of 2009, Quebecor Media completed the goodwill impairment tests and an additional non-cash goodwill impairment charge of
$5.6 million, without any tax consequences, was recorded as an adjustment to the non-cash goodwill impairment charge recorded in the fourth quarter of 2008, which included $1.7 million in the News Media segment, $1.2 million in the
Leisure and Entertainment segment, and $2.7 million in the Interactive Technologies and Communications segment.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In the second quarter of 2009, the Company also recorded an $8.0 million charge for impairment of mastheads of publications in the News Media
segment following its annual impairment test.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Income tax expense: $177.3 million in 2009
(effective rate of 24.5%) compared with $155.2 million in 2008 (effective rate of 36.2% excluding the impact of the charge, without any tax consequences, for goodwill impairment).



| |  |  | The change in the effective tax rate in 2009 compared with 2008 was mainly due to:
| | - |  | ----------------------------------------------------------------------------------



| |  |  | impact of tax rate mix on the various components of the gains and losses on financial instruments and derivative financial instruments, and on
translation of financial instruments;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increase in 2009 in tax benefits related to tax consolidation transactions with the parent company.
| | - |  | ---------------------------------------------------------------------------------------------------

Free cash flows from continuing operating activities

Free cash flows from continuing operating activities:$350.5 million in 2009, compared with $243.2 million in 2008 (see the
table below).



| |  |  | The $107.3 million increase was mainly due to:
| | - |  | ----------------------------------------------



| |  |  | $165.1 million increase in operating income;
| | - |  | --------------------------------------------



| |  |  | $38.7 million decrease in cash interest expense (see discussion of financial expenses under 2009/2008 Financial Year Comparison);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | decrease in capital expenditures in the News Media segment due to implementation in 2008 of phase two of the project to acquire new presses.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Partially offset by:
| | - |  | --------------------



| |  |  | $34.6 million increase in the use of funds for non-cash balances related to operations, mainly because of current variances in activity, including
a $31.2 million increase in accounts receivable in 2009 due to, among other things, higher revenues in the Telecommunications segment;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | higher capital expenditures in the Telecommunications segment due primarily to the build-out of the AWS network;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | $17.0 million increase in current income taxes.
| | - |  | -----------------------------------------------

Quebecor Media Inc.

Free cash flows from continuing operating activities

(in millions of Canadian dollars)



|                                                                               |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                               |  | 2009 |        |   | 2008 |   |        | 2007 | 
|Cash flows from segment operations                                             |  |      |        |   |      |   |        |      |  |   |        |  
|Cable                                                                          |  | $    | 451.0  |   |      | $ | 384.6  |      |  | $ | 314.3  |  
|Newspapers                                                                     |  |      | 156.9  |   |      |   | 140.3  |      |  |   | 118.3  |  
|Broadcasting                                                                   |  |      | 56.9   |   |      |   | 44.2   |      |  |   | 43.2   |  
|Leisure and Entertainment                                                      |  |      | 18.3   |   |      |   | 5.6    |      |  |   | 24.1   |  
|Interactive Technologies and Communications                                    |  |      | 0.7    |   |      |   | 1.5    |      |  |   | (0.5   | )
|Head Office and other                                                          |  |      | 1.9    |   |      |   | 0.5    |      |  |   | 1.4    |  
|                                                                               |  |      |        |   |      |   |        |      |  |   |        |  
|                                                                               |  | $    | 685.7  |   |      | $ | 576.7  |      |  | $ | 500.8  |  
|                                                                               |  |      |       
|Cash interest expense(1)                                                       |  | $    | (228.0 | ) |      | $ | (266.7 | )    |  | $ | (225.3 | )
|Cash portion of charge for restructuring of operations and other special items |  |      | (29.2  | ) |      |   | (35.5  | )    |  |   | (12.2  | )
|                                                                               |  |      |       
|Current income taxes                                                           |  |      | (29.7  | ) |      |   | (12.7  | )    |  |   | (11.3  | )
|Other                                                                          |  |      | 4.6    |   |      |   | (0.3   | )    |  |   | 4.3    |  
|Net change in non cash balances related to operations                          |  |      | (52.9  | ) |      |   | (18.3  | )    |  |   | 32.7   |  
|                                                                               |  |      |        |   |      |   |        |      |  |   |        |  
|Free cash flows from continuing operating activities                           |  | $    | 350.5  |   |      | $ | 243.2  |      |  | $ | 289.0  |  
|                                                                               |  |      |        |   |      |   |        |      |  |   |        |  



|(1) | Interest on long term debt, foreign currency translation of short-term monetary items and other interest expenses, less interest capitalized to cost of property, plant
and equipment and to intangible assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Reconciliation of cash flows from segment operations to operating income

(in millions of Canadian dollars)



|                                           |  |      |         |   |      |   |         |      |  |   |        |  
|------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                           |  | 2009 |         |   | 2008 |   |         | 2007 | 
|Operating income                           |  | $    | 1,284.7 |   |      | $ | 1,119.6 |      |  | $ | 963.4  |  
|Additions to property, plant and equipment |  |      | (491.1  | ) |      |   | (465.6  | )    |  |   | (430.1 | )
|Acquisitions of intangible assets(1)       |  |      | (111.5  | ) |      |   | (83.0   | )    |  |   | (38.6  | )
|Proceeds from disposal of assets           |  |      | 3.6     |   |      |   | 5.7     |      |  |   | 6.1    |  
|                                           |  |      |         |   |      |   |         |      |  |   |        |  
|Cash flows from segment operations         |  | $    | 685.7   |   |      | $ | 576.7   |      |  | $ | 500.8  |  
|                                           |  |      |         |   |      |   |         |      |  |   |        |  



|(1) | Excluding the initial disbursement in 2008 for acquisition of AWS network licenses.
|--- | -----------------------------------------------------------------------------------

Segmented Analysis

Telecommunications

In our Telecommunications segment, Videotron is the
largest cable operator in Quebec and the third-largest in Canada by customer base. Its state-of-the-art network passes 2,575,300 homes and serves approximately 1,967,500 customers. At December 31, 2009, Videotron had 1,777,000 cable television
customers, including 1,084,100 subscribers to its illico Digital TV service. Videotron is an ISP and telephone provider, with 1,170,600 subscribers to its cable Internet access services and 1,014,000 subscribers to its cable telephone service.
There are 82,800 activated handsets on its wireless telephone service. Videotron is planning to roll out its AWS network in summer 2010. The network will deliver wireless telephone service, including high-speed Internet access, mobile television and
many other advanced functionalities supported by smartphones. Videotron also includes Videotron Business Solutions, a full-service business telecommunications provider which offers telephone, high-speed data transmission, Internet access, hosting
and cable television services, and Le SuperClub Videotron and its network of franchises, which sell and rent DVDs, video cassettes and console games.



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2009 operating results

Revenues:$2.00 billion in 2009, an increase of $197.0 million (10.9%).



| |  |  | Combined revenues from all cable television services increased $65.7 million (8.1%) to $875.6 million, due primarily to customer base
growth, increases in some rates, migration from analog to digital service, increased video on demand and pay TV orders, and the success of HD packages.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues from Internet access services increased $74.6 million (14.9%) to $574.2 million. The improvement was mainly due to customer
growth, increases in some rates, excess usage fees and customer migration to higher speed services.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues from cable telephone service increased $67.7 million (23.7%) to $353.8 million, mainly due to customer growth. The increase
would have been greater had there not been a decrease in average per-customer revenues due to fewer long-distance calls.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues from wireless telephone service increased $9.8 million (31.0%) to $41.4 million, essentially due to customer growth.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues of Videotron Business Solutions decreased $5.3 million (-8.3%) to $58.3 million, mainly because of the loss of a major contract and
lower revenues from network solutions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues of Le SuperClub Videotron decreased $25.5 million (-44.7%) to $31.5 million, primarily as a result of the franchising of 33
corporate-owned stores.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Monthly ARPU:$88.21 in 2009, compared with $81.17 in 2008, an increase of
$7.04 (8.7%).

Customer statistics

Cable television The combined customer base for all of Videotrons cable television services increased by 61,400 (3.6%) in 2009, compared with increases of 77,500 and 65,700 in
2008 and 2007 respectively (see the table below). In the fourth quarter of 2009, Videotron recorded combined customer growth for its cable television services for the 18th consecutive quarter, i.e., since the end of the second quarter of 2005. As of
December 31, 2009, Videotron had 1,777,000 customers for its cable television services for a household penetration rate of 69.0% (number of subscribers as a proportion of total homes passed by Videotrons network, i.e., 2,575,300 homes as
of the end of December 2009), compared with 67.5% a year earlier.



| |  |  | The customer base for illico Digital TV stood at 1,084,100 at the end of 2009, an increase of 156,800 (16.9%) during the year, compared with
159,100 and 144,600 in 2008 and 2007 respectively. As of December 31, 2009, illico Digital TV had a household penetration rate of 42.1% versus 36.5% a year earlier.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Migration from analog to digital service was the main reason for the 95,400 (-12.1%) decrease in subscribers in the customer base for analog cable
television services in 2009. By comparison, the number of subscribers to analog cable services decreased by 81,600 and 78,900 in 2008 and 2007 respectively.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Internet access The number of subscribers to cable Internet access services stood at 1,170,600 at
December 31, 2009, an increase of 106,800 (10.0%) from the end of 2008, compared with increases of 130,800 and 141,000 in 2008 and 2007 respectively. At December 31, 2009, cable Internet access services had a household penetration
rate of 45.5%, compared with 41.8% a year earlier.

Cable telephone service The number of
subscribers to cable telephone service stood at 1,014,000 at the end of December 2009, an increase of 162,000 (19.0%) from the end of 2008, compared with increases of 215,600 in 2008 and 238,600 in 2007. At December 31, 2009, the IP
telephone service had a household penetration rate of 39.4%, compared with 33.5% a year earlier.



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Wireless telephone service At December 31, 2009, there were 82,800
activated handsets on the wireless telephone service, compared with 63,400 at the end of December 2008, an increase of 19,400 (30.6%); 18,300 and 33,300 handsets were activated in 2008 and 2007 respectively.

Telecommunications segment year-end customer numbers, 2005-2009

(in thousands of customers)



|                                              |  |         |  |         |  |         |  |         |  |        
|--------------------------------------------- |  | ------- |  | ------- |  | ------- |  | ------- |  | -------
|                                              |  | 2009    |  | 2008    |  | 2007    |  | 2006    |  | 2005   
|Cable television:                             |  |         |  |         |  |         |  |         |  |        
|                                              |  |         |  |         | 
|Analog                                        |  | 692.9   |  | 788.3   |  | 869.9   |  | 948.8   |  | 1,031.5
|Digital                                       |  | 1,084.1 |  | 927.3   |  | 768.2   |  | 623.6   |  | 474.6  
|                                              |  |         |  |         |  |         |  |         |  |        
|Total cable television                        |  | 1,777.0 |  | 1,715.6 |  | 1,638.1 |  | 1,572.4 |  | 1,506.1
|                                              |  |         |  |         | 
|Cable Internet                                |  | 1,170.6 |  | 1,063.8 |  | 933.0   |  | 792.0   |  | 638.0  
|Cable telephone                               |  | 1,014.0 |  | 852.0   |  | 636.4   |  | 397.8   |  | 163.0  
|Wireless telephone (in thousands of handsets) |  | 82.8    |  | 63.4    |  | 45.1    |  | 11.8    |  |       

Operating income:$972.9 million, an increase of $175.0 million (21.9%).



| |  |  | The increase was mainly due to:
| | - |  | -------------------------------



| |  |  | customer growth for all services;
| | - |  | ---------------------------------



| |  |  | increases in some rates, primarily for the cable television and Internet access services, and excess usage fees;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | $47.9 million favourable variance resulting from adjustments related to the provision for Part II licence fees (for details, see
Part II licence fees).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Partially offset by:



| |  |  | $12.3 million unfavourable variance related to stock option expense;
| | - |  | --------------------------------------------------------------------



| |  |  | increases in some regulatory fees.
| | - |  | ----------------------------------



| |  |  | Excluding the variance in the stock option expense, and if the figures for all prior periods were restated to retroactively reflect Part II
licence fee adjustments, operating income would have increased by 16.6% in 2009, compared with 21.3% in 2008.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost/revenue ratio:operating costs for all Telecommunications segment operations, expressed as a percentage of revenues, were 51.4% in 2009, compared with 55.8% in 2008. The decrease was mainly due to:



| |  |  | significant fixed component of costs that does not fluctuate in proportion to revenue growth;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | marginal impact on costs of increases in some rates and in consumption;
| | - |  | -----------------------------------------------------------------------



| |  |  | impact of adjustments to the provision for CRTC Part II licence fees, which was favourable in 2009 and unfavourable in 2008.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

Cash flows from segment operations:$451.0 million in 2009, compared with $384.6 million
in 2008 (see the table below).



| |  |  | The $66.4 million increase was mainly due to:
| | - |  | ---------------------------------------------



| |  |  | $175.0 million increase in operating income.
| | - |  | --------------------------------------------



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Partially offset by:



| |  |  | $77.4 million increase in additions to property, plant and equipment;
| | - |  | ---------------------------------------------------------------------



| |  |  | $29.8 million increase in acquisitions of intangible assets, due primarily to the roll-out of the AWS network.
| | - |  | --------------------------------------------------------------------------------------------------------------

Telecommunications

Cash flows from
operations

(in millions of Canadian dollars)



|                                           |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                           |  | 2009 |        |   | 2008 |   |        | 2007 | 
|Operating income                           |  | $    | 972.9  |   |      | $ | 797.9  |      |  | $ | 642.3  |  
|Additions to property, plant and equipment |  |      | (434.1 | ) |      |   | (356.7 | )    |  |   | (308.4 | )
|Acquisitions of intangible assets(1)       |  |      | (89.9  | ) |      |   | (60.1  | )    |  |   | (21.7  | )
|Proceeds from disposal of assets           |  |      | 2.1    |   |      |   | 3.5    |      |  |   | 2.1    |  
|                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Cash flows from segment operations         |  | $    | 451.0  |   |      | $ | 384.6  |      |  | $ | 314.3  |  
|                                           |  |      |        |   |      |   |        |      |  |   |        |  



|(1) | Excluding the initial disbursement in 2008 for acquisition of AWS network licenses.
|--- | -----------------------------------------------------------------------------------

Other developments in 2009

On January 7, 2009, Videotron rolled out its Ultimate Speed Internet 30TMand Ultimate Speed Internet 50TMservices in the Montreal South Shore area. At the same time, Videotron upgraded transfer limits to 70 gb for Ultimate Speed Internet 30TMand 100 gb for Ultimate Speed
Internet 50TM. In December 2009, Videotron completed the roll-out of its Ultimate Speed Internet 30TMand 50TMservices across its service area, becoming the first provider in North America to make the cutting-edge technology available to all its customers.

Part II licence fees

In 2003 and 2004, a number of companies, including Videotron, brought suit against the Crown before the Federal Court alleging that the Part II licence fees paid annually to the CRTC by broadcasters
and broadcasting distribution undertakings constituted, in fact and in law, unlawful taxes under the Broadcasting Act (Canada). Following a Federal Court of Appeal judgement in 2008 overturning a Federal Court ruling in favour of the
plaintiffs, leave to appeal to the Supreme Court of Canada was granted in 2008. In view of the unfavourable Court of Appeal judgement, the Company recognized a provision totalling $25.6 million for Part II licence fees in 2008, including a
retroactive provision for Part II licence fees accumulated since September 1, 2006.

On October 7, 2009, the
parties to the proceeding, including Videotron, agreed to an out-of-court settlement whereby the plaintiff companies withdrew their legal challenge and monetary claims, and the government agreed not to claim the unpaid Part II licence fees for
the period of September 1, 2006 through August 31, 2009. In view of this settlement, in the fourth quarter of 2009, the Company reversed a $33.8 million provision for unpaid Part II licence fees in the Telecommunications segment
as of August 31, 2009. Under the out-of-court settlement, the government also undertook to recommend that the CRTC amend its regulations to limit the amount of the Part II licence fees for periods subsequent to August 31, 2009. The
Telecommunications segments results for the period of September 1, 2009 to December 31, 2009 therefore include an estimated $3.3 million provision based on the new method for assessing CRTC Part II licence fees.

AWS network

Videotron completed several key stages in the build-out of its 3G wireless network during 2009. As of December 31, 2009, all switching services and platforms had been installed and were operational.
Interconnections with Videotrons existing fibre optic network were in place and incorporated into the companys integrated service. Videotron had conducted multi-phase testing to maintain the reliability of its platforms and siting and
tower-sharing agreements for nearly 60% of the antenna sites needed to launch the service had been reached. The equipment has been or is being installed at most of the sites for which an agreement has been signed.

On July 22, 2009, Videotron reached a roaming agreement with wireless service provider Rogers. Under this agreement, Videotron will use
Rogers network exclusively in Rogers service area across Canada to serve Videotrons



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##### Table of Contents

future wireless telephone service customers outside Videotrons coverage area. Videotron has also reached a similar roaming agreement in the United States with wireless service provider
T-Mobile. These agreements will enable Videotron to provide AWS across Canada and the U.S. Videotron is still planning to launch its advanced wireless services in summer 2010.

News Media

Quebecor Medias News Media segment, which includes Sun Media and Osprey Media, is Canadas largest newspaper chain, counting both paid and free circulation. It publishes 36 paid-circulation dailies and 6 free dailies, including
newspapers in nine of the ten largest markets in the country. It also publishes 192 community newspapers, magazines, weekly buyers guides, farm publications and other specialty publications. According to corporate figures, the aggregate
circulation of the News Media segments paid newspapers was approximately 14.8 million copies per week as of December 31, 2009.

The News Media segment also includes Canoe, an integrated company offering e-commerce, information and communication services. Canoe operates the Internet portal network of the same name, which logs over
8.9 million unique visitors per month in Canada, including more than 4.1 million in Quebec (according to ComScore Media Metrix figures for December 2009). The network owns or operates a family of sites that includes canoe.ca,
canoe.qc.ca and La Toile du Québec (toile.com).Canoe also operates a number of e-commerce sites: jobboom.com (employment), micasa.ca (real estate), autonet.ca (automobiles), reseaucontact.com
(dating), space.canoe.ca and espace.canoe.ca(social networking), classifieds.canoe.ca and classees.canoe.ca (classified ads), and canoeklix.com (cost-per-click advertising solutions).

The News Media segment is also engaged in the distribution of newspapers, magazines and flyers through, among others, the Quebecor Media
Network. The segment also includes the QMI news agency (QMI Agency), which provides content to all Quebecor Media properties and outside customers. In addition, the News Media segment offers commercial printing and related services to other
publishers through its national printing and production platform. Through Quebecor MediaPages, it conducts a combination of print and online directory publishing operations.

2009 operating results

Revenues:$1.03 billion, a decrease of $151.9 million (-12.9%).



| |  |  | Advertising revenues decreased 17.5%, circulation revenues decreased 1.8%, and combined revenues from commercial printing and other sources increased
13.1%. The far-reaching changes in the newspaper industry over the past several years, combined with the troubled economic environment since late 2008, have negatively impacted the News Media segments revenues.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The revenues of the urban dailies and community newspapers decreased by 11.6% and 18.0% respectively in 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | The revenues of the portals were flat. The decrease in revenues at the special-interest portals was offset by revenue growth at the general-interest
portals.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating income:$199.5 million, a decrease of $27.6 million (-12.2%).



| |  |  | The decrease was due primarily to:
| | - |  | ----------------------------------



| |  |  | impact of the $151.9 million decrease in revenues;
| | - |  | --------------------------------------------------



| |  |  | $7.3 million unfavourable variance related to stock option expense;
| | - |  | -------------------------------------------------------------------



| |  |  | Quebecor Media Network start-up costs.
| | - |  | --------------------------------------



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Partially offset by:



| |  |  | $77.5 million decrease in operating costs due primarily to restructuring and other cost-reduction initiatives, as well as the impact of a
$5.7 million reversal in 2009 of a reserve for bonuses recorded in 2008 and lower labour costs related to the labour dispute at the Journal de Montréal;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $5.7 million impact of decrease in newsprint prices.
| | - |  | ----------------------------------------------------



| |  |  | Excluding the impact of the stock option expense, Osprey Medias operating income and Quebecor Media Network start-up costs, operating income
decreased by 6.3% in 2009, compared with 19.6% in 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The restructuring measures introduced in late 2008
in the News Media segment include staff cuts, consolidation of prepress, shipping and press room operations, centralization of administrative processes, consolidation of distribution networks, and other resource centralization and optimization
efforts across the segments operations in all regions. While the restructuring proceeds, development of new revenue streams continues, including those related to the marketing of content produced by the QMI Agency and to the development of
integrated, convergent solutions for our business partners, including the Quebecor Media Network.

Cost/revenue ratio:
operating costs for all News Media segment operations (expressed as a percentage of revenues) were 80.6% in 2009, compared with 80.8% in 2008. The segments restructuring initiatives yielded significant cost reductions, offsetting the
unfavourable impact of the fixed costs component, which does not decline in proportion with decreasing revenues.

Cash
flows from segment operations:$156.9 million in 2009, compared with $140.3 million in 2008 (see the table below).



| |  |  | The $43.7 million decrease in additions to property, plant and equipment, due essentially to the implementation in 2008 of phase two of the
project to acquire new presses, outweighed the $27.6 million decrease in operating income.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

News Media

Cash flows from operations

(in millions of Canadian dollars)



|                                           |  |      |       |   |      |   |       |      |  |   |        |  
|------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                           |  | 2009 |       |   | 2008 |   |       | 2007 | 
|Operating income                           |  | $    | 199.5 |   |      | $ | 227.1 |      |  | $ | 232.8  |  
|Additions to property, plant and equipment |  |      | (33.4 | ) |      |   | (77.1 | )    |  |   | (103.8 | )
|Acquisitions of intangible assets          |  |      | (10.3 | ) |      |   | (11.4 | )    |  |   | (12.2  | )
|Proceeds from disposal of assets           |  |      | 1.1   |   |      |   | 1.7   |      |  |   | 1.5    |  
|                                           |  |      |       |   |      |   |       |      |  |   |        |  
|Cash flows from segment operations         |  | $    | 156.9 |   |      | $ | 140.3 |      |  | $ | 118.3  |  
|                                           |  |      |       |   |      |   |       |      |  |   |        |  

Other developments in 2009

On January 24, 2009, in view of the unions refusal to recognize the urgency of the situation and the need for far-reaching changes
to the Journal de Montréals business model, and in order to prevent pressure tactics from disrupting the newspapers publication, the Journal de Montréal management decided to exercise its rights under the
Labour Code and declared a lock-out of the approximately 250 editorial, office and classified ad employees covered by the Syndicat des travailleurs de linformation du Journal de Montréal (STIJM) bargaining certificate. The
Journal de Montréal continues publishing despite the labour dispute.

On April 16, 2009, AbitibiBowater and
some of its Canadian subsidiaries placed themselves under the protection of the CCAA. On the same date, AbitibiBowater and some of its U.S. and Canadian subsidiaries placed themselves under the protection of Chapter 11 of the United States
Bankruptcy Code. AbitibiBowater is the main supplier of newsprint to the News Media segment. These proceedings have had no material impact on the operations of Quebecor Media to date. Quebecor Media continues to monitor the situation.

In September and October 2009, Sun Media entered into joint distribution agreements with Canwest and the National
Post Company. Under these agreements, each party will assume the home delivery and single copy delivery functions for some of the other partys publications in the respective markets of those publications. These distribution agreements will
allow the companies to leverage their existing carrier forces and improve operating income.



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Broadcasting

TVA Group is one of the largest private-sector producers and broadcasters of French-language entertainment, information and public
affairs programming in Quebec and all of North America. It is the sole owner of six of the ten television stations in the TVA Network, the analog specialty channel LCN, and the digital specialty channels Mystère, Argent,
Prise 2 and Les idées de ma maison. TVA Group also holds interests in the English-language conventional station Sun TV in Toronto, two other TVA Network affiliates, the Canal Évasion specialty channel, and the
English-language digital specialty channels Mentv and Mystery. In addition, TVA Group is engaged in teleshopping services through its TVA Boutiques inc. subsidiary. Its TVA Publishing Inc. subsidiary, the largest
publisher of French-language magazines in Quebec, publishes general-interest and entertainment weeklies and monthlies. Its TVA Films division distributes films and television products in Canadas English- and French-language markets.

2009 operating results

Revenues:$439.0 million, an increase of $2.3 million (0.5%).



| |  |  | Revenues from broadcasting operations increased $14.2 million, mainly because of:
| | - |  | ---------------------------------------------------------------------------------



| |  |  | higher advertising and subscription revenues at the specialty channels;
| | - |  | -----------------------------------------------------------------------



| |  |  | higher advertising revenues at the TVA Network, partly as a result of the popular Star Académie program, combined with increases in other
revenues;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased revenues from Canal Indigo.
| | - |  | -------------------------------------

Partially offset by:



| |  |  | decreased advertising revenues at Sun TV.
| | - |  | -----------------------------------------



| |  |  | Revenues from distribution operations decreased by $6.8 million, primarily as a result of lower video sales volumes, as well as decreased sales of
television products.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Publishing revenues decreased by $4.6 million, mainly as a result of decreases in advertising, newsstand and subscription revenues.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------

Operating income:$80.0 million, an increase of $14.0 million (21.2%).



| |  |  | Operating income from broadcasting operations increased $19.6 million, mainly due to:
| | - |  | -------------------------------------------------------------------------------------



| |  |  | $13.6 million favourable variance created by adjustments to provision for Part II licence fees (for more details, see Part II
licence fees);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | impact of revenue growth at the specialty channels and TVA Network, and the contribution of Canal Indigo;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | decrease in the TVA Networks content costs.
| | - |  | --------------------------------------------

Partially offset by:



| |  |  | higher content costs at the specialty channels;
| | - |  | -----------------------------------------------



| |  |  | impact of lower revenues and higher content costs at Sun TV.
| | - |  | ------------------------------------------------------------



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| |  |  | Operating income from distribution operations showed an unfavourable variance of $6.6 million, mainly as a result of:
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | impact of revenue decrease;
| | - |  | ---------------------------



| |  |  | recognition of a $1.2 million allowance for bad debts due to one customers uncertain financial position.
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Operating income from publishing operations increased $2.5 million. The positive impact of lower printing, writing and computer graphics expenses
more than offset the decrease in revenues.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost/revenue ratio:operating costs for all Broadcasting
segment operations (expressed as a percentage of revenues) were 81.8% in 2009, compared with 84.9% in 2008. The decrease in costs as a proportion of revenues was mainly due to:



| |  |  | impact of adjustments to provision for CRTC Part II licence fees, which was favourable in 2009 and unfavourable in 2008;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | reduced proportion of fixed costs, given growth in broadcasting revenues;
| | - |  | -------------------------------------------------------------------------



| |  |  | lower costs for publishing operations.
| | - |  | --------------------------------------

Cash flows from segment operations:$56.9 million in 2009, compared with $44.2 million in 2008, an increase of $12.7 million (see the table below).



| |  |  | The favourable variance was mainly due to the $14.0 million increase in operating income.
| | - |  | -----------------------------------------------------------------------------------------

Broadcasting

Cash flows from operations

(in millions of Canadian dollars)



|                                           |  |      |       |   |      |   |       |      |  |   |       |  
|------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                           |  | 2009 |       |   | 2008 |   |       | 2007 | 
|Operating income                           |  | $    | 80.0  |   |      | $ | 66.0  |      |  | $ | 59.4  |  
|Additions to property, plant and equipment |  |      | (16.5 | ) |      |   | (17.8 | )    |  |   | (11.6 | )
|Acquisitions of intangible assets          |  |      | (7.0  | ) |      |   | (4.1  | )    |  |   | (4.6  | )
|Proceeds from disposal of assets           |  |      | 0.4   |   |      |   | 0.1   |      |  |   |      |  
|                                           |  |      |       |   |      |   |       |      |  |   |       |  
|Cash flows from segment operations         |  | $    | 56.9  |   |      | $ | 44.2  |      |  | $ | 43.2  |  
|                                           |  |      |       |   |      |   |       |      |  |   |       |  

Other developments since end of 2008

The Board of Directors of TVA Group authorized a Normal Course Issuer Bid for a maximum of 985,210 Class B Shares, representing
approximately 5% of the issued and outstanding Class B Shares. The purchases are being made from March 19, 2009 to March 18, 2010, at prevailing market prices, on the open market through the facilities of the Toronto Stock Exchange
and in accordance with the requirements of said Exchange. During 2009, 253,300 Class B shares were repurchased for a cash consideration of $2.6 million.

Part II licence fees

The facts noted above under
Part II licence fees in the discussion of the results of the Telecommunications segment also apply to the Broadcasting segment. In 2008, the Broadcasting segment recorded provisions for Part II licence fees totalling
$7.2 million, including a retroactive provision for Part II licence fees accumulated since September 1, 2006. Further to the out-of-court settlement reached on October 7, 2009, in the fourth quarter of 2009, the Broadcasting
segment reversed a $9.0 million provision for Part II licence fees accrued since September 1, 2006 and unpaid as of August 31, 2009. The Broadcasting segments results for the period of September 1, 2009 to
December 31, 2009 therefore include an estimated $0.8 million provision based on the new method for assessing CRTC Part II licence fees.

Leisure and Entertainment

Our activities in the Leisure and Entertainment
segment consist primarily of retailing CDs, books, DVDs, musical instruments, games and toys, computer games, gifts and magazines through the Archambault chain of stores and the archambault.ca e-commerce site, online sales of downloadable
music and books through the zik.ca and Jelis.ca services,



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##### Table of Contents

distribution of CDs and videos (through Select, a division of Archambault Group), online music distribution by way of file transfer (through Select Digital, a division of Archambault Group),
music recording and video production (through Musicor, a division of Archambault Group), the recording of live concerts and the production of live-event video shows and television advertising (through Les Productions Select TV, a subsidiary of
Archambault Group) and the production of music shows and concerts (through Musicor Spectacles, a division of Archambault Group). Through its new production capacity made possible with Musicor Spectacles and Les Productions Select TV, Archambault
Group is now fully integrated in Canadas music industry, as a producer of a wider offering of media solutions, and a growing participant in the live-event production industry.

We are also involved in book publishing and distribution through academic publisher CEC Publishing, 13 general literature publishers under
the Sogides Group umbrella, and Messageries A.D.P., the exclusive distributor for approximately 160 Quebec and European French-language publishers.

2009 operating results

Revenues:$307.8 million, an
increase of $5.9 million (2.0%).



| |  |  | The Book divisions revenues increased 6.8%, mainly because of significantly increased sales by CEC Publishing in the academic segment, resulting
primarily from the billing of textbooks for Quebec elementary schools. The increase was also due to a larger number of bestsellers distributed by Messageries A.D.P. in 2009 than in 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The revenues of Archambault Group (excluding the impact of the transfer of video on demand operations to the Telecommunications segment on May 1,
2008) increased 2.2% due to:
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 0.4% increase in retail sales, mainly because of higher sales of general merchandise and books;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | 2.7% increase in distribution sales because of the popularity of new releases in 2009, including the Star Académie CD and albums from singers
Ginette Reno, Marie-Mai, Maxime Landry and Ima;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 35.9% increase in production sales in 2009, mainly as a result of new releases by Musicor, including the Star Académie CD and an album
from singer Marie-Mai, as well as increased activity at the Musicor Spectacles division, created in 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating income:$25.9 million in 2009, compared with $20.2 million in 2008. The $5.7 million (28.2%) increase was mainly due to higher sales in the Book division, increased margins in the academic segment, as
well as higher revenues, on a comparable basis, and higher operating margins at Archambault Group.

Cash flows from segment
operations:$18.3 million in 2009, compared with $5.6 million in 2008 (see the table below).



| |  |  | The $12.7 million increase was mainly due to:
| | - |  | ---------------------------------------------



| |  |  | $5.7 million increase in operating income;
| | - |  | ------------------------------------------



| |  |  | $5.3 million decrease in additions to property, plant and equipment, mainly because of higher capital expenditures in 2008 for the expansion and
renovation of some Archambault stores.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Leisure and Entertainment

Cash flows from operations

(in millions
of Canadian dollars)



|                                           |  |      |      |   |      |   |      |      |  |   |      |  
|------------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                           |  | 2009 |      |   | 2008 |   |      | 2007 | 
|Operating income                           |  | $    | 25.9 |   |      | $ | 20.2 |      |  | $ | 26.9 |  
|Additions to property, plant and equipment |  |      | (3.6 | ) |      |   | (8.9 | )    |  |   | (2.8 | )
|Acquisitions of intangible assets          |  |      | (4.0 | ) |      |   | (7.4 | )    |  |   | (0.1 | )
|Proceeds from disposal of assets           |  |      |     |   |      |   | 1.7  |      |  |   | 0.1  |  
|                                           |  |      |      |   |      |   |      |      |  |   |      |  
|Cash flows from segment operations         |  | $    | 18.3 |   |      | $ | 5.6  |      |  | $ | 24.1 |  
|                                           |  |      |      |   |      |   |      |      |  |   |      |  



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Interactive Technologies and Communications

The Interactive Technologies and Communications segment consists of Nurun, which is engaged in Web, intranet and extranet development,
technological platforms for content management, e-commerce, interactive television, automated publishing solutions, and e-marketing and customer relationship management strategies.

2009 operating results

Revenues: $91.0 million, an increase of $1.4 million (1.6%).



| |  |  | The increase was mainly due to:
| | - |  | -------------------------------



| |  |  | impact of increased revenues from government customers;
| | - |  | -------------------------------------------------------



| |  |  | increased volume in China.
| | - |  | --------------------------

Partially offset by:



| |  |  | lower volume from customers in North America and Europe.
| | - |  | --------------------------------------------------------

Operating income:$4.1 million, a decrease of $1.0 million (-19.6%).



| |  |  | The decrease was mainly due to:
| | - |  | -------------------------------



| |  |  | impact of lower revenues in Canada and Europe;
| | - |  | ----------------------------------------------



| |  |  | unfavourable variance in currency translation.
| | - |  | ----------------------------------------------

Partially offset by:



| |  |  | favourable impact of new tax credits for e-commerce business development;
| | - |  | -------------------------------------------------------------------------



| |  |  | favourable variance due to one-time costs in the first quarter of 2008 related to taking Nurun private, including impact related to stock option
expense.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Cash flows from segment operations:$0.7 million in 2009, compared with
$1.5 million in 2008 (see the table below).



| |  |  | The $0.8 million decrease was mainly due to the $1.0 million decline in operating income.
| | - |  | -----------------------------------------------------------------------------------------

Interactive Technologies and Communications

Cash flows from operations

(in millions of Canadian dollars)



|                                           |  |      |      |   |      |   |      |      |  |   |      |  
|------------------------------------------ |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                           |  | 2009 |      |   | 2008 |   |      | 2007 | 
|Operating income                           |  | $    | 4.1  |   |      | $ | 5.1  |      |  | $ | 2.8  |  
|Additions to property, plant and equipment |  |      | (3.1 | ) |      |   | (3.6 | )    |  |   | (3.3 | )
|Proceeds from disposal of assets           |  |      | (0.3 | ) |      |   |     |      |  |   |     |  
|                                           |  |      |      |   |      |   |      |      |  |   |      |  
|Cash flows from segment operations         |  | $    | 0.7  |   |      | $ | 1.5  |      |  | $ | (0.5 | )
|                                           |  |      |      |   |      |   |      |      |  |   |      |  

2009/2008 Fourth Quarter Comparison

Operating results of Quebecor Media

Revenues:$1.03 billion, an increase of $24.4 million (2.4%).



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| |  |  | Revenues increased in Telecommunications (by $59.4 million or 12.5% of segment revenues) mainly because of customer growth for all services, and
in Broadcasting ($1.6 million or 1.3%).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues decreased in News Media ($28.2 million or -9.3%) due essentially to lower advertising revenues in Leisure and Entertainment
($4.9 million or -4.9%) and in Interactive Technologies and Communications ($0.5 million or -2.1%).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating income:$391.3 million, an increase of $80.9 million (26.1%).



| |  |  | Operating income increased in Telecommunications (by $62.8 million or 28.8% of segment operating income), News Media ($14.5 million or 26.5%)
and Broadcasting ($9.7 million or 43.1%).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating income decreased in Leisure and Entertainment (by $2.6 million or -23.6%) and Interactive Technologies and Communications
($1.6 million or -53.3%).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The increase in operating income includes a $43.8 million favourable variance (including $34.5 million in the Telecommunications segment and
$9.3 million in the Broadcasting segment) generated by adjustments related to provisions for CRTC Part II licence fees (for more details, see Part II licence fees in the discussion of the results of the Telecommunications
and Broadcasting segments under 2009/2008 Financial Year Comparison).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The change in the fair value of Quebecor Media resulted in a $12.7 million unfavourable variance in the consolidated stock option expense in the
fourth quarter of 2009 compared with the same period of 2008. The fair value of Quebecor Media, based on market comparables, increased during the fourth quarter of 2009, whereas it decreased in the same period of 2008.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impact of the consolidated stock option expense and if the figures for all prior periods were restated to retroactively reflect the
Part II licence fee adjustments, the increase in operating income in the fourth quarter of 2009 would have been 15.1%, compared with 2.1% in the same period of 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net income:$148.5 million in the fourth quarter of 2009, compared with a net loss of $635.4 million in the same quarter of
2008.



| |  |  | The $783.9 million increase was mainly due to:
| | - |  | ----------------------------------------------



| |  |  | recognition in the fourth quarter of 2008 of a non-cash charge totalling $671.2 million, including $631.0 million without any tax
consequences, for impairment of goodwill and intangible assets;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $80.9 million increase in operating income;
| | - |  | -------------------------------------------



| |  |  | $29.2 million favourable variance in gains on valuation and translation of financial instruments;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | $28.8 million favourable variance in charge for restructuring of operations, impairment of assets and other special items.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

Partially offset by:



| |  |  | $4.1 million increase in amortization charge.
| | - |  | ---------------------------------------------

Amortization charge:$86.9 million, an increase of $4.1 million.



| |  |  | The increase was mainly due to significant capital expenditures in 2008 and 2009 in the Telecommunications segment.
| | - |  | -------------------------------------------------------------------------------------------------------------------

Financial expenses:$64.9 million, a decrease of $1.3 million.



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| |  |  | The decrease was mainly due to:
| | - |  | -------------------------------



| |  |  | lower base interest rates.
| | - |  | --------------------------

Partially offset by:



| |  |  | $4.0 million unfavourable variance in exchange rates on operating items;
| | - |  | ------------------------------------------------------------------------



| |  |  | impact of higher indebtedness.
| | - |  | ------------------------------

Gain on valuation and translation of financial instruments: $2.5 million in the fourth quarter of 2009, compared with a $26.7 million loss in the same quarter
of 2008. The $29.2 million favourable variance resulted primarily from an unfavourable impact in the fourth quarter of 2008 related to re-measurement of derivative financial instruments due to changing yield curves and counterparty risks as
well as the unfavourable variance related to re-measurement of embedded derivatives.

Charge for
restructuring of operations and other special items:$21.5 million, compared with $50.3 million in the same period of 2008.



| |  |  | In the fourth quarter of 2009, a $20.1 million charge for restructuring of operations was recorded in the News Media segment in connection with
new staff reduction programs in Canada. A $0.1 million charge for restructuring of operations was also recorded in the fourth quarter of 2009 in other segments.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In December 2008, Quebecor Media introduced a staff-reduction program as part of a major restructuring of the operations of its News
Media segment across Canada, leading to the recognition of a $28.9 million charge for restructuring of operations in the fourth quarter of 2008. A $2.4 million charge for restructuring of operations was also recorded in the fourth quarter
of 2008 in other segments.



| |  |  | Quebecor Media also concluded that the restructuring initiatives and the loss of a major printing contract in 2008 were triggering events for
impairment tests and that write-downs of some long-lived assets were necessary. As a result, an impairment charge totalling $19.1 million was recorded in the fourth quarter of 2008 against buildings, machinery and equipment, compared with a
$0.4 million charge in the fourth quarter of 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In the fourth quarter of 2009, Quebecor Media recognized a $0.9 million loss on sales of businesses and other special items ($0.1 million
gain in the fourth quarter of 2008).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Non-cash charge for impairment of goodwill and intangible assets:nil in the fourth quarter of 2009 compared with a total of $671.2 million in the fourth quarter of 2008 (for more details, see 2009/2008 Financial Year Comparison above).

Income tax expense: $61.3 million in the fourth quarter of 2009 (effective tax rate of 27.8%), compared with $41.3 million
in the same period of 2008 (effective tax rate of 93.4% excluding the impact of a $631.0 million goodwill impairment charge, without any tax consequences). The variance in the effective tax rate in the fourth quarter of 2009 compared with the
same period of 2008 was mainly due to:



| |  |  | unfavourable tax rate mix in 2008 in the various components of the gains and losses on financial instruments and derivative financial instruments, and
on translation of financial instruments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | favourable changes in 2009 in the timing of future reversals of temporary differences.
| | - |  | --------------------------------------------------------------------------------------



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##### Table of Contents

Segmented Analysis

Telecommunications

Revenues:$532.9 million, an increase of $59.4 million (12.5%) compared with the fourth quarter of 2008. essentially due to the same factors as those noted in the 2009/2008 financial year comparison.



| |  |  | Combined revenues from all cable television services increased $20.6 million (9.9%) to $228.7 million.
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | Revenues from Internet access services increased $20.1 million (15.2%) to $152.2 million.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Revenues from cable telephone service increased $15.8 million (20.1%) to $94.3 million.
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Revenues from wireless telephone service increased $2.8 million (32.6%) to $11.3 million.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Revenues of Videotron Business Solutions decreased $1.0 million (-6.4%) to $14.6 million.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Revenues of Le SuperClub Videotron decreased $9.0 million (-55.9%) to $7.1 million.
| | - |  | -----------------------------------------------------------------------------------

Monthly ARPU:$91.68 in the fourth quarter of 2009, compared with $83.62 in the same period of 2008, an increase of $8.06 (9.6%).

Customer statistics

Cable television The combined customer base for all of Videotrons cable television services increased by 17,300 (1.0%) in the fourth quarter of 2009 (compared with an increase of
24,100 in the same quarter of 2008). Videotron posted combined customer growth for cable television services for the 18th consecutive quarter, i.e., for every period since the end of the second quarter of 2005.



| |  |  | The number of subscribers to illico Digital TV increased by 41,700 (4.0%) in the fourth quarter of 2009, compared with 50,600 in the same period
of 2008.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The customer base for analog cable television services decreased by 24,400 (-3.4%), compared with a decrease of 26,500 in the same period of 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------

Internet access  25,200 (2.2%) customer base increase in the fourth quarter of 2009,
compared with 32,400 in the fourth quarter of 2008.

Cable telephone  34,900 (3.6%) customer base increase
in the fourth quarter of 2009, compared with 54,100 in the same period of 2008.

Wireless telephone  3,000
(3.8%) handset increase in the fourth quarter of 2009, compared with 4,800 in the same quarter of 2008.

Operating
income:$280.9 million in the fourth quarter of 2009, an increase of $62.8 million (28.8%).



| |  |  | The increase was mainly due to:
| | - |  | -------------------------------



| |  |  | customer growth for all services;
| | - |  | ---------------------------------



| |  |  | $34.5 million favourable variance created by adjustments to provision for Part II licence fees (for more details, see Part II
licence fees under 2009/2008 Financial Year Comparison);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increases in some rates, primarily for the cable television and Internet access services, and excess usage fees.
| | - |  | ----------------------------------------------------------------------------------------------------------------



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Partially offset by:



| |  |  | $9.8 million increase in stock option expense.
| | - |  | ----------------------------------------------



| |  |  | Excluding the variance in the stock option expense and if the figures for all prior periods were restated to reflect the Part II licence fee
adjustments, the increase in operating income in the fourth quarter of 2009 would have been 16.4%, compared with 16.7% in the same period of 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost/revenue ratio:operating costs for all Telecommunications segment operations (expressed as a percentage of revenues) were 47.3% in the fourth quarter of 2009, compared with 53.9% in the same
quarter of 2008. The decrease was essentially due to the same factors as those noted in the 2009/2008 financial year comparison.

News Media

Revenues:$273.8 million, a decrease of $28.2 million (-9.3%).



| |  |  | Advertising revenues decreased by 14.5% and circulation revenues by 4.1%; combined revenues from commercial printing and other sources increased 74.9%.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The revenues of the urban dailies and the community newspapers decreased by 7.0% and 15.8% respectively in the fourth quarter of 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The revenues of the portals totalled $15.2 million in the fourth quarter of 2009, a decrease of 1.3%.
| | - |  | -----------------------------------------------------------------------------------------------------

Operating income:$69.3 million, an increase of $14.5 million (26.5%).



| |  |  | The increase was mainly due to:
| | - |  | -------------------------------



| |  |  | $22.3 million decrease in operating costs due primarily to restructuring and cost-reduction initiatives, as well as lower labour costs related to
the labour dispute at the Journal de Montréal;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $8.3 million decrease in newsprint costs.
| | - |  | -----------------------------------------

Partially offset by:



| |  |  | impact of the $28.2 million decrease in revenues;
| | - |  | -------------------------------------------------



| |  |  | $3.0 million unfavourable variance related to stock option expense;
| | - |  | -------------------------------------------------------------------



| |  |  | Quebecor Media Network start-up costs.
| | - |  | --------------------------------------



| |  |  | Excluding the impact of the stock option expense and Quebecor Media Network start-up costs, operating income would have increased by 37.2% in the
fourth quarter of 2009, compared with a 35.5% decrease in the same period of 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost/revenue ratio:operating costs for all News Media segment operations (expressed as a percentage of revenues) were 74.7% in the fourth quarter of 2009, compared with 81.9% in the same period of 2008. The decrease was mainly due to cost reductions generated by
the segments restructuring initiatives, as well as lower newsprint prices.

Broadcasting

Revenues:$128.5 million, an increase of $1.6 million (1.3%).



| |  |  | Revenues from broadcasting operations increased $5.0 million, mainly because of:
| | - |  | --------------------------------------------------------------------------------



| |  |  | higher advertising and subscription revenues at the specialty channels;
| | - |  | -----------------------------------------------------------------------



100



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| |  |  | increase in the TVA Networks other revenues, including revenues from the Local Programming Improvement Fund;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | increased revenues from commercial production.
| | - |  | ----------------------------------------------



| |  |  | Revenues from distribution operations decreased by $2.5 million, primarily as a result of decreased video volumes and lower sales of television
products.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Publishing revenues decreased $1.4 million as a result of lower newsstand sales, advertising revenues and subscription revenues.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

Operating income:$32.2 million, an increase of $9.7 million (43.1%).



| |  |  | Operating income from broadcasting operations increased $14.5 million, mainly due to:
| | - |  | -------------------------------------------------------------------------------------



| |  |  | $9.3 million favourable variance created by adjustments to provision for Part II licence fees (for more details, see Part II
licence fees in the segmented analysis under 2009/2008 Financial Year Comparison);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | lower content costs at the TVA Network as a result of programming strategy;
| | - |  | ---------------------------------------------------------------------------



| |  |  | impact of revenue increase.
| | - |  | ---------------------------

Partially offset by:



| |  |  | higher content costs at some specialty channels and Sun TV.
| | - |  | -----------------------------------------------------------



| |  |  | Operating income from distribution operations decreased by $3.8 million, mainly as a result of the decrease in revenues and the weak performance
of some titles.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating income from publishing operations was flat. The decrease in revenues was offset by reduced operating costs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------

Cost/revenue ratio:operating costs for all Broadcasting segment operations (expressed as a percentage of revenues) were 74.9% in the
fourth quarter of 2009, compared with 82.3% in the same period of 2008. The decrease was due to essentially the same factors as those noted in the 2009/2008 comparison.

Leisure and Entertainment

Revenues:$95.5 million, a
decrease of $4.9 million (-4.9%).



| |  |  | The Book divisions revenues declined 10.5%, mainly because of a decrease in the number of bestsellers distributed by Messageries A.D.P. in the
fourth quarter of 2009, compared with the same period of 2008, lower grant income and a decrease in the publishing revenues of Groupe Homme.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Archambault Groups revenues decreased by 2.3% due to:
| | - |  | ------------------------------------------------------



| |  |  | 3.3% drop in retail sales primarily as a result of lower sales of videos, books and CDs because of the closing of a store in the first quarter of 2009;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 2.5% decrease in distribution revenues;
| | - |  | ---------------------------------------



| |  |  | 11.0% decrease in production sales, essentially as a result of lower sales at Musicor and the closing of Groupe Archambault France in the first quarter
of 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



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Operating income:$8.4 million in the fourth quarter of 2009, a decrease of
$2.6 million (-23.6%) mainly due to the impact of the decrease in revenues.

Interactive Technologies and
Communications

Revenues:$23.5 million, a decrease of $0.5 million (-2.1%) due to lower volumes
from Canadian customers, partially offset by increased revenues from government customers.

Operating income:$1.4 million, compared with $3.0 million in the same period of 2008. The $1.6 million (-53.3%) decrease was mainly due to the unfavourable impact of the retroactive recognition in the fourth quarter of 2008 of tax credits for
research and development related to e-commerce and an unfavourable variance in foreign-exchange losses.

2008/2007
Financial Year Comparison

Operating results of Quebecor Media

Revenues:$3.73 billion, an increase of $364.2 million (10.8%).



| |  |  | Revenues increased in: Telecommunications (by $251.6 million or 16.2% of segment revenues), reflecting customer growth for all services; News
Media ($107.5 million or 10.0%), due primarily to the impact of the acquisition of Osprey Media; Broadcasting ($21.2 million or 5.1%); and Interactive Technologies and Communications ($7.6 million or 9.3%).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues decreased in Leisure and Entertainment ($27.9 million or -8.5%).
| | - |  | -------------------------------------------------------------------------

Operating income:$1.12 billion, an increase of $156.2 million (16.2%).



| |  |  | Operating income increased in Telecommunications (by $155.6 million or 24.2% of segment operating income), Broadcasting ($6.6 million or
11.1%) and Interactive Technologies and Communications ($2.3 million or 82.1%).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operating income decreased in Leisure and Entertainment ($6.7 million or -24.9%) and News Media ($5.7 million or -2.4%).
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | An unfavourable variance of $37.4 million (including $29.0 million in the Telecommunications segment and $8.4 million in the
Broadcasting segment) resulted from recognition in 2008 of a retroactive provision for CRTC Part II licence fees following the Federal Court of Appeal decision of April 29, 2008 overturning the favourable Federal Court decision on
these fees (for more details, see Part II licence fees in the discussion of the results of the Telecommunications and Broadcasting segments under 2009/2008 Financial Year Comparison).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in the fair value of Quebecor Media resulted in a $59.1 million favourable variance in the consolidated stock option expense, including
$40.6 million in the Telecommunications segment and $14.7 million in the News Media segment. The fair value of Quebecor Media, based on market comparables, decreased in 2008, compared with an increase in 2007.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the operating income of Osprey Media and the impact of the consolidated stock option expense, and if the figures for all prior periods were
restated to retroactively reflect the Part II licence fee adjustment, the increase in operating income in 2008 would have been 11.5%, compared with 17.8% in 2007.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net loss: $378.7 million, compared with net income of $328.3 million in 2007.



| |  |  | The unfavourable variance of $707.0 million was mainly due to:
| | - |  | --------------------------------------------------------------



| |  |  | recognition in the fourth quarter of 2008 of a $671.2 million non-cash charge for impairment of goodwill and intangible assets, including
$631.0 million with no tax consequences, primarily in the News Media segment;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | $79.5 million increase in income tax expense;
| | - |  | ---------------------------------------------



| |  |  | $45.9 million increase in financial expenses;
| | - |  | ---------------------------------------------



| |  |  | $42.4 million increase in charge for restructuring of operations, impairment of assets and other special items;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | $29.0 million increase in the amortization charge.
| | - |  | --------------------------------------------------

Partially offset by:



| |  |  | $156.2 million increase in operating income.
| | - |  | --------------------------------------------

Amortization charge: $316.7 million, an increase of $29.0 million.



| |  |  | The increase was mainly due to significant capital expenditures in 2007 and 2008, largely in the Telecommunications and News Media segments, and the
acquisition of Osprey Media.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financial expenses: $276.0 million, an increase of
$45.9 million.



| |  |  | The increase was mainly due to the impact of higher average indebtedness, which resulted in a $50.4 million increase in the interest expense,
which was offset by an increase in interest capitalized to the cost of additions to property, plant and equipment, and of intangible assets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The increase in Quebecor Medias average indebtedness in 2008 was mainly due to:
| | - |  | --------------------------------------------------------------------------------



| |  |  | financing in April 2008 of the acquisition of AWS network licences for a cash consideration of $554.6 million;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | financing, beginning in August 2007, of the acquisition of Osprey Media for a total consideration of $414.4 million (excluding assumed
liabilities);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | liabilities totalling $161.8 million assumed as part of the acquisition of Osprey Media in August 2007;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | financing of the settlement in October 2007 of a $106.0 million liability in connection with derivative financial instruments related to Sun
Medias term loan B;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | financing of the payment in July 2007 of the additional amount payable, for a total consideration of $127.2 million.
| | - |  | --------------------------------------------------------------------------------------------------------------------

Loss on valuation and translation of financial instruments:$3.7 million in 2008, compared with
$9.9 million in 2007, a favourable variance of $6.2 million due primarily to recognition in 2007 of a $5.2 million loss on re-measurement of the additional amount payable.

Charge for restructuring of operations, impairment of assets and other special items: $54.6 million in 2008, compared with
$12.2 million in 2007.



| |  |  | The News Media segment recognized a $33.3 million charge for restructuring of operations in 2008. The News Media segment was contending with
the fundamental industry-wide changes that had been under way for several years, combined with a difficult economic environment that was impacting its advertising revenues. Therefore, in December 2008, Quebecor Media introduced a
staff-reduction program as part of a major restructuring of the operations of its News Media segment across Canada. Quebecor Media also recognized charges for restructuring totalling $2.3 million in other segments in 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



103



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| |  |  | In the fourth quarter of 2008, Quebecor Media concluded that the restructuring initiatives and the loss of a major printing contract were a triggering
event for impairment tests and that write-downs of some long-lived assets would be necessary. As a result, a non-cash impairment charge totalling $19.1 million was recorded against buildings, machinery and equipment
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Non-cash charge for impairment of goodwill and intangible assets: $671.2 million in 2008,
compared with $5.4 million in 2007.



| |  |  | The difficult financial and economic environment for some of the Companys lines of business at the end of the fourth quarter of 2008 triggered a
goodwill and masthead impairment test in the News Media, Leisure and Entertainment, and Interactive Technologies and Communications segments. Based on preliminary results of this test, a $631.0 million non-cash charge for goodwill impairment,
without any tax consequences, was recorded, including $595.0 million in the News Media segment, $10.0 million in the Leisure and Entertainment segment, and $26.0 million in the Interactive Technologies and Communications segment.
Quebecor Media also recorded a masthead impairment charge of $40.2 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Income tax expense:
$155.2 million (effective rate of 36.2%, excluding the impact of the goodwill impairment change without any tax consequence), compared with $75.7 million in 2007 (effective tax rate of 18.1%).



| |  |  | The variance in the effective rate was mainly due to:
| | - |  | -----------------------------------------------------



| |  |  | unfavourable tax rate mix in 2008 in the various components of the gains and losses on valuation and translation of financial instruments, including
derivative financial instruments for an unfavourable variance of $39.3 million. The rate mix was relatively favourable in 2007;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | recognition in 2007 of an estimated $25.4 million favourable impact of lower tax rates introduced by the Canadian federal government;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | recognition in 2007 of tax benefits totalling $10.5 million following the adoption on third reading by the federal government of Canada of a
higher non-capital loss conversion rate for tax benefits related to Part VI.1 tax. These tax benefits, which were acquired from World Color Press Inc. (WCP, formerly Quebecor World), related to tax that
corporations must pay on preferred dividends paid during a financial year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Free cash flows from
continuing operating activities:$243.2 million in 2008, compared with $289.0 million in 2007 (see Table Quebecor Media Inc.  Free cash flows from continuing operating activities above).



| |  |  | The $45.8 million decrease was mainly due to:
| | - |  | ---------------------------------------------



| |  |  | $51.0 million increase in use of funds for non-cash balances related to operations, due primarily to disbursements of $94.1 million in
connection with the exercise of stock options, partially offset by a decrease in accounts receivable and an increase in other accounts payable and accrued charges.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $44.4 million increase in acquisitions of intangible assets, mainly in the Telecommunications segment due to IT projects and the build-out of the
AWS network;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $41.4 million increase in the cash interest expense, mainly as a result of the impact of higher indebtedness;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | $35.5 million increase in additions to property, plant and equipment, mainly because of network investments by the Telecommunications segment and
phase two of the project to acquire new presses;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $23.3 million increase in cash portion of charge for restructuring of operations and other special items.
| | - |  | ---------------------------------------------------------------------------------------------------------



104



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Partially offset by:



| |  |  | $156.2 million increase in operating income.
| | - |  | --------------------------------------------

Segmented analysis

Telecommunications

Revenues:$1.8 billion in 2008, an increase of $251.6 million (16.2%).



| |  |  | Combined revenues from all cable television services increased $74.1 million (10.1%) to $809.9 million, due primarily to customer base
growth, migration from analog to digital service, increased video on demand orders, the success of HD packages, and increases in some rates.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues from Internet access services increased $77.2 million (18.3%) to $499.6 million. The improvement was due to customer growth, as
well as customer migration to higher speed services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues from cable telephone service increased $90.6 million (46.3%) to $286.1 million, almost entirely due to customer growth. The
increase would have been greater had there not been a decrease in average per-customer long-distance revenues.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues from wireless telephone service increased $13.9 million (78.5%) to $31.6 million, mainly due to customer growth.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues of Videotron Business Solutions decreased $6.6 million (-9.4%) to $63.6 million due to the loss of a major contract.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues of Le SuperClub Videotron decreased $2.9 million (-4.9%) to $57.0 million. The decrease was mainly due to the sale of
StarStruck stores in Ontario and the franchising or closing of some locations, partially offset by an increase in revenues from rentals and retail sales on a comparable basis, as well as by increased royalty revenues.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Monthly ARPU:$81.17 in 2008, compared with $71.52 in 2007, an increase of $9.65 (13.5%).

Customer statistics

Cable television The combined customer base for all of Videotrons cable television services increased by 77,500 (4.7%) in 2008, compared with an increase of 65,700 in the same period of 2007.



| |  |  | Increase of 159,100 customers (20.7%) for the illico Digital TV service in 2008, compared with 144,600 in the same period of 2007.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Decrease of 81,600 customers (-9.4%) for analog cable television services in 2008, compared with a decrease of 78,900 in the same period of 2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

Internet access Increase of 130,800 customers
(14.0%) for cable Internet access services in 2008, compared with 141,000 in 2007.

Cable telephone Increase of 215,600 customers (33.9%) for cable telephone service in 2008, compared with 238,600 in 2007.

Wireless telephone Increase of 18,300 activated handsets (40.6%) in 2008, compared with 33,300 in 2007.

Operating income:$797.9 million, an increase of $155.6 million (24.2%).



| |  |  | The increase was due primarily to:
| | - |  | ----------------------------------



| |  |  | customer growth for all services;
| | - |  | ---------------------------------



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| |  |  | increases in some rates, mainly for cable television and cable Internet service;
| | - |  | --------------------------------------------------------------------------------



| |  |  | $40.6 million favourable variance in expenses related to Quebecor Medias stock option plan.
| | - |  | --------------------------------------------------------------------------------------------

Partially offset by:



| |  |  | an unfavourable variance of $29.0 million related to the recognition in 2008 of a provision for Part II licence fees following the decision
by the Federal Court of Appeal on April 29, 2008 overturning the favourable Federal Court ruling on the matter (for more details, see Part II licence fees in the discussion of the results of the Telecommunications segment
under 2009/2008 Financial Year Comparison).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the favourable variation in the stock option expense, and if the figures for all prior periods were restated to reflect the Part II
licence fee adjustment, operating income would have increased by 21.3% in 2008, compared with 26.0% in 2007.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost/revenue ratio:operating costs for all Telecommunications segment operations, expressed as a percentage of revenues, were 55.8% in 2008 compared with 58.6% in 2007. The decrease
was mainly due to:



| |  |  | significant fixed component of costs that does not fluctuate in proportion to revenue growth;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | marginal impact on costs of increases in some rates and in consumption;
| | - |  | -----------------------------------------------------------------------



| |  |  | favourable variance in stock option expense, which was partially offset by the increase in Part II licence fees.
| | - |  | ----------------------------------------------------------------------------------------------------------------

Cash flows from segment operations: $384.6 million in 2008, compared with $314.3 million in 2007 (see Table
Telecommunications  cash flows from operations above).



| |  |  | The $70.3 million increase was due to the $155.6 million increase in operating income, partially offset by an $86.7 million increase in
additions to property, plant and equipment and in intangible assets compared with 2007, essentially because of spending on the AWS network and network modernization.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

News Media

Revenues:$1.18 billion, an increase of $107.5 million (10.0%).



| |  |  | The increase mainly reflects a favourable variance related to the acquisition of Osprey Media ($120.2 million), which closed in August 2007.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impact of that acquisition, total revenues decreased by $12.7 million (-1.3%): advertising revenues decreased 3.1%, circulation
revenues decreased 3.0%, and combined revenues from commercial printing and other sources increased 28.9%.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The revenues of the urban dailies decreased 2.9%; excluding the acquisition of Osprey Media, the revenues of the community newspapers decreased 0.4%.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | At the urban dailies, revenues of the free dailies increased 12.6%, due to strong results posted by the Vancouver, Montreal, Calgary and Edmonton
dailies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues increased 15.1% at the general-interest portals, due mainly to website creation and maintenance, including the sites of affiliated companies,
and 8.5% at the special-interest portals, primarily because of revenue growth at the autonet.ca site resulting mainly from the acquisition of ASL Ltd. (ASL).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating income:$227.1 million, a decrease of $5.7 million (-2.4%).



106



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| |  |  | Osprey Media generated operating income of $45.6 million in 2008, compared with $25.3 million from August through December 2007,
for an increase of $20.3 million in 2008 compared with 2007.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impact of Osprey Media, operating income decreased $26.1 million (-12.6%) in the News Media segment.
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | The decrease was due primarily to:
| | - |  | ----------------------------------



| |  |  | impact of the decrease in advertising and circulation revenues, on a comparable basis;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | wage indexing and certain unusual payroll expenses, including charges related to the transition plan for printing facilities in Ontario and Quebec;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expenditures related to the start-up of Quebecor MediaPages;
| | - |  | ------------------------------------------------------------



| |  |  | cost of introducing a new business development strategy for portals.
| | - |  | --------------------------------------------------------------------

Partially offset by:



| |  |  | $14.7 million favourable impact related to the Quebecor Media stock option plan expense;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | $3.1 million decrease in newsprint costs.
| | - |  | -----------------------------------------

Cost/revenue ratio:operating costs for all News Media segment operations, expressed as a percentage of revenues, were 80.8% in 2008 compared with 78.3% in 2007. The increase was mainly
due to:



| |  |  | increase in the proportion of fixed costs, given the decrease in revenues on a comparable basis;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | unfavourable net cost factors, described above in the discussion of operating income.
| | - |  | -------------------------------------------------------------------------------------

Cash flows from segment operations:$140.3 million in 2008, compared with $118.3 million in 2007 (see Table News
media  cash flows from operations above).



| |  |  | The $22.0 million increase was mainly due to a $26.7 million decrease in additions to property, plant and equipment. The impact of increased
equipment purchases due to the implementation in 2008 of phase two of the project to acquire new presses and investment in portal development was outweighed by the favourable variance related to the acquisition of a building from WCP in 2007 for a
cash consideration of $62.5 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Broadcasting

Revenues:$436.7 million, an increase of $21.2 million (5.1%).



| |  |  | Revenues from broadcasting operations increased $21.8 million, mainly because of:
| | - |  | ---------------------------------------------------------------------------------



| |  |  | higher advertising, video on demand and other revenues at the TVA Network;
| | - |  | --------------------------------------------------------------------------



| |  |  | higher advertising and subscription revenues at the specialty channels;
| | - |  | -----------------------------------------------------------------------



| |  |  | higher revenues from the Internet, commercial production and Canal Indigo (100% of the revenues of Canal Indigo were included after the buyout on
August 31, 2008 of the interest TVA Group did not already hold).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenues from distribution operations decreased by $0.6 million.
| | - |  | ----------------------------------------------------------------



| |  |  | Publishing revenues decreased $1.3 million, primarily as a result of decreases in advertising and newsstand revenues, partially offset by an
increase in custom publishing operations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



107



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Operating income:$66.0 million, an increase of $6.6 million (11.1%);
excluding the unfavourable impact of provisions for Part II licence fees, the increase was $15.0 million.



| |  |  | Operating income from broadcasting operations increased $4.5 million, mainly because of:
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | impact of revenue growth at the TVA Network and the specialty channels;
| | - |  | -----------------------------------------------------------------------



| |  |  | decrease in selling and administrative expenses at the TVA Network;
| | - |  | -------------------------------------------------------------------



| |  |  | $2.4 million favourable variance related to stock option expense.
| | - |  | -----------------------------------------------------------------

Partially offset by:



| |  |  | an unfavourable variance of $8.4 million related to the recognition in 2008 of a provision for Part II licence fees following the decision by
the Federal Court of Appeal on April 29, 2008 overturning the favourable Federal Court ruling on the matter (for more details, see Part II licence fees in the discussion of the results of the Broadcasting segment under
2009/2008 Financial Year Comparison).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | higher content and production costs at the TVA Network.
| | - |  | -------------------------------------------------------



| |  |  | Operating income from distribution operations was flat.
| | - |  | -------------------------------------------------------



| |  |  | Operating income from publishing operations increased by $1.5 million, mainly as a result of the decrease in advertising, marketing, distribution
and printing expenses, partially offset by the unfavourable impact of the decrease in revenues.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost/revenue ratio:operating costs for all Broadcasting segment operations, expressed as a percentage of revenues, were 84.9% in 2008, compared with 85.7% in 2007. The decrease, as a proportion of revenues, was due to:



| |  |  | decrease in the proportion of fixed costs, given revenue growth on a comparable basis, partially offset by the unfavourable impact of the Part II
licence fee expense.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash flows from segment operations:$44.2 million in 2008, compared with
$43.2 million in 2007 (see Table Broadcasting  cash flows from operations above).



| |  |  | The impact of the $6.6 million increase in operating income was offset by a $6.2 million increase in additions to property, plant and
equipment, resulting mainly from expenditures related to the migration to HDTV and computer equipment purchases.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Leisure and Entertainment

Revenues:$301.9 million, a decrease of $27.9 million
(-8.5%). The Leisure and Entertainment segment is being affected by the fundamental transformation under way in the music- and book-selling industry, coupled with a difficult economic environment that is impacting its retail revenues.



| |  |  | The Book divisions revenues decreased 8.8%, due primarily to lower distribution volume in 2008 than 2007 and decreased sales in the academic
segment.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The revenues of Archambault Group decreased by 7.4%, mainly due to fewer CDs being released and distributed and lower retail sales of music. The impact
of higher broadcast revenues due to the success of the Paul McCartney concert during Québec Citys 400th anniversary celebrations was outweighed by a decrease in revenues due to the transfer of video on demand operations to the
Telecommunications segment.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating income:$20.2 million, a decrease of $6.7 million
(-24.9%), due primarily to a decrease in gross margin on retail sales and higher operating expenses at Archambault Group, combined with the impact of decreased sales at the Book division.



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Cash flows from segment operations:$5.6 million in 2008, compared with
$24.1 million in 2007 (see Table Leisure and Entertainment  cash flows from operations above).



| |  |  | The $18.5 million decrease was mainly due to:
| | - |  | ---------------------------------------------



| |  |  | $6.7 million decrease in operating income;
| | - |  | ------------------------------------------



| |  |  | $6.1 million increase in additions to property, plant and equipment, mainly at Archambault Group, essentially as a result of the opening of
an Archambault store in Laval, Quebec, as well as the expansion and renovation of other stores;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $7.3 million increase in acquisitions of intangible assets, mainly because of increased capitalization of launch-related expenses at CEC
Publishing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

Interactive Technologies and Communications

Revenue: $89.6 million, an increase of $7.6 million (9.3%).



| |  |  | The increase was mainly due to:
| | - |  | -------------------------------



| |  |  | impact of increased volumes from customers in Europe, particularly France and Italy, as well as in Asia and Canada, and favourable variance in currency
translation, partially offset by a decrease in volume in the United States.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating income:$5.1 million, an increase of $2.3 million (82.1%).



| |  |  | The increase was due mainly to:
| | - |  | -------------------------------



| |  |  | impact of increased revenues in Canada, Europe and Asia;
| | - |  | --------------------------------------------------------



| |  |  | increase in tax credits for e-commerce R&D;
| | - |  | -------------------------------------------



| |  |  | favourable variance in currency translation.
| | - |  | --------------------------------------------

Partially offset by:



| |  |  | impact of decreased volume in the United States;
| | - |  | ------------------------------------------------



| |  |  | increases in some operating expenses, including those related to labour.
| | - |  | ------------------------------------------------------------------------

Cash flows from segment operations:$1.5 million in 2008, compared with negative $0.5 million in 2007 (see Table
Interactive Technologies and Communications  cash flows from operations above), a $2.0 million improvement due mainly to the increase in operating income.

Cash Flows And Financial Position

Operating activities

2009 financial year

Cash flows provided by continuing operating activities:$949.5 million in 2009, compared with $786.1 million in 2008.



| |  |  | The $163.4 million increase was mainly due to:
| | - |  | ----------------------------------------------



| |  |  | $165.1 million increase in operating income;
| | - |  | --------------------------------------------



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| |  |  | $38.7 million decrease in cash interest expense (see the discussion of financial expenses under 2009/2008 Financial Year Comparison);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | decrease in cash portion of charge for restructuring of operations.
| | - |  | -------------------------------------------------------------------

Partially offset by:



| |  |  | $34.6 million increase in use of funds for non-cash balances related to operations, mainly because of current variances in activity, including a
$34.9 million increase in accounts receivable due to, among other things, higher revenues in the Telecommunications segment;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $17.0 million increase in current income taxes.
| | - |  | -----------------------------------------------

2008 financial year

Cash flows provided by continuing operating
activities:$786.1 million in 2008, compared with $751.6 million in 2007.



| |  |  | The $34.5 million increase was due primarily to:
| | - |  | ------------------------------------------------



| |  |  | $156.2 million increase in operating income;
| | - |  | --------------------------------------------

Largely offset by:



| |  |  | $51.0 million increase in use of funds for non-cash balances related to operations, due primarily to disbursements of $94.1 million in
connection with the exercise of stock options, partially offset by a decrease in accounts receivable and an increase in accounts payable and accrued charges;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $41.4 million increase in the cash interest expense, mainly as a result of the impact of higher indebtedness;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | $23.3 million increase in charge for restructuring of operations, impairment of assets, and other special items.
| | - |  | ----------------------------------------------------------------------------------------------------------------

Working capital of Quebecor Media:negative $1.2 million at December 31, 2009, compared with negative $227.7 million
at December 31, 2008. The favourable variance of $226.5 million mainly reflects the increase in cash and cash equivalents (see Table Consolidated balance sheet of Quebecor Media below).

The debt management strategy accounts for most of the working capital deficit in 2008. Under the Companys cash management process,
receipts of deferred revenues that are periodic and renewable are used to reduce drawings on revolving credit facilities, which are recorded under long-term debt.

Financing activities

2009 financial year

Consolidated debtof Quebecor Media (long-term debt plus bank borrowings): reduced by $585.1 million in 2009. Unfavourable
$574.0 million net variance in assets and liabilities related to derivative financial instruments.



| |  |  | The decrease in the consolidated debt was mainly due to:
| | - |  | --------------------------------------------------------



| |  |  | estimated $551.6 million favourable impact of exchange rate fluctuations on long-term debt. The decrease in this item is offset by an increase in
the liability (or a decrease in the asset) related to cross-currency swap agreements entered under Derivative financial instruments;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | net decrease in drawings on the revolving bank credit facilities and bank borrowings of Videotron, TVA Group, Sun Media, and Head Office in the amounts
of $212.7 million, $78.1 million, $12.0 million and $6.5 million respectively;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $77.0 million decrease in debt related to hedged interest rate exposure and to embedded derivatives, due mainly to interest rate fluctuations;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | debt repayments totalling $54.6 million, mainly by Quebecor Media and Osprey Media.
| | - |  | -----------------------------------------------------------------------------------

Partially offset by:



| |  |  | issuance by Videotron on March 5, 2009 of US$260.0 million aggregate principal amount of Senior Notes for net proceeds of $332.4 million
(including accrued interest and net of financing fees). The Senior Notes were sold at a price equivalent to 98.63% of face value, bear 91/8% interest (effective rate of 9.35%) and mature on April 15, 2018;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | closing on December 14, 2009 of the refinancing of TVA Groups bank debt with net proceeds of $75.0 million drawn on a new term loan
bearing interest at 5.54% and coming due in 2014. As part of this refinancing, TVA Group also renewed its revolving credit facility for a maximum of $100.0 million, expiring in 2012.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Assets and liabilities related to derivative financial instruments totalled a net liability of $373.4 million at December 31, 2009 (net of a
$49.0 million asset at that date), compared with a net asset of $200.6 million at December 31, 2008 (net of a $117.3 million liability at that date). The $574.0 million net reduction was mainly due to the impact of exchange
rate fluctuations on the value of derivative financial instruments.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On November 13, 2009, Videotron amended its Senior Secured Credit Facility in order to create within it a $75.0 million secured term credit
facility maturing in June 2018 (Export Financing Facility). Also on November 13, 2009, Videotron closed another credit agreement with a group of creditors and HSBC Bank plc, acting as agent for the creditors, for an
unsecured term credit facility (Facility B) of a maximum amount equal to the difference between US$100.0 million and the aggregate amount, in US dollars, of drawings on the Export Financing Facility. Facility B matures
in April 2016. The Export Financing Facility and Facility B may be used to, among other things, pay and/or reimburse payments for exports of equipment and local services related to the contract for wireless infrastructure equipment between
Videotron and a subsidiary of Nokia Corporation.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On January 13, 2010, Videotron closed a $300.0 million aggregate principal amount placement of Senior Notes for net proceeds of $293.9 (net
of financing fees). The Senior Notes were sold at par, bear 71/8% interest and mature in 2020.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On January 14, 2010, Quebecor Media made a US$170.0 million early payment on drawings on its term loan B and settled a
corresponding portion of its hedge agreements for $30.9 million, for a total cash disbursement of $206.7 million. The transactions resulted in total loss of approximately $10.0 million, consisting mainly of losses reported in other
comprehensive income.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On January 14, 2010, Quebecor Media also extended the maturity date of its $100.0 million revolving credit facility from January 2011 to
January 2013 and obtained certain other advantageous amendments to the covenants attached to its credit facilities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2008 financial year

Consolidated debtof Quebecor Media (long-term debt plus bank borrowings): increase
of $1.31 billion in 2008.



| |  |  | The increase was due mainly to:
| | - |  | -------------------------------



| |  |  | estimated $673.0 million unfavourable impact of exchange rate fluctuations. The impact of this item was offset by a decrease in the liability (or
increase in the asset) related to cross-currency swap agreements entered under Derivative financial instruments;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | issuance by Videotron on April 15, 2008 of US$455.0 million in aggregate principal amount of Senior Notes for net proceeds of
$447.8 million (after financing expenses). The Senior Notes were sold at a price equivalent to 98.43% of face value, bear 91/8% interest (an effective rate of 93/8%) and mature on April 15, 2018;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased drawings on the revolving bank credit facilities, long-term credit facilities and bank borrowings of Videotron, TVA Group and Quebecor Media
in the amounts of $55.1 million, $37.7 million and $21.2 million respectively;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $89.4 million increase in debt related to hedged interest rate exposure and embedded derivatives, due mainly to interest rate fluctuations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

Partially offset by:



| |  |  | debt repayments of $25.7 million, mainly by Quebecor Media.
| | - |  | -----------------------------------------------------------



| |  |  | The increase in long-term debt and free cash flows from continuing operating activities were used to finance: the disbursement of a cash consideration
of $554.6 million for the purpose of acquiring AWS network licences; for business acquisitions, including buyouts of minority interests in Nurun, for a cash consideration of $75.2 million when Nurun was taken private; and, in TVA Group,
for the disbursement of a cash consideration of $51.4 million under its Substantial Issuer Bid.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Assets and liabilities related to derivative financial instruments totalled a net asset of $200.6 million at December 31, 2008 (net of a
$117.3 million liability at that date), compared with a net liability of $538.5 million at December 31, 2007. The $739.1 million favourable variance was caused mainly by fluctuations in the Canadian dollar against the U.S.
dollar, which were partially offset by the negative impact of changes in estimates of the fair value of derivative financial instruments and the unfavourable combined effect of interest rate fluctuations in Canada and the United States.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | April 7, 2008: Videotron amended its Senior Secured Credit Facility to increase commitments under the facility from $450.0 million to
$575.0 million and to extend the maturity date to April 2012.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investing activities

2009 financial year

Additions to property, plant and equipment:$491.1 million in 2009 compared with $465.6 million in 2008.



| |  |  | The increase caused by Videotrons expenditures on its AWS network was partially offset by a decrease in the News Media segment related to
investments made in 2008 on phase two of the project to acquire new presses.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Business acquisitions(including buyouts of minority interests): $4.6 million in 2009 compared with $146.7 million in 2008.



| |  |  | Business acquisitions in 2009 were as follows:
| | - |  | ----------------------------------------------



| |  |  | 253,300 TVA Group Class B Shares were repurchased for a total cash consideration of $2.6 million;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | contingent considerations totalling $2.0 million were paid in connection with the acquisition of ASL in the News Media segment, and of China
Interactive Limited in the Interactive Technologies and Communications segment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Business acquisitions in 2008 were as follows:
| | - |  | ----------------------------------------------



| |  |  | all outstanding Common Shares of Nurun not already held acquired for a total cash consideration of $75.2 million;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | 3,000,642 TVA Group Class B Shares repurchased in the second quarter of 2008 for a total cash consideration of $51.4 million;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | certain businesses acquired, primarily in the News Media segment, for a total cash consideration of $15.1 million;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | $5.0 million contingent payment made in connection with the acquisition of Sogides in 2005.
| | - |  | -------------------------------------------------------------------------------------------

Acquisitions of intangible assets:$111.5 million in 2009 compared with $637.6 million in 2008. The variance was mainly due
to the acquisition in the third quarter of 2008 of 17 AWS network operating licences for a consideration of $554.6 million.

2008 financial year

Additions to property, plant and equipment:$465.6 million in 2008 compared
with $430.1 million in 2007.



| |  |  | The $35.5 million increase was mainly due to investments in network modernization by the Telecommunications segment and phase two of the project
to acquire new presses in the News Media segment. In 2007, the News Media segment acquired a building from WCP for a cash consideration of $62.5 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Business acquisitions(including buyouts of minority interests): $146.7 million in 2008 compared with $438.6 million in
2007.



| |  |  | In the third quarter of 2007, Quebecor Media closed the acquisition of Osprey Media for a total cash consideration of $414.4 million (excluding
assumed liabilities).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

Acquisitions of intangible assets:$637.6 million in 2008 compared with
$38.6 million in 2007. The $599.0 million increase was mainly due to the acquisition in 2008 of 17 AWS network operating licences for a consideration of $554.6 million.

Financial Position at December 31, 2009

Net available liquid assets:$1.12 billion for the Company and its wholly owned subsidiaries, consisting in $327.6 million in cash and $790.1 million in available unused lines of
credit.

Consolidated debt:total $3.76 billion as at December 31, 2009, compared with $4.35 billion as
at December 31, 2008, a $585.1 million decrease (see Financing Activities above).



| |  |  | Consolidated debt at December 31, 2009 included Videotrons $1.59 billion debt ($1.81 billion at December 31, 2008), Sun Medias
$248.9 million debt ($294.3 million at December 31, 2008), Osprey Medias $114.2 million debt ($134.1 million at December 31, 2008), TVA Groups $89.6 million debt ($93.9 million at December 31,
2008) and Quebecor Medias $1.72 billion debt ($2.01 billion at December 31, 2008).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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As of December 31, 2009, the aggregate amount of minimum principal payments on
long-term debt required in each of the next five years and thereafter, based on borrowing levels as at that date, was as follows:

Minimum
principal amount on Quebecor Medias long term debt

12 months periods ending on December 31

(in millions of Canadian dollars)



|                    |  |   |        
|------------------- |  | - | -------
|2010                |  | $ | 67.8   
|2011                |  |   | 144.4  
|2012                |  |   | 66.7   
|2013                |  |   | 567.1  
|2014                |  |   | 774.8  
|2015 and thereafter |  |   | 2,184.7
|                    |  |   |        
|Total               |  | $ | 3,805.5
|                    |  |   |        

The weighted average term of Quebecor Medias
consolidated debt was approximately 5.3 years as of December 31, 2009 (5.7 years pro-forma the refinancing of January 2010) compared to 5.7 years as of December 31, 2008. The debt comprises approximately 69.3% fixed-rate debt (72.1%
pro-forma the refinancing of January 2010) compared to 64.5% as of December 31, 2008, and 30.7% floating-rate debt (27.9% pro-forma the refinancing of January 2010) compared to 35.5% as of December 31, 2008.

Management believes that cash flows from continuing operating activities and available sources of financing should be sufficient to cover
planned cash requirements for capital investments, working capital, interest payments, debt repayments, pension plan contributions and dividends (or distributions). The Company has access to cash flows generated by its subsidiaries through dividends
(or distributions) and cash advances paid by its wholly owned subsidiaries and through the dividends paid by the publicly listed subsidiary TVA Group. The Company believes it will be able to meet future debt payments, which are staggered over the
coming years.

Pursuant to their financing agreements, the Company and its subsidiaries are subject to certain undertakings,
including requirements to maintain certain financial ratios, such as the debt service coverage ratio and debt ratio (long-term debt over operating income). At December 31, 2009, the Company was in compliance with all undertakings and required
financial ratios.

Dividends declared by Board of Directors of Quebecor Media and paid in 2009: $75.0 million. In
2008, the Board of Directors of Quebecor Media declared and paid dividends totalling $65.0 million.

AWS: As work
on the build-out and roll-out of Videotrons advanced wireless services progressed during the past year, changes in the project led to corresponding changes in the investment profile compared with the companys original estimates. Quebecor
Media does not expect, however, that this will have any material effect on its operating results or financial position, as it is confident that the project will enable it to achieve its objectives for penetration, revenue generation, and free cash
flow generation. Videotron still expects to finance future expenditures related to its AWS project from cash and cash equivalents, cash flows generated by operations, and if necessary unused lines of credit.



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Consolidated balance sheet of Quebecor Media

Analysis of main variances between December 31, 2008 and December 31, 2009

(in millions of Canadian dollars)



|                                                                   |  |             |         |             |   |         |            |  |   |                             |   |  |                                                                                                                                                                                                                                      
|------------------------------------------------------------------ |  | ----------- | ------- | ----------- | - | ------- | ---------- |  | - | --------------------------- | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                   |  | Dec. 312009 |         | Dec. 312008 |   |         | Difference |  |   | Main reasons for difference
|Assets                                                             |  |             |         |             |   |         |            |  |   |                             |   |  |                                                                                                                                                                                                                                      
|Cash and cash equivalents                                          |  | $           | 300.0   |             | $ | 22.5    |            |  | $ | 277.5                       |   |  | Impact of issuance of debt by Videotron and cash flows provided by operating activities                                                                                                                                              
|                                                                   |  |             |         |            
|Accounts receivable                                                |  |             | 518.6   |             |   | 483.7   |            |  |   | 34.9                        |   |  | Impact of current variances in activity, including increased revenues in Telecommunications segment                                                                                                                                  
|                                                                   |  |             |         |            
|Property, plant and equipment                                      |  |             | 2,439.8 |             |   | 2,215.2 |            |  |   | 224.6                       |   |  | Additions to property, plant and equipment (see Investing Activities above), less amortization                                                                                                                                     
|                                                                   |  |             |         |            
|Intangible assets                                                  |  |             | 1,052.7 |             |   | 985.9   |            |  |   | 66.8                        |   |  | Increase in capitalized interest on expenditures related to build-out of AWS network and increased expenditures for computer applications in the Telecommunications segment, offset
by amortization of amortizable intangible assets.
|                                                                   |  |             |         |            
|Liabilities                                                        |  |             |         |             |   |         |            |  |   |                             |   |  |                                                                                                                                                                                                                                      
|Long-term debt, including short-term portion and bank indebtedness |  | $           | 3,762.2 |             | $ | 4,347.3 |            |  | $ | (585.1                      | ) |  | See Financing Activities above                                                                                                                                                                                                     
|                                                                   |  |             |         |            
|Net derivative financial instruments(1)                            |  |             | 373.4   |             |   | (200.6  | )          |  |   | 574.0                       |   |  | See Financing Activities above                                                                                                                                                                                                     
|                                                                   |  |             |         |            
|Net future tax liabilities(2)                                      |  |             | 353.0   |             |   | 241.8   |            |  |   | 111.2                       |   |  | Use of tax benefits and of capital cost allowance                                                                                                                                                                                    



|(1) | Long-term liabilities less long-term assets.
|--- | --------------------------------------------

|(2) | Long-term liabilities less current and long-term assets.
|--- | --------------------------------------------------------

Additional Information

Contractual Obligations

At December 31, 2009, material contractual obligations included capital repayment and interest on long-term debt; operating lease
arrangements; capital asset purchases and other commitments; and obligations related to derivative financial instruments, less estimated future receipts on derivative instruments. The table below shows a summary of those contractual obligations.

Contractual obligations of Quebecor Media as of December 31, 2009

(in millions of Canadian dollars)

|                                                                 |  |         |  |             |  |           |  |           |  |               
|---------------------------------------------------------------- |  | ------- |  | ----------- |  | --------- |  | --------- |  | --------------
|                                                                 |  | Total   |  | Under1 year |  | 1-3 years |  | 3-5 years |  | 5 yearsor more
|Long-term debt                                                   |  | 3,805.5 |  | 67.8        |  | 211.1     |  | 1,341.9   |  | 2,184.7       
|Interest payments(1)                                             |  | 1,613.4 |  | 241.2       |  | 534.3     |  | 450.0     |  | 387.9         
|Operating leases                                                 |  | 310.9   |  | 54.7        |  | 73.6      |  | 50.6      |  | 132.0         
|Additions to property, plant and equipment and other commitments |  | 161.5   |  | 83.1        |  | 68.2      |  | 7.5       |  | 2.7           
|Derivative financial instruments(2)                              |  | 375.1   |  | 0.4         |  | 0.8       |  | 278.2     |  | 95.7          
|                                                                 |  |         |  |             |  |           |  |           |  |               
|Total contractual obligations                                    |  | 6,266.4 |  | 447.2       |  | 888.0     |  | 2,128.2   |  | 2,803.0       
|                                                                 |  |         |  |             |  |           |  |           |  |               



|(1) | Estimated interest payable on long-term debt, based on interest rates, hedging interest rates and hedging of foreign exchange rates as of December 31, 2009.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Estimated future disbursements, net of receipts, related to derivative financial instruments used for foreign exchange hedging.
|--- | -------------------------------------------------------------------------------------------------------------------------------

In the normal course of business, TVA Group contracts commitments respecting broadcast rights for television programs and films, and
respecting distribution rights for audiovisual content. The outstanding balance of such commitments was $61.1 million at December 31, 2009.



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Large quantities of newsprint, paper and ink are among the most important raw materials used
by Quebecor Media. During 2009, the total newsprint consumption of our News Media segments operations was approximately 145,000 metric tonnes. Newsprint represents approximately 10.1% ($83.6 million) of the News Media segments
operating expenses for the year ended December 31, 2009. In order to obtain more favourable pricing, Quebecor Media sources substantially all of its newsprint from a single newsprint producer, AbitibiBowater. Quebecor Media currently obtains
newsprint from this supplier at a discount to market prices, and receives additional volume rebates for purchases above certain thresholds ceiling. On April 16, 2009, AbitibiBowater and some of its Canadian subsidiaries placed themselves under
the protection of the Companies Creditors Arrangement Act in Canada. On the same date, AbitibiBowater and some of its U.S. and Canadian subsidiaries placed themselves under the protection of Chapter 11 of the United States Bankruptcy
Code. These proceedings have had no material impact on the operations of Quebecor Media to date. Quebecor Media continues to monitor the situation. However, there can be no assurance that this supplier will continue to supply newsprint to
Quebecor Media on favourable terms or at all.

Financial instruments

Quebecor Media uses a number of financial instruments, mainly cash and cash equivalents, trade receivables, temporary investments, long-term
investments, bank indebtedness, trade payables, accrued liabilities, long-term debt and derivative financial instruments.

As
at December 31, 2009, Quebecor Media was using derivative financial instruments to manage its exchange rate and interest rate exposure. The Company has entered into foreign exchange forward contracts and cross-currency interest rate swap
arrangements to hedge the foreign currency risk exposure on the entirety of its U.S. dollar-denominated long-term debt. Quebecor Media also uses interest rate swaps in order to manage the impact of interest rate fluctuations on its long-term debt.

Quebecor Media has also entered into currency forward contracts in order to hedge, among other things, the planned purchase,
in U.S. dollars, of digital set-top boxes, modems and other equipment in the Telecommunications segment, including equipment for the AWS network. As well, Quebecor Media has entered into currency forward contracts in order to hedge the contractual
instalments, in euros and Swiss Francs, on purchases of printing equipment.

The Company does not hold or use any derivative
financial instruments for trading purposes.

Certain cross-currency interest rate swaps entered into by Quebecor Media and its
subsidiaries include an option that allows each party to unwind the transaction on a specific date at the then settlement value.

Losses (gains) on valuation and translation of financial instruments for 2009, 2008 and 2007 are summarized in table below.

Gain
on valuation and translation of financial instruments

(in millions of dollars)



|                                                                                                                |  |      |        |   |      |   |       |      |  |   |       |  
|--------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                                                                |  | 2009 |        |   | 2008 |   |       | 2007 | 
|(Gain) loss on embedded derivatives and derivative financial instruments for which hedge accounting is not used |  | $    | (13.9  | ) |      | $ | (47.2 | )    |  | $ | 44.3  |  
|(Gain) loss on foreign currency translation of financial instruments for which hedge accounting is not used     |  |      | (24.6  | ) |      |   | 34.3  |      |  |   | (34.8 | )
|(Gain) loss on ineffective portion of fair value hedges                                                         |  |      | (23.0  | ) |      |   | 16.6  |      |  |   | (4.8  | )
|Loss on revaluation of the Additional Amount Payable                                                            |  |      |       |   |      |   |      |      |  |   | 5.2   |  
|                                                                                                                |  |      |        |   |      |   |       |      |  |   |       |  
|                                                                                                                |  |      | (61.5) |   |      |   | $3.7  |      |  |   | $9.9  |  
|                                                                                                                |  |      |        |   |      |   |       |      |  |   |       |  



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An $8.2 million loss was recorded under other comprehensive income in 2009 in relation
to cash flow hedging relationships ($16.7 million loss and $36.5 million gain in 2008 and 2007 respectively).

The
fair value of long-term debt and of derivative financial instruments is shown in Table Fair value of long-term debt and derivative financial instruments below.

Related Party Transactions

The following describes transactions in which the Company and its directors, executive officers and affiliates are involved. The Company believes that each of the transactions described below was on terms
no less favourable to Quebecor Media than could have been obtained from unrelated third parties.

Operating transactions

During the year ended December 31, 2009, the Company and its subsidiaries made purchases and incurred rent charges
from the parent company and affiliated companies in the amount of $15.3 million ($11.8 million in 2008 and $9.0 million in 2007), which are included in operating expenses. The Company and its subsidiaries made sales to an affiliated company in the
amount of $0.1 million ($0.4 million in 2008 and 2007). These transactions were concluded and accounted for at the exchange amount.

During the year ended December 31, 2009, the Company received interest of $0.1 million ($1.0 million in 2008 and $0.9 million in 2007) from the parent company.

Corporate reorganization

In June 2009, as part of a corporate reorganization, the subsidiary Canoe, in which the Company held an 86.2% interest and TVA Group a 13.8% interest, was wound up and its assets distributed to the
shareholders. The transactions arising from this reorganization were recorded at the carrying value of the assets transferred and an adjustment of $8.6 million was recorded as contributed surplus.

Management arrangements

The parent company has entered into management arrangements with the Company. Under these management arrangements, the parent company and the Company provide management services to each other on a
cost-reimbursement basis. The expenses subject to reimbursement include the salaries of the Companys executive officers, who also serve as executive officers of the parent company. In 2009, the Company received an amount of $2.1 million, which
is included as a reduction in operating expenses ($3.0 million in 2008 and 2007), and incurred management fees of $1.1 million ($1.1 million in 2008 and 2007) with the shareholders.

Tax transactions

In 2009, 2008 and 2007, the parent company transferred $30.1 million, $104.9 million and $66.5 million, respectively, of non-capital losses to certain Company subsidiaries in exchange for cash considerations of $6.3 million, $18.4 million
and $14.9 million. These transactions were recorded at the exchange amounts. As a result, the Company recorded reductions of $14.2 million, $6.4 million and $7.7 million, respectively, to its income tax expense in 2009, 2008 and 2007, and expects to
reduce its income tax expense by $2.7 million in the future.

WCP (a former subsidiary)

On January 21, 2008, WCP and its U.S. subsidiaries were granted creditor protection under the CCAA in Canada. On the same date, its U.S.
subsidiaries also filed a petition under Chapter 11 of the United States Bankruptcy Code. Since January 21, 2008, WCP is no longer a related company. Prior to this date, the following transactions were made with WCP:



| |  |  | From January 1, 2008 to January 21, 2008, the Company made purchases from WCP of $3.0 million ($55.3 million in 2007) and made sales to WCP
of $1.3 million ($17.9 million in 2007).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | On January 10, 2008, the Company settled a balance of $4.3 million payable to WCP by set-off. As the balance was due in 2013 and recorded at
present value, the difference of $2.7 million between the settled amount of $7.0 million and the carrying value of $4.3 million was recorded as a reduction in contributed surplus.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2007, the Company increased its investment in Nurun by acquiring 500,000 Common Shares of Nurun from WCP at the exchange amount, for a cash
consideration of $1.7 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On October 11, 2007, the Company acquired a property from WCP for a total net consideration of $62.5 million. Simultaneously, WCP entered into a
long-term operating lease with the Company to rent a portion of the property for a 17-year term. The consideration for the two transactions was settled by the payment of a net amount of $43.9 million to WCP as of the date of the transactions,
and the assumption by the Company of a $7.0 million balance of sale, including interest, payable in 2013. The transactions were concluded and accounted for at the exchange amount.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Off-Balance Sheet Arrangements

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 terms) and should the fair value of the assets be less than the guaranteed residual value, then the Company must, under certain conditions, compensate the lessor for a
portion of the shortfall. In addition, the Company has provided guarantees to the lessor of certain premises leases, with expiry dates through 2015. Should the lessee default under the agreement, the Company must, under certain conditions,
compensate the lessor. As of December 31, 2009, the maximum exposure with respect to these guarantees was $27.2 million and no liability has been recorded in the consolidated balance sheet. The Company has not made any payments
relating to these guarantees in prior years.

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.
The Company has not made any payments relating to these guarantees in prior years.

Outsourcing companies and suppliers

In the normal course of its operations, the Company enters into contractual agreements with outsourcing companies and
suppliers. In some cases, the Company agrees to provide indemnifications in the event of legal procedures initiated against them. In other cases, the Company provides indemnification to counterparties for damages resulting from the outsourcing
companies and suppliers. The nature of the indemnification agreements prevents the Company from estimating the maximum potential liability it could be required to pay. No amount has been accrued in the consolidated balance sheet with respect to
these indemnifications. The Company has not made any payments relating to these guarantees in prior years.



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Risks and Uncertainties

Quebecor Media operates in the telecommunications and media industries, which entail a variety of risk factors and uncertainties. Quebecor
Medias operating environment and financial results may be materially affected by the risks and uncertainties discussed herein and in further detail elsewhere in this Annual Report including under Item 3. Risk Factors.

Financial risk management

The Companys financial risk management policies have been established in order to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor
risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and in the Companys activities.

As a result of their use of financial instruments, the Company and its subsidiaries are exposed to credit risk, liquidity risk and market risks relating to foreign exchange fluctuations, interest rate
fluctuations and equity prices. In order to manage its foreign exchange and interest rate risks, the Company and its subsidiaries use derivative financial instruments (i) to set in Canadian dollars all future payments on debts denominated in
U.S. dollars (interest and principal) and certain purchases of inventories and other capital expenditures denominated in a foreign currency and (ii) to achieve a targeted balance of fixed and variable rate debts. The Company and it
subsidiaries do not intend to settle their derivative financial instruments prior to their maturity as none of these instruments is held or issued for speculative purposes. The Company and its subsidiaries designate their derivative financial
instruments either as fair value hedges or cash flow hedges when they qualify for hedge accounting.

Description of
derivative financial instruments

Foreign Exchange Forward Contracts

At December 31, 2009

(in millions of dollars)

|                       |  |                   |  |                      |  |                |      
|---------------------- |  | ----------------- |  | -------------------- |  | -------------- | -----
|Currency (sold/bought) |  | Maturing          |  | AverageExchange Rate |  | NotionalAmount
|Quebecor Media Inc.    |  |                   |  |                      |  |                |      
|$/                    |  | Less than 1 year  |  | 1.5421               |  | $              | 11.0 
|Sun Media Corporation  |  |                   |  |                      |  |                |      
|$/US$                  |  | February 15, 2013 |  | 1.5227               |  |                | 312.2
|Videotron Ltd.         |  |                   |  |                      |  |                |      
|$/US$                  |  | Less than 1 year  |  | 1.1173               |  |                | 94.9 

Cross Currency Interest Rate Swaps

as at December 31, 2009

(in millions of dollars)



|                                |  |                |  |                |       |                                                |                                      |   |                                  |                |   |                                                                          |   |       
|------------------------------- |  | -------------- |  | -------------- | ----- | ---------------------------------------------- | ------------------------------------ | - | -------------------------------- | -------------- | - | ------------------------------------------------------------------------ | - | ------
|                                |  | Period covered |  | NotionalAmount |       | Annual effectiveinterest rate usinghedged rate |                                      |   | Annualnominalinterestrate ofdebt |                |   | CDN dollar exchangerate on interest andcapital payments perone US
dollar
|Quebecor Media Inc.             |  |                |  |                |       |                                                |                                      |   |                                  |                |   |                                                                          |   |       
|                                |  |                |  |                |      
|Senior Notes                    |  | 2007 to 2016   |  | US$            | 700.0 |                                                | 7.69                                 | % |                                  | 7.75           | % |                                                                          | $ | 0.9990
|Senior Notes                    |  | 2006 to 2016   |  | US$            | 525.0 |                                                | 7.39                                 | % |                                  | 7.75           | % |                                                                          | $ | 1.1600
|Term loan B credit facilities |  | 2009 to 2013   |  | US$            | 192.5 |                                                | Bankers acceptance3 months plus2.22 | % |                                  | LIBORplus 2.00 | % |                                                                          | $ | 1.1625
|Term loan B credit facilities |  | 2006 to 2013   |  | US$            | 144.4 |                                                | 6.44                                 | % |                                  | LIBORplus 2.00 | % |                                                                          | $ | 1.1625
|Videotron Ltd.                  |  |                |  |                |       |                                                |                                      |   |                                  |                |   |                                                                          |   |       
|                                |  |                |  |                |      
|Senior Notes                    |  | 2004 to 2014   |  | US$            | 190.0 |                                                | Bankers acceptance3 months plus2.80 | % |                                  | 6.875          | % |                                                                          | $ | 1.2000
|Senior Notes                    |  | 2004 to 2014   |  | US$            | 125.0 |                                                | 7.45                                 | % |                                  | 6.875          | % |                                                                          | $ | 1.1950
|Senior Notes                    |  | 2003 to 2014   |  | US$            | 200.0 |                                                | Bankers acceptance3 months plus2.73 | % |                                  | 6.875          | % |                                                                          | $ | 1.3425
|Senior Notes                    |  | 2003 to 2014   |  | US$            | 135.0 |                                                | 7.66                                 | % |                                  | 6.875          | % |                                                                          | $ | 1.3425
|Senior Notes                    |  | 2005 to 2015   |  | US$            | 175.0 |                                                | 5.98                                 | % |                                  | 6.375          | % |                                                                          | $ | 1.1781
|Senior Notes                    |  | 2008 to 2018   |  | US$            | 455.0 |                                                | 9.65                                 | % |                                  | 9.125          | % |                                                                          | $ | 1.0210
|Senior Notes                    |  | 2009 to 2018   |  | US$            | 260.0 |                                                | 9.12                                 | % |                                  | 9.125          | % |                                                                          | $ | 1.2965
|Sun Media Corporation           |  |                |  |                |       |                                                |                                      |   |                                  |                |   |                                                                          |   |       
|                                |  |                |  |                |      
|Senior Notes                    |  | 2008 to 2013   |  | US$            | 155.0 |                                                | Bankers acceptance3 months plus3.70 | % |                                  | 7.625          | % |                                                                          | $ | 1.5227
|Senior Notes                    |  | 2003 to 2013   |  | US$            | 50.0  |                                                | Bankers acceptance3 months plus3.70 | % |                                  | 7.625          | % |                                                                          | $ | 1.5227



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Certain cross-currency interest rate swaps entered into by the Company and its subsidiaries
include an option that allows each party to unwind the transaction on a specific date at the then settlement amount.

Interest Rate Swaps

At December 31, 2009

(in millions of dollars)



|                             |  |                |      |             |                            |           |      |   |               |                             
|---------------------------- |  | -------------- | ---- | ----------- | -------------------------- | --------- | ---- | - | ------------- | ----------------------------
|Maturity                     |  | NotionalAmount |      | Pay/Receive |                            | FixedRate |      |   | Floating Rate
|Osprey Media Publishing Inc. |  |                |      |             |                            |           |      |   |               |                             
|December 2010                |  | $              | 50.0 |             | Pay fixed/Receive floating |           | 3.53 | % |               | Bankers acceptance 3 months
|December 2010                |  | $              | 24.8 |             | Pay fixed/Receive floating |           | 2.13 | % |               | Bankers acceptance 1 month 
|December 2010                |  | $              | 40.0 |             | Pay fixed/Receive floating |           | 2.73 | % |               | Bankers acceptance 3 months
|Sun Media Corporation        |  |                |      |             |                            |           |      |   |               |                             
|October 2012                 |  | $              | 38.5 |             | Pay fixed/Receive floating |           | 3.75 | % |               | Bankers acceptance 3 months

Fair
value of financial instruments

The carrying amount of accounts receivable from external or related parties (classified as
loans and receivables), accounts payable and accrued charges to external or related parties (classified as other liabilities), approximates their fair value since these items will be realized or paid within one year or are due on demand. Other
financial instruments classified as loans and receivables or as available-for-sale are not significant and their carrying value approximates their fair value. The carrying value and fair value of long-term debt and derivative financial instruments
as of December 31, 2009 and 2008 are as follows:

Fair value of long-term debt and derivative financial instruments

(in millions of Canadian dollars)



|                                   |  |                                |          |   |                            |          |   |                                |   |          |                            |  |          |  
|---------------------------------- |  | ------------------------------ | -------- | - | -------------------------- | -------- | - | ------------------------------ | - | -------- | -------------------------- |  | -------- | -
|                                   |  | December 31, 2009              |          |   | December 31, 2008          |         
|                                   |  | Carryingvalue asset(liability) |          |   | Fair valueasset(liability) |          |   | Carryingvalue asset(liability) |   |          | Fair valueasset(liability) | 
|Long-term debt(1)                  |  | $                              | (3,805.5 | ) |                            | (3,869.8 | ) |                                | $ | (4,300.6 | )                          |  | (3,530.2 | )
|Derivative financial instruments   |  |                                |          |   |                            |          |   |                                |   |          |                            |  |          |  
|Interest rate swaps                |  |                                | (4.3     | ) |                            | (4.3     | ) |                                |   | (7.5     | )                          |  | (7.5     | )
|Foreign exchange forward contracts |  |                                | (5.8     | ) |                            | (5.8     | ) |                                |   | 9.1      |                            |  | 9.1      |  
|Cross-currency interest swaps      |  |                                | (363.3   | ) |                            | (363.3   | ) |                                |   | 199.0    |                            |  | 199.0    |  



|(1) | The carrying value of long-term debt excludes adjustments to record changes in the fair value of long-term debt related to hedged interest risk, embedded derivatives,
and financing fees.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of long-term debt is estimated based on quoted market prices when available
or on valuation models. When the Company uses valuation models, the fair value is estimated using discounted cash flows using year-end market yields or the market value of similar instruments with the same maturity.

The fair value of derivative financial instruments recognized on the balance sheet is estimated as per the Companys valuation models.
These models project future cash flows and discount the future amounts to a present value using the contractual terms of the derivative instrument and factors observable in external markets data, such as period-end swap rates and foreign exchange
rates. An adjustment is also included to reflect non-performance risk, impacted by the financial and economic environment prevailing at the date of the valuation, in the recognized measure of the fair value of the derivative instruments by applying
a credit default premium estimated using a combination of observable and unobservable inputs on the market to the net exposure of the counterparty or the Company.



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The fair value of early settlement options recognized as embedded derivatives is determined
by option pricing models, including volatility and discount factors.

The estimated sensitivity on income and other
comprehensive income, before income tax and non-controlling interest, of a 100 basis point variance in the credit default premium used to calculate the fair value of derivative financial instruments, as per the Companys valuation models,
is as follows:



|                            |  |        |      |   |                           |   |      |  
|--------------------------- |  | ------ | ---- | - | ------------------------- | - | ---- | -
|                            |  | Income |      |   | Other comprehensiveincome |  
|Increase of 100 basis point |  | $      | 6.1  |   |                           | $ | 8.9  |  
|Decrease of 100 basis point |  |        | (6.1 | ) |                           |   | (8.9 | )

Due to the judgment used
in applying a wide range of acceptable techniques and estimates in calculating fair value amounts, fair values are not necessarily comparable among financial institutions or other market participants and may not be realized in an actual sale or the
immediate settlement of the instrument.

Credit risk management

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial asset fails to meet its contractual
obligations.

In the normal course of business, the Company continuously monitors the financial condition of its customers and
reviews the credit history of each new customer. As of December 31, 2009, no customer balance represented a significant portion of the Companys consolidated trade receivables. The Company establishes an allowance for doubtful
accounts based on the specific credit risk of its customers and historical trends. The allowance for doubtful accounts amounted to $40.3 million as of December 31, 2009 ($47.6 million as of December 31, 2008). As of
December 31, 2009, 9.8% of trade receivables were 90 days past their billing date (11.3% as of December 31, 2008).

The following table shows changes to the allowance for doubtful accounts for the years ended December 31, 2009 and 2008:



|                                |  |      |       |   |      |   |       |  
|------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|($ in millions)                 |  | 2009 |       |   | 2008 |  
|Balance as of beginning of year |  | $    | 47.6  |   |      | $ | 34.0  |  
|Charged to income               |  |      | 23.5  |   |      |   | 39.7  |  
|Utilization                     |  |      | (30.8 | ) |      |   | (26.1 | )
|                                |  |      |       |   |      |   |       |  
|Balance as of end of year       |  |      | 40.3  |   |      |   | 47.6  |  

The Company believes
that its product lines and the diversity of its customer base are instrumental in reducing its credit risk, as well as the impact of fluctuations in product-line demand. The Company does not believe that it is exposed to an unusual level of customer
credit risk.

As a result of their use of derivative financial instruments, the Company and its subsidiaries are exposed to
the risk of non-performance by a third party. When the Company and its subsidiaries enter into derivative contracts, the counterparties (either foreign or Canadian) must have credit ratings at least in accordance with the Companys risk
management policy and are subject to concentration limits.

Liquidity risk management

Liquidity risk is the risk that the Company and its subsidiaries will not be able to meet their financial obligations as they fall due or the
risk that those financial obligations have to be met at excessive cost. The Company and its



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subsidiaries manage this exposure through staggered debt maturities. The weighted average term of Quebecor Medias consolidated debt was approximately 5.3 years as of December 31, 2009
(5.7 years pro-forma the refinancing of January 2010) compared to 5.7 years as of December 31, 2008.

Market risk

Market risk is the risk that changes in market prices due to foreign exchange rates, interest rates and/or equity prices will
affect the value of the Companys financial instruments. The objective of market risk management is to mitigate and control exposures within acceptable parameters while optimizing the return on risk.

Foreign currency risk

Most of the Companys consolidated revenues and expenses, other than interest expense on U.S. dollar-denominated debt, purchases of set-top boxes and cable modems and certain capital expenditures,
are received or denominated in Canadian dollars. A large portion of the interest, principal and premium, if any, payable on its debt is payable in U.S. dollars. The Company and its subsidiaries have entered into transactions to hedge the foreign
currency risk exposure on 100% of their U.S. dollar-denominated debt obligations outstanding as of December 31, 2009 and to hedge their exposure on certain purchases of set-top boxes, cable modems and capital expenditures. Accordingly, the
Companys sensitivity to variations in foreign exchange rates is economically limited.

The following table summarizes
the estimated sensitivity on income and other comprehensive income, before income tax and non-controlling interest, of a variance of $0.10 in the year-end exchange rate of a Canadian dollar per one U.S. dollar:



|                                                                                                       |  |        |      |   |                          |   |       |  
|------------------------------------------------------------------------------------------------------ |  | ------ | ---- | - | ------------------------ | - | ----- | -
|($ in millions)                                                                                        |  | Income |      |   | Othercomprehensiveincome |  
|Increase of $0.10                                                                                      |  |        |      |   |                          |   |       |  
|U.S. dollar-denominated accounts payable                                                               |  | $      | (0.8 | ) |                          | $ |      |  
|Gain (loss) on valuation and translation of financial instruments and derivative financial instruments |  |        | (2.6 | ) |                          |   | 56.4  |  
|                                                                                                       |  |       
|Decrease of $0.10                                                                                      |  |        |      |   |                          |   |       |  
|U.S. dollar-denominated accounts payable                                                               |  | $      | (0.8 | ) |                          | $ |      |  
|Gain (loss) on valuation and translation of financial instruments and derivative financial instruments |  |        | (2.6 | ) |                          |   | (56.4 | )

Interest rate risk

Some of the Companys and its subsidiaries revolving and bank credit facilities bear interest at floating rates
based on the following reference rates: (i) Bankers acceptance rate (BA), (ii) LIBOR and (iii) Canadian bank prime rate (prime). The Senior Notes issued by the Company and its subsidiaries bear interest at fixed rates. The
Company and its subsidiaries have entered into various interest rate and cross-currency interest rate swap agreements in order to manage cash flow and fair value risk exposure due to changes in interest rates. As of December 31, 2009,
after taking into account the hedging instruments, long-term debt was comprised of 69.3 % fixed rate debt (72.1 % pro-forma the refinancing of January 2010) compared to 64.5% as of December 31, 2008 and 30.7% floating rate debt (27.9 %
pro-forma the refinancing of January 2010) compared to 35.7 % as of December 31, 2008.

The estimated sensitivity on
financial expense for floating rate debt, before income tax and non-controlling interest, of a 100 basis point variance in the year-end Canadian Bankers acceptance rate is $12.9 million.

The estimated sensitivities on income and other comprehensive income, before income tax and non-controlling interest, of a 100 basis point
variance in the discount rate used to calculate the fair value of financial instruments, as per the Companys valuation model, are as follows:



|                            |  |        |      |   |                           |   |       |  
|--------------------------- |  | ------ | ---- | - | ------------------------- | - | ----- | -
|                            |  | Income |      |   | Other comprehensiveincome |  
|Increase of 100 basis point |  | $      | (2.4 | ) |                           | $ | 10.5  |  
|Decrease of 100 basis point |  |        | 2.4  |   |                           |   | (10.5 | )



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Capital management

The Companys primary objective in managing capital is to maintain an optimal capital base in order to support the capital requirements
of its various businesses, including growth opportunities.

In managing its capital structure, the Company takes into account
the asset characteristics of its subsidiaries and planned requirements for funds, leveraging their individual borrowing capacities in the most efficient manner to achieve the lowest cost of financing. Management of the capital structure involves the
issuance of new debt, the repayment of existing debt using cash generated by operations, and the level of distributions to shareholders. The Company has not significantly changed its strategy regarding the management of its capital structure since
the last financial year.

The Companys capital structure is composed of shareholders equity, bank indebtedness,
long-term debt, net assets and liabilities related to derivative financial instruments, and non-controlling interest, less cash and cash equivalents and temporary investments. The capital structure is as follows:

Capital structure of Quebecor Media

At
December 31, 2009

(in millions of dollars)



|                                                                     |  |      |         |   |          |   |         |  
|-------------------------------------------------------------------- |  | ---- | ------- | - | -------- | - | ------- | -
|                                                                     |  | 2009 |         |   | 2008     |  
|                                                                     |  |      |         |   | Restated |  
|Bank indebtedness                                                    |  | $    | 1.0     |   |          | $ | 11.5    |  
|Long-term debt                                                       |  |      | 3,761.2 |   |          |   | 4,335.8 |  
|Net liabilities (assets) related to derivative financial instruments |  |      | 373.4   |   |          |   | (200.6  | )
|Non-controlling interest                                             |  |      | 116.2   |   |          |   | 105.7   |  
|Cash and cash equivalents                                            |  |      | (300.0  | ) |          |   | (22.5   | )
|Temporary investments                                                |  |      | (30.0   | ) |          |   | (0.2    | )
|                                                                     |  |      |         |   |          |   |         |  
|Net liabilities                                                      |  |      | 3,921.8 |   |          |   | 4,229.7 |  
|Shareholders equity                                                 |  | $    | 2,430.8 |   |          | $ | 1,942.0 |  

The Company is not
subject to any externally imposed capital requirements other than certain restrictions under the terms of its borrowing agreements, which relate to permitted investments, intercompany transactions, the declaration and payment of dividends or other
distributions.

Contingencies

From time to time, Quebecor Media is a party to various legal proceedings arising in the ordinary course of business.

Legal proceedings against certain of the Companys subsidiaries were initiated by another company in relation to printing contracts, including the resiliation of printing contracts. As with any
litigation subject to a judicial process, the outcome of such proceedings is impossible to determine with certainty. However, management believes that the suits are without merit and intends to vigorously defend its position.

In addition, a number of other legal proceedings against Quebecor Media and its subsidiaries, or in which we are in demand, are currently
pending. In the opinion of the management of Quebecor Media, the outcome of these proceedings is not expected to have a material adverse effect on Quebecor Medias results or on its financial position.

Critical Accounting Policies and Estimates

Revenue recognition

The Company recognizes its operating revenues when the
following criteria are met:



| |  |  | persuasive evidence of an arrangement exists;
| | - |  | ---------------------------------------------



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| |  |  | delivery has occurred or services have been rendered;
| | - |  | -----------------------------------------------------



| |  |  | the sellers price to the buyer is fixed or determinable; and
| | - |  | -------------------------------------------------------------



| |  |  | the collection of the sale is reasonably assured.
| | - |  | -------------------------------------------------

The portion of revenue that is unearned is recorded under Deferred revenue when customers are invoiced.

Revenue recognition policies for each of the Companys main segments are as follows:

Telecommunications

The Telecommunications segment provides services under arrangements with multiple
deliverables, for which there are two separate accounting units: one for subscriber services (cable television, Internet, IP telephony or wireless telephone, including connecting fees) and the other for equipment sales to subscribers. Components of
multiple deliverable arrangements are separately accounted for, provided the delivered elements have stand-alone value to the customer and the fair value of any undelivered elements can be objectively and reliably determined.

Cable connection fee revenues are deferred and recognized as revenues over the estimated average period that subscribers are expected to
remain connected to the network. The incremental and direct costs related to cable connection fees, in an amount not exceeding the revenue, are deferred and recognized as an operating expense over the same period. The excess of these costs over the
related revenues is recognized immediately in income. Operating revenues from cable and other services, such as Internet access, IP telephony and wireless telephone, are recognized when services are rendered. Revenues from equipment sales to
subscribers and their costs are recognized in income when the equipment is delivered and, in the case of wireless telephones, revenues from equipment sales are recognized in income when the telephone is delivered and activated. Revenues from video
rentals are recorded as revenue when services are provided. Promotional offers related to subscriber services are accounted for as a reduction in the related service revenue over the period of performance of the service contract. Promotional offers
related to equipment, including wireless telephones, are accounted for as a reduction in the related equipment sales when the equipment is delivered. Operating revenues related to service contracts are recognized in income over the life of the
specific contracts on a straight-line basis over the period in which the services are provided.

News Media

Revenues of the News Media segment derived from circulation are recognized when the publication is delivered, net of
provisions for estimated returns based on the segments historical rate of returns. Advertising revenues are recognized also when the publication is delivered. Revenues from the distribution of publications and products are recognized upon
delivery, net of provisions for estimated returns.

Broadcasting

Revenues of the Broadcasting segment derived from the sale of advertising airtime are recognized when the advertisement has been broadcast.
Revenues derived from subscriptions to specialty television channels are recognized on a monthly basis at the time service is rendered. Revenues derived from circulation from publishing activities are recognized when the publication is delivered,
net of provisions for estimated returns based on the segments historical rate of returns. Revenues from advertising related to publishing activities are also recognized when the publication is delivered.

Revenues derived from the distribution of televisual products and movies and from television program rights are recognized over the period
of broadcasting or the period that movies are presented in theatre, when the customer can begin exploitation, exhibition or sale, and the licence period of the arrangement has begun.

Theatrical revenues are recognized over the period of presentation and are based on a percentage of revenues generated by movie theatres.
Revenues generated from the distribution of DVDs are recognized at the time of their delivery, less a provision for estimated returns, or are accounted for based on a percentage of retail sales.



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Leisure and Entertainment

Revenues derived from retail stores, book publishing and distribution activities are recognized on delivery of the products, net of
provisions for estimated returns based on the segments historical rate of returns.

Goodwill

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 fair value of a reporting unit is compared
with its carrying amount. To determine the fair value of the reporting unit, Quebecor Media uses the discounted future cash flows valuation method and validates the results by comparing with values calculated using other methods, such as operating
income multiples or market price.

The discounted cash flows method involves the use of estimates such as the amount and
timing of the cash flows, expected variations in the amount or timing of those cash flows, the time value of money as represented by a risk-free interest rate, and the risk premium associated with the asset or liability.

Determining the fair value of a reporting unit is therefore based on managements judgment and is reliant on estimates and assumptions.

When the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is
carried out. The fair value of the reporting units goodwill is compared with its carrying amount in order to measure the amount of the impairment loss, if any.

The fair value of goodwill is determined in the same manner as for a business combination. Quebecor Media allocates the fair value of a reporting unit to all of the identifiable assets and liabilities of
the unit, whether or not recognized separately and the excess of the fair value over the amounts assigned to the reporting units identifiable assets and liabilities is the fair value of goodwill.

The judgment used in determining the fair value of the reporting unit and in allocating this fair value to the assets and liabilities of the
reporting unit may affect the value of the goodwill impairment to be recorded.

In the fourth quarter of 2008, the adverse
financial and economic environment currently affecting industries in some of the Companys segments triggered a goodwill impairment test related to reporting units of the News Media, Leisure and Entertainment, and Interactive Technologies and
Communications segments. As a result, the Company concluded that these segments goodwill was impaired. A preliminary estimated total non cash goodwill impairment loss of $631.0 million, without any tax consequences, was recorded: $595.0
million in the News Media segment, $10.0 million in the Leisure and Entertainment segment, and $26.0 million in the Interactive Technologies and Communications segment. In the second quarter of 2009, the Company completed the goodwill impairment
test and an additional impairment loss of $5.6 million was recorded as an adjustment of the fourth quarter of 2008 preliminary goodwill impairment loss. In the second quarter of 2009, the additional charge was allocated as follows: $1.7 million to
the News Media segment, $1.2 million to the Leisure and Entertainment segment, and $2.7 million to the Interactive Technologies and Communications segment.

Based on the data and assumptions used in its last goodwill impairment test, the Company believes that there are no material amounts for goodwill on its books at this time that present a significant risk
of impairment in the near future.

The net book value of the goodwill as at December 31, 2009 was $3.51 billion.

Intangible assets with indefinite useful life

Intangible assets such as mastheads and broadcasting licences, which have an indefinite useful life, are tested for impairment annually or
more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test compares the carrying amount of the intangible asset to its fair value, and an impairment loss is recognized in the consolidated
statements of income for the excess, if any.



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To determine the market value of its mastheads, the Company uses a method based on
discounted future cash flows, in which future cash flows related to the masthead are valued on the basis of potential royalties.

To determine the fair value of its broadcasting licences, Quebecor Media uses the Greenfield approach based on a discounted future cash flows valuation method.

These methods involve the use of estimates such as the amount and timing of the cash flows, expected variations in the amount or timing of
those cash flows, the time value of money as represented by a risk-free interest rate, and the risk premium associated with the asset or liability.

The judgment used in determining the fair value of the intangible assets with indefinite useful life may affect the value of the impairment to be recorded.

In the second quarter of 2009, the company recorded an impairment loss of $8.0 million on mastheads in the News Media segment as a result of
the completion of its 2009 annual impairment test. In the fourth quarter of 2008, the adverse financial and economic environment affecting industries of some of the Companys segments triggered a mastheads impairment test related to the News
Media reporting unit. As a result, the Company concluded that this segments mastheads were impaired and a non cash impairment loss of $40.2 million was recorded.

Based on the data and assumptions used in its last broadcasting licence impairment test, the Company believes that at this time there are no material amounts for broadcasting licences on its books that
present a significant risk of impairment in the near future.

Any decrease in the fair value of mastheads, calculated
according to the applicable valuation model, has a direct impact on the statement of income. However, based on the data and assumptions used in its last masthead impairment test, the Company believes that there are no material amounts for mastheads
on its books at this time that present a significant risk of impairment in the near future.

The net book value of intangible
assets with indefinite useful life as at December 31, 2009, was $144.4 million.

Impairment of long-lived assets

Quebecor Media reviews the carrying amounts of its long-lived assets with definite useful life by comparing the carrying
amount of the asset or group of assets with the projected undiscounted future cash flows associated with the asset or group of assets when events indicate that the carrying amount may not be recoverable. Such assets include property plant and
equipment, customer relationships and non-competition agreement. Examples of such events and changes include a significant decrease in the market price of an asset, the decommissioning of an asset, assets rendered idle after a plant shutdown, costs
that significantly exceed the amount initially estimated for the acquisition or construction of an asset, and operating or cash flow losses associated with the use of an asset. In accordance with Section 3063 of the CICA Handbook,
Impairment of Long-Lived Assets, an impairment test is carried when the carrying amount of an asset or group of assets held for use exceeds the sum of the undiscounted future cash flows expected from its use or disposal. The amount by which
the assets or group of assets carrying amount exceeds its fair value is recognized as an impairment loss. Quebecor Media estimates future cash flows based on historical performance as well as on assumptions as to the future economic
environment, pricing and volume. Quoted market prices are used as the basis for fair value measurement.

In 2009, an
impairment charge of $0.4 million related to certain buildings, equipment and machinery was recorded in the News Media segment. In the fourth quarter of 2008, the Company concluded that impairment tests were triggered by the restructuring
initiatives of December 2008 and the loss of an important printing contract and that certain long-lived assets were impaired. As a result, an impairment charge of $19.1 million related to certain buildings, equipment and machinery was recorded.

Derivative Financial Instruments and Hedge Accounting

The Company uses various derivative financial instruments to manage its exposure to fluctuations in foreign currency exchange rates and
interest rates. The Company does not hold or use any derivative financial instruments for trading purposes. Under hedge accounting, the Company documents all hedging relationships between hedging items and



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hedged items, as well as its strategy for using hedges and its risk-management objective. It also designates its derivative financial instruments as either fair value hedges or cash flow hedges.
The Company assesses the effectiveness of derivative financial instruments when the hedge is put in place and on an ongoing basis.

The Company enters into the following types of derivative financial instruments:



| |  |  | The Company uses foreign exchange forward contracts to hedge the foreign currency rate exposure on (i) anticipated equipment or inventory
purchases in a foreign currency and (ii) principal payments on long-term debt in a foreign currency. These foreign exchange forward contracts are designated as cash flow hedges.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company uses cross-currency interest rate swaps to hedge (i) the foreign currency rate exposure on interest and principal payments on foreign
currency denominated debt and/or (ii) the fair value exposure on certain debt resulting from changes in interest rates. The cross-currency interest rate swaps that set all future interest and principal payments on U.S.-denominated debt in fixed
Canadian dollars are designated as cash flow hedges. The Companys cross-currency interest rate swaps that set all future interest and principal payments on U.S.-denominated debt in fixed Canadian dollars, in addition to converting the interest
rate from a fixed rate to a floating rate, or converting a floating rate index to another floating rate index, are designated as fair value hedges.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company uses interest rate swaps to manage the fair value exposure on certain debt resulting from changes in interest rates. These swap agreements
require a periodic exchange of payments without the exchange of the notional principal amount on which the payments are based. These interest rate swaps are designated as fair value hedges when they convert the interest rate from a fixed rate to a
floating rate, or as cash flow hedges when they convert the interest rate from a floating rate to a fixed rate.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Under hedge accounting, the Company applies the following accounting policies:



| |  |  | For derivative financial instruments designated as fair value hedges, changes in the fair value of the hedging derivative recorded in income are
substantially offset by changes in the fair value of the hedged item to the extent that the hedging relationship is effective. When a fair value hedge is discontinued, the carrying value of the hedged item is no longer adjusted and the cumulative
fair value adjustments to the carrying value of the hedged item are amortized to income over the remaining term of the original hedging relationship.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For derivative financial instruments designated as cash flow hedges, the effective portion of a hedge is reported in other comprehensive income until
it is recognized in income during the same period in which the hedged item affects income, while the ineffective portion is immediately recognized in the consolidated statements of income. When a cash flow hedge is discontinued, the amounts
previously recognized in accumulated other comprehensive income are reclassified to income when the variability in the cash flows of the hedged item affects income.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any change in the fair value of these derivative financial instruments recorded in income is included in gain or loss on valuation and
translation of financial instruments. Interest expense on hedged long-term debt is reported at the hedged interest and foreign currency rates.

Derivative financial instruments that are ineffective or that are not designated as hedges, including derivatives that are embedded in financial or non-financial contracts that are not closely related to
the host contracts, are reported on a mark-to-market basis in the consolidated balance sheets. Any change in the fair value of these derivative financial instruments is recorded in the consolidated statements of income as gain or loss on valuation
and translation of financial instruments.

The judgment used in determining the fair value of derivative financial instruments
and the non-performance risk, using valuation models, may affect the value of the gain or loss on valuation and translation of financial instruments reported in the statements of income, and the value of the gain or loss on derivative financial
instruments reported in the statements of comprehensive income.



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Pension plans and post-retirement benefits

Quebecor Media offers defined benefit pension plans and defined contribution pension plans to some of its employees. Quebecor Medias
policy is to maintain its contribution at a level sufficient to cover benefits. Actuarial valuations of Quebecor Medias numerous pension plans have been performed at different dates in the last three years and the next required valuations will
be performed at various dates over the next three years. Pension plan assets are measured at fair value and consist of equities and corporate and government fixed-income securities.

Quebecor Medias obligations with respect to postretirement benefits are assessed on the basis of a number of economic and demographic
assumptions, which are established with the assistance of Quebecor Medias actuaries. Key assumptions relate to the discount rate, the expected return on the plans assets, the rate of increase in compensation, and health care costs.

Quebecor Media considers the assumptions used to be reasonable in view of the information available at this time. However,
variances from these assumptions could have a material impact on the costs and obligations of pension plans and postretirement benefits in future periods.

Allowance for doubtful accounts

Quebecor Media maintains an allowance for
doubtful accounts to cover anticipated losses from customers who are unable to pay their debts. The allowance is reviewed periodically and is based on an analysis of specific significant accounts outstanding, the age of the receivable, customer
creditworthiness, and historical collection experience.

Business combinations

Business acquisitions are accounted for by the purchase method. Under this accounting method, the purchase price is allocated to the acquired
assets and assumed liabilities based on their estimated fair value at the date of acquisition. The excess of the purchase price over the sum of the values ascribed to the acquired assets and assumed liabilities is recorded as goodwill. The judgments
made in determining the estimated fair value and the expected useful life of each acquired asset, and the estimated fair value of each assumed liability, can significantly impact net income, because, among other things, of the impact of the useful
lives of the acquired assets, which may vary from projections. Also, future income taxes on temporary differences between the book and tax value of most of the assets are recorded in the purchase price equation, while no future income taxes are
recorded on the difference between the book value and the tax value of goodwill. Consequently, to the extent that greater value is ascribed to long-lived than to shorter-lived assets under the purchase method, less amortization may be recorded in a
given period.

Determining the fair value of certain acquired assets and assumed liabilities requires judgment and involves
complete reliance on estimates and assumptions. Quebecor Media primarily uses the discounted future cash flows approach to estimate the value of acquired intangible assets.

The estimates and assumptions used in the allocation of the purchase price at the date of acquisition may also have an impact on the amount
of goodwill and intangible assets impairment to be recognized, if any, after the date of acquisition, as discussed above under  Goodwill and  Intangible Assets with Indefinite Useful Life .

Future income taxes

Quebecor Media is required to assess the ultimate realization of future income tax assets generated from temporary differences between the book basis and tax basis of assets and liabilities and losses carried forward into the future. This
assessment is judgmental in nature and is dependent on assumptions and estimates as to the availability and character of future taxable income. The ultimate amount of future income tax assets realized could be slightly different from that recorded,
since it is influenced by Quebecor Medias future operating results.

Quebecor Media is at all times under audit by
various tax authorities in each of the jurisdictions in which it operates. A number of years may elapse before a particular matter for which management has established a reserve is audited and resolved. The number of years between each tax audit
varies depending on the tax jurisdiction. Management believes that its estimates are reasonable and reflect the probable outcome of known tax contingencies, although the final outcome is difficult to predict.



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Changes in Accounting Policies and Estimates

Current changes in accounting policies under Canadian GAAP

On January 1, 2009, the Company adopted Canadian Institute of Chartered Accountants (CICA) Section 3064,
Goodwill and Intangible Assets, which replaced Section 3062, Goodwill and Other Intangible Assets, and which resulted in the withdrawal of Section 3450, Research and Development Costs and of Emerging Issues Committee
(EIC) Abstract 27, Revenues and Expenditures During the Pre-operating Period, and which also resulted in the amendment of Accounting Guideline 11, Enterprises in the Development Stage. This new standard provides guidance on
the recognition of intangible assets in accordance with the definition of an asset and the criteria for asset recognition, whether those assets are separately acquired or internally developed, as well as clarifying the application of the concept of
matching revenues and expenses. The adoption of Section 3064 eliminated the deferral of start-up costs, which are now recognized as an expense when they are incurred. The Company adjusted the opening deficit as if the new rules had always been
applied in the past and the prior period comparative figures have been restated. As well, the Company made reclassifications in order to present certain assets, mainly software, as intangible assets instead of as property, plant and equipment.

In June 2009, the CICA amended Section 3862, Financial Instruments  Disclosures. This section has been amended to
introduce new financial disclosure requirements, particularly with respect to fair value measurement of financial instruments and entity exposure to liquidity risk. On December 31, 2009, the Company adopted the amendments to this section. These
amendments did not affect the consolidated financial results.

As a result of the adoption of this section, the adjustments
were recorded in the consolidated financial statements (refer to note 2 to consolidated financial statements for more details about these adjustments).

Current changes in accounting policies under U.S. GAAP

On September 30, 2009, the Company adopted Accounting Standards Update No. 2009-01, The FASB Accounting Standards CodificationTMand the Hierarchy of Generally Accepted Accounting Principles, previously issued as the Statement of Financial
Accounting Standard No. 168. The Codification is approved as the single source of authoritative nongovernmental U.S. GAAP which does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by
providing all the authoritative literature related to a particular topic in one place. All existing accounting standards will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative.
Although the implementation of this update did not have an impact on the reconciliations contained herein, the references below now reflect the new codification.

As of January 1, 2009 the Company adopted SFAS 141R, Business Combinations, and SFAS 160, Non-controlling Interests in Consolidated Financial Statements, now contained in Codification Topic 805,
Business Combinations, and in Codification Topic 810, Consolidation, respectively. The provisions of SFAS 141R are applied prospectively to business combinations for which the acquisition date is on or after December 31, 2008. SFAS
141R establishes new guidance on the recognition and measurement at fair value of all assets and all liabilities of the acquired business. Non-controlling interests are measured at either their fair value or at the non-controlling interests
proportionate share of the fair value of identifiable assets and liabilities. The measurement of consideration given now includes the fair value of any contingent consideration as of the acquisition date and subsequent changes in fair value of the
contingent consideration classified as a liability are recognized in income. Acquisition-related costs are excluded from the purchase price and are expensed as incurred. In addition, restructuring costs related to a business combination are no
longer part of the purchase price equation and are expensed as incurred. The adoption of this Section has not yet created any impact to the Companys financial statements on adoption.

The rules under SFAS 160 establish new guidance for the accounting for non-controlling interests and for transactions with
non-controlling interest. SFAS 160 requires that non-controlling interests be presented as a separate component of shareholders equity. In the statement of income, net income is calculated before non-controlling interests and is then
attributed to shareholders and non-controlling interest. In addition, changes in the Companys ownership interest in a subsidiary that do not result in a loss of control are now accounted for as equity transactions. The new presentation applies
retroactively and U.S. GAAP prior periods figures were restated.



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On January 1, 2009, the Company adopted the provisions of SFAS 157, Fair Value
Measurements, now contained in Codification Topic 820, Fair Value Measurements and Disclosures, related to the guidance for using fair value to measure certain non-financial assets and non-financial liabilities, except those that are not
recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption had no impact on its consolidated financial statements.

Recent Accounting Developments in Canada

The CICA issued three new
accounting standards in January 2009: Section 1582, Business Combinations, Section 1601, Consolidated Financial Statements, and Section 1602, Non-controlling Interests, to converge the accounting for business combinations and the
reporting of non-controlling interests to IFRS.

Section 1582, Business Combinations, replaces Section 1581,
Business Combinations, and establishes new guidance on the recognition and measurement of all assets and all liabilities of the acquired business at fair value. Non-controlling interests are measured at either their fair value or at their
proportionate share of the fair value of identifiable assets and liabilities. The measurement of consideration given now includes the fair value of any contingent consideration as of the acquisition date, and subsequent changes in fair value of the
contingent consideration classified as a liability are recognized in income. Acquisition-related costs are excluded from the purchase price and are expensed as incurred. In addition, restructuring costs related to a business combination are no
longer part of the purchase price equation and are expensed as incurred. Section 1582 applies prospectively to business combinations realized in or subsequent to the first annual reporting period beginning on or after January 1, 2011.

Section 1601, Consolidated Financial Statements, and Section 1602, Non-controlling Interests, which together
replace Section 1600, Consolidated Financial Statements, establish new guidance on accounting for non-controlling interests and for transactions with non-controlling interest. The new sections require that non-controlling interests be presented
as a separate component of shareholders equity. In the statement of income, net income is calculated before non-controlling interests and is then attributed to shareholders and non-controlling interest. In addition, changes in the
Companys ownership interest in a subsidiary that do not result in a loss of control are now accounted for as equity transactions. These sections apply to interim and annual consolidated financial statements relating to financial years
beginning on or after January 1, 2011, and have to be adopted concurrently with Section 1582.

On
December 24, 2009, the CICAs EIC issued Abstract No.175 (EIC-175), Multiple Deliverable Revenue Arrangements, which will be applicable prospectively (with retrospective adoption permitted) to revenue arrangements with
multiple deliverables entered into or materially modified in the first annual period beginning on January 1, 2011. EIC-175 amends the guidance contained in EIC-142, Revenue Arrangements with Multiple Deliverables, and establishes additional
requirements regarding revenue recognition related to multiple deliverables as well as supplementary disclosures. The Company is evaluating the potential impact of adopting EIC-175 in its consolidated financial statements.

In February 2008, Canadas Accounting Standards Board confirmed that Canadian GAAP, as used by publicly accountable enterprises, will
be fully converged to IFRS, as issued by the IASB. For its 2011 interim and annual financial statements, the Company will be required to report under IFRS and to provide IFRS comparative information for the 2010 financial year.

IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences on recognition, measurement and
disclosures. As part of the IFRS conversion project, the Company has established an implementation team that includes a project manager, senior levels of management from all relevant departments and subsidiaries, a steering committee to oversee the
project. An external expert advisor has also been engaged to assist.

Regular progress reporting to senior management and to
the Audit Committee on the status of the IFRS conversion project has been established.

The conversion project consists of
four phases.



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Diagnostic Phase This phase involves a detailed review and initial
scoping of accounting differences between Canadian GAAP and IFRS, a preliminary evaluation of IFRS 1 exemptions for first-time IFRS adopters, and a high-level assessment of potential consequences on financial reporting, business processes,
internal controls, and information systems.

Design and Solutions Development Phase This phase
involves prioritizing accounting treatment issues and preparing a conversion plan, quantifying the impact of converting to IFRS, reviewing and approving accounting policy choices, performing a detailed impact assessment and designing changes to
systems and business processes, developing IFRS training material, and drafting IFRS financial statement content.

Implementation Phase This phase involves embedding changes to systems, business processes and internal controls, determining the opening IFRS transition balance sheet and tax impacts, parallel accounting under
Canadian GAAP and IFRS, and preparing detailed reconciliations of Canadian GAAP to IFRS financial statements.

Post-Implementation Phase This phase involves conversion assessment, evaluating improvements for a sustainable operational IFRS model, and testing the internal controls environment.

The Company has completed the diagnostic phase and the project design, has developed solutions for most of the important topics and is
continuing to develop and execute its project implementation strategy. Comprehensive training has been given to key employees and further investments in training and resources will be made throughout the transition to facilitate a timely and
efficient changeover to IFRS.

Management has assessed the exemptions from full retrospective application available under
IFRS 1, First-Time Adoption of International Financial Reporting Standards, and their potential impacts on the Companys financial position.

On adoption of IFRS, the exemptions being considered by the Company that could result in material impacts are as follows:



|                      |  |                                                                                                                                                                           
|--------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exemption             |  | Application of exemption                                                                                                                                                  
|Business Combinations |  | The Company expects to elect not to restate any business combinations that occurred prior to January 1, 2010.                                                             
|                      | 
|Employee Benefits     |  | On transition, the Company expects to elect to recognize cumulative actuarial gains and losses arising from all of its defined benefit plans in opening retained
earnings.

Management is in the process of quantifying the expected material differences between IFRS and the
current accounting treatment under Canadian GAAP. Differences with respect to recognition, measurement, presentation and disclosure of financial information are expected to be in the following key accounting areas:



|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Key accounting area                          |  | Differences with potential impact for the
Company                                                                                                                                                                                                                                                                                                                                                                                      
|Presentation of Financial Statements (IAS 1) |  | Additional disclosures in the notes to consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                              
|                                             | 
|Property, Plant and Equipment (IAS 16)       |  | Separate amortization over a shorter useful life for significant component parts of certain real estate  No capitalization of start-up costs incurred on certain built-to-suit assets prior to
substantial completion.                                                                                                                                                                                                                 
|                                             | 
|Impairment of Assets (IAS 36)                |  | Grouping of assets in cash generating units (CGUs) on the basis of independent cash inflows for impairment testing purposes, using a
discounted cash flow method (DCF) in a single-step approach.  Goodwill
allocated to and tested in conjunction with its related CGU or group of CGUs that benefit from collective synergies.  Under certain circumstances, previous impairment taken (other than goodwill) required to be reversed.



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|                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Income Taxes (IAS 12)                                  |  | Recognition and measurement criteria for deferred tax assets and liabilities may differ.                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                       | 
|Employee Benefits (IAS 19)                             |  | Immediate recognition of vested past service costs to opening retained earnings at
transition and to income subsequent to transition.  After transition, an entity may recognize actuarial gains and losses as they occur in Other Comprehensive Income (OCI), with no impact on income.  Limit to which a net benefit asset can be
recognized under certain circumstances under IFRS calculated differently; may have a material impact at date when an actuarial valuation is performed.
|                                                       | 
|Business Combinations and Minority Interests (IFRS 3R) |  | Acquisition-related and restructuring costs expensed as incurred and contingent
consideration recorded at its fair value on acquisition date; subsequent changes in fair value of a contingent consideration classified as a liability recognized in income.  Changes in ownership interests in a
subsidiary that do not result in a loss of control accounted for as equity transactions.  Non-controlling interests presented as a separate component of shareholders equity.          
|                                                       | 
|Related party transactions                             |  | Recognition and measurement criteria for related party transactions may differ under IFRS.                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                       | 
|Share-based Payment (IFRS 2)                           |  | Liability related to share-based payments made to employees that call for settlement in cash or other assets recognized at
fair value at initial grant date and re-measured at fair value at end of each subsequent reporting. Each instalment is accounted for as a separate arrangement.                                                                                                                                                                                                  
|                                                       | 
|Provisions and Contingencies (IAS 37)                  |  | Different threshold used for recognition of a contingent liability which could impact timing of when a provision may be
recorded. At transition, liabilities for severances payments and contract termination penalties may be adjusted, with a corresponding effect on opening retained earnings.                                                                                                                                                                                          

This is not an exhaustive list of all the significant impacts that could occur during the conversion to IFRS.

Additionally, the Company has prepared a preliminary IFRS financial statement format in accordance with IAS 1, Presentation of
Financial Statements, and is in the process of analyzing the contractual implications of new policy choices on financing arrangements and similar obligations. The effects on information technology, data systems, and internal controls are also
being analyzed; the Company does not expect that significant modifications will be necessary on conversion.

At this time, the
comprehensive impact of the changeover on the Companys future financial position and results of operations is not yet determinable. Management expects to complete this assessment in time for parallel recording of financial information in
accordance with IFRS.

The Company continues to monitor and assess the impact of evolving differences between Canadian GAAP
and IFRS, since the IASB is expected to continue issuing new accounting standards during the transition period. As a result, the final impact of IFRS on the Companys consolidated financial statements can only be measured once all the
applicable IFRS at the conversion date are known.

The Companys IFRS conversion project is progressing according to
schedule. As the project advances, the Company could alter its intentions and the milestones communicated at the time of reporting as a result of changes to international standards currently in development, or in light of new information or other
external factors that could arise between now and when the changeover has been completed.



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ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A - Directors and Senior Management

The following table sets forth certain information concerning our directors and executive officers at March 15, 2010:



|                                                                         |  |     |  |                                                                                        
|------------------------------------------------------------------------ |  | --- |  | ---------------------------------------------------------------------------------------
|Name and Municipality of Residence                                       |  | Age |  | Position                                                                               
|SERGE GOUIN(1)(3) Outremont, Quebec                                      |  | 66  |  | Director, Chairman of the Board of Directors and Chairman of the Compensation Committee
|                                                                         |  |    
|JEAN LA COUTURE, FCA(2) Montreal,
Quebec                                 |  | 63  |  | Director and Chairman of the Audit Committee                                           
|                                                                         |  |    
|ANDRÉ DELISLE(1) (2) Montreal, Quebec                                    |  | 63  |  | Director                                                                               
|                                                                         |  |    
|A. MICHEL LAVIGNE, FCA(1)(2)(3) Brossard, Quebec                         |  | 59  |  | Director                                                                               
|                                                                         |  |    
|SAMUEL MINZBERG(3) Westmount,
Quebec                                     |  | 60  |  | Director                                                                               
|                                                                         |  |    
|THE RIGHT HONOURABLE BRIAN MULRONEY, P.C., C.C., LL.D. Westmount, Quebec |  | 70  |  | Director                                                                               
|                                                                         |  |    
|JEAN NEVEU(1) Longueuil,
Quebec                                          |  | 69  |  | Director                                                                               
|                                                                         |  |    
|PIERRE KARL PÉLADEAU(1) Outremont,
Quebec                                |  | 48  |  | Director, President and Chief Executive Officer                                        
|                                                                         |  |    
|NORMAND PROVOST Brossard, Quebec                                         |  | 55  |  | Director                                                                               
|                                                                         |  |    
|JEAN-FRANÇOIS PRUNEAU Repentigny, Quebec                                 |  | 39  |  | Vice President, Finance                                                                
|                                                                         |  |    
|HUGUES SIMARD Outremont, Quebec                                          |  | 43  |  | Senior Vice President, Development and Strategy                                        
|                                                                         |  |    
|ISABELLE DESSUREAULT Verdun, Quebec                                      |  | 39  |  | Vice President, Public Affairs                                                         
|                                                                         |  |    
|MICHEL ETHIER Montreal, Quebec                                           |  | 55  |  | Vice President, Taxation                                                               
|                                                                         |  |    
|PHILIPPE GUAY Oakville, Ontario                                          |  | 39  |  | Vice President, National Sales Toronto                                                 



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|                                       |  |     |  |                                        
|-------------------------------------- |  | --- |  | ---------------------------------------
|Name and Municipality of Residence     |  | Age |  | Position                               
|ROGER MARTEL Montreal, Quebec          |  | 61  |  | Vice President, Internal Audit         
|                                       |  |    
|DENIS SABOURIN Kirkland, Quebec        |  | 49  |  | Vice President and Corporate Controller
|                                       |  |    
|CLAUDINE TREMBLAY Nuns Island, Quebec |  | 56  |  | Vice President and Secretary           
|                                       |  |    
|JULIE TREMBLAY Westmount, Quebec       |  | 50  |  | Vice President, Human Resources        
|                                       |  |    
|MARC TREMBLAY Westmount, Quebec        |  | 49  |  | Vice President, Legal Affairs          
|                                       |  |    
|CHLOÉ POIRIER Nuns Island, Quebec     |  | 40  |  | Treasurer                              
|                                       |  |    
|CHRISTIAN MARCOUX Laval, Quebec        |  | 35  |  | Assistant Secretary                    



|(1) | Member of the Executive Committee
|--- | ---------------------------------

|(2) | Member of the Audit Committee
|--- | -----------------------------

|(3) | Member of the Compensation Committee
|--- | ------------------------------------

Serge Gouin, Director, Chairman of the Board of Directors and Chairman of the Compensation Committee. Mr. Gouin has been a Director of Quebecor Media since May 2001, and he re-assumed the position of Chairman of the Board of
Directors in May 2005, having also held that position from January 2003 to March 2004. Mr. Gouin also re-assumed the position of Chairman of our Compensation Committee in February 2006, having also held that position from May 2003 to May 2004.
Mr. Gouin served as President and Chief Executive Officer of Quebecor Media from March 2004 until May 2005. Mr. Gouin has served as a Director and Chairman of the Board of Directors of Videotron and Sun Media since July 2001 and May
2004, respectively. Mr. Gouin was an Advisory Director of Citigroup Global Markets Canada Inc. from 1998 to 2003. From 1991 to 1996, Mr. Gouin served as President and Chief Operating Officer of Le Groupe Videotron ltée. From
1987 to 1991, Mr. Gouin was President and Chief Executive Officer of Télé-Métropole inc. (now TVA Group). Mr. Gouin is also a member of the Board of Directors of Biovail Corporation, Onex Corporation and TVA Group.

Pierre Karl Péladeau, Director and President and Chief Executive Officer. Mr. Péladeau has been a
Director of Quebecor Media since August 2000. Mr. Péladeau has served as President and Chief Executive Officer of Quebecor Media since August 2008, a position he also previously held from August 2000 to March 2004.
Mr. Péladeau is also President and Chief Executive Officer of Quebecor Inc. and Sun Media. He was Vice Chairman of the Board of Directors and Chief Executive Officer of the Company from May 2006 to August 2008 and President and Chief
Executive Officer of Quebecor World, from March 2004 to May 2006. Mr. Péladeau joined Quebecors communications division in 1985 as Assistant to the President. Since then, he has occupied various positions in the Quebecor group of
companies. In 1998, Mr. Péladeau spearheaded the acquisition of Sun Media and in 2000, he was responsible for the acquisition of Le Groupe Videotron Ltée. Mr. Péladeau was also the President and Chief Executive Officer
of Videotron from July 2001 until June 2003. Mr. Péladeau sits on the board of numerous Quebecor group companies and is active in many charitable and cultural organizations.

Jean La Couture, FCA, Director and Chairman of the Audit Committee. Mr. La Couture has been a Director of Quebecor Media
and the Chairman of its Audit Committee since May 5, 2003 and he has also serves as a Director and



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Chairman of the Audit Committee of each of Quebecor, Sun Media and Videotron. Mr. La Couture was Director of Quebecor World from December 2007 to December 2008. Mr. La Couture, a Fellow
Chartered Accountant, is President of Huis Clos Ltée., a management and mediation firm. He is also President of the Regroupement des assureurs de personnes à charte du Quebec (RACQ), a position he has held since August 1995 and
President of the Institute of Corporate Directors, Quebec Chapter, since August 2009. From 1972 to 1994, he was President and Chief Executive Officer of three organizations, including The Guarantee Company of North America, a Canadian specialty line
insurance company from 1990 to 1994. He is Chairman of the Boards of Innergex Power Trust, Groupe Pomerleau (a Quebec-based construction company) and Maestro (a real estate capital fund), and serves as a Director of Immunotec Inc. and Jevco
Insurance Company.

André Delisle, Director and member of the Audit Committee. Mr. Delisle has served as a
Director of Quebecor Media and a member of its Audit Committee since October 31, 2005. Since that date, he has also served as a Director and member of the Audit Committee of each of Videotron and Sun Media. From August 2000 until July
2003, Mr. Delisle acted as Assistant General Manager and Treasurer of the City of Montreal. He previously acted as internal consultant for the Caisse de dépôt et placement du Québec from February 1998 until August 2000. From
1982 through 1997, he worked for Hydro-Quebec and the Quebec Department of Finance, mainly in the capacity of Chief Financial Officer (Hydro-Quebec) or Assistant Deputy Minister (Department of Finance). Mr. Delisle is a member of the Institute
of Corporate Directors, a member of the Association of Quebec Economists and a member of the Barreau du Quebec.

A. Michel
Lavigne, FCA, Director and member of the Audit Committee and the Compensation Committee. Mr. Lavigne has served as a Director and member of the Audit Committee and the Compensation Committee of Quebecor Media since June 30, 2005. Since
that date, Mr. Lavigne has also served as a Director and member of the Audit Committee of each of Videotron, Sun Media and TVA Group. Mr. Lavigne is also a Director of the Caisse de dépôt et placement du Québec,
Richmont Mines Inc. and NStein Technologies Inc., as well as the Chairman of the Board of Primary Energy Recycling Corporation. Until May 2005, he served as President and Chief Executive Officer of Raymond Chabot Grant Thornton in Montreal, Quebec,
as Chairman of the Board of Grant Thornton Canada and as a member of the Board of Governors of Grant Thornton International. Mr. Lavigne is a Fellow Chartered Accountant of the Ordre des comptables agréés du Quebec and a member of
the CICA since 1973.

Samuel Minzberg, Director and member of Compensation Committee. Mr. Minzberg has been a
Director of Quebecor Media since June 2002 and is a member of the Compensation Committee. Mr. Minzberg is a partner with Davies Ward Phillips & Vineberg LLP. From January 1998 to December 2002, he was President and
Chief Executive Officer of Claridge Inc., a management and holding company, on behalf of the Charles R. Bronfman Family. Until December 1997, he was a partner at the Montreal predecessor law firm to Davies Ward Phillips & Vineberg
(Montreal). He also serves as a Director of HSBC Bank Canada, HSBC North America Holdings Inc., HSBC Finance Corporation, Reitmans (Canada) Limited and Richmont Mines, Inc. Mr. Minzberg received a B.A., B.C.L. and LL.B from McGill University.

The Right Honourable Brian Mulroney, P.C., C.C., LL.D, Director. Mr. Mulroney has been a Director of
Quebecor Media since January 31, 2001. Mr. Mulroney has also served as Chairman of the Board of Directors of Quebecor World from April 2002 to July 2009. Mr. Mulroney served as Chairman of the Board of Directors of
Sun Media from January 2000 to June 2001. Since 1993, Mr. Mulroney has been a Senior Partner with the law firm of Ogilvy Renault LLP in Montreal, Quebec. Prior to that, Mr. Mulroney was the Prime Minister of Canada from 1984
until 1993. Mr. Mulroney practiced law in Montreal and served as President of the Iron Ore Company of Canada before entering politics in 1983. Mr. Mulroney serves as a Director of a number of public corporations including Quebecor, Barrick
Gold Corporation, Wyndham Worldwide Corporation, The Blackstone Group LP, Independent News and Media, PLC, Saïd Holdings Limited and Lion Capital (London).

Jean Neveu, Director. Mr. Neveu has been a Director of Quebecor Media since January 2001. Mr. Neveu was also Chairman of our Compensation Committee from May 2004 to February
2006. Mr. Neveu has been a Director of Quebecor since 1988 and its Chairman since 1999. Mr. Neveu has also been a Director and the Chairman of TVA Group since 2001. He joined Quebecor in 1969 as Controller and held several different
management positions before leaving in 1979 to join a major magazine publisher and distributor. In 1988, Mr. Neveu returned to Quebecor as its Vice President, Dailies and later became Senior Vice President. In December 1997, he was
appointed to the position of President and Chief Executive Officer of Quebecor, a position he has held until 1999. In April 1999, he was appointed Chairman of Quebecor. In addition, Mr. Neveu served as a Director of Quebecor World from 1989 to
2008, as its Chairman and Chief Executive Officer from 1989 to 1997 and as its Chairman from 1997 to 2002. He also served as Quebecor Worlds interim President and Chief Executive Officer from March 2003 to March 2004.



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Normand Provost, Director. Mr. Provost has been a Director of
Quebecor Media since July 2004. Mr. Provost has served as Executive Vice President, Private Equity, of the Caisse de dépôt et placement du Québec since November 2003 and was recently promoted to Executive Vice
President, Private Equity and Chief Operations Officer in April 2009. Mr. Provost joined the Caisse de dépôt et placement du Québec in 1980 and has held various management positions during his time there. He namely served as
President of CDP Capital Americas from 1995 to 2004. Mr. Provost is a member of the Leaders Networking Group of Quebec and the Montreal Chamber of Commerce.

Hugues Simard, Senior Vice President, Development and Strategy. Mr. Simard has served as Senior Vice President, Development and Strategy since February 2007. He was also appointed Vice
President, Corporate Advertising Sales of Sun Media in December 2008. Mr. Simard joined the Quebecor group of companies in July 1998 as Director, Business Development of Quebecor Printing which became Quebecor World in 1999. He was appointed
Vice President, Corporate Development of Quebecor New Media in 1999 and President & CEO of Netgraphe/Canoe in 2000. He rejoined Quebecor World in 2003, first as Vice President, Development and Planning and then as President of the
Commercial Printing Group in 2004. Prior to his appointment as Senior Vice President, Development and Strategy at Quebecor Media, he spent a year in Paris, France as Managing Director of Secor Conseil, a management consulting firm.

Jean-François Pruneau, Vice President, Finance. Mr. Pruneau has served as Vice President, Finance of the Company since
May 2009. He also serves as Vice President, Finance of Quebecor inc. and Sun Media and as Vice President of Videotron. From October 2005 to May 2009, Mr. Pruneau served as Treasurer of the Company, Sun Media and Videotron. From February 2007 to
May 2009, he also served as Treasurer of Quebecor Inc. Prior to that, Mr. Pruneau served as Director, Finance and Assistant Treasurer Corporate Finance of Quebecor Media. Before joining Quebecor Media in May 2001, Mr. Pruneau was Associate
Director of BCE Media from 1999 to 2001. From 1997 to 1999, he served as Corporate Finance Officer at Canadian National Railway. He has been a member of the CFA Institute, formerly the Association for Investment Management and Research, since 2000.

Isabelle Dessureault, Vice President, Public Affairs. Ms. Dessureault was appointed Vice President, Public
Affairs of Quebecor Media in November 2008. In 2005, after working a dozen years as a consultant, including eight years with National Public Relations, where she was a partner in the Montreal office, Ms. Dessureault joined Videotron as
General Manager, Communications. From 2006 to 2008, Ms. Dessureault was Vice President with combined responsibility for Videotron Corporate Affairs and the VOX television channel. Ms. Dessureault studied at the Amsterdam School of Business
and is a graduate of the Université du Québec at Montreal, and holds an MBA from Concordia University.

Michel Ethier, Vice President, Taxation. Mr. Ethier has served as Vice President, Taxation of Quebecor Media since March 2004. Mr. Ethier is also Vice President, Taxation, of Quebecor. From 1988 to 2000,
Mr. Ethier was Director, Taxation of Le Groupe Videotron Ltée. Following the acquisition of Le Groupe Videotron Ltée by Quebecor Media in October 2000, Mr. Ethier became Senior Director, Taxation of
Quebecor Media. From 1983 to 1988, Mr. Ethier was Senior Tax Advisor of Gaz Metropolitain Inc. and from 1978 to 1983, he was, successively, auditor and tax specialist for Coopers & Lybrand, Chartered Accountants.
Mr. Ethier has been a member of the Canadian Institute of the Chartered Accountants since 1980.

Philippe Guay,
Vice President, National Sales Toronto. Mr. Guay was appointed Vice President, National Sales Toronto in October 2009. Prior to that, he was Chief Marketing Officer with Laura Secord and worked for other food industry leaders, namely H.J. Heinz
and Hostess Frito Lay. Mr. Guay holds a Bachelor of Administration from Université de Sherbrooke and an MBA from the University of Western Ontario.

Roger Martel, Vice President, Internal Audit. Mr. Martel has served as Vice President, Internal Audit of Quebecor Media since February 2004. He acts in the same capacity for Quebecor,
Videotron and Sun Media. From February 2001 until February 2004, he was Principal Director, Internal Audit of Quebecor Media. Prior to that, he was an Internal Auditor of Le Groupe Videotron ltée.

Denis Sabourin, Vice President and Corporate Controller. Mr. Sabourin was appointed Vice President and Corporate Controller of
Quebecor Media in March 2004. Before that date, he held the position of Senior Manager,



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Control. Mr. Sabourin is also Vice President and Corporate Controller of Quebecor. Prior to joining Quebecor Media, Mr. Sabourin served as corporate controller of Compagnie
Unimédia (previously known as Unimédia Inc.) from 1994 to 2001 and as Operating Controller for the Hotel Group Auberges des Gouverneurs Inc. from 1990 to 1994. He also spent seven years with Samson
Bélair/Deloitte & Touche, Chartered Accountants. Mr. Sabourin has been a member of the CICA since 1984.

Claudine Tremblay, Vice President and Secretary. Ms. Tremblay was appointed Vice President and Secretary of Quebecor Media on January 1st, 2008. She holds the same position with Quebecor, TVA Group, Sun Media and Videotron.
Prior to her appointment to her current position, Ms. Tremblay was Senior Director, Corporate Secretariat for Quebecor Media, Quebecor World and Quebecor from 2003 to December 2007. Prior to joining the Quebecor group of companies as Assistant
Secretary in 1987, Ms. Tremblay was Assistant Secretary and Administrative Assistant at the National Bank of Canada from 1979 to 1987. She has also been a member of the Chambre des notaires du Quebec since 1977.

Julie Tremblay, Vice President, Human Resources. Ms. Tremblay rejoined Quebecor Media in May 2007, after having served in this
position from August 1998 to April 2003, which is when she was transferred to Quebecor World as Vice President, Human Resources. Ms. Tremblay remained responsible for the Human Resources of Quebecor World until October 2007. She has also held
the position of Vice President, Human Resources of Quebecor, a position she has held over a period of 8 years. Ms. Tremblay has worked for the Quebecor group of companies in different positions since 1989. Prior to joining the Quebecor Group,
she practiced in a private law firm. She has been a member of the Quebec Bar Association since 1984.

Marc Tremblay,
Vice President, Legal Affairs. Mr. Tremblay has been appointed Vice President, Legal Affairs at Quebecor Media on March 30, 2007. Prior to that date, Mr. Tremblay practiced law at Ogilvy Renault LLP for the past 22 years. He has been
a member of the Quebec Bar Association since 1983.

Chloé Poirier, Treasurer. Ms. Poirier was appointed
Treasurer of Quebecor Media in July 2009. She also serves as Treasurer of Quebecor, Sun Media and Videotron. Ms. Poirier joined the company in 2001 as Director, Treasury / Assistant Treasurer, Treasury Operations. Prior to that, she was
Analyst, Treasury and Finance with Natrel inc./Agropur from 1997 to 2001 and trader at la Caisse de dépôt et placement du Québec from 1995 to 1997. She is a Chartered Financial Analyst (CFA) and holds a Bachelor degree in
Actuarial Science and an MBA from Université Laval.

Christian Marcoux, Assistant Secretary. Mr. Marcoux
was appointed Assistant Secretary of Quebecor Media in January 2008. Mr. Marcoux joined Quebecor Media in 2006 as Senior Legal Counsel, Compliance and has been promoted to Director, Compliance, Corporate Secretariat in February 2010. He is
currently acting as Assistant Secretary of Quebecor, TVA Group, Sun Media and Videotron. From January 2004 to December 2006, Mr. Marcoux was Manager, Listed Issuer Services at the Toronto Stock Exchange. Prior to January 2004, Mr. Marcoux
was an attorney with BCF LLP, a law firm, for three years. He has been a member of the Quebec Bar Association since 2000.

B - Board of Directors

In accordance with our charter, our Board of Directors may consist of at least
one director and no more than 20 directors. Our Board of Directors presently consists of 9 directors (Erik Péladeau having resigned on September 30, 2009). Each director serves a one-year term and holds office until the next annual
general shareholders meeting or until the election of his or her successor, unless he or she resigns or his or her office becomes vacant by reason of death, removal or other cause. Pursuant to a Consolidated and Amended Shareholders
Agreement, dated as of December 11, 2000, as amended, among Quebecor, certain wholly owned subsidiaries of Quebecor, Capital Communications CDPQ Inc. (now Capital CDPQ) and Quebecor Media, our Board of Directors is comprised of nominees of each
of Quebecor and of Capital CDPQ. In May 2003, our shareholders, acting by written resolution, increased the size of our Board of Directors to ten directors from nine, and established that Quebecor would be entitled to nominate six directors and
Capital CDPQ would be entitled to nominate four directors. See  Major Shareholders and Related Party Transactions  Major Shareholders below for a description of the Consolidated and Amended Shareholders Agreement and the
shareholders resolution increasing the size of the Board of Directors to ten.



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Board Practices

Reference is made to  Directors and Senior Management above for the current term of office, if applicable, and the period
during which our directors and senior management have served in that office.

Executive Committee

Our Executive Committee is currently composed of five members, namely Messrs. Serge Gouin, André Delisle, A. Michel Lavigne, Jean
Neveu and Pierre Karl Péladeau. Mr. Gouin is the Chairman of our Executive Committee. Subject to the provisions of the Companys Shareholders Agreement, the Committee has and may exercise all the powers of the Board, subject to the
restrictions that shall be imposed by the Board from time to time. However, the Committee does not have the power to grant options, which power has already been delegated by the Board to its Compensation Committee, nor the power to destitute or
replace directors.

Audit Committee

Our Audit Committee is currently composed of three directors, namely Messrs. Jean La Couture, André Delisle and A. Michel Lavigne. Mr. La Couture is the Chairman of our Audit Committee and our
Board of Directors has determined that Mr. La Couture is an audit committee financial expert as defined under SEC rules. See Item 16A  Audit Committee Financial Expert. Our Board of Directors adopted the mandate of
our Audit Committee in light of the Sarbanes-Oxley Act of 2002. Our Audit Committee assists our Board of Directors in overseeing our financial controls and reporting. Our Audit Committee also oversees our compliance with financial covenants
and legal and regulatory requirements governing financial disclosure matters and financial risk management.

The current
mandate of our Audit Committee provides, among other things, that our Audit Committee reviews our annual and quarterly financial statements before they are submitted to our Board of Directors, as well as the financial information contained in our
annual reports on Form 20-F, our managements discussion and analysis of financial condition and results of operations, our quarterly reports furnished to the SEC under cover of Form 6-K and other documents containing similar information before
their public disclosure or filing with regulatory authorities; reviews our accounting policies and practices; and discusses with our independent auditors the scope of their audit and reviews their recommendations and the responses of our management
to their recommendations. Our Audit Committee is also responsible for ensuring that we have in place adequate and efficient internal control and management information systems to monitor our financial information and to ensure that our transactions
with related parties are made on terms that are fair for us. Our Audit Committee pre-approves all audit services and permitted non-audit services and pre-approves all the fees pertaining to those services that are payable to our independent
auditors, and it submits the appropriate recommendations to our Board of Directors in connection with these services and fees. Our Audit Committee also reviews the scope of the audit and the results of the examinations conducted by our internal
audit department. In addition, our Audit Committee recommends the appointment of our independent auditors, subject to our shareholders approval. It also reviews and approves our code of ethics (Code of Ethics) for the Chief
Executive Officer, Chief Financial Officer, controller, principal financial officer and other persons performing similar functions.

Compensation Committee

Our Compensation Committee is composed of Messrs. Serge Gouin, A. Michel Lavigne and
Samuel Minzberg. Mr. Gouin is the Chairman of our Compensation Committee. Our Compensation Committee was formed with the mandate to examine and decide upon the global compensation and benefits policies of us and those of our subsidiaries that
do not have a Compensation Committee, and to formulate appropriate recommendations to the Board of Directors, among other things, concerning long-term compensation in the form of stock option grants. Our Compensation Committee is also responsible
for the review, on an annual basis, of the compensation of our directors.

C - Compensation

Compensation of Directors

Our directors who are also employees of Quebecor Media are not entitled to receive any additional compensation for serving as our Directors. Since January 1, 2009, each director is entitled to
receive an annual directors fee of $42,500



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from Quebecor Media. Directors are also entitled to receive an attendance fee of $1,500 for each Board or committee meeting attended (other than the Audit Committee) and an attendance fee of
$2,500 for each Audit Committee meeting attended, each payable quarterly. The President of our Audit Committee receives additional fees of $12,000 per year and the President of our Compensation Committee receives additional fees of $5,000 per year.
Each Compensation Committee member, other than the president, also receive additional fees of $2,000 per year. Each Audit Committee member, other than the president, also receives additional fees of $4,000 per year. Each Executive Committee member
receives additional fees of $3,000 per year. All of our Directors are reimbursed for travel and other reasonable expenses incurred in attending board meetings. Mr. Jean Neveu, who serves as Chairman of the Board of Directors of our parent
company, Quebecor, receives compensation for its position of Chairman of the Board of our ultimate parent company and does not receive any annual fees or attendance fees for its position of Director of Quebecor Media. In addition,
Mr. Neveus compensation is not subject to the Quebecor Inc. Directors Deferred Stock Unit Plan, which we refer to as the DSUP plan. Mr. Serge Gouin, who serves as Chairman of the Board of Quebecor Media, receives compensation
from us for acting in such capacity.

During the financial year ended December 31, 2009, the amount of compensation
(including benefits in kind) paid to six of our Directors (other than Pierre Karl Péladeau, Éric Péladeau and Jean Neveu) for services in all capacities to Quebecor Media and its subsidiaries (other than TVA Group) was $789,000.
None of our directors have contracts with us or any of our subsidiaries that provide for benefits upon termination of employment.

Quebecor Inc. DSUP

In addition to the compensation described above, our directors who are also
Directors of Quebecor (other than Mr. Neveu), namely Jean La Couture, The Right Honourable Brian Mulroney and Pierre Karl Péladeau, participate in the Quebecor Inc. DSUP plan. Under this plan and subject to certain conditions, each
beneficiary may elect to receive in the form of units any percentage, up to 100%, of the total fees payable for his or her services as a director, including meeting attendance fees and any other fees payable to the director. Since March 12,
2004, Pierre Karl Péladeau no longer receives compensation in the form of units for serving as directors of Quebecor.

Under the Quebecor Inc. DSUP plan, beneficiaries are credited, on the last day of each fiscal quarter of Quebecor, a number of units determined on the basis of the amounts payable to such director in respect of such fiscal quarter, divided
by the value of a unit. The value of a unit means the weighted average trading price of the Class B Shares of Quebecor on the Toronto Stock Exchange over the five trading days immediately preceding such date. The units take the form of a credit to
the account of the director, who may not convert such units into cash as long as he or she remains a director.

Under the
Quebecor Inc. DSUP plan, all of the units credited to the beneficiary are redeemed by Quebecor and the value of these units are paid when the director ceases to serve as a director of Quebecor. For purposes of redemption of units, the value of a
unit corresponds to the market value of Class B Shares at the redemption date, being the closing price of the Class B Shares on The Toronto Stock Exchange on the last trading day preceding such date.

Units entitle the holders thereof to dividends which will be paid in the form of additional units at the same rate as applicable to
dividends paid on the Class B Shares.

No units held by directors of Quebecor Media who also sit on the Board of Directors of
Quebecor were redeemed in 2009.

As of December 31, 2009, the Right Honourable Brian Mulroney held 22,013 units, Pierre
Karl Péladeau held 6,362 units and Jean La Couture held 8,382 units under the Quebecor Inc. DSUP plan.

Compensation
of Executive Officers

Compensation of our senior executive officers is composed primarily of base salary and the payment
of cash bonuses. Cash bonuses are generally tied to the achievement of financial performance indicators and personal objectives, and they may vary from 15% to 100% of base salary depending upon the level of responsibilities of the senior executive
officer. Our executive compensation package is also complemented by long-term incentives in the form of options to purchase our common shares to be issued pursuant to Quebecor Medias Stock Option Plan.



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For the financial year ended December 31, 2009, our senior executive officers, as a
group, received aggregate compensation of $6.3 million for services they rendered in all capacities during 2009, which amount includes base salary, bonuses, benefits in kind and deferred compensation paid to such senior executive officers.

Quebecor Medias Stock Option Plan

On January 29, 2002, we established a stock option plan to attract, retain and motivate our directors, executive officers and key contributors, as well as those of our subsidiaries, including
Videotron and Sun Media. The Compensation Committee is responsible for the administration of this stock option plan and, as such, designates the participants under the stock option plan and determines the number of options granted, the vesting
schedule, the expiration date and any other terms and conditions relating to the options.

Under this stock option plan,
6,180,140 Quebecor Media common shares (representing 5% of all of the outstanding shares of Quebecor Media) have been set aside for directors, officers, senior employees, and other key employees of Quebecor Media and its subsidiaries. Each option
may be exercised within a maximum period of ten 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 at the date of grant, as determined by our Board
of Directors (if the common shares of Quebecor Media are not listed on a stock exchange at the time of the grant) or the 5-day weighted average closing price ending on the day preceding the date of the grant of the common shares of Quebecor Media on
the stock exchange(s) where such shares are listed at the time of grant. For so long as the shares of Quebecor Media are not listed on a recognized stock exchange, optionees may exercise their vested options during one of the following annual
periods: from March 1 to March 30, from June 1 to June 29, from September 1 to September 29 and from December 1 to December 30. Holders of options under the plan have the choice at the time of exercising their
options to receive an amount in cash equal to the difference between the fair market value of the common shares, as determined by our Board of Directors, and the exercise price of their vested options or, subject to certain stated conditions,
purchase common shares of Quebecor Media at the exercise price. Except under specific circumstances, and unless our Compensation Committee decides otherwise, options vest over a five-year period in accordance with one of the following vesting
schedules as determined by our 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 date of grant. Pursuant to the terms of this plan, no optionee may hold options representing more than
5% of the outstanding common shares of Quebecor Media.

During the year ended December 31, 2009, an aggregate total of
671,000 options were granted under this plan to officers and employees of Quebecor Media and its subsidiaries, with a weighted average exercise price of $37.19 per share, as determined by Quebecor Medias Compensation Committee. During the year
ended December 31, 2009, a total of 304,422 options were exercised by officers and employees of Quebecor Media and its subsidiaries, for aggregate gross value realized of $4.25 million. The value realized on option exercises represents the
difference between the option exercise price and the fair market value of Quebecor Media common shares (as determined as set forth above) at the date of exercise. As of December 31, 2009, an aggregate total of 3,326,069 options remain
outstanding (of which 423,732 were vested as at that date), with a weighted average exercise price of $40.96 per share, as determined by Quebecor Medias Compensation Committee. For more information on this stock option plan, see Note 19 to our
audited consolidated financial statements included under Item 17. Financial Statements of this annual report.

Quebecor Inc.s Stock Option Plan

Under a stock option plan established by Quebecor,
6,500,000 Quebecor Class B Shares have been set aside for directors, officers, senior employees and other key employees of Quebecor and its subsidiaries, including Quebecor Media. The exercise price of each option is equal to the weighted average
trading price of Quebecor Class B Shares on the Toronto Stock Exchange over the last five trading days immediately preceding the grant of the option. Each option may be exercised during a period not exceeding ten years from the date granted. Options
usually vest as follows: 1/3after one year, 2/3after two years, and 100% three years after the
original grant. Holders of options under the Quebecor stock option plan have the choice, when they want to exercise their options, to acquire Quebecor Class B Shares at the corresponding option exercise price or to receive a cash payment from
Quebecor equivalent to the difference between the market value of the underlying shares and the exercise price of the option. The Board of Directors of Quebecor may, at its discretion, affix different vesting periods at the time of each grant.



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During the year ended December 31, 2009, 930,715 options to purchase Quebecor Class B
Shares, with a weighted average exercise price of $19.16 per share, were granted to one senior executive officer of Quebecor Media. As of December 31, 2009, a total of 2,586,496 options to purchase Quebecor Class B Shares, with a weighted
average exercise price of $25.15 per share, were held by two senior executive officers of Quebecor Media. The closing sale price of the Quebecor Class B Shares on the Toronto Stock Exchange on December 31, 2009 was $27.22 per share.

Pension Benefits

Quebecor Media maintains a pension plan for its non-unionized employees and those of its subsidiaries. The pension plan provides greater pension benefits to eligible executive officers than it does to other employees. The greater benefits
under this plan equal 2% of the average salary over the best five consecutive years of salary (including bonuses), multiplied by the number of years of membership in the plan as an executive officer. The pension so calculated is payable at the
normal retirement age, which is 65 years of age, or sooner at the election of the executive officer, and, from age 61, without early retirement reduction. In addition, the pension may be deferred, but not beyond the age limit under the provisions of
the Income Tax Act(Canada), in which case the pension is adjusted to take into account the delay in payment thereof in relation to the normal retirement age. The maximum pension payable under such pension plan is as prescribed by the
Income Tax Act (Canada) and is based on a maximum salary of $124,722. An executive officer contributes to the plan an amount equal to 5% of his or her salary up to a maximum of $6,236 in respect of 2010.

The total amount contributed by Quebecor Media in 2009 to provide the pension benefits was $25.3 million on a consolidated basis. For a
description of the amount set aside or accrued for pension plans and post-retirement benefits by Quebecor Media see Note 25 to our audited consolidated financial statements included under Item 17. Financial Statements of this annual
report.

The table below indicates the annual pension benefits that would be payable at the normal retirement age of 65 years:



|                 |  |                        |        |    |   |        |  |    |        |    |   |        |  |   |       
|---------------- |  | ---------------------- | ------ | -- | - | ------ |  | -- | ------ | -- | - | ------ |  | - | ------
|                 |  | Years of Participation
|Compensation     |  | 10                     |        | 15 |   | 20     |  | 25 |        | 30
|                 |  |                        |        |    |  
|$124,722 or more |  | $                      | 24,944 |    | $ | 37,417 |  | $  | 49,889 |    | $ | 62,361 |  | $ | 74,833

Supplemental
Retirement Benefit Plan for Designated Executives

In addition to the pension plans in force, Quebecor Media provides
supplemental retirement benefits to certain designated executives. Four senior executive officers of Quebecor Media are participants under the Quebecor Media plan.

The pensions of the four senior executive officers who participate in the Quebecor Media plan is equal, for each year of membership under the plan to 2% of the difference between their respective average
salaries (including bonuses) for the best five consecutive years and the maximum salary under the pension plan. The pension is payable for life without reduction from age 61. In case of death after retirement and from the date of death, the plan
provides for the payment of a pension to the eligible surviving spouse representing 50% of the retirees pension and payable for up to ten years.



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As of December 31, 2009, these four senior executive officers of Quebecor Media had
credited service of approximately six years or less. The table below indicates the annual pension benefits that would be payable under Quebecor Medias plan at the normal retirement age of 65 years:



|             |  |                           |         |    |   |         |  |    |         |    |   |         |  |   |        
|------------ |  | ------------------------- | ------- | -- | - | ------- |  | -- | ------- | -- | - | ------- |  | - | -------
|             |  | Years of Credited Service
|Compensation |  | 10                        |         | 15 |   | 20      |  | 25 |         | 30
|             |  |                           |         |    |  
|$200,000     |  | $                         | 15,056  |    | $ | 22,583  |  | $  | 30,111  |    | $ | 37,639  |  | $ | 45,167 
|$300,000     |  | $                         | 35,056  |    | $ | 52,583  |  | $  | 70,111  |    | $ | 87,639  |  | $ | 105,167
|$400,000     |  | $                         | 55,056  |    | $ | 82,583  |  | $  | 110,111 |    | $ | 137,639 |  | $ | 165,167
|$500,000     |  | $                         | 75,056  |    | $ | 112,583 |  | $  | 150,111 |    | $ | 187,639 |  | $ | 225,167
|$600,000     |  | $                         | 95,056  |    | $ | 142,583 |  | $  | 190,111 |    | $ | 237,639 |  | $ | 285,167
|$800,000     |  | $                         | 135,056 |    | $ | 202,583 |  | $  | 270,111 |    | $ | 337,639 |  | $ | 405,167
|$1,000,000   |  | $                         | 175,056 |    | $ | 262,583 |  | $  | 350,111 |    | $ | 437,639 |  | $ | 525,167
|$1,200,000   |  | $                         | 215,056 |    | $ | 322,583 |  | $  | 430,111 |    | $ | 537,639 |  | $ | 645,167
|$1,400,000   |  | $                         | 255,056 |    | $ | 382,583 |  | $  | 510,111 |    | $ | 637,639 |  | $ | 765,167

D - Liability
Insurance

Quebecor carries liability insurance for the benefit of its directors and officers, as well as for the
directors and officers of its subsidiaries, including Quebecor Media and our subsidiaries, against certain liabilities incurred by them in such capacity. These policies are subject to customary deductibles and exceptions. The premiums in respect of
this insurance are entirely paid by Quebecor, which is then reimbursed by Quebecor Media and its subsidiaries for their ratable portion thereof.

E - Employees

At December 31, 2009, we had approximately
15,710 employees on a consolidated basis. A number of our employees work part-time. The following table sets forth certain information relating to our employees in each of our operating segments as of December 31, 2009.



|                                            |  |                                      |  |                                                           |  |                               
|------------------------------------------- |  | ------------------------------------ |  | --------------------------------------------------------- |  | ------------------------------
|Operations                                  |  | Approximate total numberof employees |  | Approximate number ofemployees undercollective agreements |  | Number ofcollective agreements
|                                            |  |                                      | 
|Telecommunications                          |  | 4,870                                |  | 3,750                                                     |  | 5                             
|News Media(1)                               |  | 6,590                                |  | 2,210                                                     |  | 81                            
|Broadcasting                                |  | 1,940                                |  | 1,200                                                     |  | 13                            
|Leisure and Entertainment                   |  | 1,350                                |  | 350                                                       |  | 8                             
|Interactive Technologies and Communications |  | 810                                  |  |                                                          |  |                              
|Corporate(2)                                |  | 150                                  |  |                                                          |  |                              
|Total                                       |  | 15,710                               |  | 7,510                                                     |  | 107                           



|(1) | Includes, in the aggregate, approximately 400 employees of Canoe, which is now part of our News Media segment. In December 2008, Sun Media announced a decrease in the
number of its employees, carried out over the course of 2008 and 2009. The restructuring initiatives are still ongoing.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes QMI Agency.
|--- | --------------------

At
December 31, 2009, approximately 47% of our employees were represented by collective bargaining agreements. Through our subsidiaries, we are currently a party to 107 collective bargaining agreements:



| |  |  | Videotron is party to five collective bargaining agreements representing approximately 3,750 unionized employees. All collective agreements have
been renewed during the year 2009. The two most important collective bargaining agreements, covering unionized employees in the Montreal and Quebec City regions, have terms extending to December 31, 2013. There are also two collective
bargaining agreements covering unionized employees in the Chicoutimi and Hull regions, with terms running through December 31, 2014 and August 31, 2015, respectively, and one other collective bargaining agreement, covering approximately 40
employees of our SETTE inc. subsidiary, which will expire on December 31, 2012.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sun Media (including Osprey Media) is party to 79 collective bargaining agreements, representing approximately 2,030 unionized employees. 40 collective
bargaining agreements have expired, representing
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | approximately 810 unionized employees, or 40% of its unionized workforce. Negotiations regarding these collective bargaining agreements are either in progress or will be undertaken in 2010. The
other collective bargaining agreements are scheduled to expire on various dates through August 2013.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TVA Group is party to 13 collective bargaining agreements, representing approximately 1,200 unionized employees. Of this number, three collective
bargaining agreements, representing approximately 550 unionized employees, or 46% of its unionized workforce, have expired. Negotiations regarding these collective bargaining agreements are either in progress or will be undertaken in 2010. The other
collective bargaining agreements will expire between April 30, 2011 and December 31, 2013.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Of the other ten collective bargaining agreements, representing approximately 540 unionized employees or 7% of the unionized workforce, three
collective bargaining agreements representing approximately 180 unionized employees are expired and negotiations are ongoing or will be undertaken in 2010. The other collective bargaining agreements will expire between April 2010 and May 2011.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have, in the past, experienced labour disputes which have disrupted our operations, resulted in damage
to our network or our equipment and impaired our growth and operating results. We currently have a labour dispute affecting the editorial, classified, sales support and business office staff of the Journal de Montréal.

We cannot predict the outcome of this work stoppage, although we currently anticipate that any prolonged work stoppage will have an adverse
effect on operations at the newspaper despite our current ability to continue its circulation. We can neither predict the outcome of current or future negotiations relating to other labour disputes, union representation or renewal of collective
bargaining agreements, nor guarantee that we will not experience further work stoppages, strikes or other forms of labour protests pending the outcome of any current or future negotiations. If our unionized workers engage in a strike or any other
form of work stoppage, we could experience a significant disruption to our operations, damage to our property and/or interruption to our services, which could adversely affect our business, assets, financial position, results of operations and
reputation. Even if we do not experience strikes or other forms of labour protests, the outcome of labour negotiations could adversely affect our business and results of operations. Such could be the case if current or future labour negotiations or
contracts were to further restrict our ability to maximize the efficiency of our operations. In addition, our ability to make short-term adjustments to control compensation and benefits costs is limited by the terms of our collective bargaining
agreements.

With regard to the work stoppage at Les Éditions du Réveil, an agreement has been reached and a
three-year collective agreement was signed on February 24, 2010.

F - Share Ownership

Except as disclosed under Item 7. Major Shareholders and Related Party Transactions  Major Shareholders of this annual
report, none of our equity securities are held by any of our directors or senior executive officers. For a description of Quebecor Medias stock option plan, see C. Compensation above.

ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A - Major Shareholders

As of December 31, 2009, Quebecor held, directly and indirectly, 67,636,713 common shares of our company, representing a 54.72% voting and equity interest in us. The remaining 45.28% voting and
equity interest, or 55,966,094 common shares, was held by Capital CDPQ. The primary asset of Quebecor, a communications holding company, is its interest in us. Capital CDPQ is a wholly owned subsidiary of the Caisse de dépôt et
placement du Québec, one of Canadas largest pension fund managers.

To the knowledge of our directors and
officers, based on the most recent regulatory filings, the only persons who beneficially own or exercise control or direction over more than 10% of the shares of any class of voting shares of Quebecor are: (i) Les Placements Péladeau
inc., a corporation controlled by Pierre Karl Péladeau, (ii) Jarislowsky, Fraser Limited, and (iii) Beutel, Goodman & Co. Ltd., (iv) Letko, Brosseau & Associates Inc. As of December 31, 2009, Les
Placements Péladeau inc. and Pierre Karl Péladeau held, directly and indirectly, a total of 17,468,464 Quebecor Class A



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Shares and 69,800 Quebecor Class B Shares Subordinate Voting Shares, representing approximately 86.84% of the outstanding Quebecor Class A Shares, approximately 0.16% of the outstanding
Quebecor Class B Shares Subordinate Voting Shares and approximately 71.22% of the voting rights attached to all outstanding Quebecor shares.

According to an early warning report filed on SEDAR on April 14, 2008, Jarislowsky, Fraser Limited held, directly or indirectly, 55,800 Quebecor Class A Shares and 7,111,596 Quebecor Class B
Subordinate Voting Shares, representing approximately 0.28% of the outstanding Quebecor Class A Shares, approximately 16.09% of the oustanding Quebecor Class B Shares Subordinate Voting Shares and approximately 3.13% of the voting rights
attached to all outstanding Quebecor shares. According to an early warning report filed on SEDAR on April 6, 2009, Beutel, Goodman & Co. Ltd. held directly or indirectly, 6,474,742 Quebecor Class B Subordinate Voting Shares,
representing approximately 14.65% of the outstanding Quebecor Class B Subordinate Voting Shares and approximately 2.64% of the voting rights attached to all outstanding Quebecor shares. According to an early warning report filed on SEDAR on
September 9, 2008, Letko, Brosseau & Associates Inc. held, directly or indirectly, 4,642,563 Quebecor Class B Subordinate Voting Shares, representing approximately 10.5% of the outstanding Quebecor Class B Subordinate Voting Shares and
approximately 1.89% of the voting rights attached to all outstanding Quebecor shares. Since the date of each of the above filings, respectively, no publicly-available regulatory filing has been made disclosing that these respective positions in
Quebecor have changed.

B - Consolidated and Amended Shareholders Agreement

We entered into a shareholders agreement, dated October 23, 2000, with Quebecor, Capital CDPQ and certain of our wholly owned
subsidiaries, as consolidated and amended by a shareholders agreement dated December 11, 2000, which sets forth the rights and obligations of Quebecor and Capital CDPQ as our shareholders. Except as specifically provided in the
shareholders agreement, the rights thereunder apply only to shareholders holding at least 10% of our equity shares, which we refer to as QMI Shares, on a fully-diluted basis.

The shareholders agreement provides, among other things, for:



| | (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 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 Videotron; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | a non-competition covenant by Quebecor in respect of it and its affiliates pursuant to which Quebecor and its affiliates shall not compete with Quebecor Media and its
subsidiaries in their areas of activity so long as Quebecor has de jure or de facto control of us, subject to certain limited exceptions.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The shareholders agreement provides that once we become a reporting issuer and have a
20% public float of QMI Shares, certain provisions of the shareholders agreement will cease to apply, including the consent rights described under subsections (d)(4) and (f) in the description of the shareholders
agreement above.

In a separate letter agreement, dated December 11, 2000, Quebecor and Capital CDPQ agreed, subject to
applicable laws, fiduciary obligations and existing agreements, to attempt to apply the same board representation and consent rights as set forth in the shareholders agreement to our reporting issuer (public) subsidiaries so long as Capital CDPQ
holds at least 20% of the QMI Shares on a fully diluted basis or, in the case of TVA Group only, 10%.

On May 5, 2003,
our Board of Directors, by resolution, increased the total number of directors on our Board of Directors from nine to ten and determined that the tenth director would be a nominee of Quebecor. Following the resolution, our Board of Directors
consists of ten directors, of which six are nominees of Quebecor and four are nominees of Capital CDPQ. See Item 6. Directors, Senior Management and Employees  Directors and Senior Management.

C - Certain Relationships and Related Party Transactions

Related Party Transactions

The following describes transactions in which the Company and its directors, executive officers and affiliates are involved. The Company believes that each of the transactions described below was on terms
no less favourable to Quebecor Media than could have been obtained from unrelated third parties.

Operating transactions

During the year ended December 31, 2009, the Company and its subsidiaries made purchases and incurred rent
charges from the parent company and affiliated companies in the amount of $15.3 million ($11.8 million in 2008 and $9.0 million in 2007), which are included in operating expenses. The Company and its subsidiaries made sales to an affiliated company
in the amount of $0.1 million ($0.4 million in 2008 and 2007). These transactions were concluded and accounted for at the exchange amount.

During the year ended December 31, 2009, the Company received interest of $0.1 million ($1.0 million in 2008 and $0.9 million in 2007) from the parent company.

Corporate reorganization

In June 2009, as part of a corporate reorganization, the subsidiary Canoe, in which the Company held an 86.2% interest and TVA Group a 13.8% interest, was wound up and its assets distributed to the
shareholders. The transactions arising from this reorganization were recorded at the carrying value of the assets transferred and an adjustment of $8.6 million was recorded as contributed surplus.

Management arrangements

The parent company has entered into management arrangements with the Company. Under these management arrangements, the parent company and the Company provide management services to each other on a
cost-reimbursement basis. The expenses subject to reimbursement include the salaries of the Companys executive officers, who also serve as executive officers of the parent company. In 2009, the Company received an amount of $2.1 million, which
is included as a reduction in operating expenses ($3.0 million in 2008 and 2007), and incurred management fees of $1.1 million ($1.1 million in 2008 and 2007) with the shareholders.

Tax transactions

In 2009, 2008 and 2007, the parent company transferred $30.1 million, $104.9 million and $66.5 million, respectively, of non-capital losses to certain Company subsidiaries in exchange for cash
considerations of $6.3 million, $18.4 million and $14.9 million. These transactions were recorded at the exchange amounts. As a result, the Company recorded reductions of $14.2 million, $6.4 million and $7.7 million, respectively, to its income tax
expense in 2009, 2008 and 2007, and expects to reduce its income tax expense by $2.7 million in the future.



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WCP (a former subsidiary)

On January 21, 2008, WCP and its U.S. subsidiaries were granted creditor protection under the CCAA in Canada. On the same date, its U.S.
subsidiaries also filed a petition under Chapter 11 of the United States Bankruptcy Code. Since January 21, 2008, WCP is no longer a related company. Prior to this date, the following transactions were made with WCP:



| |  |  | From January 1, 2008 to January 21, 2008, the Company made purchases from WCP of $3.0 million ($55.3 million in 2007) and made sales to WCP
of $1.3 million ($17.9 million in 2007).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On January 10, 2008, the Company settled a balance of $4.3 million payable to WCP by set-off. As the balance was due in 2013 and recorded at
present value, the difference of $2.7 million between the settled amount of $7.0 million and the carrying value of $4.3 million was recorded as a reduction in contributed surplus.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2007, the Company increased its investment in Nurun by acquiring 500,000 Common Shares of Nurun from WCP at the exchange amount, for a cash
consideration of $1.7 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On October 11, 2007, the Company acquired a property from WCP for a total net consideration of $62.5 million. Simultaneously, WCP entered into a
long-term operating lease with the Company to rent a portion of the property for a 17-year term. The consideration for the two transactions was settled by the payment of a net amount of $43.9 million to WCP as of the date of the transactions,
and the assumption by the Company of a $7.0 million balance of sale, including interest, payable in 2013. The transactions were concluded and accounted for at the exchange amount.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Tax Consolidation Transactions

Unlike corporations in the United States, corporations in Canada are not permitted to file consolidated tax returns. As a result, Quebecor Media and its subsidiaries have entered into certain tax
consolidation transactions pursuant to which Quebecor Media typically issues preferred shares to its subsidiaries and correspondingly acquires convertible debt obligations or subordinated loans of these subsidiaries or Quebecor Media borrows money
from its subsidiaries and acquires preferred shares of such subsidiaries. As a result of such transactions, Quebecor Media and its subsidiaries recognize significant income tax benefits.

Issuance and Redemption of Convertible Obligations and Investments in Quebecor Media Preferred Shares

On July 9, 2001, Sun Media and its subsidiaries issued a $1.6 billion convertible obligation to Quebecor Media and used the proceeds to
invest in $1.6 billion of Quebecor Media preferred shares, for tax consolidation purposes. On November 28, 2002, Sun Media and its subsidiaries issued a convertible obligation to Quebecor Media in the amount of $350.0 million, and used the
proceeds to invest in $350.0 million of Quebecor Media preferred shares. On July 31, 2003, Sun Media and its subsidiaries redeemed $360.0 million and on January 14, 2004, Sun Media and its subsidiaries redeemed another $450.0 million of
the convertible obligations, using the proceeds from the redemption of Quebecor Media preferred shares.

In January 2005, Sun
Media and its subsidiaries received a further $150.0 million for its investment in the Quebecor Media preferred shares and used the proceeds to redeem $150.0 million of its convertible obligations. In addition, Sun Media and its subsidiaries issued
a new convertible obligation to Quebecor Media in the amount of $255.0 million and used the proceeds from the issuance to invest in an additional $255.0 million of Quebecor Media preferred shares.

In June 2006, Sun Media and its subsidiaries issued a $120.0 million convertible obligation to Quebecor Media and used the proceeds to
invest in $120.0 million of Quebecor Media preferred shares, for tax consolidation purposes. Also in June 2006, Sun Media and its subsidiaries received a further $255.0 million for its investment in the Quebecor Media preferred shares and used the
proceeds to redeem $255.0 million of its convertible obligations. In December 2006, Sun Media and its subsidiaries received $555.0 million for its investments in Quebecor Media preferred shares and used the proceed to redeem another $555.0 million
of its convertible obligations.



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In July 2007, Sun Media received $235.0 million for its investment in Quebecor Media
preferred shares and used the proceeds to redeem $235.0 million of its convertible obligations.

In July 2007, Sun Media
issued a new convertible obligation to Quebecor Media in the amount of $240.0 million. Sun Media used the proceeds from the issuance of this new convertible obligation to invest in an additional $240.0 million of Quebecor Media preferred shares.

In December 2008, Sun Media and its subsidiaries received $560.0 million in respect of the redemption of certain Quebecor
Media preferred shares and used the proceeds to redeem the $560.0 million principal amount outstanding on its convertible obligations.

Issuance and redemption of Subordinated Loans and Investments in Quebecor Media Preferred Shares

In
January 2004, Archambault Group issued a $70.0 million subordinated loan to Quebecor Media and used the proceeds to invest in $70.0 million of the Quebecor Media preferred shares for tax consolidation purposes. In April 2005, Archambault Group
issued a $55.0 million subordinated loan to Quebecor Media and used the proceeds to invest in $55.0 million of Quebecor Media preferred shares for tax consolidation purposes. In December 2007, Archambault Group reimbursed its subordinated loan with
Quebecor Media for $125.0 million and Quebecor Media redeemed $125.0 million of preferred shares.

In June 2004 and October
2004, CEC Publishing, a wholly-owned subsidiary of Quebecor Media, issued an aggregate $200.0 million subordinated loan to Quebecor Media and used the proceeds to invest in an aggregate of $200.0 million in Quebecor Media preferred shares, for tax
consolidation purposes. In August 2005, CEC Publishing reimbursed $184.0 million of the loan and Quebecor Media redeemed $184.0 million of preferred shares. In April 2006, CEC Publishing issued an aggregate $44.0 million subordinated loan to
Quebecor Media and used the proceeds to invest an aggregate of $44.0 million in Quebecor Media preferred shares for tax consolidation purposes. In November 2008, CEC Publishing reimbursed $60.0 million principal amount of the loan and Quebecor Media
redeemed $60.0 million of preferred shares.

In June 2006, Messageries ADP, an indirect wholly-owned subsidiary of Quebecor
Media, issued an aggregate $50.0 million subordinated loan to Quebecor Media and used the proceeds to invest an aggregate of $50.0 million in Quebecor Media preferred shares, for tax consolidation purposes, and Edition QMI, an indirect wholly-owned
subsidiary of Quebecor Media, issued an aggregate $40.0 million subordinated loan to Quebecor Media and used the proceeds to invest an aggregate of $40.0 million in Quebecor Media preferred shares, also for tax consolidation purposes. In November
2007, Edition QMI reimbursed its $40.0 million subordinated loan with Quebecor Media and Quebecor Media redeemed $40.0 million of preferred shares. In November 2008, Messageries ADP reimbursed its $50.0 million subordinated loan with Quebecor Media
and Quebecor Media redeemed $50.0 million of preferred shares.

In January 2007, Videotron issued an aggregate $1.0 billion
subordinated loan to Quebecor Media and used the proceeds to invest an aggregate of $1.0 billion in Quebecor Medias preferred shares for tax consolidation purposes. In May 2007, Videotron issued an aggregate $995.0 million subordinated loan to
Quebecor Media and used the proceeds to invest an aggregate of $995.0 million in Quebecor Medias preferred shares for tax consolidation purposes.

In January 2008, Videotron issued an additional aggregate $585.0 million subordinated loan to Quebecor Media and used the proceeds to invest an aggregate of $585.0 million in Quebecor Media preferred
shares, and in December 2008, Videotron reimbursed $525.0 million of its subordinated loan with Quebecor Media and Quebecor Media redeemed $525.0 million of its preferred shares.

In January 2008, Osprey Media issued a $215.0 million subordinated loan to Quebecor Media and used the proceeds to invest an aggregate of
$215.0 million in Quebecor Media preferred shares, for tax consolidation purposes. In December 2008, Osprey Media reimbursed its $215.0 million subordinated loan with Quebecor Media and Quebecor Media redeemed $215.0 million of its preferred shares.

Also in January 2008, 4411986 Canada Inc., a wholly-owned subsidiary of Quebecor Media, issued an aggregate $300.0 million
subordinated loan to Quebecor Media and used the proceeds to invest an aggregate of $300.0 million in Quebecor Medias preferred shares for tax consolidation purposes. In June 2008, 4411986 Canada Inc. received $300.0 million for its investment
in Quebecor Media preferred shares and used the proceeds to reimburse its $300.0 million subordinated loan to Quebecor Media.



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In January 2009, Videotron issued an additional aggregate $190.0 million subordinated loan
to Quebecor Media and used the proceeds to invest an aggregate of $190.0 million in Quebecor Media preferred shares. In November and December 2009, Videotron reimbursed respectively $500.0 million and $485.0 million of its subordinated loan with
Quebecor Media and Quebecor Media redeemed on the same dates respectively $500.0 million and 485.0 million of its preferred shares.

Investment by Quebecor Media in Preferred Shares of direct and indirect wholly-owned subsidiaries

In January 2009, Quebecor Media issued an aggregate $186.43 million subordinated loan to 9085-3011 Quebec inc., its wholly-owned subsidiary, and used the proceeds to invest an aggregate $186.43 million in
9085-3011 Quebec inc. preferred shares, for tax consolidation purposes. In June 2009, Quebecor Media reimbursed $186.43 million principal amount of the loan and 9085-3011 Quebec inc. redeemed $186.43 million of preferred shares.

In August 2009, Quebecor Media issued an aggregate $98.0 million subordinated loan to 9195-5161 Quebec inc., its wholly-owned subsidiary,
and used the proceeds to invest an aggregate $98.0 million in 9195-5161 Quebec inc. preferred shares, for tax consolidation purposes. In December 2009, Quebecor Media reimbursed $ 76.0 million principal amount of the loan and 9195-5161 Quebec
inc. redeemed $76.0 million of preferred shares.

Also in August 2009, Quebecor Media issued an aggregate $850.0 million
subordinated loan to Quebecor Media Printing, its wholly-owned subsidiary, and used the proceeds to invest an aggregate $850.0 million in Quebecor Media Printing preferred shares, for tax consolitation purposes.

In October 2009, Quebecor Media issued an aggregate $390.0 million subordinated loan to Canoe, its wholly-owned subsidiary, and used the
proceeds to invest an aggregate $390.0 million in Canoe preferred shares, for tax consolidation purposes.

Also in October
2009, Quebecor Media issued an aggregate $1.12 billion subordinated loan to Sun Media, an indirect wholly-owned subsidiary, and used the proceeds to invest an aggregate $1.12 billion in Sun Media preferred shares, for tax consolidation purposes.

D - Interests of Experts and Counsel

Not applicable.

ITEM 8  FINANCIAL INFORMATION

A - Consolidated Statements and Other Financial Information

The consolidated balance sheets of Quebecor Media as at December 31, 2009 and 2008 and the consolidated statements of
income, comprehensive income, shareholders equity and cash flows of Quebecor Media for the years ended December 31, 2009, 2008 and 2007, as well as the auditors report thereon, are presented at Item 17. Financial
Statements of this annual report (beginning on page F-1).

B - Legal Proceedings

From time to time, Quebecor Media is a party to various legal proceedings arising in the ordinary course of business.

Legal proceedings against certain of Quebecor Medias subsidiaries were initiated by another company in relation to printing contracts,
including the resiliation of printing contracts. As with any litigation subject to a judicial process, the outcome of such proceedings is impossible to determine with certainty. However, management believes that the suits are without merit and
intends to vigorously defend its position.



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In addition, a number of other legal proceedings against Quebecor Media and its
subsidiaries, or in which we are in demand, are currently pending. In the opinion of the management of Quebecor Media, the outcome of these proceedings is not expected to have a material adverse effect on Quebecor Medias results or on its
financial position.

C - Dividend Policy and Dividends

Dividend Policies and Payments

Our authorized share capital consists of (i) common shares, (ii) Cumulative First Preferred Shares, consisting of Series A Shares, Series B Shares, Series C Shares, Series D Shares, Series F
Shares and Series G Shares, and (iii) Preferred Shares, Series E. As of December 31, 2009, our issued and outstanding share capital was as follows:



| |  |  | 123,602,807 common shares outstanding, of which 67,636,713 were held by Quebecor and 55,966,094 were held by Capital CDPQ; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | 1,260,000 Cumulative First Preferred Shares, Series G, outstanding, all of which were held by 9101-0835 Quebec Inc.
| | - |  | -------------------------------------------------------------------------------------------------------------------

Holders of our common shares are entitled, subject to the rights of the holders of any Preferred Shares, to receive such dividends as our
Board of Directors shall determine in its discretion. In 2009, the Board of Directors of Quebecor Media declared and paid aggregate cash dividends on our common shares of $75.0 million. In 2008, the Board of Directors of Quebecor Media declared and
paid aggregate cash dividends on our common shares of $65.0 million. In 2007, the Board of Directors of Quebecor Media declared and paid aggregate cash dividends on our common shares of $110.0 million. We currently expect, to the extent permitted by
our Articles of Incorporation, the terms of our indebtedness and applicable law, to continue to pay dividends to our shareholders or reduce paid-up capital in the future.

Holders of our Series A Shares are entitled to receive fixed cumulative preferred dividends at a rate of 12.5% per share per annum. The dividends declared on the Series A Shares are payable
semi-annually on a cumulative basis on January 14 and July 14 of each year. No dividends may be paid on 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.

Holders of our Series B Shares are entitled to receive a cumulative cash dividend, when, as
and if declared by the Board of Directors. The dividend shall be payable only upon conversion of the Series B Shares into Common shares. Dividends are determined by the Board of Directors in accordance with our Articles of Incorporation.

Holders of our Series C Shares are entitled to receive fixed cumulative preferred dividends at a rate of 11.25% per share per annum.
The dividends declared on the Series C Shares are payable semi-annually on a cumulative basis on June 20 and December 20 of each year. 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.

Holders of our Series D Shares are
entitled to receive fixed cumulative preferred dividends at a rate of 11.0% per share per annum. The dividends declared on the Series D Shares are payable semi-annually on a cumulative basis on June 20 and December 20 of each year. 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.

Holders of our Series E Shares are entitled to receive a maximum non-cumulative preferred monthly dividend at a rate of 1.25% per
month, calculated on the redemption price of the Series E Shares when, as and if declared by the Board of Directors. 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.

Holders of our Series F Shares are entitled to receive fixed cumulative preferred dividends at a rate of
10.85% per annum per share. The dividends declared on the Series F Shares are payable semi-annually on a cumulative basis on January 14 and July 14 of each year. 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.



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Holders of our Series G Shares are entitled to receive fixed cumulative preferred dividends
at a rate of 10.85% per annum per share. The dividends declared on the Series G Shares are payable semi-annually on a cumulative basis on June 20 and December 20 of each year. 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.

D - Significant Changes

Except as otherwise disclosed in this
annual report (including under Item 5. Operating and Financial Review and Prospects  Subsequent Events), there has been no significant change in our financial position since December 31, 2009.

ITEM 9  THE OFFER AND LISTING

A - Offer and Listing Details

Not applicable.

B - Plan of Distribution

Not applicable.

C - Markets

Outstanding Notes

On October 5, 2007, we issued and sold US$700.0 million aggregate principal amount of our 73/4% Senior Notes due 2016 in a private placement exempt from the
registration requirements of the Securities Act. Our 73/4% Senior Notes due 2016 are unsecured and each are due March 15, 2016, with cash interest payable semi-annually in arrears on June 15 and December 15 of each year. In connection with the private placement of these
unregistered notes, we agreed to file an exchange offer registration statement with the SEC with respect to a registered offer to exchange without novation the unregistered notes for our new SEC-registered 73/4% Senior Notes due 2016 evidencing the same continuing indebtedness
and having substantially identical terms. We filed a registration statement on Form F-4 with the SEC on November 20, 2007 and completed the registered exchange offer on March 31, 2008. As a result of this exchange offer, we have US$700.0
million in aggregate principal amount of our 73/4%
Senior Notes due 2016 outstanding and registered under the Securities Act. These notes were issued under a different indenture than, and do not form a single series and are not fungible with, our 73/4% Senior Notes due 2016 which we issued in 2006, as described in the
next paragraph.

On January 17, 2006, we issued and sold US$525.0
million aggregate principal amount of our 73/4%
Senior Notes due 2016 in a private placement exempt from the registration requirements of the Securities Act. In connection with the issuance of these unregistered notes, we agreed to file an exchange offer registration statement with the SEC with
respect to a registered offer to exchange without novation the unregistered notes for our new SEC-registered 73/4% Senior Notes due 2016 evidencing the same continuing indebtedness and having substantially identical terms. We filed a registration statement on Form F-4 with the SEC on
May 8, 2006 and completed the registered exchange offer on July 14, 2006. As a result, we have US$525.0 million in aggregate principal amount of our 73/4% Senior Notes due 2016 outstanding and registered under the
Securities Act. Our 73/4% Senior Notes due 2016 are
unsecured and each are due March 15, 2016, with cash interest payable semi-annually in arrears on June 15 and December 15 of each year.

There is currently no established trading market for our Senior Notes. There can be no assurance as to the liquidity of
any market that may develop for our outstanding notes, the ability of the holders of any such notes to sell them or the prices at which any such sales may be made. We have not and do not presently intend to apply for a listing of our outstanding
notes on any exchange or automated dealer quotation system. The record holder of each of the respective issuances of our 73/4% Senior Notes due 2016 is Cede & Co., a nominee of The Depository Trust Company.

D - Selling Shareholders

Not applicable.



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E - Dilution

Not applicable.

F - Expenses of the Issuer

Not applicable.

ITEM 10  ADDITIONAL INFORMATION

A - Share Capital

In addition to our common shares, our authorized
share capital is comprised of (i) Cumulative First Preferred Shares, Series A, or Series A Shares; (ii) Cumulative First Preferred Shares, Series B, or Series B Shares; (iii) Cumulative First Preferred Shares, Series C, or Series C
Shares; (iv) Cumulative First Preferred Shares, Series D, or Series D Shares; (v) Preferred Shares, Series E, or Series E Shares; (vi) Cumulative First Preferred Shares, Series F, or Series F Shares; and (vii) Cumulative First
Preferred Shares, Series G, or Series G Shares.

As of December 31, 2009, there were no issued and outstanding Series A
Shares.

As of December 31, 2009, there were no issued and outstanding Series B Shares.

As of December 31, 2009, there were no issued and outstanding Series C Shares.

As of December 31, 2009, there were no issued and outstanding Series D Shares.

As of December 31, 2009, there were no issued and outstanding Series E Shares.

As of December 31, 2009, there were no issued and outstanding Series F Shares.

As of December 31, 2009, there were 1,260,000 of our Series G Shares issued and outstanding, all of which are held by 9101-0835 Quebec
Inc., one of our indirect wholly-owned subsidiaries. In 2009, in connection with various intra-group transactions, 190,000 Series G Shares were issued to 9101-0835 Quebec Inc., and 985,000 Series G Shares were redeemed. These Series G Shares have
been issued in connection with transactions that consolidate tax losses within the Quebecor Media group. The Series G Shares are non-voting shares. Holders of Series G Shares are entitled to a cumulative annual dividend of 10.85% per annum per
share. Holders may require us to redeem the Series G Shares at any time at a price of $1,000 per share plus any accumulated and unpaid dividends. 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.

B - Memorandum and Articles of Association

Our Articles of Incorporation and the various Articles of Amendment to our Articles of Incorporation are incorporated herein by reference to
our registration statement filed with the SEC on September 5, 2001 (Registration No. 333-13792). In addition, (a) the Articles of Amendment, dated as of February 3, 2003, to our Articles of Incorporation are included as Exhibit
1.2 to our annual report for the fiscal year ended December 31, 2002 which was filed with the SEC on March 31, 2003; (b) the Articles of Amendment, dated as of December 5, 2003, and the Articles of Amendment, dated as of
January 16, 2004, to our Articles of Incorporation are included as Exhibits 1.4 and 1.5, respectively, to our annual report for the fiscal year ended December 31, 2003, which was filed with the SEC on March 31, 2004; (c) the
Articles of Amendment, dated as of November 26, 2004, to our Articles of Incorporation are included as Exhibit 1.6 to our annual report for the fiscal year ended December 31, 2004, which was filed with the SEC on March 31, 2005;
(d) the Articles of Amendment, dated as of January 14, 2005, to our Articles of Incorporation are included as Exhibit 1.9 to our annual report for the fiscal year ended December 31, 2005, which was filed with the SEC on March 29,
2006; (e) the Articles of Amendment, dated as of January 12, 2007, to our Articles of Incorporation are included as Exhibit 1.11 to our annual report for the fiscal year ended December 31, 2006, which was filed with the SEC on
March 30, 2007; and (f) the Articles of Amendment, dated as of November 30, 2007, to our Articles of Incorporation are included as Exhibit 1.13 to our annual report for the fiscal year ended December 31, 2007, which was filed
with the SEC on March 27, 2008. In this description, we refer to our Articles of Incorporation, as amended, as the Articles. The following is a summary of certain provisions of our Articles and our bylaws.



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|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.                                                                                                                                                                                                                           |  | We were incorporated, in Canada, under Part IA of the Companies Act (Quebec) (the Companies Act) as 9093-9687 Quebec Inc. on August 8, 2000 under
registration number 1149501992. On August 18, 2000, a Certificate of Amendment was filed to change our name to Media Acquisition Inc. Our name was further changed to Quebecor Media 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.
|                                                                                                                                                                                                                            
|Neither the Articles nor our by-laws contain any provision with respect to (i) the retirement of directors under an age limit
requirement or (ii) the number of shares, if any, required for the qualification of directors.
|                                                                                                                                                                                                                             | 
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                             |  | (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.                                                                                                                                                                                                                                                                                                                                                                                       



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (e) |  | Redemption provisions: None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    
| |  | (f) |  | Sinking fund provisions: None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |    
| |  | (g) |  | Liability to capital calls by Quebecor Media: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of
or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to the Companies Act (Quebec) and as determined by the Board of Directors.
Our directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares.
| |  |    
| |  | (h) |  | Provisions discriminating against existing or prospective holders of common shares as a result of such holder owning a substantial number of shares:
None                                                                                                                                                                                                                                                                                                                                                                                              

For a description of the Consolidated and Amended Shareholders Agreement among the holders of our
common stock, see Item 7. Major Shareholders and Related Party Transactions  Major Shareholders in this annual report.

Cumulative First Preferred Shares

Our Board of Directors may issue
Cumulative First Preferred Shares at any time and from time to time in one or more series. Unless the Articles otherwise provide, the Cumulative First Preferred Shares of each series shall rank on parity with the Cumulative First Preferred Shares of
every other series with respect to priority in the payment of dividends, return of capital and in the distribution of our assets in the event of our liquidation or dissolution. Unless the Articles otherwise provide, the Cumulative First Preferred
Shares shall be entitled to priority over our common shares and any other class of our shares, with respect to priority in the payment of dividends, return of capital and in the distribution of our assets in the event of liquidation or dissolution.

As long as there are Cumulative First Preferred Shares outstanding, we shall not, unless consented to by the holders of the
Cumulative First Preferred Shares and upon compliance with the provisions of the Companies Act (Quebec), (a) create any other class of shares ranking pari passuor in priority to any outstanding series of the Cumulative First
Preferred Shares, (b) voluntarily liquidate or dissolve our company or execute any decrease of capital involving the distribution of assets on any other shares of our capital stock or (c) repeal, amend or otherwise alter any provisions of
the Articles relating to any series of the Cumulative First Preferred Shares.

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 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                                                                                                                                                                                                                                                                                                                                                                                                                                     



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |  | voluntarily or involuntarily, the holders of Series A Shares shall be entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series A
Share and any accumulated and unpaid dividends with respect thereto.                                                                                                                                                                                                                                                                                      
| |  |    
| |  | (e) |  | Redemption provisions: Holders of Series A Shares may require us to redeem the Series A preferred shares at any time at a price of $1,000 per share plus any accumulated and
unpaid dividends with respect thereto. In addition, we may, at our option, redeem the Series A Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto.                                                                                                                                                          
| |  |    
| |  | (f) |  | Sinking fund provisions: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |    
| |  | (g) |  | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise
dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to the Companies Act (Quebec) and as determined by the Board of Directors. The directors
may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares.
| |  |    
| |  | (h) |  | Provisions discriminating against existing or prospective holders of Series A Shares as a result of such holders owning a substantial number of shares:
None.                                                                                                                                                                                                                                                                                                                                                                              

Cumulative First Preferred Shares, Series B (Series B Shares)



| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | Dividend rights: The holders of record of the Series B Shares shall be entitled to receive a single cumulative 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.
| |  |    
| |  | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (g) |  | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise
dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to the Companies Act (Quebec) and as determined by the Board of Directors. The directors
may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares.
| |  |    
| |  | (h) |  | Provisions discriminating against existing or prospective holders of Series B Shares as a result of such holders owning a substantial number of shares:
None.                                                                                                                                                                                                                                                                                                                                                                              

Cumulative First Preferred Shares, Series C (Series C Shares)



| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | Dividend rights: The holders of record of the Series C Shares shall be entitled to receive in each fiscal year fixed cumulative preferred dividends at the rate of
11.25% per share per annum. No dividends may be paid on any shares ranking junior to the Series C Shares unless all dividends which shall have become payable on the Series C Shares have been paid or set aside for payment.                                                                                                                                                                                                                                          
| |  |    
| |  | (b) |  | Voting rights: Holders of Series C Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders unless we shall have
failed to pay certain dividends on the Series C Shares. In that event and only for so long as the dividend remains in arrears, the holders of Series C Shares shall be entitled to receive notice of, and to attend and vote at, all shareholders
meetings, except meetings at which only holders of another specified series or class of shares are entitled to vote. At each such meeting, each Series C Share shall entitle the holder thereof to one vote.
| |  |    
| |  | (c) |  | Rights to share in our profits: Except as provided in paragraph (a) above (the holders of Series C Shares are entitled to receive a 11.25% cumulative preferential
dividend) and paragraph (d) below (the holders of Series C Shares are entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series C Share and any accumulated and unpaid dividends with respect thereto
in the event of our liquidation, dissolution or reorganization), none.                                                                                                                                            
| |  |    
| |  | (d) |  | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of
winding-up our affairs, whether voluntarily or involuntarily, the holders of Series C Shares shall be entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series C Share and any accumulated and unpaid
dividends with respect thereto.                                                                                                                                                                           
| |  |    
| |  | (e) |  | Redemption provisions: Holders of Series C Shares may require us to redeem the Series C preferred shares at any time at a price of $1,000 per share plus any accumulated and
unpaid dividends with respect thereto. In addition, we may, at its option, redeem the Series C Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto.                                                                                                                                                                                                                                                         
| |  |    
| |  | (f) |  | Sinking fund provisions: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    
| |  | (g) |  | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise
dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to the Companies Act (Quebec) and as determined by the Board of Directors. The directors
may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares.                                                                                               
| |  |    
| |  | (h) |  | Provisions discriminating against existing or prospective holders of Series C Shares as a result of such holders owning a substantial number of shares:
None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Cumulative First Preferred Shares, Series D (Series D Shares)



| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | Dividend rights: The holders of record of the Series D Shares shall be entitled to receive in each fiscal year fixed cumulative preferred dividends at the rate of
11.0% per share per annum. No dividends may be paid on any shares ranking junior to the Series D Shares unless all dividends which shall have become payable on the Series D Shares have been paid or set aside for
payment.



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (b) |  | Voting rights: Holders of Series D Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders unless we shall have
failed to pay certain dividends on the Series D Shares. In that event and only for so long as the dividend remains in arrears, the holders of Series D Shares shall be entitled to receive notice of, and to attend and vote at, all shareholders
meetings, except meetings at which only holders of another specified series or class of shares are entitled to vote. At each such meeting, each Series D Share shall entitle the holder thereof to one vote.
| |  |    
| |  | (c) |  | Rights to share in our profits: Except as provided in paragraph (a) above (the holders of Series D Shares are entitled to receive a 11.0% cumulative preferential
dividend) and paragraph (d) below (the holders of Series D Shares are entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series D Share and any accumulated and unpaid dividends with respect thereto
in the event of our liquidation, dissolution or reorganization), none.                                                                                                                                             
| |  |    
| |  | (d) |  | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of
winding-up our affairs, whether voluntarily or involuntarily, the holders of Series D Shares shall be entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series D Share and any accumulated and unpaid
dividends with respect thereto.                                                                                                                                                                           
| |  |    
| |  | (e) |  | Redemption provisions: Holders of Series D Shares may require us to redeem the Series D preferred shares at any time at a price of $1,000 per share plus any accumulated and
unpaid dividends with respect thereto. In addition, we may, at its option, redeem the Series D Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto.                                                                                                                                                                                                                                                         
| |  |    
| |  | (f) |  | Sinking fund provisions: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    
| |  | (g) |  | Liability to capital calls by us: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of or otherwise
dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to the Companies Act (Quebec) and as determined by the Board of Directors. The directors
may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares.                                                                                               
| |  |    
| |  | (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.                                                                                                                                              



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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 F Shares shall be entitled to receive, in preference to the holders of common shares, an amount equal to $1,000 per Series F Share and any accumulated and unpaid
dividends with respect thereto.                                                                                        
| |  |    
| |  | (e) |  | Redemption provisions: Holders of Series F Shares may require us to redeem the Series F preferred shares at any time at a price of $1,000 per share plus any accumulated and
unpaid dividends with respect thereto. In addition, we may, at our option, redeem the Series F Shares at a price of $1,000 per share plus any accumulated and unpaid dividends with respect thereto.                                                                                                                                                                      
| |  |    
| |  | (f) |  | Sinking fund provisions: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |    
| |  | (g) |  | Liability to capital calls by Quebecor Media: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of
or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to the Companies Act (Quebec) and as determined by the Board of Directors.
The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares.
| |  |    
| |  | (h) |  | Provisions discriminating against existing or prospective holders of Series F Shares as a result of such holders owning a substantial number of shares:
None.                                                                                                                                                                                                                                                                                                                                                                                          

Cumulative First Preferred Shares, Series G (Series G Shares)



| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | Dividend rights: The holders of record of the Series G Shares shall be entitled to receive in each fiscal year fixed cumulative semi-annual dividends at the rate of
10.85% per share per annum. No dividends may be paid on any shares ranking junior to the Series G Shares unless all dividends which shall have become payable on the Series G Shares have been paid or set aside for payment.                                                                                                                                                                                                                                                  
| |  |    
| |  | (b) |  | Voting rights: Holders of Series G Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders unless we shall have
failed to pay eight semi-annual dividends on the Series G 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.                                                                                                                                                                                                                                                                   



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (f) |  | Sinking fund provisions: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |    
| |  | (g) |  | Liability to capital calls by Quebecor Media: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of
or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to the Companies Act (Quebec) and as determined by the Board of Directors.
The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares.
| |  |    
| |  | (h) |  | Provisions discriminating against existing or prospective holders of Series G Shares as a result of such holders owning a substantial number of shares:
None.                                                                                                                                                                                                                                                                                                                                                                                          

Preferred Shares

Preferred Shares, Series E (Series E Shares)



| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | Dividend rights: The holders of record of the Series E Shares shall be entitled to receive a maximum non-cumulative preferential monthly dividend at the rate of
1.25% per share per month, which dividend shall be calculated based on the redemption price (the amount equal to the aggregate consideration for such share). The Series E Shares rank senior to the common shares but junior to the Series A
Shares, Series B Shares, Series C Shares and Series D Shares.                                                                                                                                                                  
| |  |    
| |  | (b) |  | Voting rights: Holders of Series E Shares shall not, as such, be entitled to receive notice of, or attend or vote at, any meeting of our shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |    
| |  | (c) |  | Rights to share in our profits: Except as provided in paragraph (a) above (the holders of Series E Shares are entitled to receive a 1.25% maximum non-cumulative
preferential monthly dividend) and paragraph (d) below (the holders of Series E Shares are entitled to receive, in preference to the holders of common shares, but subsequent to the holders of Series A Shares, Series B Shares, Series C Shares
and Series D Shares, an amount equal to the redemption price of the Series E Shares and the amount of any declared but unpaid dividends on the Series E Shares referred to in paragraph (a) above), none.                  
| |  |    
| |  | (d) |  | Rights upon liquidation: In the event of our liquidation, dissolution or reorganization or any other distribution of our assets among our shareholders for the purpose of
winding-up our affairs, whether voluntarily or involuntarily, the holders of Series E Shares shall be entitled to receive, in preference to the holders of common shares, but subsequent to the holders of Series A Shares, Series B Shares, Series C
Shares and Series D Shares, an amount equal to the redemption price of the Series E Shares held and the amount of any declared but unpaid dividends on the Series E Shares referred to in paragraph (a) above.
| |  |    
| |  | (e) |  | Redemption provisions: Holders of Series E Shares may require us to redeem the Series E preferred shares at any time at a price equal to the redemption price plus an amount
equal to any dividends declared thereon but unpaid up to the date of redemption. The redemption price shall be equal to the aggregate consideration received for such share.                                                                                                                                                                                                                                                                                     
| |  |    
| |  | (f) |  | Sinking fund provisions: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |    
| |  | (g) |  | Liability to capital calls by Quebecor Media: Our by-laws provide that our directors may, from time to time, accept subscriptions, allot, issue, grant options in respect of
or otherwise dispose of the whole or any part of the unissued shares of our share capital on such terms and conditions, for such consideration not contrary to law or to the Companies Act (Quebec) and as determined by the Board of Directors.
The directors may, from time to time, make calls upon the shareholders in respect of any moneys unpaid upon their shares.                                                                                       
| |  |    
| |  | (h) |  | Provisions discriminating against existing or prospective holders of Series E Shares: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



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|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|4. |  | Actions necessary to change the rights of shareholders: For a description of the action necessary to change the rights of holders of our
Cumulative First Preferred Shares, see Section 3. Cumulative First Preferred Shares above. As regards our Preferred Shares, Series E, we will not, unless consented to by the holders of the Series E Shares and upon compliance with the
provisions of the Companies Act (Quebec), repeal, amend or otherwise alter any provisions of the Articles relating to the Series E Shares. Under the general provisions of the Companies Act (Quebec), (i) our Articles may be amended
by the affirmative vote of the holders of two-thirds (2/3) of the vote cast by the shareholders at a special meeting, and (ii) our by-laws may be amended by our directors and ratified by a majority of the vote cast by the shareholders at a meeting called for such
purpose.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | 
|5. |  | Shareholder meetings: Our by-laws provide that the annual meetings of the shareholders shall be held at such time, on such date and at such
place as the Board of Directors determines from time to time. Annual meetings of the shareholders may be called at any time by order of the Board of Directors, the chairman of the board, or, provided they are directors of our company, by the
president or any vice president. Special general meetings of the shareholders shall be held at such time, on such date and at such place as the Board of Directors determines from time to time. Special general meetings of the shareholders may be
called at any time by order of the Board of Directors, the chairman of the board, or, provided they are directors of our company, by the president or any vice president.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | 
|   |  | For any general meeting, our by-laws provide that a notice specifying the date, time and place of the meeting and the items to be discussed at the meeting must be sent
to each shareholder entitled to vote at that meeting (at the address indicated in our books) at least twenty-one (21) days before the date of such a meeting. If the convening of any meeting of shareholders is a matter of urgency, notice of a
meeting may be given not less than 48 hours before such meeting is to be held.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | 
|   |  | The Chairman of the Board or, in his absence, the President, if he is a director or, in his absence, one of the Vice Presidents who is a director of our company shall
preside at all meetings of shareholders. If all of the aforesaid officers are absent or decline to act, the persons present and entitled to vote may choose one of their number to act as chairman of the meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | 
|   |  | Our by-laws provide that the holders of not less than 50.1% of the outstanding shares of our share capital carrying rights to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum for any meeting of our shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | 
|6. |  | Limitations on right to own securities: There are regulations related to the ownership and control of Canadian broadcast undertakings as
described under Item 4  Information on the Company  Regulation. There is no other limitation imposed by Canadian law or by the Articles or other constituent documents on the right of nonresidents or foreign owners to hold or
vote shares, other than as provided in the Investment Act and the Radiocommunication Act. The Investment Act requires non-Canadian (as defined in the Investment Act) individuals, governments, corporations and other entities who wish to
acquire control of a Canadian business (as defined in the Investment Act) 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 Act, unless a specific exemption applies. The Investment Act 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 Act 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 Act. Radio licenses may be issued under
the Radiocommunication Act to radiocommunication service providers (Service Providers) that meet the eligibility criteria of Canadian ownership and control set forth in the Canadian Telecommunications Common Carrier Ownership
and Control Regulations (CTCCOCR). Under the CTCCOCR, the holding corporation of a Service Provider may refuse to accept any subscription for or register the transfer of any of its voting shares unless it receives a
declaration that such subscription or transfer would not result in the percentage of the total voting shares of the holding corporation of the Service Provider that are beneficially owned and controlled by non-Canadians exceeding 331/3%.
|   | 
|7. |  | Provisions that could have the effect of delaying, deferring or preventing a change of control: The Articles provide that none of our shares
may be transferred without the consent of the directors expressed in a resolution duly adopted by them.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



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|    |  |                                                                                                                                                                                                                                                                                                       |  | 
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|    |  | A register of transfers containing the date and particulars of all transfers of shares of our share capital shall be kept either at our head office or at another of our
offices or at such other place in the Province of Quebec as may be determined, from time to time, by the Board of Directors.
|    | 
|8.  |  | Not applicable.                                                                                                                                                                                                                                                                                      
|    | 
|9.  |  | Not applicable.                                                                                                                                                                                                                                                                                      
|    | 
|10. |  | Not applicable.                                                                                                                                                                                                                                                                                      

C -
Material Contracts

The following is a summary of each material contract, other than contracts entered into in the
ordinary course of business, to which we or any of our subsidiaries is a party, for the two years preceding publication of this annual report.



| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | Indenture relating to US$700,000,000 of our 73/4% Senior Notes due March 15, 2016, dated as of October 5, 2007, by and between Quebecor Media, and U.S. Bank National Association, as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |    
| |  |     |  | On October 5, 2007, we issued US$700,000,000 aggregate principal amount of our 73/4% Senior Notes due March 15, 2016 pursuant to an Indenture,
dated as of October 5, 2007, by and between Quebecor Media and U.S. Bank National Association, as trustee. These notes are unsecured and are due on March 15, 2016. Interest on these notes is payable semi-annually in arrears on June 15
and December 15 of each year, beginning on December 15, 2007. These notes are not guaranteed by our subsidiaries. These notes are redeemable, at our option, under certain circumstances and at the redemption prices set forth in these
indentures. These indentures contain customary restrictive covenants with respect to Quebecor Media and certain of its subsidiaries and customary events of default. If an event of default occurs and is continuing, other than our bankruptcy or
insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to be due and payable immediately. These notes were issued under a different indenture from, and do not
form a single series and are not fungible with, our 73/4% Senior Notes due 2016 which we issued in 2006, as described in the paragraph (b) below.
| |  |    
| |  | (b) |  | Indenture relating to US$525,000,000 of our 73/4% Senior Notes due March 15, 2016, dated as of January 17, 2006, by and between Quebecor Media, and U.S. Bank National Association, as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    
| |  |     |  | On January 17, 2006, we issued US$525,000,000 aggregate principal amount of our 73/4% Senior Notes due March 15, 2016 pursuant to an Indenture,
dated as of January 17, 2006, by and between Quebecor Media and U.S. Bank National Association, as trustee. These notes are unsecured and are due on March 15, 2016. Interest on these notes is payable semi-annually in arrears on
June 15 and December 15 of each year, beginning on June 15, 2006. These notes are not guaranteed by our subsidiaries. These notes are redeemable, at our option, under certain circumstances and at the redemption prices set forth in
these indentures. These indentures contain customary restrictive covenants with respect to Quebecor Media and certain of its subsidiaries and customary events of default. If an event of default occurs and is continuing, other than our bankruptcy or
insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to be due and payable immediately. These notes were issued under a different indenture from, and do not
form a single series and are not fungible with, our 73/4% Senior Notes due 2016 which we issued in 2007, as described in the previous paragraph.   
| |  |    
| |  | (c) |  | Credit Agreement, dated as of January 17, 2006 by and among Quebecor Media, as Borrower, the financial institutions party thereto from time to time, as Lenders, and Bank of
America, N.A., as Administrative Agent, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |    
| |  |     |  | 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 with an initial maturity date of January 2011, (ii) a 5-year $125.0 million term loan A that matures in January 2011, and (iii) a 7-year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |  | US$350.0 million term loan B facility that matures in January 2013. On January 14, 2010, we entered into a First Amendment Agreement to our credit agreement pursuant to
which, amongst other things, the maturity date of the revolving credit facility was extended to January 3, 2013 and various other definitions and covenants were amended. 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 on January 3, 2013. Borrowings under our term loan A facility are repayable in full in January 2011
and borrowing under our term loan B facility are repayable in full in January 2013. We are also required to make specified quarterly repayments of amounts borrowed under the term loan A and term loan B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |    
| |  |     |  | Borrowings under the Senior Secured Credit Facilities and under eligible derivative instruments are secured by a first-ranking hypothec and security agreement (subject to certain
permitted encumbrances) on all of our movable property and first-ranking pledges of all of the shares (subject to certain permitted encumbrances) of Sun Media and Videotron.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |    
| |  |     |  | The Senior Secured Credit Facilities contain customary covenants that restrict and limit our ability to, among other things, enter into merger or amalgamation transactions, grant
encumbrances, sell assets, pay dividends or make other distributions, issue shares of capital stock, incur indebtedness and enter into related party transactions. In addition, the Senior Secured Credit Facilities contain customary financial
covenants. The Senior Secured Credit Facilities contain customary events of default including the non-payment of principal or interest, the breach of any financial covenant, the failure to perform or observe any other covenant, certain bankruptcy
events relating to Quebecor Media and its subsidiaries, and the occurrence of a change of control.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |    
| |  | (d) |  | Indenture relating to US$650,000,000 of Videotrons 67/8% Senior Notes due January 15, 2014, dated as of October 8, 2003, by and among Videotron, the guarantors party thereto and Wells Fargo Bank Minnesota, N.A.
(now Wells Fargo Bank, National Association) as trustee, as supplemented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |    
| |  |     |  | On October 8, 2003, Videotron issued US$335.0 million aggregate principal amount of 67/8% Senior Notes due January 15, 2014 and, on November 19,
2004, Videotron issued an additional US$315.0 million aggregate principal amount of these notes, pursuant to an Indenture, dated as of October 8, 2003, by and among Videotron, the guarantors party thereto and Wells Fargo Bank Minnesota, N.A.
(now Wells Fargo Bank, National Association), as trustee. These notes are unsecured and are due January 15, 2014. Interest on these notes is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on
July 15, 2004. These notes are guaranteed on a senior unsecured basis by most, but not all, of Videotrons subsidiaries. The notes are redeemable, at Videotrons option, under certain circumstances and at the redemption prices set
forth in the indenture. The indenture contains customary restrictive covenants with respect to Videotron and certain of its subsidiaries and customary events of default. If an event of default occurs and is continuing (other than Videotrons
bankruptcy or insolvency) the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to be due and payable immediately.



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (e) |  | Indenture relating to US$175,000,000 of Videotrons 63/8% Senior Notes due December 15, 2015, dated as of September 16, 2005, by and among Videotron, the guarantors party thereto, and Wells Fargo Bank, National
Association, as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |    
| |  |     |  | On September 16, 2005, Videotron issued US$175,000,000 aggregate principal amount of its 63/8Senior Notes due December 15, 2015, pursuant to an Indenture,
dated as of September 16, 2005, by and among Videotron, the guarantors party thereto, and Wells Fargo, National Association, as trustee. These notes are unsecured and are due on December 15, 2015. Interest on these notes is payable
semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2005. These notes are guaranteed on a senior unsecured basis by most, but not all, of Videotrons subsidiaries. These notes are
redeemable, at Videotrons option, under certain circumstances and at the redemption prices set forth in the indenture. The indenture contains customary restrictive covenants with respect to Videotron and certain of its subsidiaries, and
customary events of default. If an event of default occurs and is continuing, other than Videotrons bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare
all the notes to be due and payable immediately.                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |    
| |  | (f) |  | Indenture relating to US$715,000,000 of Videotrons 91/8% Senior Notes due April 15, 2018, dated as of April 15, 2008, as supplemented, by and among Videotron, the guarantors party thereto, and Wells Fargo Bank,
National Association, as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    
| |  |     |  | On April 15, 2008, Videotron issued US$455,000,000 aggregate principal amount of its 91/8% Senior Notes due April 15, 2018, in each case pursuant to an
Indenture, dated as of April 15, 2018, by and among Videotron, the guarantors party thereto, and Wells Fargo Bank, National Association, as trustee. These notes are unsecured and are due on April 15, 2018. Interest on these notes is
payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2008. These notes are guaranteed on a senior unsecured basis by most, but not all, of Videotrons subsidiaries. These notes are
redeemable, at Videotrons option, under certain circumstances and at the redemption prices set forth in the indenture. The indenture contains customary restrictive covenants with respect to Videotron and certain of its subsidiaries, and
customary events of default. If an event of default occurs and is continuing, other than Videotrons bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare
all the notes to be due and payable immediately. On March 5, 2009, Videotron issued an additional US$260.0 million aggregate principal amount of its 91/8% Senior Notes due 2018 for net proceeds of $332.4 million
(including accrued interest and net of financing expenses). These notes form part of a single series with Videotrons existing 91/8% Senior Notes due 2018 that were issued in 2008, were issued under the same indenture and have the same terms as these existing notes.
| |  |    
| |  | (g) |  | Indenture relating to Cdn$300,000,000 of Videotrons 71/8% Senior Notes due January 15, 2020, dated as of January 13, 2010, by and among Videotron, the guarantors party thereto, and Computershare Trust
Company of Canada, as trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |    
| |  |     |  | On January 13, 2010, Videotron issued Cdn$300,000,000 aggregate principal amount of its 71/8% Senior Notes due January 15, 2020, pursuant to an Indenture,
dated as of January 13, 2010, by and among Videotron, the guarantors party thereto, and Computershare Trust Company of Canada, as trustee. These notes are unsecured and are due on January 15, 2020. Interest on these notes is payable
semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2010. These notes are guaranteed on a senior unsecured basis by most, but not all, of Videotrons subsidiaries. These notes are redeemable,
at Videotrons option, under certain circumstances and at the redemption prices set forth in the indenture. The indenture contains customary restrictive covenants with respect to Videotron and certain of its subsidiaries, and customary events
of default. If an event of default occurs and is continuing, other than Videotrons bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount at maturity of the then-outstanding notes may declare all the notes to
be due and payable immediately.                                                                                                                                                                                                                                                                                                                                                                                                                                                   



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |    
| |  | (h) |  | Credit Agreement dated as of November 28, 2000, as amended up to a Tenth Amending Agreement dated as of November 13, 2009, by and among Videotron, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |    
| |  |     |  | The $650.0 million senior secured credit facilities of Videotron provide for a $575.0 million secured revolving credit facility that matures in April 2012 and a $75.0 million
secured export financing facility providing for a term loan that matures in June 2018. The proceeds of the revolving credit facility can be used for general corporate purposes including, without limitation, to pay dividends to Quebecor Media subject
to certain conditions. The proceeds of the term loan may be used for payments and/or reimbursement of payments of export equipment and local services in relation to contracts for wireless infrastructure equipment between Videotron and an affiliate
of Nokia Corporation and also for the financing of the Finnvera guarantee fee (Finnvera plc being a specialised financing company owned by the State of Finland which is providing an export buyer credit guarantee in favour of the lenders under
the export financing facility covering political and commercial risks).
| |  |    
| |  |     |  | Advances under the revolving credit facility bear interest at the Canadian prime rate, the bankers acceptance rate or the London Interbank Offered Rate (LIBOR) plus, in each
instance, an applicable margin. Advances under the export financing facility bear interest at the bankers acceptance rate (CDOR Rate) plus a margin.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |    
| |  |     |  | The revolving credit facility will be repayable in full in April 2012. Drawdowns under the export financing facility are repayable by way of seventeen equal and consecutive
semi-annual payments starting on June 15, 2010. Subject to certain exceptions and the exemption of the first $50.0 million received, Videotron is required to apply 100% of the net cash proceeds of asset sales or transfers to repay borrowings
under the senior secured credit facilities (pro rata as between the revolving credit facility and the export financing facility), unless Videotron reinvests these proceeds within specified periods and for specific purposes. Subject to the
exemption of the first $50.0 million received, Videotron is also required to apply proceeds from insurance settlements received in excess of $50.0 million in the aggregate to repay borrowings under the senior secured credit facilities (pro
rata as between the revolving credit facility and the export financing facility).            
| |  |    
| |  |     |  | Borrowings under the senior secured credit facilities and under eligible derivative instruments are secured by a first-ranking hypothec or security interest (subject to certain
permitted encumbrances) on all of Videotrons current and future assets, as well as those of the guarantors party thereto, including most but not all of Videotrons subsidiaries (the Videotron Group), guarantees of all
the members of the Videotron Group, pledges of the shares of Videotron and the members of the Videotron Group, and other security.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |    
| |  |     |  | The senior secured credit facilities contain customary covenants that restrict and limit the ability of Videotron and the members of the Videotron Group to, among other things,
enter into merger or amalgamation transactions, grant encumbrances, sell assets, pay dividends or make other distributions, issue shares of capital stock, incur indebtedness and enter into related party transactions. In addition, the senior secured
credit facilities contain customary financial covenants and customary events of default including the non-payment of principal or interest, the breach of any financial covenant, the failure to perform or observe any other covenant, certain
bankruptcy events relating to us and the members of the Videotron Group, and the occurrence of a change of control.                                                                                                                                                                                                              
| |  |    
| |  | (i) |  | Indenture relating to US$205,000,000 of Sun Medias 75/8% Senior Notes due February 15, 2013, dated as of February 7, 2003 by and among Sun Media, the guarantors party thereto, and National City Bank, as trustee,
as supplemented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |    
| |  |     |  | On February 7, 2003 Sun Media issued US$205.0 million aggregate principal amount of its 75/8% 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |  | 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.                                                                                                                                                
| |  |    
| |  | (j) |  | Credit Agreement, dated as of February 7, 2003, by and among Sun Media, the guarantors party thereto, Banc of America Securities LLC, Credit Suisse First Boston Canada, the
lenders party thereto, and Bank of America, N.A., as Administrative Agent, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |    
| |  |     |  | On February 7, 2003, as part of the refinancing of its indebtedness, Sun Media entered into a secured credit facility consisting of a five-year revolving credit facility of
$75.0 million and a six-year US$230.0 million term loan B. In connection with Quebecor Medias 2006 refinancing, Sun Medias credit facility was amended for the addition of a $40.0 million term loan C in January 2006. On October 31,
2007, Sun Media repaid in full and terminated its term loan B. In addition, on October 31, 2007, Sun Media entered into a Fifth Amending Agreement to its credit agreement. The amendment reduces the revolving credit facility from $75.0 million
to $70.0 million, extends the term of the credit facilities to October 31, 2012, and modifies certain definitions and covenants related to leverage and interest coverage ratios, while removing the fixed charge ratio.
| |  |    
| |  |     |  | Borrowings under the revolving credit facility and the term loan C are repayable in full in October 2012. Sun Media is also required to make specified quarterly repayments of
amounts borrowed under the term loan C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |    
| |  |     |  | Borrowings under the revolving credit facility and the term loan C facility are in Canadian dollars and bear interest at the Canadian prime rate or the bankers acceptance rate
plus an applicable margin. The proceeds of the term loan C were used to refinance existing debt and for permitted distributions to Sun Medias shareholder. The proceeds of Sun Medias revolving facility may be used for general corporate
purposes including distributions to Sun Medias shareholder in certain circumstances.                                                                                                                                                                                                                                                                                                                                                                              
| |  |    
| |  |     |  | Borrowings under this amended and restated credit facility and under eligible derivative instruments are secured by a first-ranking hypothec and security agreement (subject to
certain permitted encumbrances) on all of Sun Medias current and future assets, as well as those of the guarantors party thereto, if any (the Sun Media Group), guarantees of all the members of the Sun Media Group, pledges of
shares of the members of the Sun Media Group, and other security.                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    
| |  |     |  | This credit facility contains customary covenants that restrict and limit the ability of Sun Media and its subsidiaries, if any, to, among other things, enter into merger or
amalgamation transactions, grant encumbrances, sell assets, pay dividends or make other distributions, issue shares of capital stock, incur indebtedness and enter into related party transactions. In addition, this credit facility contains customary
financial covenants. This credit facility also contains customary events of default including the non-payment of principal or interest, the breach of any financial covenant, the failure to perform or observe any other covenant, certain bankruptcy
events relating to Sun Media and members of the Sun Media Group, and the occurrence of a change of control.                                                                                        
| |  |    
| |  | (k) |  | Share Purchase Agreement dated December 22, 2003 between Carlyle VTL Holdings, L.P. and Carlyle Partners III (Videotron), L.P., and Quebecor Media and 9101-0827 Quebec Inc.
relating to the purchase by 9101-0827 Quebec Inc. of 5,000 Class C Preferred Shares of 3662527 Canada Inc., as amended by a First Amendment to Share Purchase Agreement dated as of December 31, 2004, and by an Assignment and Assumption Agreement
dated as of June 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |    
| |  |     |  | On December 22, 2003, 9101-0827 Quebec Inc., a wholly owned subsidiary of Quebecor Media entered into an agreement with Carlyle VTL Holdings, L.P. and Carlyle Partners III
(Videotron), L.P. (collectively Carlyle) to purchase the 5,000 Class C Preferred Shares held by Carlyle in 3662527                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



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| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |  | Canada Inc., the parent company of Videotron Télécom Ltd., Quebecor Medias business telecommunications venture. The acquisition was made for a purchase price
with a value estimated at approximately $125 million at closing. A payment of $55 million was made to Carlyle at closing on December 22, 2003. The balance of the purchase price was subject to variation on the basis of the valuation of the
common shares of Quebecor Media and was payable on demand at any time after December 15, 2004, but no later than December 15, 2008. Quebecor Media held an option to pay this additional amount in cash, at its fair value for a period of 30
days following each of June 15, 2007 and June 15, 2008. At the date of the transaction, both parties had agreed that the initial value of the additional amount payable was $70.0 million ($122.0 million as at December 31, 2006), and on
July 23, 2007, Quebecor Media exercised its option to pay in full the additional amount payable to The Carlyle Group for total cash consideration of $127.2 million.
| |  |    
| |  | (l) |  | Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, by and among 4411986 Canada Inc., Osprey Media Income Fund, Osprey Media LP and Osprey Media
Income Fund, as borrowers, the financial institutions party thereto from time to time, as lenders, and The Bank of Nova Scotia, as administrative agent, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    
| |  |     |  | On September 28, 2007, 4411986 Canada Inc., Osprey Media LP and Osprey Media Income Fund entered into a fourth amended and restated secured credit facility consisting of a
39-month revolving credit facility of $65.0 million and a 39-month $133.3 million term facility. Borrowings under the revolving credit facility and the term facility are repayable in full in January 2011. Pursuant to a corporate reorganization
following the acquisition of Osprey Media, 4411986 Canada Inc., Osprey Media L.P., Osprey Media and other subsidiaries of 4411986 Canada Inc. entered into, inter alia, a first amendment dated as of January 1, 2008, a second amendment
dated as of August 31, 2008 and an assumption and confirmation agreement dated as of December 28, 2008 to evidence such corporate reorganization.                                                                                                                                                                                                                                                
| |  |    
| |  |     |  | Borrowings under the revolving credit facility and the term facility are in Canadian dollars and bear interest at the Canadian prime rate or the bankers acceptance rate plus
an applicable margin. The proceeds of the term facility were used to refinance existing debt. The proceeds of Osprey Medias revolving facility may be used for general corporate purposes including acquisitions, capital expenditures and
distributions to Osprey Medias shareholder (subject in each case to certain restrictions).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |    
| |  |     |  | Borrowings under this Fourth Amended and Restated Credit Agreement and under eligible derivative instruments are secured by a first-ranking hypothec and security agreement (subject
to certain permitted encumbrances) on all of Osprey Medias current and future assets, as well as those of its subsidiaries (the Osprey Media Group) and other security.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    
| |  |     |  | This credit facility contains customary covenants that restrict and limit the ability of Osprey Media and its subsidiaries to, among other things, enter into merger or amalgamation
transactions, grant encumbrances, sell assets, pay dividends or make other distributions, issue shares of capital stock, incur indebtedness and enter into related party transactions. In addition, this credit facility contains customary financial
covenants. This credit facility also contains customary events of default including the non-payment of principal or interest, the breach of any financial covenant, the failure to perform or observe any other covenant, and certain bankruptcy events
relating to Osprey Media and members of the Osprey Media Group.                                                                                                                                                                                                                                                                                                         

D - Exchange Controls

There are currently no laws, decrees, regulations or other legislation in Canada that restrict the export or import of capital, or affect
the remittance of dividends, interest or other payments to non-resident holders of the Companys securities, other than withholding tax requirements. Canada has no system of exchange controls.

There is no limitation imposed by Canadian law or by the Articles of Incorporation or other charter documents of the Company on the right of
a non-resident to hold voting shares of the Company, other than as provided by the Investment Canada Act, as amended (the Investment Act), as amended by the North American Free Trade Agreement Implementation Act(Canada), and the World Trade Organization (WTO) Agreement Implementation Act. The Investment



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Act requires notification and, in certain cases, advance review and approval by the Government of Canada of the acquisition by a non-Canadian of control of a Canadian
business, all as defined in the Investment Act. Generally, the threshold for review will be higher in monetary terms for a member of the WTO or NAFTA.

In addition, there are regulations related to the ownership and control of Canadian broadcast undertakings. See Item 4  Information on the Company  Regulation.

E - Taxation

Certain U.S. Federal Income Tax Considerations

The following discussion is a summary of
certain U.S. federal income tax consequences applicable to the purchase, ownership and disposition of our 73/4% Senior Notes due 2016 issued on January 17, 2006 (the 2006 notes) and our 73/4% Senior Notes due 2016 issued on October 5, 2007 (the
2007 OID notes) (collectively, the notes) by a U.S. Holder (as defined below), but does not purport to be a complete analysis of all potential U.S. federal income tax effects. This summary is based on the
Internal Revenue Code of 1986, as amended (the Code), U.S. Treasury regulations promulgated thereunder, Internal Revenue Service (IRS) rulings and judicial decisions now in effect. All of these are subject to
change, possibly with retroactive effect, or different interpretations.

This summary does not address all
aspects of U.S. federal income taxation that may be relevant to particular U.S. Holders in light of their specific circumstances (for example, U.S. Holders subject to the alternative minimum tax provisions of the Code) or to holders that may be
subject to special rules under U.S. federal income tax law, including:



| |  |  | dealers in stocks, securities or currencies;
| | - |  | --------------------------------------------



| |  |  | securities traders that use a mark-to-market accounting method;
| | - |  | ---------------------------------------------------------------



| |  |  | banks and financial institutions;
| | - |  | ---------------------------------



| |  |  | insurance companies;
| | - |  | --------------------



| |  |  | regulated investment companies;
| | - |  | -------------------------------



| |  |  | real estate investment trusts;
| | - |  | ------------------------------



| |  |  | tax-exempt organizations;
| | - |  | -------------------------



| |  |  | persons holding notes as part of a hedging or conversion transaction or a straddle;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | persons deemed to sell notes under the constructive sale provisions of the Code;
| | - |  | --------------------------------------------------------------------------------



| |  |  | persons who or that are, or may become, subject to the expatriation provisions of the Code;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | persons whose functional currency is not the U.S. dollar; and
| | - |  | -------------------------------------------------------------



| |  |  | direct, indirect or constructive owners of 10% or more of our outstanding voting shares.
| | - |  | ----------------------------------------------------------------------------------------

The summary also does not discuss any aspect of state, local or foreign law, or U.S. federal estate and gift tax law as applicable to U.S.
Holders. Moreover, the discussion is limited to U.S. Holders who acquire and hold the notes as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). In addition, this summary
assumes that the notes are properly characterized as debt that is not contingent debt for U.S. federal income tax purposes.

For purposes of this summary, U.S. Holder means the beneficial holder of a note who or that for U.S. federal income tax purposes is:



| |  |  | an individual citizen or resident alien of the United States;
| | - |  | -------------------------------------------------------------



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| |  |  | a corporation or other entity treated as such formed in or under the laws of the United States, any state thereof or the District of Columbia;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | a trust, if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more U.S.
persons (within the meaning of the Code) have the authority to control all substantial decisions of the trust, or if a valid election is in effect to be treated as a U.S. person.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have not sought and will not seek any rulings from the IRS with respect to the matters discussed below. There can be no assurance that
the IRS will not take a different position concerning the tax consequences of the purchase, ownership or disposition of the notes or that any such position will not be sustained.

If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds the notes, the U.S.
federal income tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. Such partner should consult its own tax advisor as to the tax consequences of the partnership purchasing, owning and
disposing of the notes.

To ensure compliance with requirements imposed by the IRS, we inform you that the U.S. tax advice
contained herein: (i) is written in connection with the promotion or marketing by Quebecor Media 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 U.S. tax penalties. Each taxpayer should seek advice based on the taxpayers particular circumstances from an independent tax advisor.

PROSPECTIVE U.S. INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE TAX CONSEQUENCES DESCRIBED BELOW TO THEIR PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY
STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, INCLUDING GIFT AND ESTATE TAX LAWS.

Interest on the Notes

Interest on the 2006 notes

Payments of stated interest on the 2006 notes generally will be taxable to a U.S. Holder as ordinary income at the time that such payments are received or accrued, in accordance with the U.S.
Holders method of accounting for U.S. federal income tax purposes.

Interest on the 2007 OID notes

The 2007 OID notes are treated as issued with original issue discount (OID) in an amount equal to the difference between
their stated redemption price at maturity (the sum of all payments to be made on the notes other than qualified stated interest) and their issue price (generally the first price at which a substantial amount of the 2007 OID
notes were sold to the public for cash). A U.S. Holder generally must include OID in gross income in advance of the receipt of cash attributable to that income, regardless of the U.S. Holders regular method of accounting for U.S. federal
income tax purposes.

The term qualified stated interest generally means stated interest that is unconditionally
payable in cash or in property (other than debt instruments of the issuer) at least annually at a single fixed rate. Payments of qualified stated interest on a 2007 OID note will be includible in the gross income of a U.S. Holder as ordinary
interest income at the time the interest is received or accrued, depending on the U.S. Holders method of accounting for U.S. tax purposes.

The amount of OID that a U.S. Holder must include in income with respect to a 2007 OID note will generally equal the sum of the daily portions of OID with respect to the 2007 OID note for each
day during the taxable year or portion of the taxable year on which the U.S. Holder held such note (accrued OID). The daily portion is determined by



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allocating to each day in any accrual period a pro rata portion of the OID allocable to that accrual period. An accrual period for a note may be of any length and may vary
in length over the term of the 2007 OID note, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on the first day or the final day of an accrual period. The amount of OID allocable
to any accrual period is an amount equal to the difference between (i) the product of the 2007 OID notes adjusted issue price at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the
close of each accrual period and properly adjusted for the length of the accrual period) and (ii) the amount of any qualified stated interest allocable to the accrual period. Under these rules, a U.S. Holder will generally have to include in
income increasingly greater amounts of OID in successive accrual periods.

OID allocable to a final accrual period is the
difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. The adjusted issue price of a 2007 OID note at the beginning
of any accrual period is equal to its issue price increased by the accrued OID for each prior accrual period and reduced by any payments received on the notes that were not payments of qualified stated interest.

Instead of reporting under a U.S. Holders normal method of accounting, a U.S. Holder may elect to include in gross income all interest
that accrues on a debt security by using the constant yield method applicable to OID, subject to OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition
premium.

U.S. Holders may obtain information regarding the amount of OID, the issue price, the issue date and the yield to
maturity by contacting Quebecor Media, 612 St-Jacques Street, Montreal, Quebec, Canada H3C 4M8, Attention: Vice President, Legal Affairs (telephone: (514) 380-1999).

The rules regarding OID are complex. U.S. Holders of 2007 OID notes are urged to consult their own tax advisors regarding the application of these rules to their particular situation.

Market Discount, Acquisition Premium, and Bond Premium

If a U.S. Holder purchases notes for an amount less than their stated redemption price at maturity in the case of 2006 notes, or their
revised issue price in the case of 2007 OID notes (which generally should be equal to the sum of the issue price of the 2007 OID notes and all OID includible in income by all holders prior to such Holders acquisition of the 2007 OID notes
(without regard to reduction of OID for acquisition premium), and less any cash payments on the 2007 OID notes other than qualified stated interest), this difference is treated as market discount. Subject to a de minimis exception, gain
realized on the maturity, sale, exchange or retirement of a market discount note will be treated as ordinary income to the extent of any accrued market discount not previously recognized (including, in the case of a note exchanged for a registered
note pursuant to the registration offer, any market discount accrued on the related outstanding note). A U.S. Holder may elect to include market discount in income currently as it accrues, on either a ratable or constant yield method. In that case,
such U.S. Holders tax basis in the notes will increase by such income inclusions. An election to include market discount in income currently, once made, will apply to all market discount obligations acquired by the U.S. Holder during the
taxable year of the election and thereafter, and may not be revoked without the consent of the IRS. If a U.S. Holder does not make such an election, in general, all or a portion of the interest expense on any indebtedness incurred or continued in
order to purchase or carry notes may be deferred until the maturity of the notes, or certain earlier dispositions. Unless a U.S. Holder elects to accrue market discount under a constant yield method, any market discount will accrue ratably during
the period from the date of acquisition of the related note to its maturity date.

In the case of 2007 OID notes, if a U.S.
Holder purchases notes for an amount greater than their adjusted issue price but less than or equal to the sum of all amounts (other than qualified stated interest) payable with respect to the notes after the date of acquisition, such U.S. Holder
will have purchased the 2007 OID notes with acquisition premium. Under the acquisition premium rules, the amount of OID which must be included in gross income for the 2007 OID notes for any taxable year, or any portion of a taxable year in which the
2007 OID notes are held, generally will be reduced (but not below zero) by the portion of the acquisition premium allocated to the period.

If a U.S. Holder purchases notes for an amount greater than the sum of all amounts (other than qualified stated interest) payable with respect to the notes after the date of acquisition, the U.S. Holder
is treated as having purchased the related notes with amortizable bond premium. A U.S. Holder generally will not be required to include OID in income and



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may elect to amortize the premium from the purchase date to the maturity date of the notes under a constant yield method. Amortizable premium generally may be deducted against interest income on
such notes and generally may not be deducted against other income. A U.S. Holders basis in a note will be reduced by any premium amortization deductions. An election to amortize premium on a constant yield method, once made, generally applies
to all debt obligations held or subsequently acquired by such U.S. Holder during the taxable year of the election and thereafter, and may not be revoked without IRS consent.

The market discount, acquisition premium, and bond premium rules are complicated, and U.S. Holders are urged to consult their own tax
advisors regarding the tax consequences of owning and disposing of notes with market discount, acquisition premium, or bond premium, including the availability of certain elections.

Other

Interest on the notes will constitute income from sources outside the United States and generally, with certain exceptions, will be passive category income, which is treated separately from other income for purposes of computing
the foreign tax credit allowable to a U.S. Holder under the federal income tax laws. Due to the complexity of the foreign tax credit rules, U.S. Holders should consult their own tax advisors with respect to the amount of foreign taxes that may be
claimed as a credit.

In certain circumstances we may be obligated to pay amounts in excess of stated interest or principal on
the notes or may make payments or redeem the notes in advance of the expected maturity of the notes. According to U.S. Treasury regulations, the possibility that any such payments or redemptions will be made will not affect the amount of interest
income a U.S. Holder recognizes if there is only a remote chance as of the date the notes were issued that such payments will be made. We believe the likelihood that we will make any such payments is remote. Therefore, we do not intend to treat the
potential payments or redemptions pursuant to the provisions related to changes in Canadian laws or regulations applicable to tax-related withholdings or deductions, any registration rights provisions, or the other redemption and repurchase
provisions as part of the yield to maturity of the notes or as affecting the tax treatment of the notes. Our determination that these contingencies are remote is binding on a U.S. Holder unless such holder discloses its contrary position in the
manner required by applicable U.S. Treasury regulations. Our determination is not, however, binding on the IRS, and if the IRS were to challenge this determination, a U.S. Holder may be required to accrue income on its notes in excess of interest
that would otherwise accrue and to treat as ordinary income rather than capital gain any income realized on the taxable disposition of a note before the resolution of the contingencies. In the event a contingency occurs, it would affect the amount
and timing of the income recognized by a U.S. Holder. If we pay additional amounts on the notes, U.S. Holders will be required to recognize such amounts as income.

Sale, Exchange or Retirement of a Note

A U.S. Holder generally will
recognize gain or loss upon the sale, exchange (other than pursuant to a tax-free transaction), redemption, retirement or other taxable disposition of a note, equal to the difference, if any, between:



| |  |  | the amount of cash and the fair market value of any property received (less any portion allocable to the payment of accrued interest or, in the case of
2007 OID notes, OID not previously included in income, which amount will be taxable as ordinary interest income); and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the U.S. Holders adjusted tax basis in the note.
| | - |  | -------------------------------------------------

Any such gain or loss generally will be capital gain or loss (except as described under  Market Discount, Acquisition Premium, and Bond Premium above) and generally will be long-term
capital gain or loss if the note has been held or deemed held for more than one year at the time of the disposition. Long-term capital gains of noncorporate U.S. Holders, including individuals, may be taxed at lower rates than items of ordinary
income. The ability of a U.S. Holder to offset capital losses against ordinary income is limited. Any capital gain or loss recognized by a U.S. Holder on the sale or other disposition of a note generally will be treated as income from sources within
the United States or loss allocable to income from sources within the United States. U.S. Holders should consult their own tax advisors regarding the source of gain attributable to market discount. A U.S. Holders adjusted tax basis in a note
generally will equal the U.S. Holders cost therefor, increased by any market discount previously included in income and, in the case of the 2007 OID notes, by any OID previously included in income, and reduced by any payments (other than
payments constituting qualified stated interest) received on the notes, any amount treated as a return of pre-issuance accrued interest excluded from income, and the amount of amortized bond premium, if any, previously taken into account with
respect to the note.



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Information Reporting and Backup Withholding

In general, information reporting requirements may apply to payments of principal and interest on a note and to the proceeds of the sale or
other disposition of a note made to U.S. Holders other than certain exempt recipients (such as corporations). A U.S. Holder of the notes may be subject to backup withholding with respect to certain reportable payments,
including interest payments and, under certain circumstances, principal payments on the notes or upon the receipt of proceeds upon the sale or other disposition of such notes. These backup withholding rules apply if the U.S. Holder, among other
things:



| |  |  | fails to furnish a social security number or other taxpayer identification number (TIN) certified under penalty of perjury within a
reasonable time after the request for the TIN;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | furnishes an incorrect TIN;
| | - |  | ---------------------------



| |  |  | is notified by the IRS that it has failed to report properly interest or dividends; or
| | - |  | --------------------------------------------------------------------------------------



| |  |  | under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN furnished is the correct number
and that such holder is not subject to backup withholding.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A U.S. Holder that does not provide us with its
correct TIN also may be subject to penalties imposed by the IRS. Any amount withheld from a payment to a U.S. Holder under the backup withholding rules is creditable against the U.S. Holders federal income tax liability, provided that the
required information is timely furnished to the IRS. Backup withholding will not apply, however, with respect to payments made to certain exempt U.S. Holders, including corporations and tax-exempt organizations, provided their exemptions from backup
withholding are properly established.

Certain Canadian Federal Income Tax Considerations for Residents of the United
States

The following summary fairly describes the main Canadian federal income tax consequences
applicable to you if you invested, as initial purchaser or through a subsequent investment, in any of our 73/4% Senior Notes due 2016 issued on January 17, 2006 (the 2006 notes) and/or our 73/4% Senior Notes due 2016 issued on October 5, 2007 (the
2007 notes and, collectively, with the 2006 notes, the Senior Notes) and you hold such Senior Notes as capital property for purposes of theIncome Tax Act(Canada), which we refer to as the Act.
Generally, a Senior Note will be considered to be capital property to a holder provided the holder does not hold the Senior Note in the course of carrying on a business and has not acquired the Senior Note in one or more transactions considered to
be an adventure or concerns in the nature of trade. This summary is based on the Canada-United States Income Tax Convention (1980), as amended, or the Convention, the relevant provisions of the Act and the Regulations thereunder, or the Regulations,
as in force on the date hereof, and counsels understanding of the administrative practices of the Canada Revenue Agency. It assumes that the specific proposals to amend the Act and the Regulations publicly announced by the Minister of Finance
of Canada prior to the date of this annual report are enacted in their present form, but the Act or the Regulations may not be amended as proposed or at all. This summary does not address provincial, territorial or foreign income tax considerations.
Changes in the law or administrative practices or future court decisions may affect your tax treatment.

The
following commentary is generally applicable to a holder who, at all times for purposes of the Act, deals at arms length with us and is neither an insurer who carries on an insurance business in Canada nor an authorized foreign bank and who,
at all times for the purposes of the Convention and the Act, is a resident of the United States, is not and is not deemed to be a resident of Canada and does not use or hold, and is not deemed to use or hold the Senior Notes in the course of
carrying on a business in Canada, who we refer to as a U.S. Holder.

Interest Payments

A U.S. Holder will not be subject to tax (including withholding tax) under the Act on interest, principal or premium on the Senior Notes.



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Dispositions

Gains realized on the disposition or deemed disposition of Senior Notes by a U.S. Holder will not be subject to tax under the Act.

The preceding discussions of federal income tax consequences is for general information only and is not legal or tax advice.
Accordingly, you should consult your own tax advisor as to particular tax consequences of purchasing, holding, and disposing of the Senior Notes, including the applicability and effect of any state, provincial, territorial, local or foreign tax
laws, and of any proposed changes in applicable laws.

F - Dividends and Paying Agents

Not applicable.

G - Statement by Experts

Not applicable.

H - Documents on Display

We file periodic reports and other information with the SEC. You may read and copy this information at the public reference room of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549, or
obtain copies of this information by mail from the public reference room at prescribed rates. The SEC also maintains an Internet website that contains reports and other information about issuers like us who file electronically with the SEC. The URL
of that website is http://www.sec.gov.

In addition, you may obtain a copy of the documents to which we refer you in this
annual report without charge upon written or oral request to: Quebecor Media Inc., 612 St-Jacques Street, Montreal, Quebec, Canada H3C 4M8, Attention: Investor Relations. Our telephone number is (514) 380-1999.

I - Subsidiary Information

Not applicable.

ITEM 11  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

We use certain financial instruments, such as interest rate swaps, cross-currency swaps and
foreign exchange forward contracts, to manage interest rate and foreign exchange risk exposures. These instruments are used solely to manage the financial risks associated with our obligations and are not used for trading or speculation purposes.

Foreign currency risk, interest rate risk and non-performance risk

Most of the Companys consolidated revenues and expenses, other than interest expense on U.S. dollar-denominated debt, purchases of
set-top boxes and cable modems and certain capital expenditures, are denominated in Canadian dollars. A large portion of the interest, principal and premium, if any, payable on its debt is payable in U.S. dollars. The Company and its subsidiaries
have entered into transactions to hedge the foreign currency risk exposure on 100% of their U.S. dollar-denominated debt obligations outstanding as of December 31, 2009 and to hedge their exposure on certain purchases of set-top boxes, cable
modems and capital expenditures. Accordingly, the Companys sensitivity to variations in foreign exchange rates is economically limited.

Some of the Companys and its subsidiaries revolving and bank credit facilities bear interest at floating rates based on the following reference rates: (i) Bankers acceptance rate
(BA), (ii) LIBOR and (iii) Canadian bank prime rate (prime). The Senior Notes issued by the Company and its subsidiaries bear interest at fixed rates. The Company and its subsidiaries have entered into various interest rate and
cross-currency interest rate swap agreements in order to manage cash flow and fair value risk exposure due to changes in interest rates. As of December 31, 2009, after taking into account the hedging instruments, long-term debt was
comprised of 69.3% fixed rate debt (72.1% pro-forma the refinancing of January 2010) compared to 64.5% as of December 31, 2008 and 30.7% floating rate debt (27.9% pro-forma the refinancing of January 2010) compared to 35.7% as of
December 31, 2008.



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The estimated sensitivity on financial expense for floating rate debt, before income tax and
non-controlling interest, of a 100 basis point variance in the year-end Canadian Bankers acceptance rate is $12.9 million.

Commodity price risk

Our company is exposed to commodity price risk relating to the prices of
newsprint, paper and ink, which are the basic raw materials used to publish newspapers. The market price of newsprint has historically been and may continue to be subject to significant price volatility. During 2009, the total
newsprint consumption of our newspaper operations was approximately 145,000 metric tonnes. Newsprint represents our single largest raw material expense and one of our most significant operating costs. Newsprint expense represented 10.1% ($83.6
million) of our News Media segments operating cost for the year ended December 31, 2009. Changes in the price of newsprint could significantly affect our earnings, and volatile or increased newsprint costs have had, and may in the future
have, a material adverse effect on our financial condition and results of operations.

In order to obtain more favourable
pricing, we source substantially all of our newsprint from a single newsprint producer, AbitibiBowater. Pursuant to the terms of our agreement with AbitibiBowater, we obtain newsprint at a discount to market prices, receive additional volume rebates
for purchases above certain thresholds, and benefit from a ceiling on the unit cost of newsprint. Our agreement with AbitibiBowater is a short-term agreement, and there can be no assurance that we will be able to renew this agreement or that
AbitibiBowater will continue to supply newsprint to us on favourable terms or at all after the expiry of our agreement. Moreover, our newsprint producer AbitibiBowater voluntarily filed for protection from its creditors in Canada and the United
States, meaning that our supply agreement could be repudiated by or on behalf of AbitibiBowater pursuant to Chapter 11 of the United States Bankruptcy Code in the United States and the CCAA. If we are unable to continue to source newsprint
from AbitibiBowater on favourable terms, or if we are unable to otherwise source sufficient newsprint on terms acceptable to us, our costs could increase materially, which could materially adversely affect the profitability of our newspaper business
and our results of operations.

Credit risk management

Credit risk is the risk of financial loss to Quebecor Media if a customer or counterparty to a financial asset fails to meet its contractual
obligations.

In the normal course of business, Quebecor Media continuously monitors the financial condition of its customers
and reviews the credit history of each new customer. As of December 31, 2009, no customer balance represented a significant portion of our consolidated trade receivables. Quebecor Media establishes an allowance for doubtful accounts based on
the specific credit risk of its customers and historical trends. The allowance for doubtful accounts amounted to $40.3 million as of December 31, 2009 ($47.6 million as of December 31, 2008). As of December 31, 2009, 9.8% of trade
receivables were 90 days past their billing date (11.3% as of December 31, 2008). Quebecor Media believes that its product lines and the diversity of its customer base are instrumental in reducing its credit risk, as well as the impact of
fluctuations in product-line demand. Quebecor Media does not believe that it is exposed to an unusual level of customer credit risk. As a result of their use of derivative financial instruments, Quebecor Media and its subsidiaries are exposed to the
risk of non-performance by a third party. When Quebecor Media and its subsidiaries enter into derivative contracts, the counterparties (either foreign or Canadian) must have credit ratings at least in accordance with Quebecor Medias credit
risk management policy and are subject to concentration limits.

Fair value of financial instruments

See Item 5  Operating and Financial Review and Prospects  Additional Information  Risks and Uncertainties 
Fair Value of Financial Instruments in this annual report.

Material limitations

Fair value estimates are made at a specific point in time and are based on relevant market information about the financial instruments. These
estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.



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Principal repayments

As of December 31, 2009, the aggregate amount of minimum principal payments on long-term debt required in each of the next five years
and thereafter, based on borrowing levels as at that date, are as follows:



|                                        |  |   |        
|--------------------------------------- |  | - | -------
|Twelve month period ending December 31, |  |  
|(in millions)                           |  |  
|2010                                    |  | $ | 67.8   
|2011                                    |  |   | 144.4  
|2012                                    |  |   | 66.7   
|2013                                    |  |   | 567.1  
|2014                                    |  |   | 774.8  
|2015 and thereafter                     |  |   | 2,184.7
|                                        |  |   |        
|Total                                   |  |   | 3,805.5
|                                        |  |   |        

ITEM 12  DESCRIPTION OF
SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.



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PART II

ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

A - None.

B - Not applicable.

ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS

A - Material Modifications to the Rights of Security Holders

There have been no material modifications to the rights of security holders.

B - Use of Proceeds

Not applicable.

ITEM 15  CONTROLS AND PROCEDURES

As at the end of the period covered by this report, Quebecor Medias President and Chief Executive Officer and Quebecor
Medias Vice President, Finance, together with members of Quebecor Medias senior management, have carried out an evaluation of the effectiveness of our disclosure controls and procedures. These are defined (in Rule 13a-15(e) or 15d-15(e)
under the Securities Exchange Act of 1934, as amended) as controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Actis recorded, processed, summarized and
reported within specified time periods. As of the date of the evaluation, Quebecor Medias President and Chief Executive Officer and Quebecor Medias Vice President, Finance concluded that Quebecor Medias disclosure controls and
procedures were effective to ensure that information required to be disclosed in the reports that the company files or submits under the Securities Exchange Actis accumulated and communicated to management, including the companys
principal executive and principal financial officer, to allow timely decisions regarding disclosure.

Quebecor Medias
management is responsible for establishing and maintaining adequate internal control over financial reporting of the company (as defined by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). Quebecor Medias
internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Quebecor Medias internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of Quebecor Medias assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of Quebecor Media are being made only in accordance with authorizations of management and directors of Quebecor Media; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of Quebecor Medias assets that could have a material effect on the financial statements. Because of its inherent limitations, internal controls over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Quebecor Medias management conducted an evaluation of the effectiveness of internal control
over financial reporting based on the framework in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that Quebecor
Medias internal control over financial reporting was effective as of December 31, 2009.

Pursuant to
Section 404 of theSarbanes-Oxley Actof 2002 and related temporary SEC rules, this annual report does not include an attestation report of the Companys registered public accounting firm regarding our internal control over
financial reporting. Our managements report regarding the effectiveness of our internal control over financial reporting was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit
us to provide only managements report in this annual report.



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There have been no changes in Quebecor Medias internal control over financial
reporting (as defined in Rule 13a-15 or 15d-15 under the Exchange Act) that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, Quebecor Medias internal control
over financial reporting.

ITEM 16  [RESERVED]

ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that Mr. La Couture is an audit committee financial expert (as defined in
Item 16A of Form 20-F) serving on our Audit Committee. Our Board of Directors has determined that Mr. La Couture is an independent director, as defined under SEC rules.

ITEM 16B  CODE OF ETHICS

We have a Code of Ethics that applies to all directors, officers and employees of Quebecor Media, including our Chief Executive Officer, Chief Financial Officer, principal accounting officer, controller
and persons performing similar functions. In 2008, we adopted a restated Code of Ethics which effects a general update of the Code of Ethics that we originally adopted in 2003, as well as a new section specifically setting forth our commitment to
respect for the environment and compliance with environmental laws and regulations. We have filed a copy of our Code of Ethics as an exhibit to this annual report on Form 20-F.

ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Ernst & Young LLP has served as our independent public accountant for the fiscal years ended December 31, 2009 and December 31, 2008. Prior to the fiscal year ended
December 31, 2008, KPMG LLP served as our independent public accountant, including for the fiscal year ended December 31, 2007. The audited financial statements for each of the fiscal years in the three-year period ended
December 31, 2009 are included in this annual report on Form 20-F.

Our Audit Committee establishes the independent
auditors compensation. In February 2010, the Audit Committee reviewed its policy relating to the pre-approval of services to be rendered by its independent auditors. The Audit Committee pre-approved all audit services, determined which
non-audit services the independent auditors are prohibited from providing, and authorized permitted non-audit services to be performed by the independent auditors to the extent those services are permitted by the Sarbanes-Oxley Act and
Canadian law. For each of the years ended December 31, 2007, 2008 and 2009, none of the non-audit services described below were approved by the Audit Committee of our Board of Directors pursuant to the de minimisexception to
the pre-approval requirement for non-audit services. The following table presents the aggregate fees billed for professional services and other services rendered by our independent auditor, Ernst & Young LLP, for the fiscal years ended
December 31, 2008 and 2009, and the aggregate fees billed for professional services and other services rendered by our former independent auditor, KPMG LLP, for a portion of the fiscal year ended December 31, 2008.



|                      |  |      |           |         |   |           |  |   |          
|--------------------- |  | ---- | --------- | ------- | - | --------- |  | - | ---------
|                      |  | 2009 |           | 2008(1) |   | 2008(2)  
|Audit Fees(3)         |  | $    | 3,177,932 |         | $ | 2,178,643 |  | $ | 717,158  
|Audit related Fees(4) |  |      | 1,145,796 |         |   | 206,078   |  |   | 210,805  
|Tax Fees(5)           |  |      | 65,897    |         |   | 31,228    |  |   | 32,500   
|All Other Fees(6)     |  |      | 46,212    |         |   |          |  |   | 52,500   
|                      |  |      |           |         |   |           |  |   |          
|Total                 |  | $    | 4,435,837 |         | $ | 2,415,949 |  | $ | 1,012,963



|(1) | Fees of
Ernst & Young LLP.
|--- | --------------------------

|(2) | Fees of KPMG LLP.
|--- | -----------------



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|(3) | Audit Fees consist
of fees approved for the annual audit of the Companys consolidated financial statements and quarterly reviews of interim financial statements of the Company with the SEC, including required assistance or services that only the external auditor
reasonably can provide and accounting consultations on specific issues and translation. It also includes audit and attestation services required by statute or regulation, such as comfort letters and consents, SEC prospectus and registration
statements, other filings and other offerings, including annual reports and SEC forms and statutory audits.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Audit related Fees
consist of fees billed for assurance and related services that are traditionally performed by the external auditor, and include consultations concerning financial accounting and reporting standards on proposed transactions, due diligence or
accounting work related to acquisitions; employee benefit plan audits, and audit or attestation services not required by statute or regulation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Tax Fees include
fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refunds, tax consultations, such as assistance and representation in connection with tax audits and appeals, tax advice related to
mergers, acquisitions and divestitures, transfer pricing, and requests for advance tax rulings or technical interpretations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | All Other Fees
include fees billed for forensic accounting and occasional training services, assistance with respect to internal controls over financial reporting and disclosure controls and procedures.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16F  CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANT

On June 9, 2008, Quebecor Media announced its decision to appoint Ernst & Young LLP as its auditors, and the dismissal of KPMG
LLP, effective as of the 2008 financial year. Ernst & Young LLP has audited Quebecor Medias financial statements for the years ended December 31, 2009 and December 31, 2008. The decision to change auditors was approved by
the Audit Committee of the Board of Directors of Quebecor Media on May 5, 2008. This change in auditors was effected simultaneously with a corresponding change in auditors at Quebecor Inc.

KPMG LLPs reports on the financial statements of Quebecor Media for the fiscal years ended December 31, 2007 and 2006 did not
contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except that KPMGs report for the fiscal year ended December 31, 2007 contained the
following explanatory paragraphs:

Also, as discussed in note 1 b) to the consolidated financial
statements, effective January 1, 2007 the Company adopted the CICAs new accounting standards on (i) Comprehensive income; (ii) Financial instruments and (iii) Hedges.

Canadian generally accepted accounting principles vary in certain significant respects from US generally accepted accounting
principles (U.S. GAAP). Information relating to the nature and effect of such differences is presented in Note 26 to the consolidated financial statements. Also, as discussed in note 26 to the consolidated financial statements, in 2007
the Company changed in its U.S. GAAP reconciliation its method of accounting for uncertainty in income taxes.

and except that KPMG
LLPs report for the fiscal year ended December 31, 2006 contained the following explanatory paragraph:

Canadian generally accepted accounting principles vary in certain significant respects from US generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in Note 26 to the
consolidated financial statements. Also, as discussed in Note 26 to the consolidated financial statements, in 2006 the Company changed in its US generally accepted accounting principles reconciliation (i) its method of accounting for
share-based payment; and (ii) its method of accounting for pensions and other postretirement benefits plans. As described in Note 26, the Company has restated its US generally accepted accounting principles reconciliation from that previously
issued.

For Quebecor Medias fiscal years ended December 31, 2007 and 2006 and any subsequent interim period
through June 9, 2008, there were no disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which disagreements, if not resolved to the satisfaction of KPMG
LLP, would have caused it to make reference to the subject matter of such disagreements in connection with their report on the financial statements for such years.



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During Quebecor Medias fiscal years ended December 31, 2007 and 2006 and any
subsequent interim period prior to June 9, 2008, neither Quebecor Media nor anyone acting on its behalf, consulted with Ernst & Young LLP regarding either (a) the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that would have been rendered on Quebecor Medias consolidated financial statements and either a written report was provided to Quebecor Media or oral advice was provided that
Ernst & Young LLP concluded was an important factor considered by Quebecor Media in reaching a decision as to the accounting, auditing or financial reporting issue, or (b) any matter that was either the subject of a disagreement (as
that term is used in Item 16F of Form 20-F and the related instructions to Item 16F) with the former auditors or a reportable event (as described in Item 16F of Form 20-F).

On February 23, 2009, Quebecor Media provided KPMG LLP and Ernst & Young LLP with a copy of the foregoing disclosures.
Quebecor Media requested that KPMG LLP furnish it with a letter addressed to the SEC stating whether it agrees with the above statements, and if not, stating the respects in which it does not agree. Quebecor Media has received the requested letter
from KPMG LLP, and a copy of KPMG LLPs letter was filed as Exhibit 99.1 to Quebecor Medias annual report on Form 20-F for the year ended December 31, 2008. Quebecor Media requested that Ernst & Young LLP review
the foregoing disclosures and offered Ernst & Young LLP the opportunity to furnish Quebecor Media with a letter addressed to the SEC containing any new information, clarification of Quebecor Medias expression of its views or the
respects in which it does not agree with the statements by Quebecor Media in response to this Item 16F. Ernst & Young LLP had no disagreement with the disclosures and consequently declined the opportunity to furnish Quebecor Media with
such a letter.

ITEM 16G  CORPORATE GOVERNANCE

Not applicable.



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PART III

ITEM 17  FINANCIAL STATEMENTS

Our audited consolidated balance sheets as of December 31, 2009 and 2008 and the consolidated statements of income, shareholders equity and cash flows for the years ended December 31,
2009, 2008 and 2007, including the notes thereto and together with the auditors report thereon, are included in this annual report beginning on page F 1.

ITEM 18  FINANCIAL STATEMENTS

Not
applicable.

ITEM 19  EXHIBITS

EXHIBITS

The following documents are filed as exhibits to this annual report on Form 20-F:



|              |  |                                                                                                                                                                                                                                                                          
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                              
|              | 
|1.1           |  | Articles of Incorporation of Quebecor Media (translation) (incorporated by reference to Exhibit 3.1 to Quebecor Media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 (translation) (incorporated by reference to Exhibit 3.2 to Quebecor Media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 (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 (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, 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).



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|     |  |                                                                                                                                                                                                                                                                                                                                                                             
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.10 |  | By-law number 2005-1 of Quebecor Media (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, as of January 12, 2007 (translation) (incorporated by reference to Exhibit 1.11 of Quebecor Medias
Annual Report on Form 20-F for fiscal year ended December 31, 2006, filed on March 30, 2007).                                                                                                  
|     | 
|1.12 |  | By-law number 2007-1 of Quebecor Media (translation) (incorporated by reference to Exhibit 1.12 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December
31, 2006, filed on March 30, 2007).                                                                                                                                                           
|     | 
|1.13 |  | Certificate of Amendment of Articles of Incorporation of Quebecor Media, as of November 30, 2007 (translation) (incorporated by reference to Exhibit 1.13 of Quebecor Medias
Annual Report on Form 20-F for fiscal year ended December 31, 2007, filed on March 27, 2008).                                                                                                 
|     | 
|1.14 |  | By-law number 2007-2 of Quebecor Media (translation) (incorporated by reference to Exhibit 1.14 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December
31, 2007, filed on March 27, 2008).                                                                                                                                                           
|     | 
|1.15 |  | By-law number 2008-1 of Quebecor Media (translation) (incorporated by reference to Exhibit 1.15 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December
31, 2008, filed on March 12, 2009).                                                                                                                                                           
|     | 
|2.1  |  | Form of 73/4% Senior Note due 2016 originally issued on January 17, 2006 (included as Exhibit A to Exhibit 2.2 below) (incorporated by reference to Exhibit 2.7 of Quebecor Medias Annual Report on Form 20-F for
fiscal year ended December 31, 2005, filed on March 29, 2006).                                                                                           
|     | 
|2.2  |  | 73/4% Senior Notes Indenture, dated as of January 17, 2006, by and between Quebecor Media, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 2.8 of Quebecor Medias
Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).                                                                       
|     | 
|2.3  |  | Form of 73/4% Senior Note due 2016 originally issued on October 5, 2007 (included as Exhibit A to Exhibit 2.4 below) (incorporated by reference to Exhibit 4.3 of Quebecor Medias Registration Statement on Form
F-4 dated November 20, 2007, Registration Statement No. 333-147551).                                                                                      
|     | 
|2.4  |  | 73/4% Senior Notes Indenture, dated as of October 5, 2007, by and between Quebecor Media, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.4 of Quebecor Medias
Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No. 333-147551).                                                                  
|     | 
|2.5  |  | Form of Sun Media 75/8% Senior Note due 2013 (included in Exhibit A to Exhibit 2.6 below) (incorporated by reference to Exhibit A to Exhibit 4.2 to Sun Medias Registration Statement on Form F-4 dated April 10, 2003,
Registration Statement No. 333-103998).                                                                                                            
|     | 
|2.6  |  | Indenture relating to Sun Media 75/8% Senior Notes due 2013, dated as of February 7, 2003, among Sun Media, the subsidiary guarantors signatory thereto, and National City Bank, as trustee (incorporated by reference to
Exhibit 4.2 to Sun Medias Registration Statement on Form F-4 dated April 10, 2003, Registration Statement No. 333-103998).                       
|     | 
|2.7  |  | Sun Media First Supplemental Indenture, dated as of July 30, 2004, by and among Sun Media, 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s annual report on Form 20-F for the year ended December 31, 2004, filed on March 24, 2005).



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                           
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.8  |  | Form of Videotron 67/8% Senior Notes due January 15, 2014 (incorporated by reference to Exhibit A to Exhibit 4.3 to Videotrons Registration Statement on Form F-4 dated January 8, 2004, Registration Statement
No. 333-110697).                                                                                                                                                                         
|     | 
|2.9  |  | Form of Notation of Guarantee by the subsidiary guarantors of the 67/8% Videotron Senior Notes due January 15, 2014 (incorporated by reference to Exhibit E to Exhibit 4.3 to Videotrons Registration Statement on Form F-4
dated January 8, 2004, Registration Statement No. 333-110697).                                                                                                               
|     | 
|2.10 |  | Indenture relating to Videotron 67/8% Notes due 2014, dated as of October 8, 2003, by and among Videotron, the subsidiary guarantors signatory thereto and Wells Fargo Bank Minnesota, N.A., as trustee (incorporated by
reference to Exhibit 4.3 to Videotrons Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No. 333-110697).                                        
|     | 
|2.11 |  | Supplemental Indenture, dated as of July 12, 2004, by and among Videotron, SuperClub Videotron Canada inc., Les Propriétés SuperClub inc. and Wells Fargo Bank,
National Association, as trustee, to the Indenture dated as of October 8, 2003 (incorporated by reference to Exhibit 4.4 to Videotrons Registration Statement on Form F-4 dated January 18, 2005, Registration Statement
No. 333-121032).
|     | 
|2.12 |  | Supplemental Indenture, dated as of April 15, 2008, by and among Videotron, Videotron US Inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the Indenture
dated as of October 8, 2003 (incorporated by reference to Exhibit 2.5 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No. 033-51000).             
|     | 
|2.13 |  | Supplemental Indenture, dated as of September 23, 2008, by and among Videotron, 9193-2962 Quebec inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the
Indenture dated as of October 8, 2003 (incorporated by reference to Exhibit 2.6 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No. 033-51000).     
|     | 
|2.14 |  | Form of Videotron 63/8% Senior Note due 2015 (included as Exhibit A to Exhibit 2.16 below).                                                                                                                                                                                                                                                                                                               
|     | 
|2.15 |  | Form of Notation of Guarantee by the subsidiary guarantors of Videotrons 63/8% Senior Notes due 2015 (included as Exhibit E to Exhibit 2.16 below).                                                                                                                                                                                                                                                      
|     | 
|2.16 |  | Indenture relating to Videotron 63/8% Senior Notes, dated as of September 16, 2005, by and between Videotron, the guarantors party thereto, and Wells Fargo, National Association, as trustee (incorporated by reference
to Exhibit 4.3 of Videotrons Registration Statement on Form F-4 dated October 14, 2005, Registration Statement No. 333-128998).                                                 
|     | 
|2.17 |  | Supplemental Indenture, dated as of April 15, 2008, by and among Videotron, Videotron US Inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the Indenture
dated as of September 16, 2005 (incorporated by reference to Exhibit 2.10 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No. 033-51000).         
|     | 
|2.18 |  | Supplemental Indenture, dated as of September 23, 2008, by and among Videotron, 9193-2962 Quebec inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the
Indenture dated as of September 16, 2005 (incorporated by reference to Exhibit 2.11 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No. 033-51000). 
|     | 
|2.19 |  | Form of 91/8% Senior Notes due April 15, 2018 of Videotron (incorporated by reference to Exhibit 2.12 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission
file No. 033-51000).                                                                                                                                                                   
|     | 
|2.20 |  | Form of Notation of Guarantee by the subsidiary guarantors of the 91/8% Senior Notes due April 15, 2018 of Videotron (incorporated by reference to Exhibit 2.13 of Videotrons Annual Report on Form 20-F for the year December
31, 2008, filed on March 6, 2009, Commission file No. 033-51000).                                                                                                         



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.21 |  | Indenture, dated as of April 15, 2008, by and among Videotron, the subsidiary guarantors signatory thereto and Wells Fargo Bank, National Association, as trustee (incorporated
by reference to Exhibit 2.14 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No. 033-51000).                                                       
|     | 
|2.22 |  | Supplemental Indenture, dated as of September 23, 2008, by and among Videotron, 9193-2962 Quebec inc., as guarantor, and Wells Fargo Bank, National Association, as trustee, to the
Indenture dated as of April 15, 2008 (incorporated by reference to Exhibit 2.15 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No. 033-51000).
|     | 
|2.23 |  | Supplemental Indenture, dated as of March 5, 2009, by and among Videotron Ltd., the subsidiary guarantors signatory thereto and Wells Fargo Bank, National Association, as trustee,
to the Indenture dated as of April 15, 2008 (incorporated by reference to Exhibit 2.16 to Videotrons Annual Report on Form 20-F for the year December 31, 2009, filed on March 15, 2010).                       
|     | 
|2.24 |  | Form of 71/8% Senior Notes due January 15, 2020 of Videotron (included as Exhibit A to Exhibit 2.26 below).                                                                                                                                                                                                                                                                                          
|     | 
|2.25 |  | Form of Notation of Guarantee by the subsidiary guarantors of the 71/8% Senior Notes due January 15, 2020 of Videotron (included as Exhibit E to Exhibit 2.26 below).                                                                                                                                                                                                                                
|     | 
|2.26 |  | Indenture relating to Videotron 71/8% Senior Notes, dated as of January 13, 2010, by and among Videotron, the subsidiary guarantors signatory thereto and Computershare Trust Company of Canada, as trustee (incorporated
by reference to Exhibit 2.17 to Videotrons Annual Report on Form 20-F for the year December 31, 2009, filed on March 16, 2010).                                           
|     | 
|2.27 |  | Third Supplemental Indenture, dated as of October 28, 2009, by and among Sun Media, the subsidiary guarantor signatory thereto and U.S. Bank National Association (formerly National
City Bank), as trustee (incorporated by reference to Exhibit 2.5 to Sun Medias Annual Report on Form 20-F for the year December 31, 2009, filed on March 16, 2010).                                            
|     | 
|3.1  |  | Shareholders Agreement dated December 11, 2000 by and among Quebecor Inc., Capital Communications CDPQ inc. (now known as Capital dAmérique CDPQ inc.) and
Quebecor Media, together with a summary thereof in the English-language (incorporated by reference to Exhibit 9.1 to Quebecor Media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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 on May 5, 2003 relating to the increase in the size of the Board of Directors of Quebecor Media (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2003, filed on March 31, 2004).                                                
|     | 
|4.1  |  | Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media, as Borrower, the financial institutions party thereto from time to time, as Lenders, and Bank of
America, N.A., as administrative agent (incorporated by reference to Exhibit 4.2 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).                     
|     | 
|4.2  |  | First Amending Agreement, dated as of January 14, 2010, amending the Credit Agreement dated as of January 17, 2006 among Quebecor Media, as Borrower, the financial institutions
party thereto from time to time, as Lenders, and Bank of America, N.A., as administrative agent.                                                                                                                    



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.3  |  | Credit Agreement, dated as of April 7, 2006, by and between Société Générale (Canada), as lender, and Quebecor Media, as borrower (incorporated by
reference to Exhibit 10.3 of Quebecor Medias Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No. 333-147551).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | 
|4.4  |  | First Amending Agreement, dated as of December 7, 2007, amending the Credit Agreement dated as of April 7, 2006 among Quebecor Media, as borrower, and
Société Générale (Canada), as lender.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | 
|4.5  |  | Credit Agreement dated as of February 7, 2003 among Sun Media, 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s Registration Statement on Form F-4 dated April 10, 2003,
Registration Statement No. 333-103998).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 
|4.6  |  | First Amending Agreement, dated as of December 3, 2003, amending the Credit Agreement dated as of February 7, 2003 among Sun Media, 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     | 
|4.7  |  | Second Amending Agreement, dated as of October 12, 2004, amending the Credit Agreement dated as of February 7, 2003 among Sun Media, 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s Annual Report on Form 20-F for the year ended December 31, 2004, filed on March 24, 2005, Commission file No. 333-6690).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 
|4.8  |  | Third Amending Agreement, dated as of January 17, 2006, amending the Credit Agreement dated as of February 7, 2003, as amended, among Sun Media, 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s Annual Report on Form 20-F for the year ended December 31, 2005, filed on
March 21, 2006, Commission file No. 333-6690).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 
|4.9  |  | Fourth Amending Agreement, dated as of April 27, 2006, amending the Credit Agreement dated as of February 7, 2003, as amended, among Sun Media, Banc of America Securities LLC,
Credit Suisse First Boston Canada and the lenders party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.8 of Quebecor Medias Registration Statement on Form F-4 dated November 20, 2007,
Registration Statement No. 333-147551).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | 
|4.10 |  | Fifth Amending Agreement, dated as of October 31, 2007, amending the Credit Agreement dated as of February 7, 2003, as amended, among Sun Media, Banc of America Securities LLC,
Credit Suisse First Boston Canada and the lenders party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.9 of Quebecor Medias Registration Statement on Form F-4 dated November 20, 2007,
Registration Statement No. 333-147551).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     | 
|4.11 |  | 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, a Second Amending
Agreement dated as of June 29, 2001, a Third Amending Agreement dated December 12, 2001 and accepted by the Lenders as of December 21, 2001, a Fourth Amending Agreement dated as of December 23, 2002, a Fifth Amending Agreement dated as of March 24,
2003, a Sixth Amending Agreement dated as of October 8, 2003, a Seventh Amending Agreement dated as of November 19, 2004, an Eighth Amending Agreement dated as of March 6, 2008, a Ninth Amending Agreement dated as of April 7, 2008, and Tenth
Amending Agreement dated as of November 13, 2009) entered into as of November 28, 2000, as amended as of November 13, 2009, by and among Videotron, Royal Bank of Canada, as administrative agent, and the financial institutions signatory thereto
(incorporated by reference to Exhibit 4.1 of Videotrons Annual Report on Form 20-F for the year December 31, 2009, filed on March 16, 2010, Commission file No. 033-51000).



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.12 |  | Seventh Amending Agreement, dated as of November 19, 2004, to the Credit Agreement dated as of November 28, 2000, among Videotron, Royal Bank of Canada, as administrative
agent, and the financial institutions signatory thereto and acknowledged by Le SuperClub Videotron, Groupe de Divertissement SuperClub inc., Videotron (1998) ltée, CF Cable TV Inc., Videotron (Regional) Ltd., 9139-3256 Quebec inc., Videotron
TVN inc., Les Propriétés SuperClub inc. and SuperClub Videotron Canada inc., as guarantors (the Guarantors), and by Quebecor Media (incorporated by reference to Exhibit 10.2 to Videotrons Registration Statement on
Form F-4 dated January 18, 2005, Registration Statement No. 333-121032).                                                                                                                                                                                                                                                                                                                                                                                                             
|     | 
|4.13 |  | Eighth Amending Agreement, dated as of March 6, 2008, to the Credit Agreement, dated as of November 28, 2000, as amended by the First Amending Agreement, dated as of January 5,
2001, a Second Amending Agreement, dated as of June 29, 2001, a Third Amending Agreement, dated as of December 12, 2001, a Fourth Amending Agreement, dated as of December 23, 2002, a Fifth Amending Agreement, dated as of March 24, 2003, a Sixth
Amending Agreement dated as of October 8, 2003 and a Seventh Amending Agreement, dated as of November 19, 2004 among Videotron, Royal Bank of Canada, as administrative agent, and the financial institutions signatory thereto and acknowledged by Le
SuperClub-Videotron ltée, Groupe de Divertissement SuperClub inc., CF Cable TV Inc., Les Propriétés SuperClub inc. and SuperClub Videotron Canada inc., as guarantors, and by Quebecor Media (incorporated by reference to Exhibit
4.3 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No. 033-51000).                                                                      
|     | 
|4.14 |  | Ninth Amending Agreement, dated as of April 7, 2008, to the Credit Agreement, dated as of November 28, 2000, as amended by the First Amending Agreement, dated as of January 5, 2001,
a Second Amending Agreement, dated as of June 29, 2001, a Third Amending Agreement, dated as of December 12, 2001, a Fourth Amending Agreement, dated as of December 23, 2002, a Fifth Amending Agreement, dated as of March 24, 2003, a Sixth Amending
Agreement dated as of October 8, 2003, a Seventh Amending Agreement dated as of November 19, 2004, and an Eighth Amending Agreement dated as of March 6, 2008, among Videotron, Royal Bank of Canada, as administrative agent, and the financial
institutions signatory thereto and acknowledged by Le SuperClub Videotron, Groupe de Divertissement SuperClub inc., CF Cable TV Inc., Les Propriétés SuperClub inc. and SuperClub Videotron Canada inc., as guarantors, and by Quebecor
Media (incorporated by reference to Exhibit 4.2 of Videotrons Annual Report on Form 20-F for the year December 31, 2008, filed on March 6, 2009, Commission file No. 033-51000).                   
|     | 
|4.15 |  | Tenth Amending Agreement, dated as of November 13, 2009, to the Credit Agreement, dated as of November 28, 2000, as amended by the First Amending Agreement, dated as of January 5,
2001, a Second Amending Agreement, dated as of June 29, 2001, a Third Amending Agreement, dated as of December 12, 2001, a Fourth Amending Agreement, dated as of December 23, 2002, a Fifth Amending Agreement, dated as of March 24, 2003, a Sixth
Amending Agreement dated as of October 8, 2003, a Seventh Amending Agreement dated as of November 19, 2004, an Eighth Amending Agreement dated as of March 6, 2008, and a Ninth Amending Agreement, dated as of April 7, 2008, among Videotron, Royal
Bank of Canada, as administrative agent, and the financial institutions signatory thereto and acknowledged by Le SuperClub Videotron, CF Cable TV Inc., 7215924 Canada Inc., 9212-7919 Québec inc., and Videotron US Inc., as guarantors, and by
Quebecor Media (incorporated by reference to Exhibit 4.2 of Videotrons Annual Report on Form 20-F for the year December 31, 2009, filed on March 16, 2010, Commission file No. 033-51000).
|     | 
|4.16 |  | Finnvera Facility B Credit agreement dated as of November 13, 2009, by and among Videotron, as borrower, the financial institutions party thereto from time to time, as Lenders, and
HSBC Bank plc, as agent (incorporated by reference to Exhibit 4.17 of Videotrons Annual Report on Form 20-F for the year December 31, 2009, filed on March 16, 2010, Commission file No. 033-51000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.17 |  | Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, between 4411986 Canada Inc., Osprey Media LP, Osprey Media Income Fund, as borrowers, the
financial institutions party thereto, as Credit Facility lenders, the Canadian Imperial Bank of Commerce, as syndication agent, Bank of Montreal, as documentation agent, and the Bank of Nova Scotia, as administrative agent, including the First
Amendment, made as of January 1, 2008, to the Fourth Amended and Restated Credit Agreement (incorporated by reference to Exhibit 4.16 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2007, filed on
March 27, 2008).
|     | 
|4.18 |  | Second Amendment, dated as of August 31, 2008, to the Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, between 4411986 Canada Inc., Osprey Media LP,
Osprey Media Income Fund, as borrowers, the financial institutions party thereto, as Credit Facility lenders, the Canadian Imperial Bank of Commerce, as syndication agent, Bank of Montreal, as documentation agent, and the Bank of Nova Scotia, as
administrative agent (incorporated by reference to Exhibit 4.18 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2008, filed on March 12, 2009).                                                          
|     | 
|7.1  |  | Statement regarding calculation of ratio of earnings to fixed charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | 
|8.1  |  | Subsidiaries of Quebecor Media                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 
|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, 2008, filed on March 12,
2009).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     | 
|12.1 |  | Certification of Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor Media, 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 Jean-François Pruneau, Vice President, Finance of Quebecor Media, pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     | 
|13.1 |  | Certification of Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor Media, 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 Jean-François Pruneau, Vice President, Finance of Quebecor Media, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Actof 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



184



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##### Table of Contents

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.



QUEBECOR MEDIA INC.By:

/S/    JEAN-FRANÇOIS PRUNEAUName:

Jean-François PruneauTitle:

Vice President, Finance


Dated: March 16, 2010



185



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

Years ended December 31, 2009, 2008, and 2007





|                                                                                                                                                                                                                     |  |     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Ernst & Young LLP to the Board of Directors and to the Shareholders of Quebecor Media (with respect
 to Quebecor Medias consolidated financial statements for the years ended December 31, 2008 and 2009) |  | F-2 
|Report of KPMG LLP to the Board of Directors and to the Shareholders of Quebecor Media (with respect to Quebecor
 Medias consolidated financial statements for the year ended December 31, 2007)                    |  | F-3 
|                                                                                                                                                                                                                     | 
|Financial Statements                                                                                                                                                                                                 |  |     
|Consolidated Statements of Income                                                                                                                                                                                    |  | F-4 
|Consolidated Statements of Comprehensive Income                                                                                                                                                                      |  | F-5 
|Consolidated Statements of Shareholders Equity                                                                                                                                                                      |  | F-6 
|Consolidated Statements of Cash Flows                                                                                                                                                                                |  | F-7 
|Consolidated Balance Sheets                                                                                                                                                                                          |  | F-9 
|Segmented Information                                                                                                                                                                                                |  | F-11
|Notes to Consolidated Financial Statements                                                                                                                                                                           |  | F-14



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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.

We have audited the accompanying consolidated balance sheets of Quebecor Media Inc. and its subsidiaries as of December 31, 2009 and 2008, and the
related consolidated statements of income, comprehensive income, shareholders equity and cash flows for the years ended December 31, 2009 and 2008. These consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The consolidated financial statements of Quebecor Media Inc. for the year ended December 31, 2007, were audited by other
auditors whose report, dated March 20, 2008, expressed an unqualified opinion on those statements prior to restatements, and included an explanatory paragraph that, effective January 1, 2007, the Company adopted the Canadian Institute of
Chartered Accountants new accounting standards on (i) Comprehensive income; (ii) Financial instruments and (iii) Hedges.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated financial position of Quebecor Media Inc. and its subsidiaries as of December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows
for the years ended December 31, 2009 and 2008, in conformity with Canadian Generally Accepted Accounting Principles.

We also audited
the adjustments described in notes 1b) and 26 ix) that were applied to restate the 2007 consolidated financial statements. In our opinion, such adjustments are appropriate and have been properly applied.

As discussed in note 1b) to the consolidated financial statements, effective January 1, 2009, the Company adopted the Canadian Institute of Chartered
Accountants Standard 3064, Goodwill and Intangible Assets. Also, as discussed in note 26 ix) to the consolidated financial statements, effective January 1, 2009, the Company adopted statement of the Financial Accounting Standards No 141R
Business Combinations and No 160, Non-Controlling Interests.



/s/ Ernst & Young LLP(1)

Chartered Accountants

Montreal, Canada

March 16, 2010

(1) CA auditor
permit no. 9298



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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.

We have audited, before the effects of the adjustments to retrospectively apply the changes in accounting described in notes 1(b) and 26(ix), the
accompanying consolidated statements of income, comprehensive income, shareholders equity and cash flows of Quebecor Media Inc. and its subsidiaries for the year ended December 31, 2007. The 2007 financial statements before the effects of
the adjustments discussed in notes 1(b) and 26(ix) are not presented herein. The 2007 consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2007 consolidated financial statements, before the
effects of the adjustments to retrospectively apply the changes in accounting described in notes 1(b) and 26(ix) present fairly, in all material respects, the results of operations and cash flows of Quebecor Media Inc. and its subsidiaries for
the year ended December 31, 2007 in conformity with Canadian generally accepted accounting principles. Also, as discussed in note 1(h) to the consolidated financial statements, effective January 1, 2007 the Company adopted the
Canadian Institute of Chartered Accountants new accounting standards on (i) Comprehensive income; (ii) Financial instruments and (iii) Hedges.

We were not engaged to audit, review or apply any procedures to the adjustments to retrospectively apply the changes in accounting described in notes 1(b) and 26(ix) and, accordingly, we do not
express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by a successor auditor.

Canadian generally accepted accounting principles vary in certain significant respects from US generally accepted accounting principles (US GAAP). Information relating to the nature and effect
of such differences is presented in note 26 to the consolidated financial statements.



/s/ KPMG LLP

Chartered Accountants

Montréal, Canada

March 20, 2008



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2009, 2008, and 2007

(in millions of Canadian dollars)





|                                                                                   |  |      |         |   |                       |   |         |                       |  |   |         |  
|---------------------------------------------------------------------------------- |  | ---- | ------- | - | --------------------- | - | ------- | --------------------- |  | - | ------- | -
|                                                                                   |  | 2009 |         |   | 2008                  |   |         | 2007                  | 
|                                                                                   |  |      |         |   | (restated, note 1(b)) |   |         | (restated, note 1(b)) | 
|Revenues                                                                           |  | $    | 3,781.0 |   |                       | $ | 3,730.1 |                       |  | $ | 3,365.9 |  
|                                                                                   |  |      |        
|Operating expenses                                                                 |  |      | 2,496.3 |   |                       |   | 2,610.5 |                       |  |   | 2,402.5 |  
|Amortization                                                                       |  |      | 341.5   |   |                       |   | 316.7   |                       |  |   | 287.7   |  
|Financial expenses (note 2)                                                        |  |      | 238.2   |   |                       |   | 276.0   |                       |  |   | 230.1   |  
|(Gain) loss on valuation and translation of financial instruments (note 3)         |  |      | (61.5   | ) |                       |   | 3.7     |                       |  |   | 9.9     |  
|Restructuring of operations, impairment of assets and other special items (note 4) |  |      | 29.6    |   |                       |   | 54.6    |                       |  |   | 12.2    |  
|Impairment of goodwill and intangible assets (note 5)                              |  |      | 13.6    |   |                       |   | 671.2   |                       |  |   | 5.4     |  
|                                                                                   |  |      |         |   |                       |   |         |                       |  |   |         |  
|Income (loss) before income taxes and non-controlling interest                     |  |      | 723.3   |   |                       |   | (202.6  | )                     |  |   | 418.1   |  
|                                                                                   |  |      |        
|Income taxes (note 7)                                                              |  |      | 177.3   |   |                       |   | 155.2   |                       |  |   | 75.7    |  
|                                                                                   |  |      |         |   |                       |   |         |                       |  |   |         |  
|Income (loss) before non-controlling interest                                      |  |      | 546.0   |   |                       |   | (357.8  | )                     |  |   | 342.4   |  
|Non-controlling interest                                                           |  |      | (23.8   | ) |                       |   | (23.2   | )                     |  |   | (19.3   | )
|                                                                                   |  |      |         |   |                       |   |         |                       |  |   |         |  
|Income (loss) from continuing operations                                           |  |      | 522.2   |   |                       |   | (381.0  | )                     |  |   | 323.1   |  
|                                                                                   |  |      |        
|Income from discontinued operations                                                |  |      | 2.9     |   |                       |   | 2.3     |                       |  |   | 5.2     |  
|                                                                                   |  |      |         |   |                       |   |         |                       |  |   |         |  
|Net income (loss)                                                                  |  | $    | 525.1   |   |                       | $ | (378.7  | )                     |  | $ | 328.3   |  
|                                                                                   |  |      |         |   |                       |   |         |                       |  |   |         |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME

Years ended December 31, 2009, 2008, and 2007

(in millions of Canadian dollars)





|                                                                               |  |      |       |   |                       |   |        |                       |  |   |       |  
|------------------------------------------------------------------------------ |  | ---- | ----- | - | --------------------- | - | ------ | --------------------- |  | - | ----- | -
|                                                                               |  | 2009 |       |   | 2008                  |   |        | 2007                  | 
|                                                                               |  |      |       |   | (restated, note 1(b)) |   |        | (restated, note 1(b)) | 
|Net income (loss)                                                              |  | $    | 525.1 |   |                       | $ | (378.7 | )                     |  | $ | 328.3 |  
|                                                                               |  |      |      
|Other comprehensive income (loss) :                                            |  |      |       |   |                       |   |        |                       |  |   |       |  
|Unrealized (loss) gain on translation of net investments in foreign operations |  |      | (3.3  | ) |                       |   | 5.0    |                       |  |   | (2.0  | )
|(Loss) gain on valuation of derivative financial instruments                   |  |      | (8.2  | ) |                       |   | (16.7  | )                     |  |   | 36.5  |  
|Income taxes related to derivative financial instruments                       |  |      | 41.6  |   |                       |   | (47.9  | )                     |  |   | 11.5  |  
|                                                                               |  |      |       |   |                       |   |        |                       |  |   |       |  
|                                                                               |  |      | 30.1  |   |                       |   | (59.6  | )                     |  |   | 46.0  |  
|                                                                               |  |      |       |   |                       |   |        |                       |  |   |       |  
|                                                                               |  |      |      
|Comprehensive income (loss)                                                    |  | $    | 555.2 |   |                       | $ | (438.3 | )                     |  | $ | 374.3 |  
|                                                                               |  |      |       |   |                       |   |        |                       |  |   |       |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

Years ended December 31, 2009, 2008, and 2007

(in millions of Canadian dollars)





|                                                                |  |                       |         |                    |   |         |         |  |   |                                                     |   |  |                          |       |   |  |   |         |  
|--------------------------------------------------------------- |  | --------------------- | ------- | ------------------ | - | ------- | ------- |  | - | --------------------------------------------------- | - |  | ------------------------ | ----- | - |  | - | ------- | -
|                                                                |  | Capitalstock(note 18) |         | Contributedsurplus |   |         | Deficit |  |   | Accumulatedothercomprehensiveincome (loss)(note 20) |   |  | Totalshareholdersequity |      
|Balance as of December 31, 2006, as previously reported         |  | $                     | 1,752.4 |                    | $ | 3,217.2 |         |  | $ | (2,745.8                                            | ) |  | $                        | (36.6 | ) |  | $ | 2,187.2 |  
|Cumulative effect of changes in accounting policies (note 1(b)) |  |                       |        |                    |   |        |         |  |   | (3.5                                                | ) |  |                          |      |   |  |   | (3.5    | )
|                                                                |  |                       |         |                    |   |         |         |  |   |                                                     |   |  |                          |       |   |  |   |         |  
|                                                                |  |                       |         |                    |  
|Balance as of December 31, 2006, as restated                    |  |                       | 1,752.4 |                    |   | 3,217.2 |         |  |   | (2,749.3                                            | ) |  |                          | (36.6 | ) |  |   | 2,183.7 |  
|Net income                                                      |  |                       |        |                    |   |        |         |  |   | 328.3                                               |   |  |                          |      |   |  |   | 328.3   |  
|Dividends                                                       |  |                       |        |                    |   |        |         |  |   | (110.0                                              | ) |  |                          |      |   |  |   | (110.0  | )
|Other comprehensive income                                      |  |                       |        |                    |   |        |         |  |   |                                                    |   |  |                          | 46.0  |   |  |   | 46.0    |  
|                                                                |  |                       |         |                    |   |         |         |  |   |                                                     |   |  |                          |       |   |  |   |         |  
|                                                                |  |                       |         |                    |  
|Balance as of December 31, 2007, as restated                    |  |                       | 1,752.4 |                    |   | 3,217.2 |         |  |   | (2,531.0                                            | ) |  |                          | 9.4   |   |  |   | 2,448.0 |  
|Net loss                                                        |  |                       |        |                    |   |        |         |  |   | (378.7                                              | ) |  |                          |      |   |  |   | (378.7  | )
|Dividends                                                       |  |                       |        |                    |   |        |         |  |   | (65.0                                               | ) |  |                          |      |   |  |   | (65.0   | )
|Related party transaction (note 24)                             |  |                       |        |                    |   | (2.7    | )       |  |   |                                                    |   |  |                          |      |   |  |   | (2.7    | )
|Other comprehensive loss                                        |  |                       |        |                    |   |        |         |  |   |                                                    |   |  |                          | (59.6 | ) |  |   | (59.6   | )
|                                                                |  |                       |         |                    |   |         |         |  |   |                                                     |   |  |                          |       |   |  |   |         |  
|                                                                |  |                       |         |                    |  
|Balance as of December 31, 2008, as restated                    |  |                       | 1,752.4 |                    |   | 3,214.5 |         |  |   | (2,974.7                                            | ) |  |                          | (50.2 | ) |  |   | 1,942.0 |  
|Net income                                                      |  |                       |        |                    |   |        |         |  |   | 525.1                                               |   |  |                          |      |   |  |   | 525.1   |  
|Dividends                                                       |  |                       |        |                    |   |        |         |  |   | (75.0                                               | ) |  |                          |      |   |  |   | (75.0   | )
|Related party transaction (note 24)                             |  |                       |        |                    |   | 8.6     |         |  |   |                                                    |   |  |                          |      |   |  |   | 8.6     |  
|Other comprehensive income                                      |  |                       |        |                    |   |        |         |  |   |                                                    |   |  |                          | 30.1  |   |  |   | 30.1    |  
|                                                                |  |                       |         |                    |   |         |         |  |   |                                                     |   |  |                          |       |   |  |   |         |  
|                                                                |  |                       |         |                    |  
|Balance as of December 31, 2009                                 |  | $                     | 1,752.4 |                    | $ | 3,223.1 |         |  | $ | (2,524.6                                            | ) |  | $                        | (20.1 | ) |  | $ | 2,430.8 |  
|                                                                |  |                       |         |                    |   |         |         |  |   |                                                     |   |  |                          |       |   |  |   |         |  

See accompanying notes to consolidated financial statements.



F-6



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2009, 2008, and 2007

(in millions of Canadian dollars)





|                                                                           |  |      |         |   |                      |   |          |                       |  |   |        |  
|-------------------------------------------------------------------------- |  | ---- | ------- | - | -------------------- | - | -------- | --------------------- |  | - | ------ | -
|                                                                           |  | 2009 |         |   | 2008                 |   |          | 2007                  | 
|                                                                           |  |      |         |   | (restated,note 1(b)) |   |          | (restated, note 1(b)) | 
|Cash flows related to operating activities:                                |  |      |         |   |                      |   |          |                       |  |   |        |  
|Income (loss) from continuing operations                                   |  | $    | 522.2   |   |                      | $ | (381.0   | )                     |  | $ | 323.1  |  
|Adjustments for:                                                           |  |      |         |   |                      |   |          |                       |  |   |        |  
|Amortization of property, plant and equipment                              |  |      | 292.6   |   |                      |   | 277.2    |                       |  |   | 263.0  |  
|Amortization of intangible assets and other assets                         |  |      | 48.9    |   |                      |   | 39.5     |                       |  |   | 24.7   |  
|Impairment of goodwill and intangible assets (note 5)                      |  |      | 13.6    |   |                      |   | 671.2    |                       |  |   | 5.4    |  
|Impairment of property, plant and equipment (note 4(a))                    |  |      | 0.4     |   |                      |   | 19.1     |                       |  |   |       |  
|(Gain) loss on valuation and translation of financial instruments (note 3) |  |      | (61.5   | ) |                      |   | 3.7      |                       |  |   | 9.9    |  
|Amortization of financing costs and long-term debt discount (note 2)       |  |      | 10.2    |   |                      |   | 9.3      |                       |  |   | 4.8    |  
|Future income taxes (note 7)                                               |  |      | 147.6   |   |                      |   | 142.5    |                       |  |   | 64.4   |  
|Non-controlling interest                                                   |  |      | 23.8    |   |                      |   | 23.2     |                       |  |   | 19.3   |  
|Other                                                                      |  |      | 4.6     |   |                      |   | (0.3     | )                     |  |   | 4.3    |  
|                                                                           |  |      |         |   |                      |   |          |                       |  |   |        |  
|                                                                           |  |      | 1,002.4 |   |                      |   | 804.4    |                       |  |   | 718.9  |  
|Net change in non-cash balances related to operating activities            |  |      | (52.9   | ) |                      |   | (18.3    | )                     |  |   | 32.7   |  
|                                                                           |  |      |         |   |                      |   |          |                       |  |   |        |  
|Cash flows provided by continuing operating activities                     |  |      | 949.5   |   |                      |   | 786.1    |                       |  |   | 751.6  |  
|Cash flows provided by discontinued operating activities                   |  |      |        |   |                      |   |         |                       |  |   | 1.4    |  
|                                                                           |  |      |         |   |                      |   |          |                       |  |   |        |  
|Cash flows provided by operating activities                                |  |      | 949.5   |   |                      |   | 786.1    |                       |  |   | 753.0  |  
|                                                                           |  |      |        
|Cash flows related to investing activities:                                |  |      |         |   |                      |   |          |                       |  |   |        |  
|Business acquisitions, net of cash and cash equivalents (note 6)           |  |      | (4.6    | ) |                      |   | (146.7   | )                     |  |   | (438.6 | )
|Business disposals, net of cash and cash equivalents                       |  |      | 14.6    |   |                      |   | 6.4      |                       |  |   | 8.5    |  
|Additions to property, plant and equipment                                 |  |      | (491.1  | ) |                      |   | (465.6   | )                     |  |   | (430.1 | )
|Additions to intangible assets                                             |  |      | (111.5  | ) |                      |   | (637.6   | )                     |  |   | (38.6  | )
|Net change in temporary investments                                        |  |      | (29.8   | ) |                      |   |         |                       |  |   | 1.2    |  
|Acquisition of tax deductions from parent company (note 24)                |  |      | (6.3    | ) |                      |   | (18.4    | )                     |  |   | (14.9  | )
|Other                                                                      |  |      | 3.6     |   |                      |   | 4.4      |                       |  |   | 5.1    |  
|                                                                           |  |      |         |   |                      |   |          |                       |  |   |        |  
|Cash flows used in investing activities                                    |  |      | (625.1  | ) |                      |   | (1,257.5 | )                     |  |   | (907.4 | )
|                                                                           |  |      |         |   |                      |   |          |                       |  |   |        |  
|                                                                           |  |      |        
|Sub-total, balance carried forward                                         |  | $    | 324.4   |   |                      | $ | (471.4   | )                     |  | $ | (154.4 | )



F-7



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Years ended December 31, 2009, 2008, and 2007

(in millions of Canadian dollars)





|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|---------------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | -------------------- | - | ------ | -------------------- |  | - | ------ | -
|                                                                                                           |  | 2009 |        |   | 2008                 |   |        | 2007                 | 
|                                                                                                           |  |      |        |   | (restated,note 1(b)) |   |        | (restated,note 1(b)) | 
|Sub-total, balance brought forward                                                                         |  | $    | 324.4  |   |                      | $ | (471.4 | )                    |  | $ | (154.4 | )
|                                                                                                           |  |      |       
|Cash flows related to financing activities:                                                                |  |      |        |   |                      |   |        |                      |  |   |        |  
|Net change in bank indebtedness                                                                            |  |      | (10.5  | ) |                      |   | (4.8   | )                    |  |   | (6.6   | )
|Issuance of long-term debt, net of financing fees                                                          |  |      | 399.1  |   |                      |   | 463.8  |                      |  |   | 756.1  |  
|Net change under revolving and bridge bank facilities                                                      |  |      | (300.1 | ) |                      |   | 98.4   |                      |  |   | (56.7  | )
|Repayments of long-term debt                                                                               |  |      | (54.6  | ) |                      |   | (25.7  | )                    |  |   | (301.3 | )
|Repayment of the Additional Amount payable (note 14)                                                       |  |      |       |   |                      |   |       |                      |  |   | (127.2 | )
|Dividends                                                                                                  |  |      | (75.0  | ) |                      |   | (65.0  | )                    |  |   | (110.0 | )
|Dividends paid to non-controlling shareholders                                                             |  |      | (2.5   | ) |                      |   | (3.0   | )                    |  |   | (4.0   | )
|Other                                                                                                      |  |      | (2.7   | ) |                      |   | 2.7    |                      |  |   | (3.1   | )
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|Cash flow (used in) provided by financing activities                                                       |  |      | (46.3  | ) |                      |   | 466.4  |                      |  |   | 147.2  |  
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|                                                                                                           |  |      |       
|Net change in cash and cash equivalents                                                                    |  |      | 278.1  |   |                      |   | (5.0   | )                    |  |   | (7.2   | )
|Effect of exchange rate changes on cash and cash equivalents denominated in foreign currencies             |  |      | (0.6   | ) |                      |   | 1.4    |                      |  |   | (0.8   | )
|Cash and cash equivalents at beginning of year                                                             |  |      | 22.5   |   |                      |   | 26.1   |                      |  |   | 34.1   |  
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|Cash and cash equivalents at end of year                                                                   |  | $    | 300.0  |   |                      | $ | 22.5   |                      |  | $ | 26.1   |  
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|                                                                                                           |  |      |       
|Cash and cash equivalents consist of:                                                                      |  |      |        |   |                      |   |        |                      |  |   |        |  
|Cash                                                                                                       |  | $    | 26.0   |   |                      | $ | 9.9    |                      |  | $ | 6.8    |  
|Cash equivalents                                                                                           |  |      | 274.0  |   |                      |   | 12.6   |                      |  |   | 19.3   |  
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|                                                                                                           |  | $    | 300.0  |   |                      | $ | 22.5   |                      |  | $ | 26.1   |  
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|                                                                                                           |  |      |       
|Additional 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                                                                                        |  | $    | (31.2  | ) |                      | $ | 18.3   |                      |  | $ | (41.5  | )
|Inventories                                                                                                |  |      | 16.4   |   |                      |   | (30.2  | )                    |  |   | (6.4   | )
|Accounts payable and accrued charges                                                                       |  |      | (41.6  | ) |                      |   | 87.8   |                      |  |   | 35.5   |  
|Stock-based compensation                                                                                   |  |      | 7.1    |   |                      |   | (100.0 | )                    |  |   | 54.1   |  
|Other                                                                                                      |  |      | (3.6   | ) |                      |   | 5.8    |                      |  |   | (9.0   | )
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|                                                                                                           |  | $    | (52.9  | ) |                      | $ | (18.3  | )                    |  | $ | 32.7   |  
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|                                                                                                           |  |      |       
|Non-cash investing activities:                                                                             |  |      |        |   |                      |   |        |                      |  |   |        |  
|Additions to property, plant and equipment and intangible assets financed with accounts payable            |  | $    | 107.3  |   |                      | $ | 56.8   |                      |  | $ | 62.0   |  
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  
|                                                                                                           |  |      |       
|Cash interest payments                                                                                     |  | $    | 276.8  |   |                      | $ | 282.0  |                      |  | $ | 243.3  |  
|Cash income taxes payments (net of refunds)                                                                |  |      | 17.0   |   |                      |   | 24.4   |                      |  |   | (1.0   | )
|                                                                                                           |  |      |        |   |                      |   |        |                      |  |   |        |  

See accompanying notes to consolidated financial statements.



F-8



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2009 and 2008

(in millions of Canadian dollars)



|                                           |  |      |         |                       |   |        
|------------------------------------------ |  | ---- | ------- | --------------------- | - | -------
|                                           |  | 2009 |         | 2008                 
|                                           |  |      |         | (restated, note 1(b))
|Assets                                     |  |      |         |                       |   |        
|                                           |  |     
|Current Assets:                            |  |      |         |                       |   |        
|Cash and cash equivalents                  |  | $    | 300.0   |                       | $ | 22.5   
|Temporary investments                      |  |      | 30.0    |                       |   | 0.2    
|Accounts receivable (note 8)               |  |      | 518.6   |                       |   | 483.7  
|Income taxes                               |  |      | 1.3     |                       |   | 9.4    
|Amounts receivable from parent company     |  |      | 8.2     |                       |   | 5.3    
|Inventories (note 9)                       |  |      | 176.1   |                       |   | 193.5  
|Prepaid expenses                           |  |      | 28.7    |                       |   | 31.0   
|Future income taxes (note 7)               |  |      | 47.9    |                       |   | 102.8  
|                                           |  |      |         |                       |   |        
|                                           |  |      | 1,110.8 |                       |   | 848.4  
|                                           |  |     
|Property, plant and equipment (note 10)    |  |      | 2,439.8 |                       |   | 2,215.2
|Intangible assets (note 11)                |  |      | 1,052.7 |                       |   | 985.9  
|Derivative financial instruments (note 23) |  |      | 49.0    |                       |   | 317.9  
|Other assets (note 12)                     |  |      | 122.1   |                       |   | 98.0   
|Future income taxes (note 7)               |  |      | 12.5    |                       |   | 12.3   
|Goodwill (note 13)                         |  |      | 3,506.1 |                       |   | 3,516.7
|                                           |  |      |         |                       |   |        
|                                           |  | $    | 8,293.0 |                       | $ | 7,994.4
|                                           |  |      |         |                       |   |        



F-9



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

December 31, 2009 and 2008

(in millions of Canadian dollars)





|                                               |  |      |          |   |                       |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | --------------------- | - | -------- | -
|                                               |  | 2009 |          |   | 2008                  |  
|                                               |  |      |          |   | (restated, note 1(b)) |  
|Liabilities and shareholders equity           |  |      |          |   |                       |   |          |  
|                                               |  |     
|Current liabilities:                           |  |      |          |   |                       |   |          |  
|Bank indebtedness                              |  | $    | 1.0      |   |                       | $ | 11.5     |  
|Accounts payable and accrued charges           |  |      | 792.2    |   |                       |   | 793.7    |  
|Deferred revenue                               |  |      | 234.7    |   |                       |   | 224.0    |  
|Income taxes                                   |  |      | 16.3     |   |                       |   | 9.8      |  
|Current portion of long-term debt (note 15)    |  |      | 67.8     |   |                       |   | 37.1     |  
|                                               |  |      |          |   |                       |   |          |  
|                                               |  |      | 1,112.0  |   |                       |   | 1,076.1  |  
|                                               |  |     
|Long-term debt (note 15)                       |  |      | 3,693.4  |   |                       |   | 4,298.7  |  
|Derivative financial instruments (note 23)     |  |      | 422.4    |   |                       |   | 117.3    |  
|Other liabilities (note 16)                    |  |      | 104.8    |   |                       |   | 97.7     |  
|Future income taxes (note 7)                   |  |      | 413.4    |   |                       |   | 356.9    |  
|Non-controlling interest (note 17)             |  |      | 116.2    |   |                       |   | 105.7    |  
|                                               |  |     
|Shareholders equity:                          |  |      |          |   |                       |   |          |  
|Capital stock (note 18)                        |  |      | 1,752.4  |   |                       |   | 1,752.4  |  
|Contributed surplus (note 24)                  |  |      | 3,223.1  |   |                       |   | 3,214.5  |  
|Deficit                                        |  |      | (2,524.6 | ) |                       |   | (2,974.7 | )
|Accumulated other comprehensive loss (note 20) |  |      | (20.1    | ) |                       |   | (50.2    | )
|                                               |  |      |          |   |                       |   |          |  
|                                               |  |      | 2,430.8  |   |                       |   | 1,942.0  |  
|                                               |  |     
|Commitments and contingencies (note 21)        |  |      |          |   |                       |   |          |  
|Guarantees (note 22)                           |  |      |          |   |                       |   |          |  
|Subsequent events (note 28)                    |  |      |          |   |                       |   |          |  
|                                               |  |      |          |   |                       |   |          |  
|                                               |  | $    | 8,293.0  |   |                       | $ | 7,994.4  |  
|                                               |  |      |          |   |                       |   |          |  

See accompanying notes to consolidated financial statements.



F-10



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

SEGMENTED INFORMATION

Years ended December 31, 2009, 2008 and 2007

(in millions of Canadian dollars)



Quebecor Media Inc. (Quebecor Media or the Company) operates in the following industry segments: Telecommunications (formerly Cable), News Media (formerly
Newspapers), Broadcasting, Leisure and Entertainment, and Interactive Technologies and Communications. The Telecommunications segment offers television distribution, Internet, business solutions, telephony and wireless services in Canada
and operates in the rental of movies or televisual products through its video on demand service or its distribution and rental stores. The News Media segment produces original content in Canada for all of Quebecor Medias platforms. Its
operations includes the printing, publishing and distribution of daily newspapers, weekly newspapers and directories in Canada and the operation of Internet sites in Canada, including French- and English-language portals and specialized sites. The
Broadcasting segment operates French- and English-language general-interest television networks, specialized television networks, magazine publishing and movie distribution businesses in Canada. The Leisure and Entertainment segment combines book
publishing and distribution, retail sales of CDs, books, digital video discs (DVD units), musical instruments and magazines in Canada, online sales of downloadable music and music production and distribution in Canada. The Interactive
Technologies and Communications segment offers e-commerce solutions through a combination of strategies, technology integration, IP solutions and creativity on the Internet and is active in Canada, the United States, Europe and Asia.

In the second quarter of 2009, the Company decided to adopt new names for two of its business segments. To reflect the Cable segments comprehensive
range of cable television, Internet access and telephone services, as well as the upcoming roll-out of its Advanced Wireless Services (AWS) network, its name has been changed to the Telecommunications segment. At the same time, in view
of the integration of content from Sun Media Corporation and Canoe Inc. (Canoe), the Newspapers segment has been renamed News Media, reflecting the creation of an integrated news and related products organization that produces
diverse, original content of high quality for all of Quebecor Medias platforms.

These segments are managed separately since they all
require specific market strategies. The Company assesses the performance of each segment based on income from continuing operations before amortization, financial expenses, (gain) loss on valuation and translation of financial instruments,
restructuring of operations, impairment of assets and other special items, impairment of goodwill and intangible assets, income taxes and non-controlling interest.

The accounting policies of each segment are the same as the accounting policies used for the consolidated financial statements.

Segment income includes income from sales to third parties and inter-segment sales. Transactions between segments are measured at exchange amounts between the parties.



|                                            |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                            |  | 2009 |         |   | 2008 |   |         | 2007 | 
|Revenues:                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Telecommunications                          |  | $    | 2,001.2 |   |      | $ | 1,804.2 |      |  | $ | 1,552.6 |  
|News Media                                  |  |      | 1,029.5 |   |      |   | 1,181.4 |      |  |   | 1,073.9 |  
|Broadcasting                                |  |      | 439.0   |   |      |   | 436.7   |      |  |   | 415.5   |  
|Leisure and Entertainment                   |  |      | 307.8   |   |      |   | 301.9   |      |  |   | 329.8   |  
|Interactive Technologies and Communications |  |      | 91.0    |   |      |   | 89.6    |      |  |   | 82.0    |  
|Inter-segment                               |  |      | (87.5   | ) |      |   | (83.7   | )    |  |   | (87.9   | )
|                                            |  |      |         |   |      |   |         |      |  |   |         |  
|                                            |  | $    | 3,781.0 |   |      | $ | 3,730.1 |      |  | $ | 3,365.9 |  
|                                            |  |      |         |   |      |   |         |      |  |   |         |  



F-11



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

SEGMENTED INFORMATION (CONTINUED)

Years ended December 31, 2009, 2008 and 2007

(in
millions of Canadian dollars)





|                                                                                                                                                                                                                                                                                                                  |  |      |         |                      |   |                       |  |   |       |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | -------------------- | - | --------------------- |  | - | ----- | -
|                                                                                                                                                                                                                                                                                                                  |  | 2009 |         | 2008                 |   | 2007                  | 
|                                                                                                                                                                                                                                                                                                                  |  |      |         | (restated,note 1(b)) |   | (restated, note 1(b)) | 
|Income from continuing operations before amortization, financial expenses, (gain) loss on valuation and translation of
financial instruments, restructuring of operations, impairment of assets and other special items, impairment of goodwill and intangible assets, income taxes and non-controlling interest: |  |      |         |                      |   |                       |  |   |       |  
|Telecommunications                                                                                                                                                                                                                                                                                                |  | $    | 972.9   |                      | $ | 797.9                 |  | $ | 642.3 |  
|News Media                                                                                                                                                                                                                                                                                                        |  |      | 199.5   |                      |   | 227.1                 |  |   | 232.8 |  
|Broadcasting                                                                                                                                                                                                                                                                                                      |  |      | 80.0    |                      |   | 66.0                  |  |   | 59.4  |  
|Leisure and Entertainment                                                                                                                                                                                                                                                                                         |  |      | 25.9    |                      |   | 20.2                  |  |   | 26.9  |  
|Interactive Technologies and Communications                                                                                                                                                                                                                                                                       |  |      | 4.1     |                      |   | 5.1                   |  |   | 2.8   |  
|Head Office                                                                                                                                                                                                                                                                                                       |  |      | 2.3     |                      |   | 3.3                   |  |   | (0.8  | )
|                                                                                                                                                                                                                                                                                                                  |  |      |         |                      |   |                       |  |   |       |  
|                                                                                                                                                                                                                                                                                                                  |  | $    | 1,284.7 |                      | $ | 1,119.6               |  | $ | 963.4 |  
|                                                                                                                                                                                                                                                                                                                  |  |      |         |                      |   |                       |  |   |       |  
|                                                                                                                                                                                                                                                                                                                  |  |      |        
|                                                                                                                                                                                                                                                                                                                  |  | 2009 |         | 2008                 |   | 2007                  | 
|                                                                                                                                                                                                                                                                                                                  |  |      |         | (restated,note 1(b)) |   | (restated,note 1(b))  | 
|Amortization:                                                                                                                                                                                                                                                                                                     |  |      |         |                      |   |                       |  |   |       |  
|Telecommunications                                                                                                                                                                                                                                                                                                |  | $    | 254.4   |                      | $ | 226.4                 |  | $ | 217.5 |  
|News Media                                                                                                                                                                                                                                                                                                        |  |      | 57.3    |                      |   | 62.1                  |  |   | 46.3  |  
|Broadcasting                                                                                                                                                                                                                                                                                                      |  |      | 14.8    |                      |   | 13.9                  |  |   | 12.7  |  
|Leisure and Entertainment                                                                                                                                                                                                                                                                                         |  |      | 9.9     |                      |   | 9.5                   |  |   | 7.6   |  
|Interactive Technologies and Communications                                                                                                                                                                                                                                                                       |  |      | 4.0     |                      |   | 4.3                   |  |   | 3.0   |  
|Head Office                                                                                                                                                                                                                                                                                                       |  |      | 1.1     |                      |   | 0.5                   |  |   | 0.6   |  
|                                                                                                                                                                                                                                                                                                                  |  |      |         |                      |   |                       |  |   |       |  
|                                                                                                                                                                                                                                                                                                                  |  | $    | 341.5   |                      | $ | 316.7                 |  | $ | 287.7 |  
|                                                                                                                                                                                                                                                                                                                  |  |      |         |                      |   |                       |  |   |       |  



F-12



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

SEGMENTED INFORMATION (continued)

Years ended December 31, 2009, 2008 and 2007

(in
millions of Canadian dollars)





|                                            |  |      |       |                      |   |                      |  |   |        
|------------------------------------------- |  | ---- | ----- | -------------------- | - | -------------------- |  | - | -------
|                                            |  | 2009 |       | 2008                 |   | 2007                
|                                            |  |      |       | (restated,note 1(b)) |   | (restated,note 1(b))
|Additions to property, plant and equipment: |  |      |       |                      |   |                      |  |   |        
|Telecommunications                          |  | $    | 434.1 |                      | $ | 356.7                |  | $ | 308.4  
|News Media                                  |  |      | 33.4  |                      |   | 77.1                 |  |   | 103.8  
|Broadcasting                                |  |      | 16.5  |                      |   | 17.8                 |  |   | 11.6   
|Leisure and Entertainment                   |  |      | 3.6   |                      |   | 8.9                  |  |   | 2.8    
|Interactive Technologies and Communications |  |      | 3.1   |                      |   | 3.6                  |  |   | 3.3    
|Head Office                                 |  |      | 0.4   |                      |   | 1.5                  |  |   | 0.2    
|                                            |  |      |       |                      |   |                      |  |   |        
|                                            |  | $    | 491.1 |                      | $ | 465.6                |  | $ | 430.1  
|                                            |  |      |       |                      |   |                      |  |   |        
|                                            |  |      |      
|                                            |  | 2009 |       | 2008                 |   | 2007                
|                                            |  |      |       | (restated,note 1(b)) |   | (restated,note 1(b))
|Additions to intangible assets:             |  |      |       |                      |   |                      |  |   |        
|Telecommunications                          |  | $    | 89.9  |                      | $ | 614.7                |  | $ | 21.7   
|News Media                                  |  |      | 10.3  |                      |   | 11.4                 |  |   | 12.2   
|Broadcasting                                |  |      | 7.0   |                      |   | 4.1                  |  |   | 4.6    
|Leisure and Entertainment                   |  |      | 4.0   |                      |   | 7.4                  |  |   | 0.1    
|Interactive Technologies and Communications |  |      | 0.3   |                      |   |                     |  |   |       
|                                            |  |      |       |                      |   |                      |  |   |        
|                                            |  | $    | 111.5 |                      | $ | 637.6                |  | $ | 38.6   
|                                            |  |      |       |                      |   |                      |  |   |        
|                                            |  |      |      
|Externally acquired intangible assets       |  | $    | 69.5  |                      | $ | 593.8                |  | $ | 17.1   
|Internally generated intangible assets      |  |      | 42.0  |                      |   | 43.8                 |  |   | 21.5   
|                                            |  |      |       |                      |   |                      |  |   |        
|                                            |  | $    | 111.5 |                      | $ | 637.6                |  | $ | 38.6   
|                                            |  |      |       |                      |   |                      |  |   |        
|                                            |  |      |      
|                                            |  |      |       | 2009                 |   | 2008                
|                                            |  |      |       |                      |   | (restated,note 1(b))
|Assets:                                     |  |      |       |                      |   |                      |  |   |        
|Telecommunications                          |  |      |       |                      | $ | 5,631.1              |  | $ | 5,275.2
|News Media                                  |  |      |       |                      |   | 1,839.2              |  |   | 1,788.4
|Broadcasting                                |  |      |       |                      |   | 468.3                |  |   | 438.2  
|Leisure and Entertainment                   |  |      |       |                      |   | 175.4                |  |   | 188.8  
|Interactive Technologies and Communications |  |      |       |                      |   | 88.4                 |  |   | 105.1  
|Head Office                                 |  |      |       |                      |   | 90.6                 |  |   | 198.7  
|                                            |  |      |       |                      |   |                      |  |   |        
|                                            |  |      |       |                      | $ | 8,293.0              |  | $ | 7,994.4
|                                            |  |      |       |                      |   |                      |  |   |        



F-13



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)



Quebecor Media is incorporated under the laws of
Quebec and is a subsidiary of Quebecor Inc. (Quebecor or the parent company).



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
|-- | -------------------------------------------

The consolidated financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles (Canadian 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 2008 and 2007 have been reclassified to conform to the presentation adopted for the year ended
December 31, 2009.



| | (b) | Changes in accounting policies:
| | --- | -------------------------------

On January 1, 2009, the Company adopted Canadian Institute of Chartered Accountants (CICA) Section 3064, Goodwill and Intangible Assets, which replaced Section 3062,
Goodwill and Other Intangible Assets, and which resulted in the withdrawal of Section 3450, Research and Development Costs and of Emerging Issues Committee (EIC) Abstract 27, Revenues and Expenditures During
the Pre-operating Period, and which also resulted in the amendment of Accounting Guideline (AcG) 11, Enterprises in the Development Stage. This new standard provides guidance on the recognition of intangible assets in
accordance with the definition of an asset and the criteria for asset recognition, whether those assets are separately acquired or internally developed, as well as clarifying the application of the concept of matching revenues and expenses. The
adoption of Section 3064 eliminated the deferral of start-up costs, which are now recognized as an expense when they are incurred. The Company adjusted opening deficit as if the new rules had always been applied in the past and the prior period
comparative figures have been restated. As well, the Company made reclassifications in order to present certain assets, mainly software, as intangible assets instead of presenting them as property, plant and equipment.

As a result of the adoption of these new rules, the following tables summarize the adjustments that were recorded in the consolidated
financial statements.

Consolidated balance sheet



|                              |  |                   |        |   |                   |   |       |  
|----------------------------- |  | ----------------- | ------ | - | ----------------- | - | ----- | -
|Increase (decrease)           |  | December 31, 2008 |        |   | December 31, 2007 |  
|Property, plant and equipment |  | $                 | (119.5 | ) |                   | $ | (67.5 | )
|Intangible assets             |  |                   | 127.3  |   |                   |   | 67.5  |  
|Other assets                  |  |                   | (9.6   | ) |                   |   | (3.7  | )
|Future income tax liabilities |  |                   | (0.5   | ) |                   |   | (1.0  | )
|Non-controlling interest      |  |                   | (0.3   | ) |                   |   | (0.4  | )
|Deficit                       |  |                   | 1.0    |   |                   |   | 2.3   |  

As of
December 31, 2006, the deficit was increased by $3.5 million following the adoption of these new rules.



F-14



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (b) | Changes in accounting policies (continued):
| | --- | -------------------------------------------



Consolidated statement of income



|                          |  |      |      |   |      |   |      |  
|------------------------- |  | ---- | ---- | - | ---- | - | ---- | -
|Increase (decrease)       |  | 2008 |      |   | 2007 |  
|Operating expenses        |  | $    | (0.1 | ) |      | $ | 0.5  |  
|Amortization              |  |      | (1.8 | ) |      |   | (2.7 | )
|Future income tax expense |  |      | 0.5  |   |      |   | 0.9  |  
|Non-controlling interest  |  |      | 0.1  |   |      |   | 0.1  |  
|Net income                |  |      | 1.3  |   |      |   | 1.2  |  

In June 2009, the
CICA amended Section 3862, Financial Instruments  Disclosures. This section has been amended to introduce new financial disclosure requirements, particularly with respect to fair value measurement of financial instruments and
entity exposure to liquidity risk. On December 31, 2009, the Company adopted the amendments to this section. All the new financial disclosure requirements related to this section are presented in note 23. These amendments did not affect the
consolidated financial results.



| | (c) | Foreign currency translation:
| | --- | -----------------------------

Financial statements of self-sustaining foreign operations are translated using the rate in effect at the balance sheet date for asset and liability items, and using the average exchange rates during the
year for revenues and expenses. Adjustments arising from this translation are recorded in other comprehensive income and are reclassified in income only when a reduction in the investment in these foreign operations is realized.

Foreign currency transactions are translated using the temporal method. Translation gains and losses are included in financial expenses or in
gain or loss on valuation and translation of financial instruments, unless hedge accounting is used.



| | (d) | 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. Although these estimates are based on managements best knowledge of the amount, event or actions, actual results could differ from these estimates. The following significant areas
require management to use assumptions and make estimates:



| |  |  | impairment testing of goodwill, intangible assets and property, plant and equipment;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | business purchase price allocation;
| | - |  | -----------------------------------



| |  |  | fair value of financial instruments;
| | - |  | ------------------------------------



| |  |  | cost and liabilities related to pension and postretirement benefit plans;
| | - |  | -------------------------------------------------------------------------



| |  |  | allowance for doubtful accounts, provision for obsolescence and allowance for sales returns;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | provisions such as legal contingencies and restructuring of operations;
| | - |  | -----------------------------------------------------------------------



| |  |  | residual value and useful life of assets subject to amortization;
| | - |  | -----------------------------------------------------------------



| |  |  | future income taxes;
| | - |  | --------------------



| |  |  | stock-based compensation.
| | - |  | -------------------------



F-15



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



| | (e) | Impairment of long-lived assets:
| | --- | --------------------------------

The Company reviews long-lived assets with definite useful lives whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment test is
done when the carrying amount of an asset or a group of assets held for use exceeds the sum of the undiscounted cash flows expected from its use and eventual disposition. Measurement of an impairment loss is based on the amount by which the carrying
amount of a group of assets exceeds its fair value. Fair value is determined using quoted market prices, when available, or using accepted valuation techniques such as the discounted future cash flows method.



| | (f) | Revenue recognition:
| | --- | --------------------

The Company recognizes its operating revenues when the following criteria are met:



| |  |  | persuasive evidence of an arrangement exists;
| | - |  | ---------------------------------------------



| |  |  | delivery has occurred or services have been rendered;
| | - |  | -----------------------------------------------------



| |  |  | the sellers price to the buyer is fixed or determinable; and
| | - |  | -------------------------------------------------------------



| |  |  | the collection of the sale is reasonably assured.
| | - |  | -------------------------------------------------

The portion of revenue that is unearned is recorded under Deferred revenue when customers are invoiced.

Revenue recognition policies for each of the Companys main segments are as follows:

Telecommunications

The Telecommunications segment provides services under arrangements with multiple
deliverables, for which there are two separate accounting units: one for subscriber services (cable television, Internet, IP telephony or wireless telephone, including connecting fees) and the other for equipment sales to subscribers. Components of
multiple deliverable arrangements are separately accounted for, provided the delivered elements have stand-alone value to the customer and the fair value of any undelivered elements can be objectively and reliably determined.

Cable connection fee revenues are deferred and recognized as revenues over the estimated average period that subscribers are expected to
remain connected to the network. The incremental and direct costs related to cable connection fees, in an amount not exceeding the revenue, are deferred and recognized as an operating expense over the same period. The excess of these costs over the
related revenues is recognized immediately in income. Operating revenues from cable and other services, such as Internet access, IP telephony and wireless telephone, are recognized when services are rendered. Revenues from equipment sales to
subscribers and their costs are recognized in income when the equipment is delivered and, in the case of wireless telephones, revenues from equipment sales are recognized in income when the telephone is delivered and activated. Revenues from video
rentals are recorded as revenue when services are provided. Promotional offers related to subscriber services are accounted for as a reduction in the related service revenue over the period of performance of the service contract. Promotional offers
related to equipment, including wireless telephones, are accounted for as a reduction in the related equipment sales when the equipment is delivered. Operating revenues related to service contracts are recognized in income over the life of the
specific contracts on a straight-line basis over the period in which the services are provided.

News Media

Revenues of the News Media segment derived from circulation are recognized when the publication is delivered, net of provisions for
estimated returns based on the segments historical rate of returns. Advertising revenues are recognized also when the publication is delivered. Revenues from the distribution of publications and products are recognized upon delivery, net of
provisions for estimated returns.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|-- | -------------------------------------------------------



| | (f) | Revenue recognition (continued):
| | --- | --------------------------------



Broadcasting

Revenues of the Broadcasting segment derived from the sale of advertising airtime are recognized when the advertisement has been broadcast.
Revenues derived from subscriptions to specialty television channels are recognized on a monthly basis at the time service is rendered. Revenues derived from circulation from publishing activities are recognized when the publication is delivered,
net of provisions for estimated returns based on the segments historical rate of returns. Revenues from advertising related to publishing activities are also recognized when the publication is delivered.

Revenues derived from the distribution of televisual products and movies and from television program rights are recognized over the period
of broadcasting or the period that movies are presented in theatre, when the customer can begin exploitation, exhibition or sale, and the licence period of the arrangement has begun.

Theatrical revenues are recognized over the period of presentation and are based on a percentage of revenues generated by movie theatres.
Revenues generated from the distribution of DVDs are recognized at the time of their delivery, less a provision for estimated returns, or are accounted for based on a percentage of retail sales.

Leisure and Entertainment

Revenues derived from retail stores, book publishing and distribution activities are recognized on delivery of the products, net of provisions for estimated returns based on the segments historical
rate of returns.



| | (g) | Barter transactions:
| | --- | --------------------

In the normal course of operations, the News Media and the Broadcasting segments offer advertising in exchange for goods and services. Revenues thus earned and expenses incurred are accounted for on the basis of the fair value of the goods
and services obtained.

For the year ended December 31, 2009, the Company recorded $19.8 million of barter advertising
($20.2 million in 2008 and $19.0 million in 2007).



| | (h) | Financial instruments:
| | --- | ----------------------

Classification, recognition and measurement:

Financial instruments are classified as held-for-trading,
available-for-sale, held-to-maturity, loans and receivables, or other financial liabilities, and measurement in subsequent periods depends on their classification. The Company has classified its financial instruments (except derivative financial
instruments) as follows:



Held for trading

Loans and receivables

Available-for-sale

Other liabilities     Cash and cash equivalents       Temporary
investments       Bank indebtedness

     Accounts receivable       Amounts
receivable from parent company       Loans and other long-term receivables included in Other assets

     Other portfolio investments included in Other assets

     Accounts payable and accrued charges       Long-term
debt       Other long-term liabilities




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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|-- | -------------------------------------------------------



| | (h) | Financial instruments (continued):
| | --- | ----------------------------------



Classification, recognition and measurement (continued):



Financial instruments held-for-trading are measured at fair value with changes
recognized in income as gain or loss on valuation and translation of financial instruments. Available-for-sale portfolio investments are measured at fair value or at cost in the case of equity investments that do not have a quoted market price in an
active market. Changes in fair value are recorded in other comprehensive income. Financial assets classified as loans and receivables and other financial liabilities are measured at amortized cost, using the effective interest rate method of
amortization.

Financing fees related to long-term financing are capitalized in reduction of long-term debt and amortized using
the effective interest rate method.

Derivative financial instruments and hedge accounting:

The Company uses various derivative financial instruments to manage its exposure to fluctuations in foreign currency exchange rates and
interest rates. The Company does not hold or use any derivative financial instruments for trading purposes. Under hedge accounting, the Company documents all hedging relationships between hedging items and hedged items, as well as its strategy for
using hedges and its risk-management objective. It also designates its derivative financial instruments as either fair value hedges or cash flow hedges. The Company assesses the effectiveness of derivative financial instruments when the hedge is put
in place and on an ongoing basis.

The Company enters into the following types of derivative financial instruments:



| |  |  | The Company uses foreign exchange forward contracts to hedge the foreign currency rate exposure on (i) anticipated equipment or inventory
purchases in a foreign currency and (ii) principal payments on long-term debt in a foreign currency. These foreign exchange forward contracts are designated as cash flow hedges.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company uses cross-currency interest rate swaps to hedge (i) the foreign currency rate exposure on interest and principal payments on foreign
currency denominated debt and/or (ii) the fair value exposure on certain debt resulting from changes in interest rates. The cross-currency interest rate swaps that set all future interest and principal payments on U.S.-denominated debt in fixed
Canadian dollars are designated as cash flow hedges. The Companys cross-currency interest rate swaps that set all future interest and principal payments on U.S.-denominated debt in fixed Canadian dollars, in addition to converting the interest
rate from a fixed rate to a floating rate, or converting a floating rate index to another floating rate index, are designated as fair value hedges.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company uses interest rate swaps to manage the fair value exposure on certain debt resulting from changes in interest rates. These swap agreements
require a periodic exchange of payments without the exchange of the notional principal amount on which the payments are based. These interest rate swaps are designated as fair value hedges when they convert the interest rate from a fixed rate to a
floating rate, or as cash flow hedges when they convert the interest rate from a floating rate to a fixed rate.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|-- | -------------------------------------------------------



| | (h) | Financial instruments (continued):
| | --- | ----------------------------------



Derivative financial instruments and hedge accounting (continued):



Under hedge accounting, the Company applies the following accounting policies:



| |  |  | For derivative financial instruments designated as fair value hedges, changes in the fair value of the hedging derivative recorded in income are
substantially offset by changes in the fair value of the hedged item to the extent that the hedging relationship is effective. When a fair value hedge is discontinued, the carrying value of the hedged item is no longer adjusted and the cumulative
fair value adjustments to the carrying value of the hedged item are amortized to income over the remaining term of the original hedging relationship.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For derivative financial instruments designated as cash flow hedges, the effective portion of a hedge is reported in other comprehensive income until
it is recognized in income during the same period in which the hedged item affects income, while the ineffective portion is immediately recognized in the consolidated statements of income. When a cash flow hedge is discontinued, the amounts
previously recognized in accumulated other comprehensive income are reclassified to income when the variability in the cash flows of the hedged item affects income.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any change in the fair value of these derivative financial instruments recorded in income is included in gain or loss on valuation and
translation of financial instruments. Interest expense on hedged long-term debt is reported at the hedged interest and foreign currency rates.

Derivative financial instruments that are ineffective or that are not designated as hedges, including derivatives that are embedded in financial or non-financial contracts that are not closely related to
the host contracts, are reported on a mark-to-market basis in the consolidated balance sheets. Any change in the fair value of these derivative financial instruments is recorded in the consolidated statements of income as gain or loss on valuation
and translation of financial instruments.



| | (i) | Cash and cash equivalents and temporary investments:
| | --- | ----------------------------------------------------

Cash and cash equivalents include highly liquid investments purchased three months or less from maturity and are recorded at fair value. As of December 31, 2009, these highly liquid investments
consisted of Bankers acceptances and term deposits.

Temporary investments consisted of high-quality money market
instruments as of December 31, 2009. These temporary investments, classified as held-for-trading, are recorded at fair value.



| | (j) | Tax credits and government assistance:
| | --- | --------------------------------------

The Broadcasting and the Leisure and Entertainment segments have access to several government programs designed to support production and distribution of televisual products and movies, as well as music
products, magazine and book publishing in Canada. In addition, the Interactive Technologies and Communications and the Leisure and Entertainment segments receive tax credits mainly related to their research and development activities and publishing
activities. The government financial assistance is accounted for as revenue or as a reduction in related costs, whether capitalized and amortized or expensed, in the year the costs are incurred and when the conditions of the government programs are
met.



| | (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 estimated selling price in the ordinary course of
business, less the estimated costs of completion and the estimated costs necessary to make the sale. Work in progress is valued at the pro-rata billing value of the work completed.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|-- | -------------------------------------------------------



| | (k) | Inventories (continued):
| | --- | ------------------------



In particular, the Broadcasting segment inventories, which are primarily comprised of
programs, broadcast and distribution rights, are accounted for as follows:



| | (i) | Programs produced and productions in progress
| | --- | ---------------------------------------------

Programs produced and productions in progress related to broadcasting activities are accounted for at the lesser of cost and net realizable value. Cost includes direct charges for goods and services and
the share of labour and general expenses related to each production. The cost of each program is charged to operating expenses when the program is broadcast.



| | (ii) | Broadcast rights
| | ---- | ----------------

Broadcast rights are essentially contractual rights allowing the limited or unlimited broadcast of televisual products or movies. The Broadcasting segment records the broadcast rights acquired as inventory and the obligations incurred under
a licence agreement as a liability when the broadcast period begins and all of the following conditions have been met: (a) the cost of each program, movies or series is known or can be reasonably determined; (b) the programs, movies or
series have been accepted in accordance with the conditions of the broadcast licence agreement; (c) the programs, movies or series are available for first showing or telecast.

Amounts paid for broadcast rights before all of the above conditions are met are recorded as prepaid broadcast rights.

Broadcast rights are classified as short or long term, based on managements estimate of the broadcast period. These rights are charged
to operating expenses when televisual products and movies are broadcast over the contract period, using a method based on future revenues and the estimated number of showings. Broadcast rights are reduced to their net realizable value, when it
exceeds cost. Broadcast rights payable are classified as current or long-term liabilities based on the payment terms included in the licence.



| | (iii) | Distribution rights
| | ----- | -------------------

Distribution rights include costs to acquire distribution rights for televisual products and movies and other operating costs incurred that generate future economic benefits. The net realizable value of distribution rights represents the
Broadcasting segments share of the future estimated revenues to be derived, net of future costs. The Broadcasting segment records an inventory and a liability for the distribution rights and obligations incurred under a licence agreement when
(a) the cost of the licence is known or can be reasonably estimated, (b) the televisual product and movie has been accepted in accordance with the conditions of the licence agreement, and (c) the televisual product or movie is
available for distribution.

Amounts paid for distribution rights before all of the above conditions are met are recorded as
prepaid distribution rights. Distribution rights are charged to operating expenses using the individual film forecast computation method based on actual revenues realized over total revenues expected.

Estimates of revenues related to the distribution of television products and movies are examined periodically by Broadcasting segment
management and revised as necessary. The carrying value of rights is reduced to net realizable value, as necessary, based on this assessment.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|-- | -------------------------------------------------------



| | (l) | Income taxes:
| | --- | -------------

The
Company uses the liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the carrying amounts of
existing assets and liabilities in the financial statements and their respective tax bases. Future income tax assets and liabilities are measured using substantively enacted tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect of a change in tax rates on future income tax assets and liabilities is recognized in income in the period that includes the substantive enactment date. A valuation allowance is established, if
necessary, to reduce any future income tax asset to an amount that is more likely than not to be realized.

In the course of
the Companys operations, there are a number of uncertain tax positions due to the complexity of certain transactions and due to the fact that related tax interpretations and legislation are continually changing. When a tax position is
uncertain, the Company recognizes an income tax benefit or reduces an income tax liability only when it is probable that the tax benefit will be realized in the future or that the income tax liability is no longer probable.



| | (m) | Long-term investments:
| | --- | ----------------------

Investments in companies subject to significant influence are accounted for by the equity method. Carrying values of investments are reduced to estimated fair values if there is other than a temporary decline in the value of the investment.



| | (n) | Property, plant and equipment:
| | --- | ------------------------------

Property, plant and equipment are stated at cost, net of government grants and investment tax credits. Cost represents acquisition or construction costs, including preparation, installation and testing
costs and interest incurred with respect to the property, plant and equipment until they are ready for commercial production. In the case of projects to construct and connect receiving and distribution networks of cable and wireless, the cost
includes equipment, direct labour and direct overhead costs. Projects under development may also include advances for equipment under construction. Expenditures for additions, improvements and replacements are capitalized, whereas maintenance and
repair expenditures are expensed as incurred.

Amortization is principally calculated on a straight-line basis over the
following estimated useful lives:



|                                                       |  |                      
|------------------------------------------------------ |  | ---------------------
|Assets                                                 |  | Estimated useful life
|Buildings                                              |  | 25 to 40 years       
|Machinery and equipment                                |  | 3 to 20 years        
|Receiving, distribution and telecommunication networks |  | 3 to 20 years        

Leasehold improvements are amortized over the shorter of the term of the lease and economic life.

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 for
these assets undeterminable.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|-- | -------------------------------------------------------



| | (o) | Goodwill and other intangible assets:
| | --- | -------------------------------------

Goodwill and intangible assets with indefinite useful lives are not amortized.

Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test is carried out in two steps. In the first step, the carrying amount of the
reporting unit is compared to its fair value. When the fair value of a reporting unit exceeds its carrying amount, then the goodwill of the reporting unit is considered not to be impaired and the second step is not required. The second step of the
impairment test is carried out when the carrying amount of a reporting unit exceeds its fair value, in which case the implied fair value of the reporting units goodwill is compared to its carrying amount to measure the amount of the impairment
loss, if any. When the carrying amount of the reporting units goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess.

Intangible assets acquired, such as broadcasting licences and mastheads that have an indefinite useful life, are also tested for impairment
annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test compares the carrying amount of the intangible asset to its fair value, and an impairment loss is recognized in the
consolidated statements of income for the excess, if any.

The cost of the spectrum licences for AWS includes acquisition costs
and interest incurred during the development period of the wireless network project until the network is ready for commercial service. As of December 31, 2009, the AWS network is not ready for commercial use.

Intangible assets with definite useful lives are amortized over their useful life using the straight-line method over the following periods:



|                                     |  |                      
|------------------------------------ |  | ---------------------
|Assets                               |  | Estimated useful life
|Software                             |  | 3 to 7 years         
|Customer relationships               |  | 3 to 10 years        
|Non-competition agreements and other |  | 3 to 5 years         

Internally generated intangible assets are mainly comprised of internal costs in connection with the development of software to be used internally or for providing services to customers. These costs are capitalized when the development
stage of the software application begins and costs incurred prior to this stage are recognized as expenses.



| | (p) | Stock-based compensation:
| | --- | -------------------------

The compensation cost attributable to stock-based awards to employees that call for settlement in cash or other assets at the option of the employee is recognized in operating expenses over the vesting period. Changes in the intrinsic value
of the stock option awards between the grant date and the measurement date result in a change in the liability and compensation cost.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|-- | -------------------------------------------------------



| | (q) | Pension plans and postretirement benefits:
| | --- | ------------------------------------------

The Company offers defined contribution pension plans and defined benefit pension plans to some of its employees.



| | (i) | Defined contribution pension plans:
| | --- | -----------------------------------

Under its defined contribution pension plans, the Company pays fixed contributions to participating employee pension plans and has no legal or constructive obligation to pay further amounts. Obligations
for contributions to defined contribution pension plans are recognized as employee benefits in the consolidated statement of income when the contributions become due.



| | (ii) | Defined benefit pension and postretirement plans:
| | ---- | -------------------------------------------------

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. Defined benefit pension costs recognized in the consolidated statements of income include the
following:



| |  |  | 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 (except in certain pension plans for which past service costs are recognized
immediately in income as they are incurred) 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 and 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 of plan assets as of the end of the year to evaluate plan assets for the purpose of calculating the expected return on plan assets.

The Company also offers health, life and dental insurance plans to some of its retired employees. The cost of postretirement benefits is
determined using an accounting methodology similar to that for defined benefit pension plans. The related benefits of these plans are funded by the Company as they become due.



| | (r) | Rates subject to CRTC regulations:
| | --- | ----------------------------------

The Telecommunications 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 Commission (CRTC). Accordingly, the Telecommunications segments operating revenues could be affected by changes in regulations or decisions made
by this regulating body. The Company does not select accounting policies that differ from Canadian GAAP, even though the Company is subject to these regulations.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
|-- | -------------------------------------------------------



| | (s) | Future changes in accounting policies
| | --- | -------------------------------------

The CICA issued three new accounting standards in January 2009: Section 1582, Business Combinations, Section 1601, Consolidated Financial Statements, and Section 1602,
Non-controlling Interests, to converge the accounting for business combinations and the reporting of non-controlling interest to International Financial Reporting Standards (IFRS).

Section 1582, Business Combinations, replaces Section 1581, Business Combinations, and establishes new guidance on
the recognition and measurement of all assets and all liabilities of the acquired business at fair value. Non-controlling interests are measured at either their fair value or at their proportionate share of the fair value of identifiable assets and
liabilities. The measurement of consideration given now includes the fair value of any contingent consideration as of the acquisition date, and subsequent changes in fair value of the contingent consideration classified as a liability are recognized
in earnings. Acquisition-related costs are excluded from the purchase price and are expensed as incurred. In addition, restructuring costs related to a business combination are no longer part of the purchase price equation and are expensed as
incurred. Section 1582 applies prospectively to business combinations realized in or subsequent to the first annual reporting period beginning on or after January 1, 2011.

Section 1601, Consolidated Financial Statements, and Section 1602, Non-controlling Interests, which together replace
Section 1600, Consolidated Financial Statements, establish new guidance on accounting for non-controlling interests and for transactions with non-controlling interest. The new sections require that non-controlling interest be presented
as a separate component of shareholders equity. In the statement of income, net income is calculated before non-controlling interest and is then attributed to shareholders and non-controlling interest. In addition, changes in the
Companys ownership interest in a subsidiary that do not result in a loss of control are now accounted for as equity transactions. These sections apply to interim and annual consolidated financial statements relating to financial years
beginning on or after January 1, 2011, and have to be adopted concurrently with Section 1582.

On
December 24, 2009, the CICAs EIC issued Abstract No.175 (EIC-175), Multiple Deliverable Revenue Arrangements, which will be applicable prospectively (with retrospective adoption permitted) to revenue arrangements with
multiple deliverables entered into or materially modified in the first annual period beginning on January 1, 2011. EIC-175 amends the guidance contained in EIC-142, Revenue Arrangements with Multiple Deliverables, and establishes
additional requirements regarding revenue recognition related to multiple deliverables as well as supplementary disclosures. The Company is evaluating the potential impact of adopting EIC-175 on its consolidated financial statements.



|2. | FINANCIAL EXPENSES:
|-- | -------------------



2009


2008


2007Interest on long-term debt

$
272.7


$
278.3


$
232.4Amortization of financing costs and long-term debt discount


10.2



9.3



4.8(Gain) loss on foreign currency translation on short-term monetary items


(4.7
)


4.9



3.0Other


0.1



(3.7
)


(5.1
)278.3



288.8



235.1Interest capitalized to the cost of:Property, plant and equipment


(6.7
)


(0.3
)


(5.0
)Intangible assets


(33.4
)


(12.5
)


(40.1
)


(12.8
)


(5.0
)$
238.2


$
276.0


$
230.1




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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|3. | (GAIN) LOSS ON VALUATION AND TRANSLATION OF FINANCIAL INSTRUMENTS:
|-- | ------------------------------------------------------------------



2009


2008


2007(Gain) loss on embedded derivatives and derivative financial instruments for which hedge accounting is not used

$
(13.9
)

$
(47.2
)

$
44.3(Gain) loss on foreign currency translation of financial instruments for which hedge accounting is not used


(24.6
)


34.3



(34.8
)(Gain) loss on the ineffective portion of fair value hedges


(23.0
)


16.6



(4.8
)Loss on revaluation of the Additional Amount payable










5.2$
(61.5
)

$
3.7


$
9.9




|4. | RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL ITEMS:
|-- | --------------------------------------------------------------------------



| | (a) | News Media
| | --- | ----------

Restructuring costs

The News Media segment has been facing a fundamental transformation underway in the
newspaper industry in recent years, as well as a difficult economic environment affecting its advertising revenues. In this context, the Company implemented various restructuring initiatives to reduce the News Media segments operating costs.
As a result of these initiatives, the News Media segment recorded restructuring costs of $26.3 million in 2009 ($33.3 million in 2008 and $9.9 million in 2007), mainly related to the elimination of positions at several
publications.

Continuity of restructuring costs payable



2009


2008Balance at beginning of year

$
29.7


$
6.0Workforce-reduction initiatives


26.3



33.3Payments


(24.0
)


(9.6
)Balance at end of year

$
32.0


$
29.7


Impairment of assets

The Company concluded that impairment tests were triggered by restructuring initiatives and the loss of an important printing contract in
2008. As a result, an impairment charge of $0.4 million related to certain buildings, equipment and machinery was recorded in 2009 ($19.1 million in 2008 and none in 2007).



| | (b) | Other segments
| | --- | --------------

In
2009, other segments recorded restructuring costs of $2.0 million ($2.3 million in 2008 and $1.7 million in 2007).



| | (c) | Other special items
| | --- | -------------------

In 2009, the Company recorded a loss on the sale of businesses and other special items of $0.9 million (a gain of $0.1 million in 2008 and a loss of $0.6 million in 2007).



F-25



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|5. | IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS:
|-- | ---------------------------------------------

2009 and 2008

In the fourth quarter of 2008, the Company determined
that the adverse financial and economic environment prevailing at that time triggered a goodwill impairment test in the reporting units of the News Media, Leisure and Entertainment, and Interactive Technologies and Communications segments. As a
result, the Company concluded that these reporting units goodwill was impaired. In the second quarter of 2009, the Company completed the goodwill impairment test and an additional impairment loss of $5.6 million was recorded as an
adjustment to the preliminary goodwill impairment loss of $631.0 million in the fourth quarter of 2008. The additional charge was allocated as follows: $1.7 million to the News Media segment, $1.2 million to the Leisure and
Entertainment segment, and $2.7 million to the Interactive Technologies and Communications segment.

In the second quarter
of 2009, the Company also recorded an impairment loss of $8.0 million on mastheads as a result of the completion of its 2009 annual impairment test. An impairment loss of $40.2 million was recorded on mastheads in the fourth quarter of 2008.

2007

In the fourth quarter of 2007, the Company concluded that the goodwill of a reporting unit in its Telecommunications segment, related to the DVDs and game rental operations in Ontario, was impaired.
Accordingly, an impairment charge of $5.4 million was recorded.



|6. | BUSINESS ACQUISITIONS:
|-- | ----------------------

During the years ended December 31, 2009, 2008, and 2007, the Company acquired or increased its interest in several businesses and has accounted for these by the purchase method. The results of operations of these businesses have been
included in the Companys consolidated financial statements from the dates of their respective acquisitions.

2009



| |  |  | In 2009, the Company increased its equity interest in TVA Group Inc. (TVA Group), Broadcasting segment, from 50.90% to 51.44% when TVA
Group repurchased 253,300 Class B shares for a total cash consideration of $2.6 million, resulting in goodwill of $0.2 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2009, the Company made additional contingent payments of $2.0 million resulting in goodwill of an equivalent amount.
| | - |  | -----------------------------------------------------------------------------------------------------------------------



F-26



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|6. | BUSINESS ACQUISITIONS (continued):
|-- | ----------------------------------



2008



| |  |  | On June 2, 2008, TVA Group repurchased 3,000,642 Class B shares at a price of $17.00 per share under a substantial issuer bid for a total
cash consideration of $51.4 million, resulting in goodwill of $4.3 million. The Companys equity interest in TVA Group increased from 45.24% to 50.90% following this transaction.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In February 2008, the Company acquired all of the non-controlling interest in Nurun Inc. (Nurun), Interactive Technologies and
Communications segment, pursuant to its offer to purchase the shares at a price of $4.75 per Common Share for a total cash consideration of $75.2 million, resulting in goodwill of $40.3 million. Common Shares of Nurun were
delisted from the Toronto Stock Exchange following this transaction.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company incurred and paid a contingent amount of $5.0 million in the first quarter of 2008 in relation to the 2005 acquisition of Sogides
Group Inc. (Sogides Group), Leisure and Entertainment segment. The payment was recorded as goodwill.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company acquired and/or increased its interest in various businesses, mainly in the News Media segment, for a total cash consideration of
$15.1 million, a contingent amount payable of $1.0 million as of December 31, 2008, and additional contingent payments totalling $6.0 million, based on the achievement of specific conditions in the future. These acquisitions resulted
in goodwill of $11.1 million.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2007



| |  |  | In August 2007, the Company acquired all outstanding units of Osprey Media Income Fund, which subsequently became Osprey Media Publishing Inc.
(Osprey Media) as a result of a corporate reorganization, for a total cash consideration, excluding assumed debt, of $415.2 million (including transaction costs of $0.8 million). As part of the acquisition, the Company assumed the
debt of $161.8 million under Osprey Medias credit facilities (note 15(xiii)). Osprey Media is one of Canadas leading publishers of daily and non-daily newspapers, magazines and specialty publications. Its publications include
20 daily newspapers and 33 non-daily newspapers, together with shopping guides, magazines and other publications.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended December 31, 2007, the Company acquired or increased its interest in several businesses, mainly in the News Media segment,
for total consideration of $20.5 million, resulting in preliminary goodwill of $17.4 million, which was reduced by $2.3 million in 2008 when the purchase price allocation was finalized.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In January 2007, TVA Group and Sun Media Corporation paid the balance payable of $3.4 million related to the acquisition of SUN TV in 2004.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



F-27



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|6. | BUSINESS ACQUISITIONS (continued):
|-- | ----------------------------------



Business acquisitions for 2008 and 2007 are summarized as follows:



2008


2007OspreyMedia3


Other3


TotalAssets acquired:Cash and cash equivalents

$
0.5


$



$
0.5


$
0.5Non-cash current assets


1.1



38.5



0.4



38.9Property, plant and equipment


3.1



42.4



0.5



42.9Intangible assets1


18.8



233.7



3.2



236.9Other assets






0.3



0.4



0.7Goodwill2


60.7



360.4



15.1



375.5Non-controlling interest


73.0







1.9



1.9157.2



675.3



22.0



697.3Liabilities assumed:Bank indebtedness






(2.3
)






(2.3
)Non-cash current liabilities


(2.9
)


(27.3
)


(0.7
)


(28.0
)Long-term debt






(161.8
)






(161.8
)Other liabilities






(6.8
)






(6.8
)Future income taxes


(6.1
)


(61.9
)


(0.8
)


(62.7
)(9.0
)


(260.1
)


(1.5
)


(261.6
)Net assets acquired at fair value

$
148.2


$
415.2


$
20.5


$
435.7Consideration:Cash

$
147.2


$
415.2


$
20.5


$
435.7Contingent amount payable


1.0











$
148.2


$
415.2


$
20.5


$
435.7




| | 1 | In connection with the Osprey Media acquisition, intangible assets are mainly comprised of customer relationship and non-competition agreements with a
fair value of $130.3 million and mastheads with a fair value of $103.4 million.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2 | No amount of goodwill is deductible for tax purposes in 2009 ($0.7 million in 2008 and $3.1 million in 2007).
| | - | -------------------------------------------------------------------------------------------------------------



| | 3 | During the third quarter of 2008, the Company finalized certain purchase price allocations, mainly related to the acquisition of Osprey Media in
August 2007, which resulted in a reduction in property, plant and equipment of $11.9 million, an increase in intangible assets of $3.1 million, a reduction in other assets of $0.4 million, an increase in other liabilities of
$1.4 million, a reduction in future income tax liabilities of $3.5 million, and an increase in goodwill of $7.1 million.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-28



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|7. | INCOME TAXES:
|-- | -------------

Income
taxes on continuing operations are as follows:



2009

2008

2007(restated,note 1(b))

(restated,note 1(b))Current

$
29.7

$
12.7

$
11.3Future


147.6


142.5


64.4$
177.3

$
155.2

$
75.7


The following table reconciles income taxes at
the Companys domestic statutory tax rate of 30.9 % in 2009 (30.9 % in 2008 and 32.0 % in 2007) and income taxes in the consolidated statements of income:



2009


2008


2007(restated,note 1(b))


(restated,note 1(b))Income taxes at domestic statutory tax rate

$
223.5


$
(62.7
)

$
133.8Increase (reduction) resulting from:Effect of provincial tax rate differences


(0.4
)


(3.1
)


(0.9
)Effect of non-deductible charges, non-taxable income and differences between current and future tax rates


(23.7
)


11.5



(7.8
)Change in valuation allowance


(10.3
)


15.3



(3.6
)Change in future income tax balances due to a change in substantively enacted tax rates


(3.7
)






(35.9
)Tax consolidation transactions with parent company (note 24)


(14.2
)


(6.4
)


(7.7
)Impairment of goodwill


1.7



196.4



Other


4.4



4.2



2.2Income taxes

$
177.3


$
155.2


$
75.7




F-29



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|7. | INCOME TAXES (continued):
|-- | -------------------------



The tax effects of significant items comprising the Companys net future income tax
positions are as follows:



2009


2008(restated,note 1(b))Losses carryforwards

$
147.4


$
214.2Accounts payable and accrued charges


15.2



16.8Property, plant and equipment


(294.5
)


(239.1
)Goodwill, intangible assets and other assets


(107.5
)


(74.1
)Long-term debt and derivative financial instruments


(2.0
)


(10.5
)Other


13.5



3.0(227.9
)


(89.7
)Valuation allowance


(125.1
)


(152.1
)Net future income tax liabilities

$
(353.0
)

$
(241.8
)




F-30



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|7. | INCOME TAXES (continued):
|-- | -------------------------



The current and long-term future income tax assets and liabilities are as follows:



2009


2008(restated,note 1(b))Future income tax assets:Current

$
47.9


$
102.8Long-term


12.5



12.360.4



115.1Future income tax liabilities:Long-term


(413.4
)


(356.9
)Net future income tax liabilities

$
(353.0
)

$
(241.8
)


As of December 31, 2009, the Company had operating loss carryforwards for income tax purposes of
$113.9 available to reduce future taxable income, including $86.8 million that will expire between 2026 and 2029 and $27.1 million that can be carried forward indefinitely. The Company also had capital losses of $836.9 million that can be carried
forward indefinitely and applied only against future capital gains.

The Company has not recognized a future income tax
liability for the undistributed earnings of its subsidiaries in the current or prior years since the Company does not expect to sell or repatriate funds from those investments, in which case the undistributed earnings might become taxable. Any such
liability cannot reasonably be determined at the present time.



|8. | ACCOUNTS RECEIVABLE:
|-- | --------------------



2009

2008Trade

$
462.6

$
426.7Other


56.0


57.0$
518.6

$
483.7




F-31



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|9. | INVENTORIES:
|-- | ------------



2009

2008Raw materials and supplies

$
27.3

$
31.0Work in progress


14.3


17.3Finished goods


83.4


91.6Programs, broadcast and distribution rights


51.1


53.6$
176.1

$
193.5


Cost of inventories included in operating
expenses amounted to $787.3 million in 2009 ($823.1 million in 2008 and $806.6 million in 2007). Write-downs of inventories and programs, broadcast and distribution rights totalling $5.8 million were recognized in cost of sales in 2009 ($6.8 million
in 2008 and $6.7 million in 2007).



|10. | PROPERTY, PLANT AND EQUIPMENT:
|--- | ------------------------------



Cost

Accumulatedamortization/depreciation

2009Net amountLand

$
41.2

$


$
41.2Buildings and leasehold improvements


403.2


141.6


261.6Machinery and equipment


847.4


352.1


495.3Receiving, distribution and telecommunication networks


2,840.7


1,363.9


1,476.8Projects under development


164.9





164.9$
4,297.4

$
1,857.6

$
2,439.8




Cost

Accumulatedamortization/depreciation

2008(restated,note 1(b))Net amountLand

$
40.7

$


$
40.7Buildings and leasehold improvements


387.0


132.3


254.7Machinery and equipment


865.6


426.1


439.5Receiving, distribution and telecommunication networks


2,466.2


1,086.5


1,379.7Projects under development


100.6





100.6$
3,860.1

$
1,644.9

$
2,215.2




F-32



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|11. | INTANGIBLE ASSETS:
|--- | ------------------



Cost

Accumulatedamortization/depreciation

2009Net amountAWS spectrum licences1

$
599.6

$


$
599.6Software


259.6


127.8


131.8Customer relationships, non-competition agreements and other


200.8


68.9


131.9Mastheads


105.6


48.2


57.4Broadcasting licences


87.0





87.0Projects under development


45.0





45.0$
1,297.6

$
244.9

$
1,052.7




Cost

Accumulatedamortization/depreciation

2008(restated,note 1(b))Net amountAWS spectrum licences1

$
567.1

$


$
567.1Software


208.6


103.5


105.1Customer relationships, non-competition agreements and other


193.5


44.5


149.0Mastheads


105.6


40.2


65.4Broadcasting licences


88.3





88.3Projects under development


11.0





11.0$
1,174.1

$
188.2

$
985.9




| | 1 | As a result of the spectrum auction for AWS that ended on July 21, 2008, the Company acquired 17 new spectrum licences for AWS, covering all
of the province of Quebec and certain areas of Ontario, for an aggregate amount of $554.6 million, which was fully paid by its Telecommunications segment in the third quarter of 2008. In addition, interest costs of $32.5 million were
capitalized to the cost of these licences in 2009 ($12.5 million in 2008). The spectrum licences were issued by Industry Canada on December 23, 2008 for an initial term of 10 years.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-33



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|12. | OTHER ASSETS:
|--- | -------------



2009

2008(restated,note 1(b))Programs, broadcast and distribution rights

$
39.0

$
31.8Deferred pension charge (note 25)


28.8


22.9Deferred connection costs


28.6


19.3Other


25.7


24.0$
122.1

$
98.0




|13. | GOODWILL:
|--- | ---------

For the years
ended December 31, 2009 and 2008, the changes in the carrying amounts of goodwill were as follows:



Balance as atDecember 31,2008

Businessacquisitions(disposals)


Impairment(note 5)


Adjustment ofpurchase priceallocation andother


2009Balance as
atDecember 31,2009Telecommunications

$
2,575.0

$
(4.9
)

$



$



$
2,570.1News Media


818.9


1.0



(1.7
)


(0.7
)


817.5Broadcasting


54.7


0.2











54.9Leisure and Entertainment


38.4






(1.2
)






37.2Interactive Technologies and Communications


29.7


1.0



(2.7
)


(1.6
)


26.4Total

$
3,516.7

$
(2.7
)

$
(5.6
)

$
(2.3
)

$
3,506.1




Balance as atDecember 31,2007

Businessacquisitions(disposals)


Impairment(note 5)


Adjustment ofpurchase priceallocation andother


2008Balance as
atDecember 31,2008Telecommunications

$
2,576.9

$
(1.9
)

$



$



$
2,575.0News Media


1,397.1


9.7



(595.0
)


7.1



818.9Broadcasting


51.4


4.3







(1.0
)


54.7Leisure and Entertainment


43.4


5.0



(10.0
)






38.4Interactive Technologies and Communications


12.5


40.9



(26.0
)


2.3



29.7Total

$
4,081.3

$
58.0


$
(631.0
)

$
8.4


$
3,516.7




F-34



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|14. | ADDITIONAL AMOUNT PAYABLE:
|--- | --------------------------

In July 2007, the Company exercised its right to repay the Additional Amount payable in the amount of $127.2 million. Until its repayment, the value of the Additional Amount payable, resulting from the repurchase of the redeemable preferred
shares of a subsidiary in 2003, fluctuated based on a formula established as per the repurchase agreement. Changes in the amount payable were recorded as a loss on valuation and translation of financial instruments in the consolidated statements of
income.



|15. | LONG-TERM DEBT:
|--- | ---------------



Effective interestrate as ofDecember 31, 2009


Year of maturity

2009


2008Quebecor Media:Bank credit facilities (i)

2.27
%

2011-2013

$
422.4


$
505.4Other credit facility (ii)

0.98
%

2015


63.8



74.4Senior Notes (iii)

7.75
%

2016


551.2



634.8Senior Notes (iv)

8.81
%

2016


698.1



799.11,735.5



2,013.7Videotron and its subsidiaries (v):Bank credit facilites (vi)


%

2012-2018






207.7Senior Notes (vii)

6.59
%

2014


689.2



800.4Senior Notes (viii)

6.44
%

2015


183.4



212.4Senior Notes (ix)

9.37
%

2018


741.2



546.11,613.8



1,766.6Sun Media Corporation and its subsidiaries (v):Bank credit facilities (x)

1.98
%

2012


38.3



48.5Senior Notes (xi)

7.88
%

2013


213.8



245.7252.1



294.2Osprey Media (v):Bank credit facilities (xii)

2.38
%

2011


114.2



132.3TVA Group and its subsidiaries (v):Bank credit facilities (xiii)

5.21
%

2012-2014


89.9



93.8Total long-term debt







3,805.5



4,300.6Change in fair value related to hedged interest rate risk







16.8



52.0Adjustments related to embedded derivatives







(17.1
)


24.7Financing fees, net of amortization







(44.0
)


(41.5
)(44.3
)


35.23,761.2



4,335.8Less current portion:







67.8



37.1$
3,693.4


$
4,298.7




F-35



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|15. | LONG-TERM DEBT (continued):
|--- | ---------------------------



| | (i) | The bank credit facilities of Quebecor Media are comprised of (i) a $125.0 million term loan A credit facility, bearing interest at Bankers
acceptance rate, London Interbanking Offered Rate (LIBOR) or Canadian prime rate, plus a premium determined by a leverage ratio, and maturing in January 2011, (ii) a US$350.0 million term loan B credit facility, bearing
interest at U.S. prime rate, plus a premium of 1.0%, or at LIBOR, plus a premium of 2.0%, and maturing in January 2013, and (iii) a $100.0 million revolving credit facility, bearing interest at Bankers acceptance rate, LIBOR or Canadian
prime rate, plus a premium determined by a leverage ratio, and maturing in January 2011. These credit facilities contain covenants concerning certain financial ratios and restricting the declaration and payment of dividends and other distributions.
They are collateralized by liens on all of the movable property and assets of the Company (primarily shares of its subsidiaries), now owned or hereafter acquired. As of December 31, 2009, the credit facilities of the Company were secured by
assets with a carrying value of $4,116.0 million ($3,772.1 million in 2008, as restated). The Company shall repay the term loan A in quarterly repayments equal to 2.5% of the principal amount during the first three years of the term,
5.0% in the fourth year and 12.5% in the fifth year of the term. It shall repay the principal amount of its term loan B in quarterly repayments of 0.25% of the principal amount and the balance at the end of the term. As of
December 31, 2009, no amount ($4.0 million in 2008) was drawn on the revolving credit facility, while $68.7 million ($89.8 million in 2008) and $353.7 million ($411.6 million in 2008) were drawn under the term A and B
credit facilities respectively.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The long-term credit facility with Société Générale (Canada) for the Canadian dollar equivalent of 59.4 million, bears interest
at Bankers acceptance rate, plus a premium, and matures in 2015. The facility is secured by all the property and assets of the Company, now owned and hereafter acquired. This facility mostly contains the same covenants as the bank facilities
described in (i).
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | In January 2006, the Company issued Senior Notes of US$525.0 million in aggregate principal amount for net proceeds of $609.0 million, before issuance fees of $9.0
million. The notes bear interest at 7.75%, payable every six months on June 15 and December 15, and mature in March 2016. These notes contain certain restrictions on the Company, including limitations on its ability to incur additional
indebtedness, pay dividends or make other distributions. The notes are unsecured and are redeemable at the option of the Company at a decreasing premium, commencing on March 15, 2011.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | In October 2007, the Company issued Senior Notes of US$700.0 million in aggregate principal amount at a discount price of 93.75% for net proceeds of $672.2 million,
including accrued interest of $16.6 million and before financing fees of $9.8 million. The Senior Notes bear interest at 7.75% for an effective interest rate of 8.81%, payable every six months on June 15 and December 15, and mature in
March 2016. These notes contain certain restrictions on the Company, including limitations on its ability to incur additional indebtedness, pay dividends or make other distributions. The notes are unsecured and are redeemable at the option of the
Company at a decreasing premium, commencing on March 15, 2011.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | The debts of these subsidiaries are non-recourse to Quebecor Media.
| | --- | -------------------------------------------------------------------



| | (vi) | The senior secured credit facilities provide for a $575.0 million secured revolving credit facility that matures in April 2012 and a $75.0 million secured export
financing facility providing for a term loan that matures in June 2018. The revolving credit facility bears interest at Bankers acceptance or Canadian prime rates, plus a margin, depending on Videotron Ltd.s (Videotron)
leverage ratio. Advances under the export financing facility bear interest at Bankers acceptance rate plus a margin. The senior secured credit facilities are secured by a first ranking hypothec on the universality of all tangible and
intangible assets, current and future, of Videotron and its subsidiaries. As of December 31, 2009, the senior secured credit facilities of Videotron were secured by assets with a carrying value of $4,690.6 million ($5,105.3 million in
2008, as restated). The senior secured credit facilities contain covenants such as maintaining certain financial ratios and some restrictions on the payment of dividends and asset acquisitions and dispositions.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In November 2009, Videotron entered into the facility B credit agreement providing for an unsecured term credit facility in a maximum amount
equal to the difference between US$100.0 million and the aggregate of the U.S. dollar equivalent of each drawing on the Companys export financing facility. This facility matures in April 2016 and is bearing interest at the Bankers
acceptance rate plus a margin. As of December 31, 2009, no amount was drawn on the facility.



F-36



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|15. | LONG-TERM DEBT (continued):
|--- | ---------------------------



| | (vii) | In October 2003, a first series of US$335.0 million in aggregate principal amount of Senior Notes was issued at a discount price of 99.08% for net proceeds of
$445.6 million, before issuance fees of $7.6 million. In November 2004, a second series of US$315.0 million in aggregate principal amount of Senior Notes was issued at a premium price of 105.0% for net proceeds of $405.1 million,
including accrued interest of $8.9 million and before issuance fees of $7.4 million. These notes bear interest at a rate of 6.875% for an average effective interest rate of 6.59%, payable every six months on January 15 and July 15,
and mature in January 2014. The notes contain certain restrictions on Videotron, including limitations on its ability to incur additional indebtedness, and are unsecured. The Senior Notes are guaranteed by specific subsidiaries of Videotron. The
notes are redeemable at the option of Videotron, in whole or in part, at any time on or after January 15, 2009, at a decreasing premium.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (viii) | On September 16, 2005, US$175.0 million in aggregate principal amount of Senior Notes was issued at a discount price of 99.5% for net proceeds of $205.2 million,
before issuance fees of $3.8 million. These notes bear interest at a rate of 6.375% for an effective interest rate of 6.44%, payable every six months on December 15 and June 15, and mature on December 15, 2015. The notes contain
certain restrictions on Videotron, including limitations on its ability to incur additional indebtedness, and are unsecured. The Senior Notes are guaranteed by specific subsidiaries of Videotron. The notes are redeemable at the option of Videotron,
in whole or in part, at any time on or after December 15, 2010, at a decreasing premium.
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ix) | In April, 2008, Videotron issued a first series of US$455.0 million in aggregate principal amount of Senior Notes at a discount price of 98.43% for net proceeds of
$457.3 million, before financing fees of $9.5 million. In March 2009, Videotron issued a second series of US$260.0 million in aggregate principal amount of Senior Notes at a discount price of 98.625% for net proceeds of
$332.4 million, including accrued interest of $6.9 million and net of financing fees of $6.9 million. The Senior Notes bear interest at 9.125% for an average effective interest rate of 9.37%, payable every six months on
June 15 and December 15, and mature on April 15, 2018. These notes are unsecured and contain certain restrictions on Videotron, including limitations on its ability to incur additional indebtedness, pay dividends or make other
distributions. The notes are guaranteed by specific subsidiaries of Videotron and are redeemable at the option of Videotron at a decreasing premium, commencing April 15, 2013.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | The bank credit facilities of Sun Media Corporation are comprised of (i) a revolving credit facility amounting to $70.0 million, maturing in October
2012, and (ii) a term loan C credit facility amounting to $40.0 million, also maturing in October 2012. The credit facilities are collateralized by liens on all of the property and assets of Sun Media Corporation and its
operating subsidiaries, now owned or hereafter acquired. The bank credit facilities contain covenants concerning certain financial ratios and restrictions on the declaration and payment of dividends or other distributions. As of
December 31, 2009, the bank credit facilities were secured by assets with a carrying value of $1,200.4 million ($1,307.6 million in 2008). Any amount borrowed under the revolving credit facility bears interest at Canadian Bankers
acceptance and/or Canadian prime rate, plus an applicable margin determined by financial ratios. Advances under the term C credit facility bear interest at Canadian Bankers acceptance rate, plus a margin of 1.50% per annum, or
Canadian prime rate, plus a margin of 0.50% per annum. As of December 31, 2009, no amount ($10.0 million in 2008) was drawn on the revolving credit facility, while $38.3 million ($38.5 million in 2008) was drawn down on the term loan
C credit facilities.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-37



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|15. | LONG-TERM DEBT (continued):
|--- | ---------------------------



| | (xi) | In February 2003, Sun Media Corporation issued US$205.0 million in aggregate principal amount of Senior Notes at a discount price of 98.29% for net proceeds of
$306.8 million, before issuance fees of $8.4 million. These notes bear interest at a rate of 7.625% for an effective interest rate of 7.88%, payable every six months on February 15 and August 15, and mature in February 2013.
The notes contain certain restrictions on Sun Media Corporation, including limitations on its ability to incur additional indebtedness or make other distributions, and are unsecured. The notes became redeemable, in whole or in part, at the option of
Sun Media Corporation any time after February 15, 2008, at a decreasing premium.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xii) | The credit facilities of Osprey Media are comprised of a revolving credit facility in the amount of $65.0 million and a term credit facility in the amount of $114.8
million ($133.3 million in 2008), maturing in January 2011. The credit facilities bear interest at Canadian prime rate or Bankers acceptance rate, plus an applicable margin determined by financial ratios, and they contain covenants including,
among others, certain financial ratios and restrictions on the declaration and payment of any distributions. The credit facilities are secured by liens on all assets of Osprey Media and its subsidiary. As of December 31, 2009, no amount (none
in 2008) was drawn on the revolving credit facility and $114.2 million ($132.3 million in 2008) was drawn on the term facility.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xiii) | In December 2009, TVA Group renewed its revolving credit facility and entered into a new term credit facility. The credit facilities of TVA Group are comprised of a
revolving credit facility in the amount of $100.0 million, maturing in December 2012, and a term credit facility in the amount of $75.0 million, maturing in December 2014. TVA Groups revolving credit facility bears interest at a Canadian
chartered banks prime rate or Bankers acceptance rate, plus a variable margin determined by certain financial ratios, while the term loan bears interest at a rate of 5.54%, payable every six months on June 15 and December 15.
The credit facilities contain certain restrictions, including the obligation to maintain certain financial ratios. As of December 31, 2009, $14.9 million ($93.8 million in 2008) was drawn on the revolving credit facility and $75.0 million was
drawn on the term credit facility.
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On December 31, 2009, the Company and its subsidiaries were in
compliance with all debt covenants.

Principal repayments of long-term debt over the coming years are as follows:



2010

$
67.82011


144.42012


66.72013


567.12014


774.82015 and thereafter


2,184.7




|16. | OTHER LIABILITIES:
|--- | ------------------



2009

2008Accrued pension and postretirement benefits liability (note 25)

$
50.3

$
54.9Deferred revenue


43.4


35.5Stock-based compensation1


4.3


0.8Other


6.8


6.5$
104.8

$
97.7




| | 1 | The current portion of stock-based compensation in the amount of $8.1 million is included in accounts payable and accrued charges ($4.7 million at
December 31, 2008).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-38



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008, and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|17. | NON-CONTROLLING INTEREST:
|--- | -------------------------

Non-controlling interest represents the interest of non-controlling shareholders in the participating shares of the Companys subsidiaries. As of December 31, 2009, the only significant non-controlling interest is in TVA Group,
Broadcasting segment, and it represents an interest in 0.05% (0.07% in 2008) in votes and 48.56% (49.10% in 2008) in equity.



|18. | CAPITAL STOCK:
|--- | --------------



| | (a) | Authorized capital stock:
| | --- | -------------------------

An unlimited number of Common Shares, without par value;

An unlimited number of non-voting Cumulative First Preferred
Shares, without par value; the number of preferred shares in each series and the related characteristics, rights and privileges are determined by the Board of Directors prior to each issue:



| |  |  | An unlimited number of Cumulative First Preferred Shares, Series A (Preferred A Shares), carrying a 12.5% annual fixed cumulative
preferential dividend, redeemable at the option of the holder and retractable at the option of the Company;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An unlimited number of Cumulative First Preferred Shares, Series B (Preferred B Shares), carrying a fixed cumulative preferential dividend
generally equivalent to the Companys credit facility interest rate, redeemable at the option of the holder and retractable at the option of the Company;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An unlimited number of Cumulative First Preferred Shares, Series C (Preferred C Shares), carrying an 11.25% annual fixed cumulative
preferential dividend, redeemable at the option of the holder and retractable at the option of the Company;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An unlimited number of Cumulative First Preferred Shares, Series D (Preferred D Shares), carrying an 11.00% annual fixed cumulative
preferential dividend, redeemable at the option of the holder and retractable at the option of the Company;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An unlimited number of Cumulative First Preferred Shares, Series F (Preferred F Shares), carrying a 10.85% annual fixed cumulative
preferential dividend, redeemable at the option of the holder and retractable at the option of the Company;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An unlimited number of Cumulative First Preferred Shares, Series G (Preferred G Shares), carrying a 10.85% annual fixed cumulative
preferential dividend, redeemable at the option of the holder and retractable at the option of the Company;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

An unlimited number of non-voting Preferred Shares, Series E (Preferred E Shares), carrying a non-cumulative dividend subsequent to the holders of Cumulative First Preferred Shares, redeemable at the option of the holder and
retractable at the option of the Company.



| | (b) | Issued and outstanding capital stock:
| | --- | -------------------------------------



Common SharesNumber

AmountBalance as of December 31, 2009 and 2008

123,602,807

$
1,752.4




F-39



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|18. | CAPITAL STOCK (continued):
|--- | --------------------------



| | (c) | Cumulative First Preferred Shares:
| | --- | ----------------------------------

All Cumulative First Preferred Shares are owned by subsidiaries of the Company and are eliminated on consolidation. The following Cumulative First Preferred Shares are issued and outstanding:



Preferred SharesNumber


AmountPreferred C SharesBalance as of December 31, 2007

110,000


$
110.0Redemption

(110,000
)


(110.0
)Balance as of December 31, 2008 and 2009





Preferred G SharesBalance as of December 31, 2007

2,555,000


$
2,555.0Issuance

1,100,000



1,100.0Redemption

(1,600,000
)


(1,600.0
)Balance as of December 31, 2008

2,055,000



2,055.0Issuance

190,000



190.0Redemption

(985,000
)


(985.0
)Balance as of December 31, 2009

1,260,000


$
1,260.0




F-40



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|19. | STOCK-BASED COMPENSATION PLANS:
|--- | -------------------------------



| | (a) | Quebecor Media stock option plan:
| | --- | ---------------------------------

Under a stock option plan established by the Company, 6,180,140 Common Shares of the Company have been set aside for officers, senior employees, directors, and other key employees of the Company and its
subsidiaries. Each option may be exercised within a maximum period of 10 years following the date of grant at an exercise price not lower than, as the case may be, the fair market value of the Common Shares of Quebecor Media at the date of
grant, as determined by its Board of Directors (if the Common Shares of Quebecor Media are not listed on a stock exchange at the time of the grant), or the five-day weighted average market price ending on the day preceding the date of grant of
the Common Shares of the Company on the stock exchange(s) where such shares are listed at the time of grant. As long as the Common Shares of Quebecor Media are not listed on a recognized stock exchange, optionees may exercise their vested options
during one of the following periods: from March 1 to March 30, from June 1 to June 29, from September 1 to September 29, and from December 1 to December 30. Holders of options under the plan have the choice at
the time of exercising their options of receiving an amount in cash (equal to the difference between either the five-day weighted average market price ending on the day preceding the date of exercise of the Common Shares of the Company on the stock
exchange(s) where such shares are listed at the time of exercise or the fair market value of the Common Shares, as determined by the Companys Board of Directors, and the exercise price of their vested options) or, subject to certain stated
conditions, exercise their options to purchase Common Shares of Quebecor Media at the exercise price. Except under specific circumstances, and unless the Compensation Committee decides otherwise, options vest over a five-year period in accordance
with one of the following vesting schedules as determined by the Compensation Committee at the time of grant: (i) equally over five years with the first 20% vesting on the first anniversary of the date of the grant; (ii) equally over four
years with the first 25% vesting on the second anniversary of the date of grant; and (iii) equally over three years with the first 33 1/3% vesting on the third anniversary of the date of grant. The vesting on 1,025,610 options is also subject
to (i) non-market-related performance criteria such as the realisation of future growth in revenue, EBITDA margins and market share or to (ii) market-related performance criteria as the achievement of specific targets in regards to
the fair value of the Companys shares in the future.

The following table gives summary information on outstanding
options granted as of December 31, 2009 and 2008:



2009




2008Options


Weighted averageexercise price

Options


Weighted averageexercise priceBalance at beginning of year

3,843,297


$
41.05

7,029,857


$
32.25Granted

671,000



37.19

110,000



46.84Exercised

(304,422
)


25.66

(2,824,012
)


19.00Cancelled

(883,806
)


43.76

(472,548
)


43.21Balance at end of year

3,326,069


$
40.96

3,843,297


$
41.05Vested options at end of year

564,636


$
39.74

232,903


$
32.14


During the year ended December 31, 2009,
304,422 stock options were exercised for a cash consideration of $4.5 million (2,824,012 for $94.1 million in 2008).



F-41



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|19. | STOCK-BASED COMPENSATION PLANS (continued):
|--- | -------------------------------------------



| | (a) | Quebecor Media stock option plan (continued):
| | --- | ---------------------------------------------



The following table gives summary information on outstanding options as of
December 31, 2009:



Outstanding options



Vested optionsRange ofexercise price

Number

Weightedaverage years tomaturity

Weightedaverageexerciseprice

Number

Weighted averageexerciseprice$
15.19 to 21.75

17,498

4.13

$
21.09

17,498

$
21.0922.98 to 33.41

503,008

6.14


31.08

169,057


30.7335.90 to 50.51

2,805,563

9.04


42.86

378,081


44.64$
15.19 to 50.51

3,326,069

8.58

$
40.96

564,636

$
39.74




| | (b) | TVA Group plans:
| | --- | ----------------



| | (i) | Stock option plan for senior executives and directors
| | --- | -----------------------------------------------------

Under this stock option plan, 2,200,000 Class B shares of TVA Group have been set aside for senior executives and directors of TVA Group and its subsidiaries. The terms and the conditions of
options granted are determined by TVA Groups Compensation Committee. The subscription price of an option cannot be less than the closing price of Class B shares on the Toronto Stock Exchange the day before the option is granted.
Options granted prior to January 2006 usually vest equally over a four-year period, with the first 25% vesting on the second anniversary date of the date of grant. Beginning January 2006, and unless the Compensation Committee decides otherwise,
options vest over a five-year period in accordance with one of the following vesting schedules as determined by the Compensation Committee at the time of grant: (i) equally over five years with the first 20% vesting on the first anniversary of
the date of the grant; (ii) equally over four years with the first 25% vesting on the second anniversary of the date of grant; and (iii) equally over three years with the first 33 1/3% vesting on the third anniversary of the date of 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, of receiving a cash payment from TVA Group equal to the number of shares corresponding to the options
exercised, multiplied by the difference between the market value of the Class B shares and the exercise price of the option or, subject to certain conditions, exercise their options to purchase TVA Group Class B shares at the exercise price. The
market value is defined as the average closing market price of the Class B shares for the last five trading days preceding the date on which the option was exercised.

The following table gives details on changes to outstanding options for the years ended December 31, 2009 and 2008:



2009




2008Options

Weighted averageexercise price

Options


Weighted averageexercise priceBalance at beginning of year

975,155

$
16.16

983,693


$
16.16Cancelled






(8,538
)


15.81Balance at end of year

975,155

$
16.16

975,155


$
16.16Vested options at end of year

428,383

$
17.47

185,144


$
19.20




F-42



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|19. | STOCK-BASED COMPENSATION PLANS (continued):
|--- | -------------------------------------------



| | (b) | TVA Group plans (continued):
| | --- | ----------------------------



| | (i) | Stock option plan for senior executives and directors (continued)
| | --- | -----------------------------------------------------------------

The following table gives summary information on outstanding options as of December 31, 2009:



Outstanding options



Vested optionsRange of exerciseprice

Number

Weightedaverage yearsto maturity

Weightedaverage exerciseprice

Number

Weightedaverage exerciseprice$
14.50 to 16.40

781,024

7.41

$
14.98

251,158

$
15.0816.41 to 21.38

194,131

4.86


20.90

177,225


20.87$
14.50 to 21.38

975,155

6.90

$
16.16

428,383

$
17.47


Had the vested options to purchase TVA Group
Class B shares been exercised as of December 31, 2009 and the holder chosen to purchase Class B shares, the Companys interest in TVA Group would have decreased from 51.44% to 50.53% (50.90% to 50.51% as of December 31, 2008).



| | (ii) | Share purchase plan for executives and employees
| | ---- | ------------------------------------------------

In 1998, TVA Group introduced a share purchase plan relating to 375,000 TVA Group Class B shares for its executives and a share purchase plan relating to 375,000 TVA Group Class B
shares for its employees. Under the plans, participants can acquire shares in accordance with terms and conditions related to their level of remuneration. The shares can be acquired at a price equal to 90% of the average closing market price of
TVA Group Class B shares on the Toronto Stock Exchange in the five trading days immediately preceding the first day of the annual subscription period under the plans. The plans also provide financing terms free of interest. No Class B
shares have been issued under the plans in the last three years. As of December 31, 2009 and 2008, the remaining balance of TVA Group Class B Shares that may be issued is 332,643 under the share purchase plan for executives and 229,753 under
the share purchase plan for employees.



| | (c) | All stock-based plans:
| | --- | ----------------------

For the year ended December 31, 2009, a net consolidated compensation charge related to all stock-based compensation plans was recorded in the amount of $10.1 million (a net reversal of $8.3 million in 2008 and a net charge of
$50.8 million in 2007).



F-43



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|20. | ACCUMULATED OTHER COMPREHENSIVE LOSS:
|--- | -------------------------------------





Translation of netinvestments inforeign operations


Cash flowhedges


TotalBalance as of December 31, 2006

$
(1.1
)

$
(35.5
)

$
(36.6
)Other comprehensive (loss) income


(2.0
)


48.0



46.0Balance as of December 31, 2007


(3.1
)


12.5



9.4Other comprehensive income (loss)


5.0



(64.6
)


(59.6
)Balance as of December 31, 2008


1.9



(52.1
)


(50.2
)Other comprehensive (loss) income


(3.3
)


33.4



30.1Balance as of December 31, 2009

$
(1.4
)

$
(18.7
)

$
(20.1
)


An amount of $6.5 million is expected to be reclassified in income over the next 12 months in
connection with derivatives designated as cash flow hedges (note 28). The balance is expected to reverse over an 8 1/2-year period.



|21. | 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 $472.4 million, including an amount of $126.5 million for future rent payments to the parent company. The minimum payments for the coming years are as follows:



Leases

Othercommitments2010

$
54.7

$
83.12011


39.5


45.72012


34.1


22.52013


28.3


5.52014


22.3


2.02015 and thereafter


132.0


2.7


Operating lease
expenses amounted to $49.8 million, $46.9 million and $46.1 million for the years ended December 31, 2009, 2008, and 2007, respectively.



F-44



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)



|21. | COMMITMENTS AND CONTINGENCIES (continued):
|--- | ------------------------------------------





| | (b) | Contingencies:
| | --- | --------------



| | (i) | Legal proceedings against certain of the Companys subsidiaries were initiated by another company in relation to printing contracts, including the resiliation of
printing contracts. As with any litigation subject to a judicial process, the outcome of such proceedings is impossible to determine with certainty. However, management believes that the suits are without merit and intends to vigorously defend its
position.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A number of other legal proceedings against the Company and its subsidiaries are pending. In the
opinion of the management of the Company and its subsidiaries, the outcome of these proceedings is not expected to have a material adverse effect on the Companys results or on its financial position.



| | (ii) | In 2003 and 2004, a number of companies, including Videotron and TVA Group, brought suit against the Crown before the Federal Court alleging that the Part II
licence fees to be paid annually to the CRTC by broadcasters and broadcasting distribution undertakings constituted, in fact and in law, unlawful taxes under the Broadcasting Act (Canada). Following a Federal Court of Appeal judgement in 2008
overturning a Federal Court ruling in favour of the plaintiffs, leave to appeal to the Supreme Court of Canada was authorized in 2008.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On October 7, 2009, the parties in this case, including Videotron and TVA Group, agreed on an out-of-court settlement whereby the plaintiff companies withdrew their legal challenge and monetary
claims and the government agreed not to claim the unpaid Part II licence fees for the period of September 1, 2006 through August 31, 2009. In view of this settlement, in the fourth quarter of 2009, the Company reversed
a $42.8 million provision for unpaid Part II licence fees as of August 31, 2009. Under the out-of-court settlement, the government also undertook to recommend that the CRTC amend its regulations to limit the amount of the Part II
licence fees for the period subsequent to August 31, 2009.



|22. | 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 terms) and should the fair value of the assets be less than the guaranteed residual value, then the Company must,
under certain conditions, compensate the lessor for a portion of the shortfall. In addition, the Company has provided guarantees to the lessor of certain premises leases, with expiry dates through 2015. Should the lessee default under the
agreement, the Company must, under certain conditions, compensate the lessor. As of December 31, 2009, the maximum exposure with respect to these guarantees was $27.2 million and no liability has been recorded in the consolidated
balance sheet. The Company has not made any payments relating to these guarantees in prior years.

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. The Company has not made any payments relating to these guarantees in prior years.



F-45



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|22. | GUARANTEES (continued):
|--- | -----------------------



Outsourcing companies and suppliers:

In the normal course of its operations, the Company enters into contractual agreements with outsourcing companies and suppliers. In some
cases, the Company agrees to provide indemnifications in the event of legal procedures initiated against them. In other cases, the Company provides indemnification to counterparties for damages resulting from the outsourcing companies and suppliers.
The nature of the indemnification agreements prevents the Company from estimating the maximum potential liability it could be required to pay. No amount has been accrued in the consolidated balance sheet with respect to these indemnifications. The
Company has not made any payments relating to these guarantees in prior years.



|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT:
|--- | ----------------------------------------------------

The Companys financial risk management policies have been established in order to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor
risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and in the Companys activities.

As a result of their use of financial instruments, the Company and its subsidiaries are exposed to credit risk, liquidity risk and market risks relating to foreign exchange fluctuations, interest rate
fluctuations and equity prices. In order to manage its foreign exchange and interest rate risks, the Company and its subsidiaries use derivative financial instruments (i) to set in Canadian dollars all future payments on debts denominated in
U.S. dollars (interest and principal) and certain purchases of inventories and other capital expenditures denominated in a foreign currency and (ii) to achieve a targeted balance of fixed and variable rate debts. The Company and it
subsidiaries do not intend to settle their derivative financial instruments prior to their maturity as none of these instruments is held or issued for speculative purposes. The Company and its subsidiaries designate their derivative financial
instruments either as fair value hedges or cash flow hedges when they qualify for hedge accounting.



| | (a) | Description of derivative financial instruments:
| | --- | ------------------------------------------------



| | (i) | Foreign exchange forward contracts:
| | --- | -----------------------------------



Currencies (sold/bought)

Maturing

Averageexchange rate

NotionalamountQuebecor Media$/

Less than 1 year

1.5421

$
11.0Sun Media Corporation$/US$

February 15, 2013

1.5227


312.2Videotron$/US$

Less than 1 year

1.1173


94.9




F-46



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
|--- | ----------------------------------------------------------------



| | (a) | Description of derivative financial instruments (continued):
| | --- | ------------------------------------------------------------



| | (ii) | Cross-currency interest rate swaps:
| | ---- | -----------------------------------



Period covered

Notional amount

Annual effectiveinterest rate usinghedged rate


Annual nominalinterest rateof
debt


CDN dollarexchange rateon interestand capitalpayments perone U.S. dollarQuebecor MediaSenior Notes

2007 to 2016

US$
700.0

7.69
%

7.75
%

0.9990Senior Notes

2006 to 2016

US$
525.0

7.39
%

7.75
%

1.1600Term loanBcreditfacilities

2009 to 2013

US$
192.5

Bankersacceptance 3
months + 2.22
%

LIBOR+2.00
%

1.1625Term loanBcreditfacilities

2006 to 2013

US$
144.4

6.44
%

LIBOR+2.00
%

1.1625VideotronSenior Notes

2004 to 2014

US$
190.0

Bankersacceptance 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acceptance 3
months + 2.73
%

6.875
%

1.3425Senior Notes

2003 to 2014

US$
135.0

7.66
%

6.875
%

1.3425Senior Notes

2005 to 2015

US$
175.0

5.98
%

6.375
%

1.1781Senior Notes

2008 to 2018

US$
455.0

9.65
%

9.125
%

1.0210Senior Notes

2009 to 2018

US$
260.0

9.12
%

9.125
%

1.2965




F-47



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)



|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
|--- | ----------------------------------------------------------------



| | (a) | Description of derivative financial instruments (continued):
| | --- | ------------------------------------------------------------



| | (ii) | Cross-currency interest rate swaps (continued):
| | ---- | -----------------------------------------------





Period covered

Notional amount

Annual effectiveinterest rate usinghedged rate


Annual nominalinterest rateof
debt


CDN dollarexchange rateon interestand capitalpayments perone U.S. dollarSun Media CorporationSenior Notes

2008 to 2013

US$
155.0

Bankersacceptance 3 months + 3.70
%

7.625
%

1.5227Senior Notes

2003 to 2013

US$
50.0

Bankersacceptance 3 months + 3.70
%

7.625
%

1.5227


Certain
cross-currency interest rate swaps entered into by the Company and its subsidiaries include an option that allows each party to unwind the transaction on a specific date at the then settlement amount.



F-48



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
|--- | ----------------------------------------------------------------



| | (a) | Description of derivative financial instruments (continued):
| | --- | ------------------------------------------------------------



| | (iii) | Interest rate swaps:
| | ----- | --------------------



Maturity

Notional amount

Pay/ receive

Fixed rate


Floating rateOsprey MediaDecember 2010

$
50.0

Pay fixed/receive floating

3.53
%

Bankersacceptance 3 monthsDecember 2010

$
24.8

Pay fixed/receive floating

2.13
%

Bankersacceptance 1 monthDecember 2010

$
40.0

Pay fixed/receive floating

2.73
%

Bankersacceptance 3 monthsSun Media CorporationOctober 2012

$
38.5

Pay fixed/receive floating

3.75
%

Bankersacceptance 3 months




F-49



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
|--- | ----------------------------------------------------------------



| | (b) | Fair value of financial instruments:
| | --- | ------------------------------------

The carrying amount of accounts receivable from external or related parties (classified as loans and receivables), accounts payable and accrued charges to external or related parties (classified as other
liabilities), approximates their fair value since these items will be realized or paid within one year or are due on demand. Other financial instruments classified as loans and receivables or as available-for-sale are not significant and their
carrying value approximates their fair value. The carrying value and fair value of long-term debt and derivative financial instruments as of December 31, 2009 and 2008 are as follows:



2009


2008Carryingvalue


Fair value


Carryingvalue


Fair valueLong-term debt1

$
(3,805.5
)

$
(3,869.8
)

$
(4,300.6
)

$
(3,530.2
)Derivative financial instrumentsInterest rate swaps


(4.3
)


(4.3
)


(7.5
)


(7.5
)Foreign exchange forward contracts


(5.8
)


(5.8
)


9.1



9.1Cross-currency interest rate swaps


(363.3
)


(363.3
)


199.0



199.0




| | 1 | The carrying value of long-term debt excludes adjustments to record changes in the fair value of long-term debt related to hedged interest risk,
embedded derivatives and financing fees.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of long-term debt is estimated based on quoted
market prices when available or on valuation models. When the Company uses valuation models, the fair value is estimated using discounted cash flows using year-end market yields or the market value of similar instruments with the same maturity.



F-50



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
|--- | ----------------------------------------------------------------



| | (b) | Fair value of financial instruments (continued):
| | --- | ------------------------------------------------



In accordance with CICA Section 3862, Financial Instruments 
Disclosures, the Company has considered the following fair value hierarchy that reflects the significance of the inputs used in measuring its financial instruments accounted for at fair value in the balance sheet:



| |  |  | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: inputs that are not based on observable market data (unobservable inputs).
| | - |  | -----------------------------------------------------------------------------------

The fair value of cash equivalents and temporary investments, classified as held-for-trading and accounted for at their fair value on the
balance sheet, is determined using Level 2 inputs.

The fair value of derivative financial instruments recognized on the
balance sheet is estimated as per the Companys valuation models. These models project future cash flows and discount the future amounts to a present value using the contractual terms of the derivative instrument and factors observable in
external markets data, such as period-end swap rates and foreign exchange rates (Level 2 inputs). An adjustment is also included to reflect non-performance risk impacted by the financial and economic environment prevailing at the date of the
valuation in the recognized measure of the fair value of the derivative instruments by applying a credit default premium estimated using a combination of observable and unobservable inputs in the market (Level 3 inputs) to the net exposure of the
counterparty or the Company. Accordingly, financial derivative instruments are classified as Level 3 under the fair value hierarchy.

The fair value of early settlement options recognized as embedded derivatives is determined by option pricing models using Level 2 market inputs, including volatility and discount factors.

The following table shows changes to the carrying value or fair value of derivative financial instruments (Level 3) in 2009:



2009Asset (liability)Balance as of beginning of year

$
200.6Loss recognized in the statement of income1, 2


(143.3
)Loss recognized in other comprehensive income3


(431.0
)Settlements


0.3Balance as of end of year

$
(373.4
)




| | 1 | Substantially all gains or losses were related to derivative instruments held as of December 31, 2009.
| | - | ------------------------------------------------------------------------------------------------------

| | 2 | The loss is offset by a gain on valuation and translation of long-term debt of $163.9 million.
| | - | ----------------------------------------------------------------------------------------------

| | 3 | The loss is offset by a gain on translation of long-term debt of $422.8 million.
| | - | --------------------------------------------------------------------------------



F-51



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
|--- | ---------------------------------------------------------------



| | (b) | Fair value of financial instruments (continued)
| | --- | -----------------------------------------------



The estimated sensitivity on income and other comprehensive income, before income tax
and non-controlling interest, of a 100 basis-point variance in the credit default premium used to calculate the fair value of derivative financial instruments, as per the Companys valuation models, is as follows:



Increase (decrease)

Income


OthercomprehensiveincomeIncrease of 100 basis point

$
6.1


$
8.9Decrease of 100 basis point


(6.1
)


(8.9
)




| | (c) | Credit risk management:
| | --- | -----------------------

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial asset fails to meet its contractual obligations.

In the normal course of business, the Company continuously monitors the financial condition of its customers and reviews the credit history of each new customer. As of December 31, 2009, no
customer balance represented a significant portion of the Companys consolidated trade receivables. The Company establishes an allowance for doubtful accounts based on the specific credit risk of its customers and historical trends. The
allowance for doubtful accounts amounted to $40.3 million as of December 31, 2009 ($47.6 million as of December 31, 2008). As of December 31, 2009, 9.8% of trade receivables were 90 days past their billing date
(11.3% as of December 31, 2008).

The following table shows changes to the allowance for doubtful accounts for
the years ended December 31, 2009 and 2008:



2009


2008Balance as of beginning of year

$
47.6


$
34.0Charged to income


23.5



39.7Utilization


(30.8
)


(26.1
)Balance as of end of year

$
40.3


$
47.6


The Company believes that its product lines and the diversity of its customer base are instrumental in
reducing its credit risk, as well as the impact of fluctuations in product-line demand. The Company does not believe that it is exposed to an unusual level of customer credit risk.

As a result of their use of derivative financial instruments, the Company and its subsidiaries are exposed to the risk of non-performance by
a third party. When the Company and its subsidiaries enter into derivative contracts, the counterparties (either foreign or Canadian) must have credit ratings at least in accordance with the Companys risk management policy and are subject to
concentration limits.



F-52



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
|--- | ----------------------------------------------------------------



| | (d) | Liquidity risk management:
| | --- | --------------------------

Liquidity risk is the risk that the Company and its subsidiaries will not be able to meet their financial obligations as they fall due or the risk that those financial obligations have to be met at excessive cost. The Company and its
subsidiaries manage this exposure through staggered debt maturities. The weighted average term of Quebecor Medias consolidated debt was approximately 5.3 years as of December 31, 2009 (5.7 years as of December 31, 2008).

Company management believes that cash flows from continuing operations and available sources of financing should be sufficient to cover
committed cash requirements for capital investments, working capital, interest payments, debt repayments, pension plan contributions, and dividends (or distributions) in the future. The Company has access to cash flows generated by its subsidiaries
through dividends (or distributions) and cash advances paid by its wholly owned subsidiaries and through dividends paid by its publicly traded subsidiary, TVA Group.

As of December 31, 2009, material contractual obligations related to financial instruments included capital repayment and interest on long-term debt and obligations related to derivative instruments,
less estimated future receipts on derivative instruments. These obligations and their maturities are as follows:



Total

Less than1 year

1-3 years

3-5 years

5 yearsor
moreBank indebtedness

$
1.0

$
1.0

$


$


$
Accounts payable and accrued charges


792.2


792.2








Long-term debt


3,805.5


67.8


211.1


1,341.9


2,184.7Interest payments1


1,613.4


241.2


534.3


450.0


387.9Derivative instruments2


375.1


0.4


0.8


278.2


95.7Total

$
6,587.2

$
1,102.6

$
746.2

$
2,070.1

$
2,668.3




| | 1 | Estimate of interest to be paid on long-term debt is based on hedged and unhedged interest rates and hedged foreign exchange rates as of
December 31, 2009.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2 | Estimated future disbursements, net of future receipts, on derivative financial instruments related to foreign exchange hedging.
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | (e) | Market risk:
| | --- | ------------

Market risk is the risk that changes in market prices due to foreign exchange rates, interest rates and/or equity prices will affect the value of the Companys financial instruments. The objective of market risk management is to
mitigate and control exposures within acceptable parameters while optimizing the return on risk.

Foreign currency risk

Most of the Companys consolidated revenues and expenses, other than interest expense on U.S. dollar-denominated
debt, purchases of set-top boxes and cable modems and certain capital expenditures, are received or denominated in Canadian dollars. A large portion of the interest, principal and premium, if any, payable on its debt is payable in U.S. dollars. The
Company and its subsidiaries have entered into transactions to hedge the foreign currency risk exposure on 100% of their U.S. dollar-denominated debt obligations outstanding as of December 31, 2009 and to hedge their exposure on certain
purchases of set-top boxes, cable modems and capital expenditures. Accordingly, the Companys sensitivity to variations in foreign exchange rates is economically limited.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
|--- | ----------------------------------------------------------------



| | (e) | Market risk (continued):
| | --- | ------------------------



Foreign currency risk (continued)



The following table summarizes the estimated sensitivity on income and other
comprehensive income, before income tax and non-controlling interest, of a variance of $0.10 in the year-end exchange rate of a Canadian dollar per one U.S. dollar:



Increase (decrease)

Income


OthercomprehensiveincomeIncrease of $0.10U.S. dollar-denominated accounts payable

$
(0.8
)

$
Gain (loss) on valuation and translation of financial instruments and derivative financial instruments


(2.6
)


56.4Decrease of $0.10U.S. dollar-denominated accounts payable


0.8



Gain (loss) on valuation and translation of financial instruments and derivative financial instruments


2.6



(56.4
)


Interest
rate risk

Some of the Companys and its subsidiaries revolving and bank credit facilities bear interest at
floating rates based on the following reference rates: (i) Bankers acceptance rate (BA), (ii) LIBOR and (iii) Canadian bank prime rate (prime). The Senior Notes issued by the Company and its subsidiaries bear interest at
fixed rates. The Company and its subsidiaries have entered into various interest rate and cross-currency interest rate swap agreements in order to manage cash flow and fair value risk exposure due to changes in interest rates. As of
December 31, 2009, after taking into account the hedging instruments, long-term debt was comprised of 69.3% fixed rate debt and 30.7% floating rate debt.

The estimated sensitivity on financial expense for floating rate debt, before income tax and non-controlling interest, of a 100 basis-point variance in the year-end Canadian Bankers acceptance
rate is $12.9 million.

The estimated sensitivities on income and other comprehensive income, before income tax and
non-controlling interest, of a 100 basis point variance in the discount rate used to calculate the fair value of financial instruments, as per the Companys valuation model, are as follows:



Increase (decrease)

Income


OthercomprehensiveincomeIncrease of 100 basis point

$
(2.4
)

$
10.5Decrease of 100 basis point


2.4



(10.5
)




F-54



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|23. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued):
|--- | ----------------------------------------------------------------



| | (f) | Capital management:
| | --- | -------------------

The Companys primary objective in managing capital is to maintain an optimal capital base in order to support the capital requirements of its various businesses, including growth opportunities.

In managing its capital structure, the Company takes into account the asset characteristics of its subsidiaries and planned requirements for
funds, leveraging their individual borrowing capacities in the most efficient manner to achieve the lowest cost of financing. Management of the capital structure involves the issuance of new debt, the repayment of existing debt using cash generated
by operations, and the level of distributions to shareholders. The Company has not significantly changed its strategy regarding the management of its capital structure since the last financial year.

The Companys capital structure is composed of shareholders equity, bank indebtedness, long-term debt, net assets and liabilities
related to derivative financial instruments, and non-controlling interest, less cash and cash equivalents and temporary investments. The capital structure is as follows:



2009


2008(restated,note 1(b))Bank indebtedness

$
1.0


$
11.5Long-term debt


3,761.2



4,335.8Net liabilities (assets) related to derivative financial instruments


373.4



(200.6
)Non-controlling interest


116.2



105.7Cash and cash equivalents


(300.0
)


(22.5
)Temporary investments


(30.0
)


(0.2
)Net liabilities


3,921.8



4,229.7Shareholders equity

$
2,430.8


$
1,942.0


The Company is not subject to any externally imposed capital requirements other than certain
restrictions under the terms of its borrowing agreements, which relate to permitted investments, intercompany transactions, the declaration and payment of dividends or other distributions.



|24. | RELATED PARTY TRANSACTIONS:
|--- | ---------------------------

Operating transactions

During the year ended December 31, 2009, the Company and its subsidiaries
made purchases and incurred rent charges from the parent company and affiliated companies in the amount of $15.3 million ($11.8 million in 2008 and $9.0 million in 2007), which are included in operating expenses. The Company and its subsidiaries
made sales to an affiliated company in the amount of $0.1 million ($0.4 million in 2008 and 2007). These transactions were concluded and accounted for at the exchange amount.

During the year ended December 31, 2009, the Company received interest of $0.1 million ($1.0 million in 2008 and $0.9 million in 2007)
from the parent company.



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|24. | RELATED PARTY TRANSACTIONS (continued):
|--- | ---------------------------------------



Corporate reorganization

In June 2009, as part of a corporate reorganization, the subsidiary Canoe, in which the Company held an 86.2% interest and TVA Group a
13.8% interest, was wound up and its assets distributed to the shareholders. The transactions arising from this reorganization were recorded at the carrying value of the assets transferred and an adjustment of $8.6 million was recorded as
contributed surplus.

Management arrangements

The parent company has entered into management arrangements with the Company. Under these management arrangements, the parent company and the
Company provide management services to each other on a cost-reimbursement basis. The expenses subject to reimbursement include the salaries of the Companys executive officers, who also serve as executive officers of the parent company. In
2009, the Company received an amount of $2.1 million, which is included as a reduction in operating expenses ($3.0 million in 2008 and 2007), and incurred management fees of $1.1 million ($1.1 million in 2008 and 2007) with the shareholders.

Tax transactions

In 2009, 2008 and 2007, the parent company transferred $30.1 million, $104.9 million and $66.5 million, respectively, of non-capital losses to certain Company subsidiaries in exchange for cash
considerations of $6.3 million, $18.4 million and $14.9 million. These transactions were recorded at the exchange amounts. As a result, the Company recorded reductions of $14.2 million, $6.4 million and $7.7 million, respectively, to its income tax
expense in 2009, 2008 and 2007, and expects to reduce its income tax expense by $2.7 million in the future.

World Color
Press, Inc. (a former subsidiary)

On January 21, 2008, World Color Press, Inc. (WCP formerly
Quebecor World Inc.) and its U.S. subsidiaries were granted creditor protection under the Companies Creditors Arrangement Act in Canada. On the same date, its U.S. subsidiaries also filed a petition under Chapter 11 of the
United States Bankruptcy Code. Since January 21, 2008, WCP is no longer a related company. Prior to this date, the following transactions were made with WCP:



| |  |  | From January 1, 2008 to January 21, 2008, the Company made purchases from WCP of $3.0 million ($55.3 million in 2007) and made sales to WCP
of $1.3 million ($17.9 million in 2007).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On January 10, 2008, the Company settled a balance of $4.3 million payable to WCP by set-off. As the balance was due in 2013 and recorded at
present value, the difference of $2.7 million between the settled amount of $7.0 million and the carrying value of $4.3 million was recorded as a reduction in contributed surplus.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2007, the Company increased its investment in Nurun by acquiring 500,000 Common Shares of Nurun from WCP at the exchange amount, for a cash
consideration of $1.7 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On October 11, 2007, the Company acquired a property from WCP for a total net consideration of $62.5 million. Simultaneously, WCP entered into a
long-term operating lease with the Company to rent a portion of the property for a 17-year term. The consideration for the two transactions was settled by the payment of a net amount of $43.9 million to WCP as of the date of the transactions,
and the assumption by the Company of a $7.0 million balance of sale, including interest, payable in 2013. The transactions were concluded and accounted for at the exchange amount.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|25. | PENSION PLANS AND POSTRETIREMENT BENEFITS:
|--- | ------------------------------------------

The Company maintains various flat-benefit plans, final-pay plans with indexation features from zero to 2%, and defined contribution plans. The Companys policy is to maintain its contribution at a
level sufficient to cover benefits. Actuarial valuations of the Companys numerous pension plans have been performed at least once in the last three years and the next required valuations will be performed within the next three years.

The Company provides postretirement benefits to eligible retired employees. The costs of these benefits, principally health
care, are accounted for during the employees active service period.

The following tables show a reconciliation of the
changes in the plans benefit obligations and the fair value of plan assets for the years ended December 31, 2009 and 2008, along with a statement of the funded status as of those dates:



Pension benefits


Postretirement benefits2009


2008


2009


2008Change in benefit obligations:Benefit obligations at beginning of year

$
526.5


$
635.6


$
35.5


$
43.5Service costs


9.5



20.7



1.0



1.6Interest costs


40.1



36.0



2.6



2.5Plan participants contributions


12.8



12.9







Actuarial loss (gain)


99.9



(157.5
)


7.6



(12.5
)Benefits and settlements paid


(31.1
)


(33.5
)


(0.8
)


(0.8
)Plan amendments


0.9



10.9







Curtailment loss (gain)


7.9



(0.9
)


(4.0
)


(0.7
)Special termination benefits






1.2







Other






1.1







1.9Benefit obligations at end of year

$
666.5


$
526.5


$
41.9


$
35.5Pension benefits


Postretirement benefits2009


2008


2009


2008Change in plan assets:Fair value of plan assets at beginning of year

$
529.6


$
604.0


$



$
Actual return on plan assets


86.6



(77.7
)






Employer contributions


25.3



23.1



0.8



0.8Plan participants contributions


12.8



12.9







Benefits and settlements paid


(31.1
)


(33.5
)


(0.8
)


(0.8
)Other






0.8







Fair value of plan assets at end of year

$
623.2


$
529.6


$



$





F-57



---

##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|25. | PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):
|--- | ------------------------------------------------------



The plan assets are comprised of:



2009


2008Equity securities

58.8
%

50.7
%Debt securities

38.2


44.9Other

3.0


4.4100.0
%

100.0
%


As of December 31, 2009, plan assets included shares of the parent company representing an amount
of $1.6 million ($1.2 million as of December 31, 2008).



Pension benefits


Postretirement benefits2009


2008


2009


2008Reconciliation of funded status:Plan (deficit) surplus

$
(43.3
)

$
3.1


$
(41.9
)

$
(35.5
)Unrecognized actuarial loss (gain)


58.4



6.6



4.4



(2.0
)Unrecognized net transition (asset) obligation


(3.6
)


(4.2
)


0.3



0.3Unrecognized prior service cost (benefit)


11.5



11.7



(3.4
)


(3.4
)Valuation allowance


(3.9
)


(8.6
)






Net amount recognized

$
19.1


$
8.6


$
(40.6
)

$
(40.6
)


Included in the above benefit obligations and fair value of plan assets at year-end are the following
amounts in respect of plans that are not fully funded:



Pension benefits


Postretirement benefits2009


2008


2009


2008Benefit obligations

$
(514.9
)

$
(297.0
)

$
(41.9
)

$
(35.5
)Fair value of plan assets


466.5



287.3







Funded status - plan deficit

$
(48.4
)

$
(9.7
)

$
(41.9
)

$
(35.5
)




F-58



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|25. | PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):
|--- | ------------------------------------------------------



Amounts recognized in the consolidated balance sheets are as follows:



Pension benefits


Postretirement benefits2009


2008


2009


2008Deferred pension charge

$
28.8


$
22.9


$



$
Accrued benefit liability


(9.7
)


(14.3
)


(40.6
)


(40.6
)Net amount recognized

$
19.1


$
8.6


$
(40.6
)

$
(40.6
)


Components of the net benefit costs are as follows:



Pension benefits


Postretirement benefits2009


2008


2007


2009


2008


2007Service costs

$
9.5


$
20.7


$
24.9


$
1.0


$
1.6


$
1.4Interest costs


40.1



36.0



31.9



2.6



2.5



2.0Actual return on plan assets


(86.6
)


77.7



(5.4
)










Current actuarial loss (gain)


99.9



(157.5
)


(34.8
)


7.6



(12.5
)


(1.0
)Current prior service costs


0.2



10.9



1.2











Special termination benefits, curtailment loss (gain) and other


7.7



0.5



(0.5
)


(2.2
)


(0.7
)


Elements of net benefit costs before adjustments to recognize the long-term nature and valuation allowance


70.8



(11.7
)


17.3



9.0



(9.1
)


2.4Difference between actual and expected return on plan assets


48.8



(121.3
)


(36.5
)










Deferral of amounts arising during the period:Actuarial (loss) gain


(99.9
)


157.5



34.8



(7.6
)


12.5



1.0Prior service costs


(0.2
)


(4.4
)


(0.3
)










Amortization of previously deferred amounts:Actuarial (loss) gain


(0.5
)


3.4



1.9



(0.1
)


0.5



0.6Prior service costs (benefits)


0.8



0.9



0.6



(0.4
)


(0.4
)


(0.5
)Transitional obligations


(0.2
)


(0.5
)


(0.5
)










Other






1.2















Total adjustments to recognize the long-term nature of benefit costs


(51.2
)


36.8







(8.1
)


12.6



1.1Valuation allowance


(4.7
)


(2.5
)


3.8











Net benefit costs

$
14.9


$
22.6


$
21.1


$
0.9


$
3.5


$
3.5




F-59



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|25. | PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):
|--- | ------------------------------------------------------



The expense related to defined contribution pension plans amounted to $10.6 million in
2009 ($11.3 million in 2008 and $11.1 million in 2007).

The total cash amount paid or payable for employee future
benefits for all plans, consisting of cash contributed by the Company to its funded pension plans, cash payment directly to beneficiaries for its unfunded other benefit plans, and cash contributed to its defined contribution plans, totalled $36.7
million for the year ended December 31, 2009 ($35.2 million in 2008 and $36.7 million in 2007).

The weighted average
rates used in measuring the Companys benefit obligations as of December 31, 2009, 2008, and 2007 and current periodic costs are as follows:



Pension benefits


Postretirement benefits2009


2008


2007


2009


2008


2007Benefit obligationsRates as of year-end:Discount rate

6.25
%

7.50
%

5.50
%

6.25
%

7.50
%

5.50
%Rate of compensation increase

3.50


3.50


3.50


3.50


3.50


3.50Current periodic costsRates as of preceding year-end:Discount rate

7.50
%

5.50
%

5.00
%

7.50
%

5.50
%

5.00
%Expected return on plan assets1

7.00


7.25


7.25








Rate of compensation increase

3.50


3.50


3.50


3.50


3.50


3.50




| | 1 | After management and professional fees.
| | - | ---------------------------------------

The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligations was 8.6% at the end of 2009. The cost, as per an estimate, is expected to decrease gradually
over the next nine years to 5.0% and to remain at that level thereafter. A one-percentage-point change in the assumed health care cost trend would have the following effects:



Postretirement benefitsSensitivity analysis

1% increase

1% decreaseEffect on benefit cost

$
0.5

$
(0.4
)Effect on benefit obligations


6.3


(4.9
)




F-60



---

##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES:
|--- | ------------------------------------------------------------------------

The Companys consolidated financial statements are prepared in accordance with Canadian GAAP, which differ in some respects from those
applicable in the United States (U.S. GAAP). The following tables set forth the impact of material differences between Canadian and U.S. GAAP on the Companys consolidated financial statements of income, comprehensive income (loss)
and balance sheets:



| | (a) | Consolidated statements of income (loss):
| | --- | -----------------------------------------



2009


2008


2007(restated, note 1(b) and note
26(ix))


(restated, note 1(b) and note
26(ix))Net income (loss) as per Canadian GAAP

$
525.1


$
(378.7
)

$
328.3Non-controlling interest as per Canadian GAAP (ix)


23.8



23.4



19.7Adjustments:Pension and postretirement benefits (i)


(8.2
)


2.3



2.3Derivative instruments (ii)


(42.9
)


3.8



11.0Stock-based compensation (iii)


(10.3
)


3.5



(6.9
)Impairment of goodwill (iv)






3.8



Other (v)


(1.8
)






Income taxes (vi)


14.5



(9.8
)


(24.3
)(48.7
)


3.6



(17.9
)Net income (loss) as adjusted per U.S. GAAP

$
500.2


$
(351.7
)

$
330.1Attributable to (ix):Equity shareholders

$
475.1


$
(376.7
)

$
312.9Non-controlling interest


25.1



25.0



17.2




F-61



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
|--- | ------------------------------------------------------------------------------------



| | (b) | Consolidated statements of comprehensive income (loss):
| | --- | -------------------------------------------------------



2009


2008


2007(restated, note 1(b) and note
26(ix))


(restated, note 1(b) and note
26(ix))Comprehensive income (loss) as per Canadian GAAP

$
555.2


$
(438.3
)

$
374.3Non-controlling interest as per Canadian GAAP (ix)


23.9



23.7



18.4Other adjustments to net income (loss) as per (a) above


(48.7
)


3.6



(17.9
)Adjustments to other comprehensive income:Pension and postretirement benefits (i)


(54.9
)


45.0



(1.5
)Derivative financial instruments (ii)


4.2



2.0



3.0Income taxes (vi)


15.3



(12.4
)


(0.2
)(35.4
)


34.6



1.3Comprehensive income (loss) as per U.S. GAAP

$
495.0


$
(376.4
)

$
376.1Attributable to (ix):Equity shareholders

$
474.0


$
(401.2
)

$
356.9Non-controlling interest


21.0



24.8



19.2




F-62



---

##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
|--- | ------------------------------------------------------------------------------------



| | (c) | Consolidated balance sheets:
| | --- | ----------------------------



2009


2008Canada


United States


Canada


United States(restated, note 1(b))Current assets

$
1,110.8


$
1,111.1


$
848.4


$
848.4Property, plant and equipment


2,439.8



2,438.0



2,215.2



2,215.2Other assets


122.1



59.2



98.0



67.8Long-term future income tax assets


12.5



15.2



12.3



15.7Current liabilities


(1,112.0
)


(1,124.8
)


(1,076.1
)


(1,074.0
)Long-term debt


(3,693.4
)


(3,714.8
)


(4,298.7
)


(4,281.5
)Other liabilities


(104.8
)


(131.1
)


(97.7
)


(94.8
)Long-term future income tax liabilities


(413.4
)


(364.1
)


(356.9
)


(343.7
)Contributed surplus (vii), (viii)


(3,223.1
)


(3,423.6
)


(3,214.5
)


(3,412.3
)Deficit


2,524.6



2,759.0



2,974.7



3,159.1Accumulated other comprehensive loss


20.1



53.6



50.2



52.5Non-controlling interest


(116.2
)


(110.7
)


(105.7
)


(103.2
)


The accumulated
other comprehensive loss as of December 31, 2009, 2008, and 2007 is as follows:



2009


2008


2007Accumulated other comprehensive (loss) income as per Canadian GAAP

$
(20.1
)

$
(50.2
)

$
9.4Adjustments:Pension and postretirement benefits (i)


(61.5
)


(12.5
)


(58.2
)Derivative instruments (ii)


9.2



5.0



3.0Income taxes (vi)


18.8



5.2



17.8(33.5
)


(2.3
)


(37.4
)Accumulated other comprehensive loss as per U.S. GAAP

$
(53.6
)

$
(52.5
)

$
(28.0
)


On September 30, 2009, the Company adopted Accounting Standards Update
(ASU) No. 2009-01, The FASB Accounting Standards CodificationTMand theHierarchy of Generally Accepted Accounting Principles, previously issued as Statement of Financial Accounting Standard No. 168. The Codification is approved as the single source of
authoritative non-governmental U.S. GAAP, which does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place.
All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. Although the implementation of this update did not have an impact on the
reconciliations contained herein, the references below now reflect the new codification.



F-63



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##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
|--- | ------------------------------------------------------------------------------------



| | (i) | Under U.S. GAAP, Statement of Financial Accounting Standards (SFAS) No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans, now contained in Codification Topic 715, Compensation  Retirement Benefits, requires the recognition of over- or under-funded positions of defined benefit pension and other postretirement plans on the balance sheet, along
with a corresponding non-cash adjustment to be recorded in accumulated other comprehensive loss.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Under Canadian
GAAP, a company is not required to recognize over- or under-funded positions. However, when a defined benefit plan gives rise to an accrued benefit asset, a company must recognize a valuation allowance for the excess of the adjusted benefit asset
over the expected future benefit to be realized from plan assets. U.S. GAAP does not provide for a valuation allowance against pension assets.



| | (ii) | Since January 1, 2007, standards for hedge accounting under Canadian GAAP are similar to those under U.S. GAAP, as established by SFAS 133, Accounting for
Derivative Instruments and Hedging Activities, now contained in Codification Topic 815, Derivatives and Hedging.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

However, under Canadian GAAP, certain embedded derivatives, such as the early settlement options included in some of the Companys borrowing agreements, do not meet the criteria to be considered
closely related to their host contracts and therefore must be recorded at their fair value with changes in income. Under U.S. GAAP, those embedded derivatives are considered closely related to their host contract and do not have to be recorded
separately at their fair values. Accordingly, the measurement of ineffective hedging relationships recorded in income under U.S. GAAP differs from the measurement under Canadian GAAP.



| | (iii) | Under U.S. GAAP, in accordance with SFAS 123R, Share-Based Payment now contained in Codification Topic 718, Compensation  Stock Compensation, the
liability related to stock-based awards that calls for settlement in cash or other assets must be measured at its fair value based on the fair value of stock option awards and is to be re-measured at the end of each reporting period. Under Canadian
GAAP, the liability is measured and re-measured based on the intrinsic values of the stock option awards instead of at their fair values.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | In respect of the 1999 acquisition of Sun Media Corporation, certain of the restructuring costs related to the acquired newspapers were recorded in the purchase
equation as goodwill under Canadian GAAP, but were excluded from the purchase equation and expensed under U.S. GAAP. The difference between the carrying value of goodwill under Canadian GAAP and U.S. GAAP resulted in an adjustment of the 2008
goodwill impairment charge.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Under U.S. GAAP, FSP FAS 13-1, Accounting for Rental Costs Incurred during a Construction Period, now contained in Codification Topic 840, Leases,
requires that rental costs relating to an operating lease be expensed as incurred during the construction period of an asset. Under Canadian GAAP, such rent expenses can be capitalized to the cost of an item of property, plant and equipment being
constructed until this item is substantially complete and ready for productive use.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Under Canadian GAAP, income taxes are measured using substantively enacted tax rates, while under U.S. GAAP, measurement is based on enacted tax rates.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, under U.S. GAAP, the FASB issued interpretation No. 48, Accounting for Uncertainty in
Income Taxes(FIN 48), an interpretation of SFAS 109, Accounting for Income Taxes, now contained in Codification Topic 740, Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with SFAS 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. This interpretation also provides guidance as to derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Under Canadian GAAP, there is no such interpretation and therefore the reserve
related to income tax contingencies is not based on the same level of likelihood as that prescribed by FIN 48.

Other
adjustments represent the tax impact of U.S. GAAP adjustments.



F-64



---

##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|26. | SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
|--- | ------------------------------------------------------------------------------------



| | (vii) | Under Canadian GAAP, a gain on repurchase of redeemable preferred shares of a subsidiary was included in income in 2003. Under U.S. GAAP, any such gain is
included in contributed surplus.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (viii) | The Company and its subsidiaries have entered into tax consolidation transactions with the Companys parent company, through which tax losses were transferred
between the parties. Under Canadian GAAP, this resulted in the recognition of deferred credits. Under U.S. GAAP, since these transactions relate to asset transfers between related parties, the difference between the carrying value of the tax
benefits transferred and the cash consideration received or paid is recognized in contributed surplus.
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ix) | As of January 1, 2009, the Company adopted SFAS 141R, Business Combinations, and SFAS 160, Non-controlling Interests in its consolidated
financial statements, now contained in Codification Topic 805, Business Combinations, and in Codification Topic 810, Consolidation, respectively.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The provisions of SFAS 141R apply prospectively to business combinations for which the acquisition date is on or after
December 31, 2008. SFAS 141R establishes new guidance on the recognition and measurement of all assets and all liabilities of the acquired business at fair value. Non-controlling interests are measured at either their fair value or at
their proportionate share of the fair value of identifiable assets and liabilities. The measurement of consideration given now includes the fair value of any contingent consideration as of the acquisition date, and subsequent changes in fair value
of the contingent consideration classified as a liability are recognized in earnings. Acquisition-related costs are excluded from the purchase price and are expensed as incurred. In addition, restructuring costs related to a business combination are
no longer part of the purchase price equation and are expensed as incurred. The adoption of this section has not yet created a material difference between Canadian and U.S. GAAP.

The new rules under SFAS 160 establish new guidance on accounting for non-controlling interests and for transactions with
non-controlling interest. SFAS 160 requires that non-controlling interest be presented as a separate component of shareholders equity. In the statement of income, net income is calculated before non-controlling interest and is then attributed
to shareholders and non-controlling interest. In addition, changes in the Companys ownership interest in a subsidiary that do not result in a loss of control are now accounted for as equity transactions. The new presentation applies
retroactively and U.S. GAAP prior period figures have been restated.



| | (x) | As a result of the adoption of CICA Section 3064 (note 1(b)), the accounting rules related to start-up costs have been harmonized with U.S. GAAP and, accordingly,
a U.S. GAAP adjustment in connection with these costs is no longer required. The prior period U.S. GAAP adjustment has been restated since the new rules under Canadian GAAP were applied retroactively with restatement of prior period figures.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xi) | On January 1, 2009, the Company adopted the provisions of SFAS 157, Fair Value Measurements, now contained in Codification Topic 820, Fair Value
Measurements and Disclosures, related to the guidance for using fair value to measure certain non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a
recurring basis. The adoption had no impact on its consolidated financial statements.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-65



---

##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|27. | NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY:
|--- | -----------------------------------------------------

The Company has access to the cash flows generated by its subsidiaries by way of dividends declared by its public subsidiaries and dividends and advances from its private subsidiaries. However, some of
the Companys subsidiaries have restrictions, based on contractual debt obligations and corporate solvency tests, regarding the amounts of dividends and advances that can be paid to the Company.

The U.S Securities and Exchange Commission requires that the non-consolidated financial statements of the parent company be presented when
its subsidiaries have restrictions that may limit the amount of cash that can be paid to the parent company. These non-consolidated and condensed financial statements, as prepared under Canadian GAAP, are shown below.

Non-consolidated and condensed statements of income



2009


2008


2007(restated, note 1(b))


(restated, note 1(b))RevenuesManagement fees

$
48.4


$
46.4


$
65.4Interest on loan to subsidiaries and other


8.7







3.457.1



46.4



68.8ExpensesGeneral and administrative


60.5



43.1



66.5Amortization


2.2



0.5



0.6Financial


124.3



137.0



128.3Loss before undernoted items


(129.9
)


(134.2
)


(126.6
)(Loss) gain on disposal of investments and other assets


(0.3
)


0.4



1.0Gain (loss) on valuation and translation of financial instruments


18.3



(8.8
)


(10.5
)Loss before income taxes


(111.9
)


(142.6
)


(136.1
)Income taxes


20.2



81.7



41.8(132.1
)


(224.3
)


(177.9
)Equity income (loss) from subsidiaries


657.2



(154.4
)


506.2Net income (loss)

$
525.1


$
(378.7
)

$
328.3


Non-consolidated and condensed statements of comprehensive income (loss)



2009

2008


2007(restated, note 1(b))


(restated, note 1(b))Net income (loss)

$
525.1

$
(378.7
)

$
328.3Other comprehensive income (loss)


26.9


(40.8
)


34.5Share of other comprehensive income (loss) from subsidiaries


3.2


(18.8
)


11.530.1


(59.6
)


46.0Comprehensive income (loss)

$
555.2

$
(438.3
)

$
374.3




F-66



---

##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|27. | NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):
|--- | -----------------------------------------------------------------



Non-consolidated and condensed statements of cash flows



2009


2008


2007(restated, note 1(b))


(restated, note 1(b))Cash flows related to operationsNet income (loss)

$
525.1


$
(378.7
)

$
328.3Amortization of plant, property and equipment


2.2



0.5



0.6(Gain) loss on valuation and translation of financial instruments


(18.3
)


8.8



10.5Loss (gain) on disposal of investments and other assets


0.3



(0.4
)


(1.0
)Amortization of financing costs and long-term debt discount


6.5



6.1



1.5Future income taxes


20.2



81.7



41.8Excess of equity (income) loss on dividends from subsidiaries


(332.1
)


445.1



(421.5
)Net change in non-cash balances related to operations


(25.8
)


(24.5
)


56.5Cash flows provided by operations


178.1



138.6



16.7Cash flows related to investing activitiesNet acquisitions of investments in subsidiaries


(43.5
)


(126.3
)


(484.9
)Reduction to paid-up capital of subsidiaries






120.0



299.6Disposal of a business to a subsidiary






0.4



3.5Other


1.6



(1.5
)


1.2Cash flows used in investing activities


(41.9
)


(7.4
)


(180.6
)Sub-total, balance carried forward

$
136.2


$
131.2


$
(163.9
)




F-67



---

##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|27. | NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):
|--- | -----------------------------------------------------------------



Non-consolidated and condensed statements of cash flows (continued)



2009


2008


2007(restated, note 1(b))


(restated, note 1(b))Sub-total, balance brought forward

$
136.2


$
131.2


$
(163.9
)Cash flows related to financing activitiesProceeds from issuance of redeemable preferred shares


190.0



1,100.0



2,235.0Repurchases of redeemable preferred shares


(985.0
)


(1,710.0
)


(400.0
)Net change in bank indebtedness


(2.5
)


0.7



(0.1
)Net change under revolving facility


(4.0
)


4.0



Repayments of long-term debt


(36.0
)


(25.2
)


(20.7
)Issuance of long-term debt, net of financing fees






16.3



657.5Repayment of the Additional Amount payable










(127.2
)Dividends and reduction of Common Shares paid-up capital


(75.0
)


(65.0
)


(110.0
)Net change in subordinated loans from subsidiaries


1,262.0







Net change in convertible obligations, subordinated loans and notes receivable - subsidiaries


(450.4
)


516.6



(2,072.5
)Net change in advances to or from subsidiaries


(15.9
)


31.2



2.1Cash flows (used in) provided by financing activities


(116.8
)


(131.4
)


164.1Net change in cash and cash equivalents


19.4



(0.2
)


0.2Cash and cash equivalents at beginning of year






0.2



Cash and cash equivalents at end of year

$
19.4


$



$
0.2


Non-consolidated and condensed balance sheets



2009

2008(restated, note 1(b))Assets

$


$Current assets


74.8


17.1Investments in subsidiaries


3,984.7


3,550.8Convertible obligations, subordinated loans and notes receivable - subsidiaries


2,772.4


2,371.5Other assets


56.5


204.2$
6,888.4

$
6,143.6




F-68



---

##### Table of Contents

QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Years ended December 31, 2009, 2008 and 2007

(tabular amounts in millions of Canadian dollars, except for option data)





|27. | NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):
|--- | -----------------------------------------------------------------



Non-consolidated and condensed balance sheets (continued)



2009

2008(restated, note 1(b))Liabilities and Shareholders equity

$


$Current liabilities


124.3


101.1Long-term debt


1,649.7


1,972.9Advances from subsidiaries


46.3


62.2Other liabilities


115.3


10.4Subordinated loan from subsidiaries


1,262.0


Redeemable preferred shares issued to subsidiaries


1,260.0


2,055.0Shareholders equity


2,430.8


1,942.0$
6,888.4

$
6,143.6




|28. | SUBSEQUENT EVENTS
|--- | -----------------

On
January 13, 2010, Videotron issued $300.0 million in aggregate principal amount of Senior Notes for net proceeds of $293.9 million, net of financing fees of $6.1 million. The Senior Notes bear interest at 7.125% payable every six months on
June 15 and December 15, and will mature on January 15, 2020. These notes contain certain restrictions on Videotron, including limitations on its ability to incur additional indebtedness, pay dividends, or make other distributions and
are unsecured. These Senior Notes are guaranteed by specific subsidiaries of Videotron. These notes are redeemable at the option of Videotron, in whole or in part, at any time on or after January 15, 2015, at a decreasing premium.

On January 14, 2010, the Company prepaid drawings under its term loan B credit facility in an aggregate
amount of US$170.0 million and settled a corresponding portion of its hedging contracts for an amount of $30.9 million, representing a total cash consideration of $206.7 million. This transaction resulted in a total loss of approximately $10.0
million (before income taxes), primarily including the losses previously reported in other comprehensive loss.

On
January 14, 2010, the Company also extended the maturity date of its $100 million revolving credit facility from January 2011 to January 2013 and obtained certain other favourable amendments to the covenants contained in its credit facilities.



F-69