##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 Commission file number: 333-13792
 QUEBECOR MEDIA INC.
 Province of Québec, Canada   612 Saint-Jacques Street
Montréal, Québec, Canada H3C 4M8
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  None
  13 3 / 4 % Senior Discount Notes due July 15, 2011
11 1 / 8 % Senior Notes due July 15, 2011
  123,602,807 Common Shares
990,000 Cumulative First Preferred Shares, Series A
147,950 Cumulative First Preferred Shares, Series C
255,000 Cumulative First Preferred Shares, Series F
  o þ
  o þ
  þ o
  o o þ
  þ o
  o þ




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##### 



TABLE OF CONTENTS
 PageExplanatory Notes
    
    iiForward-Looking Statements
    
    iiIndustry and Market Data
    
    iiPresentation of Financial Information
    
    iiiExchange Rate Information
    
    ivPART IItem 1  Identity of Directors, Senior Management and Advisers
    
    
    1Item 2  Offer Statistics and Expected Timetable
    
    
    1Item 3  Key Information
    
    
    1Item 4  Information on the Company
    
    
    19Item 4A  Unresolved Staff Comments
    
    
    68Item 5  Operating and Financial Review and Prospects
    
    
    69Item 6  Directors, Senior Management and Employees
    
    
    106Item 7  Major Shareholders and Related Party Transactions
    
    
    120Item 8  Financial Information
    
    
    123Item 9  The Offer and Listing
    
    
    125Item 10  Additional Information
    
    
    126Item 11  Quantitative and Qualitative Disclosures about Market Risk
    
    
    144Item 12  Description of Securities Other Than Equity Securities
    
    
    147PART IIItem 13  Defaults, Dividend Arrearages and Delinquencies
    
    
    148Item 14  Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    148Item 15  Controls and Procedures
    
    
    148Item 16  [Reserved]
    
    
    148Item 16A  Audit Committee Financial Expert
    
    
    148Item 16B  Code of Ethics
    
    
    148Item 16C  Principal Accountant Fees and Services
    
    
    149Item 16D  Exemptions from the Listing Standards for Audit Committees
    
    
    149Item 16E  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    149PART IIIItem 17  Financial Statements
    
    
    149Item 18  Financial Statements
    
    
    150Item 19  Exhibits
    
    
    150Signature
    
    
    154INDEX TO FINANCIAL STATEMENTS
    
    
    F-1Certificate of amendment of articles of QMIBy-law number 2005-1 of Quebecor Media inc.1st supplemental indenture, dated 12-30-051st supplemental indenture, dated 12-30-057 3/4% senior notes indenture, dated 01-17-06credit agreement, dated 01-17-06statement regarding calculation of ratiosubsidiaries of Quebecor Media inc.certification of Pierre Francoeurcertification of Mark D'Soukacertification of Pierre Francoeurcertification of Mark D'Souka




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




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EXCHANGE RATE INFORMATION
  Year Ended
    
    Average(1)
    
    High
    
    Low
    
    Period EndDecember 31, 2001
    
    
    0.6446
    
    
    
    0.6697
    
    
    
    0.6241
    
    
    
    0.6279December 31, 2002
    
    
    0.6370
    
    
    
    0.6619
    
    
    
    0.6200
    
    
    
    0.6329December 31, 2003
    
    
    0.7205
    
    
    
    0.7738
    
    
    
    0.6349
    
    
    
    0.7738December 31, 2004
    
    
    0.7719
    
    
    
    0.8493
    
    
    
    0.7158
    
    
    
    0.8310December 31, 2005
    
    
    0.8282
    
    
    
    0.8690
    
    
    
    0.7872
    
    
    
    0.8579
 Month Ended
    
    Average(2)
    
    High
    
    Low
    
    Period EndSeptember 30, 2005
    
    
    0.8491
    
    
    
    0.8615
    
    
    
    0.8418
    
    
    
    0.8615October 31, 2005
    
    
    0.8493
    
    
    
    0.8579
    
    
    
    0.8413
    
    
    
    0.8477November 30, 2005
    
    
    0.8463
    
    
    
    0.8579
    
    
    
    0.8361
    
    
    
    0.8569December 31, 2005
    
    
    0.8610
    
    
    
    0.8690
    
    
    
    0.8521
    
    
    
    0.8579January 31, 2006
    
    
    0.8642
    
    
    
    0.8744
    
    
    
    0.8528
    
    
    
    0.8744February 28, 2006
    
    
    0.8704
    
    
    
    0.8788
    
    
    
    0.8638
    
    
    
    0.8788March 2006 (through March 24, 2006)
    
    
    0.8663
    
    
    
    0.8834
    
    
    
    0.8565
    
    
    
    0.8565
 
 (1)
    
    The average of the exchange rates on the last day of each month during the
applicable year.(2)
    
    The average of the exchange rates for all days during the applicable month. iii




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FORWARD-LOOKING STATEMENTS
  
    
    general economic, financial or market conditions;
    
    the intensity of competitive activity in the industries in which we operate;
    
    unanticipated higher capital spending required to address continued development of
competitive alternative technologies or the inability to obtain additional capital to
continue the development of our business;
    
    our ability to implement successfully our business and operating strategies and
manage our growth and expansion;
    
    our ability to continue to distribute a wide range of television programming and to
attract large audiences and readership;
    
    variations in the cost, quality and variety of our television programming;
    
    cyclical and seasonal variations in our advertising revenue;
    
    disruptions to the network through which we provide our digital television, Internet
access and telephony services, and our ability to protect such services from piracy;
    
    labor disputes or strikes;
    
    changes in our ability to obtain services and equipment critical to our operations;
    
    changes in laws and regulations, or in their interpretations, which could result in,
among other things, the loss (or reduction in value) of our licenses or markets or in
an increase in competition, compliance costs or capital expenditures;
    
    our substantial indebtedness and the restrictions on our business imposed by the terms of our debt; and
    
    interest rate fluctuations that affect a portion of our interest payment requirements on long-term debt.
  iv




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v




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




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CANADIAN GAAP DATA
 Years Ended December 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005(in millions, except ratio)STATEMENT OF INCOME DATA:RevenuesCable
    
    $
    525.4
    
    
    $
    781.0
    
    
    $
    805.0
    
    
    $
    871.6
    
    
    $
    1,002.0Newspapers
    
    
    815.0
    
    
    
    831.6
    
    
    
    845.9
    
    
    
    888.1
    
    
    
    915.6Broadcasting
    
    
    114.7
    
    
    
    323.4
    
    
    
    340.9
    
    
    
    358.0
    
    
    
    401.4Leisure and Entertainment
    
    
    223.5
    
    
    
    206.3
    
    
    
    205.0
    
    
    
    241.7
    
    
    
    255.4Business Telecommunications
    
    
    14.6
    
    
    
    91.9
    
    
    
    77.7
    
    
    
    78.6
    
    
    
    102.1Interactive Technologies and Communications
    
    
    62.3
    
    
    
    49.9
    
    
    
    44.8
    
    
    
    51.9
    
    
    
    65.1Internet/Portals
    
    
    27.4
    
    
    
    26.8
    
    
    
    28.2
    
    
    
    34.5
    
    
    
    50.0Head Office and inter-segment
    
    
    (17.8
    )
    
    
    (57.9
    )
    
    
    (49.4
    )
    
    
    (62.0
    )
    
    
    (88.7
    )1,765.1
    
    
    
    2,253.0
    
    
    
    2,298.1
    
    
    
    2,462.4
    
    
    
    2,702.9Cost of sales, selling and administrative expenses
    
    
    (1,375.7
    )
    
    
    (1,680.6
    )
    
    
    (1,686.3
    )
    
    
    (1,765.2
    )
    
    
    (1,969.3
    )Amortization
    
    
    (150.3
    )
    
    
    (224.6
    )
    
    
    (226.6
    )
    
    
    (225.9
    )
    
    
    (231.9
    )Financial expenses
    
    
    (289.2
    )
    
    
    (323.4
    )
    
    
    (300.1
    )
    
    
    (314.6
    )
    
    
    (285.3
    )Reserve for restructuring of operations,
impairment of assets and other special charges
    
    
    (151.2
    )
    
    
    (36.9
    )
    
    
    (1.8
    )
    
    
    (2.8
    )
    
    
    0.2Gain (loss) on debt refinancing and on repurchase
of redeemable preferred shares of a subsidiary
    
    
    
    
    
    
    
    
    
    
    144.1
    
    
    
    (4.8
    )
    
    
    (60.0
    )Gain (loss) on sales of businesses and other
assets and gain on dilution
    
    
    1.5
    
    
    
    3.6
    
    
    
    (1.1
    )
    
    
    9.3
    
    
    
    0.1Write-down of goodwill
    
    
    (132.8
    )
    
    
    (178.1
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    Income taxes
    
    
    6.9
    
    
    
    (4.4
    )
    
    
    12.5
    
    
    
    (37.4
    )
    
    
    (44.0
    )Amortization of goodwill, net of non-controlling
interest
    
    
    (125.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-controlling interest
    
    
    26.0
    
    
    
    (30.5
    )
    
    
    (34.6
    )
    
    
    (31.7
    )
    
    
    (16.2
    )(Loss) income from discontinued operations and
other expenses
    
    
    (24.1
    )
    
    
    (7.9
    )
    
    
    0.2
    
    
    
    (1.1
    )
    
    
    Net (loss) income
    
    $
    (449.5
    )
    
    $
    (229.8
    )
    
    $
    203.9
    
    
    $
    88.2
    
    
    $
    96.5OTHER FINANCIAL DATA AND RATIO:Operating income(1)
    
    $
    389.4
    
    
    $
    572.4
    
    
    $
    611.8
    
    
    $
    697.2
    
    
    $
    733.6Additions to property, plant and equipment
    
    $
    129.7
    
    
    $
    135.8
    
    
    $
    131.2
    
    
    $
    181.1
    
    
    $
    315.5Ratio of earnings to fixed charges(2)
    
    
    
    
    
    
    0.4x
    
    
    
    1.7x
    
    
    
    1.5x
    
    
    
    1.5x
 As at December 31,2001
    
    2002
    
    2003
    
    2004
    
    2005(in millions)BALANCE SHEET DATA:Cash and cash equivalents
    
    $
    207.8
    
    
    $
    188.3
    
    
    $
    103.6
    
    
    $
    108.8
    
    
    $
    97.4Total assets
    
    
    9,255.9
    
    
    
    6,742.8
    
    
    
    6,610.6
    
    
    
    6,509.2
    
    
    
    6,675.5Long-term debt
    
    
    3,695.4
    
    
    
    3,506.6
    
    
    
    2,756.8
    
    
    
    2,548.8
    
    
    
    2,533.2Capital stock
    
    
    3,985.0
    
    
    
    1,341.8
    
    
    
    1,773.7
    
    
    
    1,773.7
    
    
    
    1,773.7Shareholders equity
    
    
    4,093.4
    
    
    
    1,751.9
    
    
    
    2,395.0
    
    
    
    2,459.9
    
    
    
    2,450.1
 2




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U.S. GAAP DATA
 Year Ended December 31,2003
    
    
    2004
    
    
    2005(in millions, except ratio)STATEMENT OF INCOME DATA:RevenuesCable
    
    $
    805.0
    
    
    $
    880.9
    
    
    $
    1,008.2Newspapers
    
    
    845.9
    
    
    
    888.1
    
    
    
    915.6Broadcasting
    
    
    340.9
    
    
    
    358.0
    
    
    
    401.4Leisure and Entertainment
    
    
    205.0
    
    
    
    241.7
    
    
    
    255.4Business Telecommunications
    
    
    77.7
    
    
    
    78.6
    
    
    
    102.1Interactive Technologies and Communications
    
    
    44.8
    
    
    
    51.9
    
    
    
    65.1Internet/Portals
    
    
    28.2
    
    
    
    34.5
    
    
    
    50.0Head Office and inter-segment
    
    
    (49.4
    )
    
    
    (62.0
    )
    
    
    (88.7
    )2,298.1
    
    
    
    2,471.7
    
    
    
    2,709.1Cost of sales, selling and administrative expenses
    
    
    (1,683.0
    )
    
    
    (1,764.3
    )
    
    
    (1,973.5
    )Amortization
    
    
    (226.6
    )
    
    
    (225.7
    )
    
    
    (229.6
    )Financial expenses
    
    
    (467.6
    )
    
    
    (308.0
    )
    
    
    (274.0
    )Reserve for restructuring of operations,
impairment of assets and other special charges
    
    
    (1.8
    )
    
    
    (2.8
    )
    
    
    0.2Loss on debt refinancing
    
    
    (9.6
    )
    
    
    (4.8
    )
    
    
    (60.0
    )Gain (loss) on sales of businesses and other assets
    
    
    (1.1
    )
    
    
    9.3
    
    
    
    1.6Write-down of goodwill
    
    
    (0.5
    )
    
    
    
    
    
    
    Income taxes
    
    
    13.8
    
    
    
    (43.4
    )
    
    
    (14.2
    )Non-controlling interest
    
    
    (34.6
    )
    
    
    (35.1
    )
    
    
    (18.4
    )Income (loss) from discontinued operations and
other expenses
    
    
    16.4
    
    
    
    (0.8
    )
    
    
    Net (loss) income
    
    $
    (96.5
    )
    
    $
    96.1
    
    
    $
    141.2OTHER FINANCIAL DATA AND RATIOS:Operating income(1)
    
    $
    615.1
    
    
    $
    707.4
    
    
    $
    735.6Additions to property, plant and equipment
    
    $
    131.2
    
    
    $
    181.1
    
    
    $
    315.5Comprehensive (loss) income
    
    $
    (155.7
    )
    
    $
    (11.3
    )
    
    $
    172.4Ratio of earnings to fixed charges(2)
    
    
    0.8x
    
    
    
    1.6x
    
    
    
    1.6x
 As of December 31,2003
    
    2004
    
    2005(in millions)BALANCE SHEET DATA (U.S. GAAP):Cash and cash equivalents
    
    $
    103.6
    
    
    $
    108.8
    
    
    $
    97.4Total assets
    
    
    6,602.2
    
    
    
    6,480.1
    
    
    
    6,664.1Long-term debt
    
    
    2,736.1
    
    
    
    2,514.9
    
    
    
    2,468.5Capital stock
    
    
    1,773.7
    
    
    
    1,773.7
    
    
    
    1,773.7Shareholders equity
    
    
    2,253.3
    
    
    
    2,218.4
    
    
    
    2,301.7
 
 (1)
    
    Quebecor Media defines operating income, as reconciled to net income under Canadian GAAP,
as net (loss) income before amortization, financial expenses, reserve for restructuring of
operations, impairment of assets and other special charges, gain (loss) on debt refinancing
and on repurchase of redeemable preferred shares of a subsidiary, gain (loss) on sales of
businesses and other assets and gain on dilution, write-down of goodwill, income taxes,
amortization of goodwill net of non-controlling interest, non-controlling interest and (loss)
income from discontinued operations and other expenses. Quebecor Media defines operating
income, as reconciled to net income under U.S. GAAP, as net (loss) income before amortization,
financial expenses, reserve for restructuring of operations, impairment of assets and other
special charges, loss on debt refinancing, gain (loss) on sales of businesses and other
assets, write-down of goodwill, income taxes, non-controlling 3




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interest and (income) loss from discontinued operations and other expenses. 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. It is not intended to
represent funds available for debt service, dividends or distributions, reinvestment or other
discretionary uses, and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with Canadian GAAP or U.S. GAAP. Our management
believes that operating income is a meaningful measure of performance. Our parent company,
Quebecor, considers the media segment as a whole and uses operating income in order to assess
the performance of its investment in Quebecor Media. Our management and Board of Directors
use this measure in evaluating Quebecor Medias consolidated results as well as results of
Quebecor Medias operating segments. As such, this measure eliminates the significant level
of non-cash depreciation of tangible assets and amortization of certain intangible assets,
and it is unaffected by the capital structure or investment activities of Quebecor Media and
of its segments. Operating income is also relevant because it is a significant component of
Quebecor Medias annual incentive compensation programs. A limitation of this measure,
however, is that it does not reflect the periodic costs of capitalized tangible and
intangible assets used in generating revenues in Quebecor Medias segments. Management
evaluates the costs of such tangible and intangible assets through other financial measures
such as capital expenditures and free cash flow from operations. In addition, measures like
operating income are commonly used by the investment community to analyze and compare the
performance of companies in the industries in which we are engaged. Our definition of
operating income may not be the same as similarly titled measures reported by other
companies.The following table provides a reconciliation under Canadian GAAP of operating income to net
income as disclosed in our financial statements: Three Month PeriodYears Ended December 31,
    
    
    Ended December 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005(in millions)
    
    
    (in millions)(unaudited)Reconciliation between
net (loss) income and
operating income
disclosed herein
(Canadian GAAP)Net (loss) income
    
    $
    (449.5
    )
    
    $
    (229.8
    )
    
    $
    203.9
    
    
    $
    88.2
    
    
    $
    96.5
    
    
    $
    49.1
    
    
    $
    58.4Amortization
    
    
    150.3
    
    
    
    224.6
    
    
    
    226.6
    
    
    
    225.9
    
    
    
    231.9
    
    
    
    62.9
    
    
    
    64.7Financial expenses
    
    
    289.2
    
    
    
    323.4
    
    
    
    300.1
    
    
    
    314.6
    
    
    
    285.3
    
    
    
    86.6
    
    
    
    68.3Reserve for
restructuring of
operations, impairment
of assets and other
special
charges
    
    
    151.2
    
    
    
    36.9
    
    
    
    1.8
    
    
    
    2.8
    
    
    
    (0.2
    )
    
    
    0.6
    
    
    
    (0.2
    )(Gain) loss on debt
refinancing and on
repurchase of
redeemable preferred
shares of a subsidiary
    
    
    
    
    
    
    
    
    
    
    (144.1
    )
    
    
    4.8
    
    
    
    60.0
    
    
    
    4.8
    
    
    
    (Gain) loss on sale of
businesses and other
assets and gains on
dilution
    
    
    (1.5
    )
    
    
    (3.6
    )
    
    
    1.1
    
    
    
    (9.3
    )
    
    
    (0.1
    )
    
    
    (8.0
    )
    
    
    Write-down of goodwill
    
    
    132.8
    
    
    
    178.1
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income taxes
    
    
    (6.9
    )
    
    
    4.4
    
    
    
    (12.5
    )
    
    
    37.4
    
    
    
    44.0
    
    
    
    (0.9
    )
    
    
    16.8Amortization of
goodwill, net of
non-controlling
interest
    
    
    125.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-controlling interest
    
    
    (26.0
    )
    
    
    30.5
    
    
    
    34.6
    
    
    
    31.7
    
    
    
    16.2
    
    
    
    9.1
    
    
    
    5.4Loss (income) from
discontinued operations
and other expenses
    
    
    24.1
    
    
    
    7.9
    
    
    
    (0.2
    )
    
    
    1.1
    
    
    
    
    
    
    
    
    
    
    
    Operating income
    
    $
    389.4
    
    
    $
    572.4
    
    
    $
    611.8
    
    
    $
    697.2
    
    
    $
    733.6
    
    
    $
    204.2
    
    
    $
    213.4
 4




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The following table provides a reconciliation under U.S. GAAP of operating income to net
income as disclosed in our financial statements:
 Year Ended December 31,2003
    
    
    2004
    
    
    2005(in millions)Reconciliation between net (loss) income and
operating income disclosed herein(U.S. GAAP)Net (loss) income
    
    $
    (96.5
    )
    
    $
    96.1
    
    
    $
    141.2Amortization
    
    
    226.6
    
    
    
    225.7
    
    
    
    229.6Financial expenses
    
    
    467.6
    
    
    
    308.0
    
    
    
    274.0Reserve for restructuring of operations,
impairment of assets and other special charges
    
    
    1.8
    
    
    
    2.8
    
    
    
    (0.2
    )Loss on debt refinancing
    
    
    9.6
    
    
    
    4.8
    
    
    
    60.0Loss (gain) on sales of businesses and other assets
    
    
    1.1
    
    
    
    (9.3
    )
    
    
    (1.6
    )Write-down of goodwill
    
    
    0.5
    
    
    
    
    
    
    
    Income taxes
    
    
    (13.8
    )
    
    
    43.4
    
    
    
    14.2Non-controlling interest
    
    
    34.6
    
    
    
    35.1
    
    
    
    18.4(Income) loss from discontinued operations and
other expenses
    
    
    (16.4
    )
    
    
    0.8
    
    
    
    Operating income
    
    $
    615.1
    
    
    $
    707.4
    
    
    
    735.6
 (2)
    
    For the purpose of calculating the ratio of earnings to fixed charges, (i) earnings consist
of net income (loss) plus non-controlling interest in subsidiary, income taxes, fixed charges,
amortized capitalized interest, less interest capitalized and (ii) fixed charges consist of
interest expensed and capitalized, plus amortized premiums, discounts and capitalized expenses
relating to indebtedness and an estimate of the interest within rental expense. For the years
ended December 31, 2001 and 2002, earnings, as calculated under Canadian GAAP, were inadequate
to cover our fixed charges, and the coverage deficiency was $502.1 million and $209.2 million,
respectively. For the year ended December 31, 2003, earnings, as calculated under U.S. GAAP,
were inadequate to cover our fixed charges, and the coverage deficiency was $76.0 million.
 Capitalization and Indebtedness
  Reasons for the Offer and Use of Proceeds
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Risk Factors
 This section describes some of the risks that could affect our business, financial condition
and results of operations. The factors below should be considered in connection with any
forward-looking statements in this document and with the cautionary statements contained in
Forward-Looking Statements at the beginning of this document.
 The risks below are not the only ones that we face. Some risks may not yet be known to us and
some that we do not currently believe to be material could later turn out to be material. Any of
these risks could materially affect our business, financial condition and results of operations.
 We operate in highly competitive industries and our inability to effectively compete could have a
material adverse effect on our business.
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We compete, and will continue to compete, with alternative technologies, and we may be required to
invest a significant amount of capital to address continued technological development.
  We may not be able to obtain additional capital to continue the development of our business.
  We may not successfully implement our business and operating strategies.
  We have grown rapidly. This rapid growth presents significant strains on our management. If we do
not effectively manage our growth, our financial results and operations could be adversely
affected.
  Our financial performance could be materially adversely affected if we cannot continue to
distribute a wide range of television programming on reasonable terms.
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Our content may not attract large audiences, which may limit our ability to generate advertising
and circulation revenue.
  We may be adversely affected by variations in our costs, quality and variety of our television
programming.
   Our advertising revenue is subject to cyclical and seasonal variations, which may cause our results
to vary.
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We provide our digital television, Internet access and telephony services through a single
clustered network, which may be more vulnerable to widespread disruption.
  We depend on third-party suppliers and providers for services and other items critical to our
operations.
   We are dependent on our information technology systems and those of certain third-parties and the
inability to enhance our systems or a security breach or disaster could have an adverse impact on
our financial results and operations.
  Malicious and abusive Internet practices could impair our cable data services.
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We may not be able to protect our services from piracy, which may have a negative effect on our
customer base and lead to a possible decline in revenues.
  We may be adversely affected by the cost of newsprint.
   We may be adversely affected by strikes and other labor protests.
  
    
    Videotrons 4 collective bargaining agreements, representing 2,199, or 100% of its
unionized employees, have been recently renewed and are scheduled to expire on
respective dates between December 2009 and August 2011;
    
    20 of Sun Medias collective bargaining agreements, representing approximately 388,
or 19%, of its unionized employees, have expired. Negotiations regarding these 20
collective bargaining agreements are either in progress or will be undertaken in 2006.
Furthermore, eight of Sun Medias collective bargaining agreements, covering 484
employees, expire in 2006, while Sun Medias 21 other collective bargaining agreements,
representing approximately 1,137 unionized employees, are scheduled to expire on
respective dates between December 2007 and June 2010;
    
    12 of TVA Groups 15 collective bargaining agreements, representing approximately
379, or 41%, of its unionized employees, will expire between April 2007 and the end of
December 2008, one of its collective bargaining agreements, representing approximately
516, or 56%, of its unionized employees, will expire at the end of December 2006 and
two collective bargaining agreements, representing 26, or 3%, of its employees, have
expired and negotiations regarding these collective bargaining agreements will be
undertaken in 2006. A group of 53 employees is currently in the process of being
unionized;
    
    three of our other collective bargaining agreements, representing approximately 126,
or 13%, of our other unionized employees, have expired. Negotiations regarding these
collective bargaining agreements are either in progress or will be undertaken in 2006.
Another seven of our collective bargaining agreements,
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representing approximately 859,
or 87%, of our other unionized employees, expire at various dates between the end of
December 2006 and March 2010.
  We depend on key personnel.
  We have substantial debt and significant interest payment requirements which could adversely affect
our financial condition and therefore make it more difficult to fulfill our obligations under our
indebtedness.
  
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations to
make interest and principal payments on our indebtedness, reducing the availability of
our cash flow to fund capital expenditures, working capital and other general corporate
purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our businesses and
the industries in which we operate;
    
    place us at a competitive disadvantage compared to our competitors that have less
debt or greater financial resources; and
    
    limit, along with the financial and other restrictive covenants in our indebtedness,
among other things, our ability to borrow additional funds.
 3 4
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We are a holding company and depend on our subsidiaries to generate sufficient cash flow to meet
our debt service obligations, including payments on the notes.
   Restrictive covenants in our outstanding debt instruments may reduce our operating and financial
flexibility, which may prevent us from capitalizing on certain business opportunities.
  
    
    borrow money or sell preferred stock;
    
    create or permit certain liens;
    
    pay dividends beyond certain amounts and make other restricted payments;
    
    make certain types of investments;
    
    use the proceeds from sales of assets and subsidiary stock;
    
    enter into certain asset sales;
    
    create or permit restrictions on the ability of our restricted subsidiaries, if any,
to pay dividends or make other distributions;
    
    enter into certain transactions with affiliates;
    
    issue guarantees of debt; and
    
    enter into certain mergers, consolidations and transfers of all or substantially all of our assets.
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We may need to refinance certain of our indebtedness. Our inability to do so on favorable terms, or
at all, could have a material adverse effect on us.
  We may be adversely affected by fluctuations of exchange rates.
  .
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We are subject to extensive government regulation. Changes in government regulation could adversely
affect our business, financial condition or results of operations.
  Broadcasting Act Telecommunications Act Broadcasting Act Telecommunications Act Broadcasting Act Act Radiocommunication Act
   Radiocommunication Act i.e. i.e. Radiocommunication Act
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The CRTC may not renew our existing broadcast and distribution licenses or grant us new licenses on
acceptable terms, or at all.
   We are required to provide third-party Internet service providers with access to our cable systems,
which may result in increased competition.
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We may have to support increasing costs in securing access to support structures needed for our
network.
 Telecommunications Act Commission municipale du
Québec
 We are subject to a variety of environmental laws and regulations.
  If we fail to maintain proper and effective internal controls, our ability to produce accurate
financial statements could be impaired, which could adversely affect our ability to operate our
business, our financial results and investors view of us.
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There is no public market for our notes.
   Our Senior Notes due 2016 may only be transferred in a transaction registered under or exempt from
the registration requirements of the Securities Act of 1933, or, in Canada, in a transaction exempt
from the applicable securities laws of the provinces or territories of Canada.
  We may not be able to finance an offer to purchase our Senior Notes due 2016 following a change of
control as required by the indenture governing the notes because we may not have sufficient funds
at the time of the change of control or our senior secured credit facilities may not allow the
repurchases.
   Canadian bankruptcy and insolvency laws may impair the trustees ability to enforce remedies under
our notes.
 Bankruptcy and Insolvency Act Companies Creditors
Arrangement Act
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Bankruptcy and Insolvency Act Companies Creditors Arrangement Act
 U.S. investors in the notes may have difficulties enforcing civil liabilities.
  18




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ITEM 4  INFORMATION ON THE COMPANY
 History and Development of Quebecor Media
 CT
Corporation System
 Companies Act (Québec)
   
    
    On December 16, 2005, as part of a refinancing plan, we announced tender offers and
consent solicitations pursuant to which we offered to repurchase and retire any and all
of our outstanding 11
1/8% Senior Notes due 2011 and 13 3/4% Senior Discount
Notes due 2011 and sought consents to eliminate substantially all of the restrictive
covenants contained in the indentures governing these notes. In these tender offers,
we repurchased, on January 17, 2006, US$561.6 million in aggregate principal amount of
our Senior Notes due 2011 (representing 95.7% of the Senior Notes due 2011 outstanding)
and US$275.6 million in aggregate principal amount at maturity of our Senior Discount
Notes due 2011 (representing 97.4% of the Senior Discount Notes due 2011 outstanding).
We paid total cash consideration of US$1.3 billion to purchase the notes, including the
premium and the cost of settlement of cross-currency swap agreements. We will recognize
a loss on settlement of debt estimated at $206.0 million, net of income tax, including
the amount by which the disbursements exceeded the book value of the repurchased notes
and the related cross-currency swap agreements, as well as the write-down of deferred
financial expenses. We intend to redeem our remaining outstanding Senior Notes due 2011
and Senior Discount Notes due 2011 on July 15, 2006 at the redemption prices specified
in the respective indentures governing the notes. See also Item 5. Operating And
Financial Review And ProspectsSubsequent Events below.
    
    On December 12, 2005, we closed our acquisition of Sogides ltée, which we refer to
as Sogides, a major Québec-based book publishing and distribution group which owns the
publishing houses Les Éditions de lHomme, Le Jour, Utilis, Les Presses Libres and
Groupe Ville-Marie Littérature (which includes LHexagone, VLB Éditeur and Typo), and
owns the distributor Les Messageries A.D.P., which is a distributor for more than 120
Québec-based and foreign publishing houses. With this acquisition, Quebecor Media
offers a more complete selection of books by Québec authors, will be able to promote
Québec
writers in Europe through the Sogides network on that continent, and becomes the largest
Québec-based publisher
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and distributor of French-language books in the Province of
Québec. For the acquisition of Sogides, we paid cash
consideration of $24.0 million, and an additional contingent
amount of  $5.0 million payable upon the satisfaction of specific conditions in 2008.
    
    In the year ended December 31, 2005, TVA Group repurchased 3,739,599 of its
non-voting Class B Shares for cash consideration of $81.9 million pursuant to a
substantial issuer bid dated May 19, 2005, and pursuant to TVA Groups share
repurchase and cancellation program, increasing our interest in TVA Group at December
31, 2005 to 45.2% from 39.7% at December 31, 2004.
    
    On September 20, 2005, we announced, through Videotron, that we had signed a
strategic relationship agreement with a partnership owned by Rogers Wireless Inc., or
Rogers Wireless, the operator of Canadas largest integrated wireless voice and data
network. Through that relationship, we will be able to offer Québec consumers a
quadruple play of television, broadband Internet, VoIP telephony and Videotron-branded
mobile wireless services. Videotron will operate as a Mobile Virtual Network Operator,
or MVNO, utilizing wireless voice and data services provided by Rogers Wireless across
its GSM/GPRS network. We currently intend to launch our mobile wireless offering during
the second half of 2006, with services to include international roaming and popular
options. We will be responsible for acquiring and billing customers, as well as for
providing customer support under our own brand.
    
    On September 16, 2005, Videotron issued US$175.0 million aggregate principal amount
of its 6
3/8% Senior Notes due December 15, 2015. The net proceeds from this sale of
Videotrons 6
3/8% Senior Notes were used primarily to refinance the repurchase of all
the outstanding Senior Notes issued by our CF Cable TV subsidiary and a portion of the
repurchase by Quebecor Media of its Senior Notes and Senior Discount Notes.
    
    In August 2005, we announced an investment of more than $110.0 million to relocate
and modernize the Journal de Montréalprinting plant. The project includes the
acquisition of three new printing presses and state-of-the-art shipping and inserting
equipment. Construction of the new printing plant in Saint-Janvier-de-Mirabel, north of
Montréal, began on September 9, 2005 and should be completed by spring 2007. We also
announced the creation of a partnership with our affiliate Quebecor World Inc., or
Quebecor World, to operate a new printing press in Islington, in the Greater Toronto
area. The project entails a $110.0 million investment. The new
facility should make it
possible to consolidate some of Quebecor Worlds printing operations in Ontario and to strengthen
the convergence among our Toronto media properties. This new facility is expected to be
fully operational by 2007.
    
    On July 19, 2005, we repurchased and retired US$128.2 million in aggregate principal
amount of our 11
1/8% Senior Notes due 2011 and US$12.1 million in aggregate
principal amount at maturity of our 13 3/4% Senior Discount Notes due 2011 pursuant to
cash tender offers commenced on June 20, 2005. We paid aggregate cash consideration of
$215.3 million to purchase these notes, including the redemption premium and the cost
of settlement of related cross-currency swap agreements, recognizing a $60.8 million
loss on settlement of debt.
    
    In January 2005, Videotron launched its telephony services in the Province of
Québec, using VoIP technology. Videotron became the first major cable company in Canada
to offer consumers residential telephone service over cable. See  Cable below.
 Companies Act
 Business Overview
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Strengths
  
    
    cross-promote our brands, programs and other content across multiple media
platforms;
    
    provide advertisers with an integrated solution for local, regional and national
multi-platform advertising;
    
    offer a differentiated, bundled suite of entertainment, information and
communication services and products, including digital television, cable Internet
access, video-on-demand and other interactive television services, as well as
residential and commercial telephony services using VoIP technology;
    
    deliver high-quality services and products, including, for example, our standard
cable Internet access service that enables our customers to download data at a higher
speed than that currently offered by standard digital subscriber line, or DSL,
technology, and the widest range of French-language programming in Canada;
    
    leverage our content, management, sales and marketing and production resources to
provide superior information and entertainment services to our customers;
    
    extend our market reach by leveraging our multimedia platform and cross-marketing
expertise and experience to enhance our national media platform;
    
    leverage our single, highly contiguous network that covers approximately 80% of
Québecs total addressable market and five of the provinces top six urban areas. We
believe that our single cluster and
network architecture provides many benefits, including a higher quality and more
reliable network, the
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##### Table of Contents



ability to rapidly and efficiently launch and deploy new products
and services, and a lower cost structure through reduced maintenance and technical
support costs;
    
    leverage our advanced broadband network, 98% of which is bi-directional which allows
us to offer a wide range of advanced services on the same media, such as analog and
digital television, video-on-demand, cable Internet access and VoIP telephony services.
We are committed to maintaining and upgrading our network capacity and, to that end,
we currently anticipate that future capital expenditures over the next five years will
be required to accommodate the evolution of our products and services and to meet the
demand for increased capacity resulting from the launch of our new telephony service
and the offering of our other advanced products and services.
 Our Strategy
  
    
    Introduce new and enhanced products and services.We expect a significant portion
of our growth in our Cable segment revenues to be driven by the introduction of new
products and services and continuing penetration of products and services such as
digital cable services, cable Internet access, VoIP telephony, wireless services,
high-definition television, video-on-demand and interactive television. Our objective
is also to increase our revenue per subscriber by focusing sales and marketing efforts
on the bundling of these value-added products and services.
    
    Offer multi-platform media advertising solutions.Our multi-platform media assets
enable us to provide advertisers with an integrated advertising solution. We are able
to provide flexible, bundled advertising packages that allow advertisers to reach
local, regional and national markets, as well as special interest and specific
demographic groups. We will focus on further integrating our television, newspaper and
magazine publishing, and Internet advertising platforms to enable us to tailor
advertising packages to customers needs.
    
    Cross-promote brands, programs and other content.The geographic overlap of our
cable, television, newspaper and magazine publishing, music and video store chains, and
Internet platforms enables us to cost effectively promote and co-brand media
properties. We will continue to promote initiatives to advance these cross-promotional
activities, including the cross-promotion of various businesses, cross-divisional
advertising and shared infrastructures.
    
    Use content across media properties.We are the largest private-sector
French-language programming broadcaster, a leading producer of French-language
programming, the second largest newspaper publisher, and a leading English- and French-
language Internet news and information portal in Canada. Our objective is to further
accelerate the distribution of our content across platforms.
    
    Leverage geographic clustering.Our subsidiary Videotron holds cable licenses that
cover approximately 80% of Québecs 3 million homes and commercial premises passed by
cable. Geographic clusters facilitate bundled service offerings and, in addition, allow
us to tailor our offerings to certain demographic markets. We aim to leverage the
highly clustered nature of our systems to enable us to use marketing dollars more
efficiently and to enhance customer awareness, increase use of products and services
and build brand support.
    
    Maximize customer satisfaction and build customer loyalty. Across our media
platform, we believe that maintaining a high level of customer satisfaction is critical
to future growth and profitability. An important factor in our historical growth and
profitability has been our ability to attract and satisfy customers with
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high quality products and services and we will continue our efforts to maximize customer
satisfaction and build customer loyalty.
  Cable
        23




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Cable Television Industry Overview
  Twelve Months Ended August 31,2000
    
    2001
    
    2002
    
    2003
    
    2004
    
    CAGR(1)(Dollars in billions; homes passed and basic cable customers in millions)CanadaIndustry Revenue
    
    $
    3.2
    
    
    $
    3.4
    
    
    $
    3.7
    
    
    $
    4.2
    
    
    $
    4.5
    
    
    
    9.6
    %Homes Passed(2)
    
    
    9.4
    
    
    
    9.5
    
    
    
    9.7
    
    
    
    10.0
    
    
    
    10.2
    
    
    
    2.0
    %Basic Cable Customers
    
    
    7.0
    
    
    
    6.9
    
    
    
    6.7
    
    
    
    6.6
    
    
    
    6.6
    
    
    
    -1.2
    %Basic Penetration
    
    
    73.8
    %
    
    
    72.0
    %
    
    
    69.3
    %
    
    
    65.5
    %
    
    
    65.0
    %
 Twelve Months Ended August 31,2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    CAGR(3)(US$ in billions; homes passed and basic cable customers in millions)United StatesIndustry Revenue
    
    US$
    43.5
    
    
    US$
    49.4
    
    
    US$
    51.3
    
    
    US$
    57.6
    
    
    US$
    69.5
    
    
    
    9.8
    %Homes Passed(2)
    
    
    100.6
    
    
    
    102.7
    
    
    
    102.9
    
    
    
    108.2
    
    
    
    110.8
    
    
    
    2.0
    %Basic Cable Customers
    
    
    73.0
    
    
    
    73.5
    
    
    
    73.4
    
    
    
    73.6
    
    
    
    73.1
    
    
    
    0.0
    %Basic Penetration
    
    
    72.6
    %
    
    
    71.6
    %
    
    
    71.3
    %
    
    
    68.0
    %
    
    
    66.0
    %
 
 Source of Canadian data: CRTC. Source of U.S. data: NCTA, A.C. Nielsen Media Research and Kagan
Research LLC.(1)
    
    Compounded annual growth rate from 2000 through 2004.(2)
    
    Homes passed means the number of residential premises, such as single dwelling units or
multiple dwelling units, and commercial premises passed by the cable television distribution
network in a given cable system service area in which the programming services are offered.(3)
    
    Compounded annual growth rate from 2001 through 2005.   Expansion of Digital Distribution and Programming
  24




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Products and Services
    Traditional Cable Television Services
  25




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##### Table of Contents




    
    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 or regional
community programming. Our basic service customers generally receive 29 channels on
basic cable.
    
    Extended Basic Service.This expanded programming level of services, which is
generally comprised of approximately 24 channels, includes a package of French-language
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 Products and Services
  
    
    Cable Internet Access.Leveraging our advanced cable infrastructure, we offer cable
Internet access to our residential customers primarily via cable modems attached to
personal computers. We provide this service at speeds up to 290 times the speed of a
conventional telephone modem. As of December 31, 2005, we had over 637,971 cable
Internet access customers, representing 42.4% of our basic customers and 26.4% of our
total homes passed. In addition, as of December 31, 2005, we had 18,034 dial-up
Internet access customers. Based on internal estimates, we are the largest provider of
cable Internet access services in the areas we serve with an estimated market share of
51% as of December 31, 2005.
    
    Digital Television.As part of our network modernization program, we have installed
headend equipment capable of delivering digitally encoded transmissions to a two-way
digital-capable set-top box in the customers home. This digital connection provides
significant advantages. In particular, it increases channel capacity, which allows us
to increase both programming and service offerings while providing increased
flexibility in packaging our services. We launched our digital television service in
March 1999 with the introduction of digital video compression terminals in the greater
Montréal area. Since introducing our digital television service in the greater Montréal
area, we have also introduced the service in other major markets. In September 2001, we
launched a new digital service offering under the illicobrand. In addition to
providing high quality sound and image quality, illico Digital TVoffers our customers
significant programming flexibility. Our basic digital package includes 24 television
channels, 45 audio services providing CD quality music, 18 AM/FM radio channels, an
interactive programming guide as well as television-based e-mail capability. Our
extended digital basic television service, branded as Self-Service, 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 among many specialty channels. This service also offers customers
significant programming flexibility including the option of French-language only,
English-language only or a combination of French and English-language programming. We
also offer pre-packaged themed service tiers in the areas of news, sports and
discovery. Customers who purchase basic service and one customized package can also
purchase channels on an à la cartebasis at a specified cost per channel per month. As
part of our digital service offering, customers can also purchase video-on-demand
services. As of December 31, 2005, we had 474,629 customers for our digital television
service, representing 31.5% of our basic customers and 19.6% 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
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retention, and, as of December 31, 2005, approximately 92% of our digital television
customers have purchased and 8% lease our digital set-top boxes.
    
    VoIP.In January 2005, we launched our new telephony service using VoIP technology
in selected areas of the Province of Québec (Montréal, South Shore and North Shore of
Montréal, Laval and Québec City), and since then progressively among our other
residential and commercial customers in the Province of Québec. Our new telephony
service includes both local and long-distance calling, and permits all of our telephony
customers, both residential and commercial, to access all service features mandated by
CRTC Decision 97-8 and other regulatory decisions and orders, including: enhanced 911
Emergency service; number portability from and to any local exchange carrier; a message
relay service allowing subscribers to communicate with the hearing impaired; and a
variety of personal privacy features including universal call tracing. We also offer
free basic listings in local telephone directories, as well as full operator
assistance, including: operator-assisted calls; collect and third-party calls; local,
national and international directory assistance; person-to-person calls; and busy-line
verification. Finally, we offer as part of our new telephony service a host of
convenient, optional features, including: name and number caller ID; call waiting with
long-distance distinctive ring and audible indicator tone; name and number caller ID on
call waiting; visual indicator of a full voice mail box and audible message waiting
indicators; automatic call forwarding; three-way conference calling; automatic
recalling; and last incoming call identification and recall. In the future, VoIP will
allow us to deliver new cutting-edge features, such as voice-mail to e-mail
functionality launched in December 2005, which allows customers access their voice-mail
via e-mail in the form of audio-file attachments. In keeping with our competitive
strength of providing differentiated, bundled service offerings, we offer free
installation of our new telephony service to existing cable television and/or Internet
customers and to new bundled customers. We also offer discounts to our bundled
customers, when compared to the sum of the prices of the individual services provided
to these customers. In addition, we offer discounts for a second telephone line
subscription. As of December 31, 2005, we had 162,979 customers of our VoIP telephony
service.
    
    Interactive Services.In September 2001, we also launched digital interactive
services under the illico Interactivebrand. These services, which combine our digital
television and Internet access services, enable customers equipped with wireless
keyboards to access the Internet and send and receive e-mail. In the near future, we
intend to provide additional functionality including e-commerce. We believe interactive
services will be increasingly desired by customers, and we intend to continue to
develop and deploy advanced products and services to add greater functionality to our
interactive services offering.
    
    Video-On-Demand.Video-on-demand service enables digital cable customers to rent
from a library of movies, documentaries and other programming through their digital
set-top box. Our digital cable customers are able to rent their video-on-demand
selections for a period of 24 hours, which they are then able to watch at their
convenience with full stop, rewind, fast forward, pause and replay functionality during
that period. Our video-on-demand service is available to 98% of the homes passed by us.
We also offer pay television channels on a subscription basis that permit our customers
to access and watch any of their video-on-demand selections at any time at their
convenience.
    
    Other New Business Initiatives.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. On September 20, 2005, we
announced that we had signed a strategic relationship agreement with Rogers Wireless,
the operator of Canadas largest integrated wireless voice and data network, that will
enable us to offer Québec consumers a quadruple play of television, broadband Internet,
VoIP telephony and Videotron-branded mobile wireless services. We will operate as a
Mobile Virtual Network Operator, or MVNO, utilizing wireless voice and data services
provided by Rogers Wireless across its GSM/GPRS network. We currently intend to launch
our mobile wireless offering during the second half of 2006, with services to include
international roaming and popular options. We will be responsible for acquiring and
billing customers, as well as for providing customer support under our own brand.
 27




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##### Table of Contents



At December 31,2001
    
    2002
    
    2003
    
    2004
    
    2005Basic analog cableHomes passed(1)
    
    
    2,330,648
    
    
    
    2,329,023
    
    
    
    2,351,344
    
    
    
    2,383,443
    
    
    
    2,419,335Basic customers(2)
    
    
    1,510,408
    
    
    
    1,431,060
    
    
    
    1,424,144
    
    
    
    1,452,554
    
    
    
    1,506,113Penetration(3)
    
    
    64.8
    %
    
    
    61.4
    %
    
    
    60.6
    %
    
    
    60.9
    %
    
    
    62.3
    %Digital cableDigital customers
    
    
    114,634
    
    
    
    171,625
    
    
    
    240,863
    
    
    
    333,664
    
    
    
    474,629Penetration(4)
    
    
    7.6
    %
    
    
    12.0
    %
    
    
    16.9
    %
    
    
    23.0
    %
    
    
    31.5
    %Number of digital terminals
    
    
    121,210
    
    
    
    182,010
    
    
    
    257,350
    
    
    
    362,053
    
    
    
    537,364Dial-up Internet accessDial-up customers
    
    
    55,427
    
    
    
    43,627
    
    
    
    28,821
    
    
    
    23,973
    
    
    
    18,034Cable Internet accessCable modem customers
    
    
    228,759
    
    
    
    305,054
    
    
    
    406,277
    
    
    
    502,630
    
    
    
    637,971Penetration(3)
    
    
    9.8
    %
    
    
    13.1
    %
    
    
    17.3
    %
    
    
    21.1
    %
    
    
    26.4
    %Telephony ServicesVoIP customers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,135
    
    
    
    162,979Penetration(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    %
    
    
    6.7
    %
 
 (1)
    
    Homes passed means the number of residential premises, such as single dwelling
units or multiple dwelling units, and commercial premises passed by the cable
television distribution network in a given cable system service area in which the
programming services are offered.(2)
    
    Basic customers are customers who receive basic cable service in either the
analog or digital mode. The number of basic customers for the years 2000-2003
inclusive, were restated in order to permit such numbers to be compared to the 2004
number of basic customers.(3)
    
    Represents customers as a percentage of total homes passed.(4)
    
    Represents customers for the digital service as a percentage of basic
customers.  Business Telecommunications Services
  Video Stores
  28




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##### Table of Contents



Pricing of Our Products and Services
    Service
    
    
    Price Range(1)Basic analog cable
    
    
    $
    15.07  $28.19Extended basic analog cable
    
    
    $
    26.81  $40.50Basic digital cable
    
    
    $
    12.98  $14.98Extended basic digital cable
    
    
    $
    25.98  $73.98Pay-television
    
    
    $
    6.00  $19.95Pay-per-view (per movie or event)
    
    
    $
    3.99  $79.95Video-on-demand (per movie or event)
    
    
    $
    0.99  $24.95Dial-up Internet access
    
    
    $
    9.95  $19.95Cable Internet access
    
    
    $
    26.95  $74.90VoIP Telephony
    
    
    $
    15.95  $22.95
 
 (1)
    
    These rates reflect price increases, effective March 1, 2006, of $0.60 on
basic analog cable and extended basic analog cable, $1.00 on basic digital
cable, between $1.00 and $3.00 on extended digital cable and $1.00 on cable
internet access and VoIP telephone. Our Network Technology
   450 MHz and Under
    
    480 MHz to 625 MHz
    
    750 MHz to 860 MHz
    
    Two-Way CapabilityDecember 31, 2001
    
    
    3
    %
    
    
    25
    %
    
    
    72
    %
    
    
    97
    %December 31, 2002
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2003
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2004
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2005
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %
 29




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30




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Marketing and Customer Care
  
    
    continue to rapidly introduce and deploy advanced products and services such as
cable Internet access, digital television and VoIP telephony;
    
    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 SuperClub Videotron, Archambault Group and
third-party commercial retailers;
    
    cross-promote the wide variety of content and services offered within the Quebecor
Media group (including, for example, the content of TVA Group productions and the 1-900
service for audience voting during television programs such as Star Académie,
Occupation Doubleand other reality shows popular in Québec) in order to distribute our
cable, data transmission and 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 the Videotron Telecom network and expertise with
our commercial customer base, which should enable us to offer additional bundled
services to our customers and may result in new business opportunities.
   31




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##### Table of Contents



Programming
   Competition
  
    
    Over-the-air Television and Providers of Other Entertainment. Cable television has
long competed with broadcast television, which consists of television signals that the
viewer is able to receive without charge using an over-the-air antenna. The extent of
such competition is dependent upon the quality and quantity of broadcast signals
available through over-the-air reception compared to the services provided by the local
cable system. Cable systems also face competition from alternative methods of
distributing and receiving television signals and from other sources of entertainment
such as live sporting events, movie theaters and home video products, including
videotape recorders, DVD players and video games. The extent to which a cable
television service is competitive depends in significant part upon the cable systems
ability to provide a greater variety of programming, superior technical performance and
superior customer service than are available over the air or through competitive
alternative delivery sources.
    
    Direct Broadcast Satellite.Direct broadcast satellite, or DBS, is a significant
competitor to cable systems. DBS delivers programming via signals sent directly to
receiving dishes from medium- and high-powered satellites, as opposed to cable delivery
transmissions. This form of distribution generally provides more channels than some of
our television systems and is fully digital. DBS service can be received virtually
anywhere in Canada through the installation of a small rooftop or side-mounted antenna.
Like digital cable distribution, DBS systems use video compression technology to
increase channel capacity and digital technology to improve the quality of the signals
transmitted to their customers.
    
    DSL.The deployment of digital subscriber line technology, known as DSL, provides
customers with Internet access at data transmission speeds greater than that which is
available over conventional telephone lines. DSL service is comparable to cable-modem
Internet access over cable systems. We also face competition from providers of DSL
service.
    
    VDSL.The CRTC and Industry Canada have authorized video digital subscriber line,
or VDSL, services. VDSL technology increases the capacity of DSL lines available, which
permits the distribution of digital
 32




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##### Table of Contents



video. We expect that we will soon face competition from incumbent local exchange
carriers, which have been granted licenses to launch video distribution services using
this technology. ILECs are currently installing this new technology, which operates over
the copper lines in phone lines, in our markets. This technology can achieve speeds as
high as 52 Mbps upstream, but VDSL can only operate over a short distance of about 4,000
feet (1,200 metres). As a result, telephone companies are replacing many of their main
feeds with fibre-optic cable. By placing a VDSL transceiver, a VDSL gateway, in larger
multiple dwelling units, the distance limitation is overcome. Further, as a result of
such improvements in broadband speeds over DSL and the evolution of compression
technology, incumbent telephone carriers in our service areas may be in a position to
enable delivery of digital television over their cable Internet connections (IPTV) in
the coming years. Advanced trials are underway in Canada and in other countries. Tests
in our service markets are expected to be performed in the first half of 2006. If
successful, IPTV may provide telecommunications carriers with a way to offer services
similar to those offered by cable operators in the consumer market.
    
    Private Cable.Additional competition is posed by satellite master antenna
television systems known as SMATV systems serving multi-dwelling units, such as
condominiums, apartment complexes, and private residential communities.
    
    Other Cable Distribution.There is currently a cable operator offering analog
television distribution and providing cable Internet access service serving the greater
Montréal area. This cable operator, which has approximately 15,000 customers, is owned
by the regional ILEC.
    
    Wireless Distribution.Cable television systems also compete with wireless program
distribution services such as multi-channel multipoint distribution systems, or MDS.
This technology uses microwave links to transmit signals from multiple transmission
sites to line-of-sight antennas located within the customers premises.
    
    Grey and Black Market DBS Providers.Cable and other distributors of television
signals continue to face competition from the use of access codes and equipment that
enable the unauthorized decoding of encrypted satellite signals, from unauthorized
access to our analog and digital cable signals (black market) and from the reception of
foreign signals through subscriptions to foreign satellite television providers that
are not lawful distributors in Canada (grey market).
    
    Telephony Service.Our new VoIP telephony service competes against other telephone
companies, including both the incumbent telephone service provider in Québec, which
controls a significant portion of the telephony market in Québec, as well as other VoIP
telephony service providers and cellular telephone service providers.
    
    Other Internet Service Providers.In the Internet access business, cable operators
compete against other Internet service providers offering residential and commercial
Internet access services. The CRTC requires the large Canadian incumbent cable
operators to offer access to their high speed Internet system to competitive Internet
service providers at mandated rates.
 Newspapers
 24 Hours Vancouver 24 Hours 24 Heures Le Journal de Montréal
 33




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The Toronto
Sun
 Messageries Dynamiques Dynamic Press Group.
    Canadian Newspaper Publishing Industry Overview
  The London Free Press
    34




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##### Table of Contents



Advertising and Circulation
         35




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##### Table of Contents



Newspaper Operations
  
    
    the Urban Daily Group; and
    
    the Community Newspaper Group.
  Le Journal de Montréal
 The Urban Daily Group
 ®
 The London
Free Press Messageries Dynamiques Dynamic Press Group
 ®
  36




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##### Table of Contents



2004 Average Readership
    
    Market Position byNewspaper
    
    Saturday
    
    Sunday
    
    Mon-Fri
    
    Paid Circulation(1)Le Journal de Montréal
    
    
    694,900
    
    
    
    424,600
    
    
    
    642,000
    
    
    
    1Le Journal de Québec
    
    
    224,700
    
    
    
    137,700
    
    
    
    204,300
    
    
    
    1The Toronto Sun
    
    
    628,400
    
    
    
    900,000
    
    
    
    795,400
    
    
    
    2The London Free Press
    
    
    176,700
    
    
    
    108,000
    
    
    
    164,000
    
    
    
    1The Ottawa Sun
    
    
    98,300
    
    
    
    104,200
    
    
    
    128,000
    
    
    
    2The Winnipeg Sun
    
    
    107,500
    
    
    
    99,000
    
    
    
    126,500
    
    
    
    2The Edmonton Sun
    
    
    146,400
    
    
    
    187,400
    
    
    
    193,800
    
    
    
    2The Calgary Sun
    
    
    150,000
    
    
    
    176,400
    
    
    
    185,300
    
    
    
    2Total Average Readership
    
    
    2,226,900
    
    
    
    2,137,300
    
    
    
    2,439,300
 
 (1)
    
    Based on paid circulation data published by the Audit Bureau of Circulations in September
2005 with respect to non-national newspapers in each market. Le Journal de Montréal. Le Journal de Montréal Le Journal de Montréal Le Journal de Montréal La Presse The Gazette
 Le Journal de Montréal
 Year Ended December 31,2003
    
    2004
    
    2005Le Journal de MontréalSaturday
    
    
    314,600
    
    
    
    312,500
    
    
    
    308,000Sunday
    
    
    263,500
    
    
    
    262,400
    
    
    
    259,800Monday to Friday
    
    
    269,600
    
    
    
    267,000
    
    
    
    268,200
 
  Le Journal de Québec. Le Journal de Québec Messageries Dynamiques Le Journal de Québec Le Journal de Québec Le Soleil
 Le Journal de Québec
 Year Ended December 31,2003
    
    2004
    
    2005Le Journal de QuébecSaturday
    
    
    124,300
    
    
    
    124,100
    
    
    
    123,400Sunday
    
    
    101,500
    
    
    
    101,600
    
    
    
    101,400Monday to Friday
    
    
    99,400
    
    
    
    100,500
    
    
    
    99,700
 
  37




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##### Table of Contents



The Toronto Sun. The Toronto Sun The Toronto Sun
 The Toronto Sun The Toronto Star The Globe & Mail The National
Post The Toronto Sun
 The Toronto Sun
 Year Ended December 31,2003
    
    2004
    
    2005The Toronto SunSaturday
    
    
    170,000
    
    
    
    158,900
    
    
    
    148,000Sunday
    
    
    357,000
    
    
    
    339,700
    
    
    
    326,500Monday to Friday
    
    
    200,200
    
    
    
    192,600
    
    
    
    183,600
 
  The London Free Press. The London Free Press
 The London Free Press
 Year Ended December 31,2003
    
    2004
    
    2005The London Free PressSaturday
    
    
    111,900
    
    
    
    108,300
    
    
    
    104,400Sunday
    
    
    66,300
    
    
    
    66,300
    
    
    
    64,600Monday to Friday
    
    
    92,800
    
    
    
    90,700
    
    
    
    87,600
 
  The London Free Press The London Pennysaver
 The Ottawa Sun. The Ottawa Sun The Ottawa Sun The Ottawa Citizen Le Droit
 The Ottawa Sun
 Year Ended December 31,2003
    
    2004
    
    2005The Ottawa SunSaturday
    
    
    44,700
    
    
    
    44,200
    
    
    
    44,800Sunday
    
    
    52,500
    
    
    
    51,600
    
    
    
    51,000Monday to Friday
    
    
    49,300
    
    
    
    49,100
    
    
    
    51,200
 
  38




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##### Table of Contents



Ottawa Sun The Ottawa Pennysaver
 The Winnipeg Sun. The Winnipeg Sun The Winnipeg Sun The Winnipeg Free Press
 The Winnipeg Sun
 Year Ended December 31,2003
    
    2004
    
    2005The Winnipeg SunSaturday
    
    
    42,800
    
    
    
    41,200
    
    
    
    40,500Sunday
    
    
    55,200
    
    
    
    52,700
    
    
    
    49,100Monday to Friday
    
    
    44,000
    
    
    
    42,100
    
    
    
    40,600
 
  The Edmonton Sun. The Edmonton Sun The Edmonton Sun The Edmonton Journal
 The Edmonton Sun
 Year Ended December 31,2003
    
    2004
    
    2005The Edmonton SunSaturday
    
    
    69,300
    
    
    
    66,200
    
    
    
    68,100Sunday
    
    
    98,700
    
    
    
    95,400
    
    
    
    94,900Monday to Friday
    
    
    69,800
    
    
    
    68,900
    
    
    
    70,000
 
  The Calgary Sun. The Calgary Sun The Calgary Sun The Calgary Herald
 The Calgary Sun
 Year Ended December 31,2003
    
    2004
    
    2005The Calgary SunSaturday
    
    
    63,700
    
    
    
    62,800
    
    
    
    62,500Sunday
    
    
    95,400
    
    
    
    94,400
    
    
    
    91,500Monday to Friday
    
    
    64,400
    
    
    
    64,200
    
    
    
    62,300
 
  24 Heures. Montréal
Métropolitain 24 Heures
 39




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##### Table of Contents



24 Hours. 24 Hours Find-A-Rental 24 Hours 24
Hours
 Vancouver 24 Hours. Vancouver 24 Hours Vancouver 24
Hours Vancouver 24 Hours
 Competition
  Le Journal de Montréal Le Journal de Québec Le Journal de Montréal The Toronto Star Le Journal de Montréal
 The London Free Press
 The Toronto Sun The Toronto Sun 24 Hours The Toronto Sun
  The Community Newspaper Group
 NetMedia
  Average DailyNewspaper
    
    Location
    
    Paid CirculationThe Brockville Recorder and Times
    
    Brockville, Ontario
    
    
    11,800Stratford Beacon Herald
    
    Stratford, Ontario
    
    
    10,700The Daily Herald Tribune
    
    Grande Prairie, Alberta
    
    
    8,500Simcoe Reformer
    
    Simcoe, Ontario
    
    
    7,500
 40




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##### Table of Contents



Average DailyNewspaper
    
    Location
    
    Paid CirculationSt. Thomas Time-Journal
    
    St. Thomas, Ontario
    
    
    7,000Woodstock Sentinel-Review
    
    Woodstock, Ontario
    
    
    6,800Fort McMurray Today
    
    Fort McMurray, Alberta
    
    
    4,000The Daily Miner & News
    
    Kenora, Ontario
    
    
    3,100The Daily Graphic
    
    Portage La Prairie, Manitoba
    
    
    2,700Total Average Daily Paid Circulation
    
    
    
    
    62,100
 
   Province
    
    Number of PublicationsQuébec
    
    
    52Ontario
    
    
    50Alberta
    
    
    43Manitoba
    
    
    12Saskatchewan
    
    
    6New Brunswick
    
    
    1Total Publications
    
    
    164
  Competition
  Other Operations
 Commercial Printing and Distribution
   41




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##### Table of Contents



Messageries Dynamiques Dynamic Press Group Messageries Dynamiques Dynamic Press Group Dynamic Press Group
 NetMedia
 Television Station
  Seasonality and Cyclicality
   Raw Materials
   42




---



##### Table of Contents



Broadcasting
 Star Académie 2005 Gala Metrostar, Les Olivier Le Négociateur
 LCN Canal Évasion Canal Indigo illico sur Demande Canal TVAchats Argent LCN-Affaires Mystery TV Mystère MenTV
    Canadian Television Industry Overview
   43




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##### Table of Contents



Share of Province of QuébecNetwork
    
    Television AudienceTVA Group
    
    
    28.1
    %Société Radio-Canada
    
    
    15.0
    %Réseau TQS
    
    
    12.8
    %Télé-Québec
    
    
    3.9
    %Various French-language specialty cable channels
    
    
    32.1
    %Others
    
    
    8.1
    %
 
  Transition of Over-the-air Television Broadcasting from Analog to Digital
  Television Broadcasting
 French-language Market
   44




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##### Table of Contents



English-language Market
 60 Minutes
 Advertising Sales and Revenue
  Programming
    Specialty Broadcasting
  Type of Service
    
    Language
    
    Voting InterestAnalog Specialty Services: LCN  Le Canal Nouvelles
    
    French
    
    TVA(1) 99.9% Canal Évasion
    
    French
    
    TVA 8.3% CPAC
    
    French and English
    
    V(2) 21.7%Category One Digital Specialty Services: MenTV
    
    English
    
    TVA 51.0% Mystery (13th Street)
    
    English
    
    TVA 50.0% Mystère (13e rue)
    
    French
    
    TVA 99.9% Argent (LCN  Affaires)
    
    French
    
    TVA 99.9%Pay Per View Services (terrestrial & direct broadcasting satellite): Canal Indigo
    
    French
    
    TVA 20.0%Video-on Demand Services: illico sur Demande
    
    French and English
    
    AG(3) 100%Exempted Programming Service: Canal TVAchats
    
    French
    
    TVA(1) 99.9%
 45




---



##### Table of Contents



(1)
    
    TVA Group (TVA) controls the programming services. Quebecor Media controls TVA Group.(2)
    
    Videotron (V) controls the programming services. Quebecor Media controls Videotron.(3)
    
    Archambault Group (AG) controls the programming services. Quebecor Media controls the
Archambault Group. Le Canal Nouvelles LCN
 Le Canal Nouvelles LCN LCN LCNs
 Argent
 Argent Argent Argent Argent
 Canal Évasion
 Canal Évasion Canal Évasion
 MenTV
 MenTV MenTV
 Mystery TV
 Mystery TV 13th Street Mystery TV
 Mystère
 Mystère 13ieme rue Mystery TV Mystère
 Canal Indigo
 Canal Indigo Canal Indigo
 46




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##### Table of Contents



Canal TVAchats; Home Shopping Service; Infomercials
 La Boutique TVA Canal TVAchats
 Canadian Public Affairs Channel (CPAC)
  Authorized Digital Specialty Services
 Humour
 Télé-Services
 Nostalgie
 Star Système.
  Application for National Pay Television Services
 -
 Magazine Publishing
 Les idées de
ma maison Décoration Chez-Soi Rénovation-Bricolage Clin doeil Filles daujourdhui Femmes
Plus
 47




---



##### Table of Contents



Leisure and Entertainment
 archambault.ca ik.ca
  Cultural Products Production, Distribution and Retailing
 archambault.ca camelot.ca paragraphbooks.com ik.ca
 Star Académie 2005
  Book Publishing and Distribution
    48




---



##### Table of Contents



Video-On-Demand Services
  Ownership
  Business Telecommunications
  i.e
   Interactive Technologies and Communications
    49




---



##### Table of Contents



Ownership
  Internet/Portals
    Media Properties
  50




---



##### Table of Contents




    
    CANOE (canoe.qc.caand canoe.ca), a bilingual, integrated media and Internet
services network and one of Canadas leading Internet portals with more than 328
million page views in October 2005, according to Canoe internal statistics;
    
    La Toile du Québec (toile.com), the first French-language navigational guide in
Canada and Québecs leading portal with approximately 45,000 indexed sites and more
than 60 guides;
    
    Webfin Argent and Canoe Money (argent.canoe.comand money.canoe.ca), a financial Web
site which offers, among other things, a variety of services ranging from financial
information to portfolio management tools (the Webfin Argent website was redesigned in
early 2005 in partnership with TVAs new financial channel, Argent);
    
    TVA Group and LCN (tva.canoe.comand lcn.canoe.com) dedicated Web sites for the TVA
television network and the LCN all-news channel; and
    
    Several Web sites for popular TVA Group programs, such as Occupation Double
(occupationdouble.com) and Star Académie(staracademie.ca).
 E-commerce Properties
  
    
    Jobboom.com, a unique Web-based employment site with over 1.5 million members, which
also includes Jobboom Formation, an Internet directory of continuing education
services;
    
    Autonet.ca, Canadas leading site devoted entirely to cars;
    
    ReseauContact.com/ flirt.canoe.ca, a bilingual dating and friendship site with
500,000 unique visitors per month, over 940,000 registered members and approximately
100,000 active members generating more than 125 million page views per month, as of
October 2005, according to internal statistics;
    
    Micasa.ca, a new real-estate Web site which, according to ComScore Media Metrix
(September 2005), was the leading real estate Web site in Québec for the month of its
official launch, having been visited by over 536,000 unique visitors in that month; and
    
    Classifiedextra.caand Classeesextra.ca, classified ad sites through which visitors
can view classified ads from more than 150 Canadian newspapers.
 Ownership
   Intellectual Property
  51




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##### Table of Contents



Litigation
     Insurance
  Environment
   52




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##### Table of Contents



Organizational Structure
  53




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##### Table of Contents



Caisse de dépôt et placement du Québec Caisse de dépôt et
placement du Québec
 Property, Plants and Equipment
  Cable
   54




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##### Table of Contents



Newspapers
  Floor SpaceAddress
    
    Use of Property
    
    Press Capacity(1)
    
    (sq. ft.)Toronto, Ontario
    
    Operations building,
    
    4 Metro presses
    
    
    263,600333 King Street East
    
    including printing plant 
    
    (32 units) andThe Toronto Sun
    
    1 Metroliner press(8 units)Montréal, Québec
    
    Operations building,
    
    3 Metro presses and
    
    
    162,0004545 Frontenac Street
    
    including printing plant 
    
    1 Cosmo pressLe Journal de Montréal
    
    (37 units)London, Ontario
    
    Operations building,
    
    2 Headliner presses
    
    
    150,100369 York Street
    
    including printing plant 
    
    (12 units) andThe London Free Press
    
    1 Urbanite press(8 units)Calgary, Alberta
    
    Operations building,
    
    1 Headliner press
    
    
    90,0002615-12 Street NE
    
    including printing plant 
    
    (7 units)The Calgary SunVanier, Québec
    
    Operations building,
    
    2 Urbanite presses
    
    
    74,000450 Bechard Avenue
    
    including printing plant 
    
    (24 units)Le Journal de QuébecWinnipeg, Manitoba
    
    Operations building,
    
    1 Urbanite press
    
    
    63,0001700 Church Avenue
    
    including printing plant 
    
    (15 units)The Winnipeg SunEdmonton, Alberta
    
    Printing plant 
    
    1 Metro press
    
    
    49,6009300-47 Street
    
    The Edmonton Sun
    
    (8 units)Edmonton, Alberta
    
    Operations building
    
    N/A
    
    
    45,2004990-92 Avenue
    
    The Edmonton Sun(leased until Dec. 2013)Gloucester, Ontario
    
    Printing plant 
    
    1 Urbanite press
    
    
    23,0004080 Belgreen Drive
    
    The Ottawa Sun
    
    (14 units)Ottawa, Ontario
    
    Operations building
    
    N/A
    
    
    19,3006 Antares Drive
    
    (leased until Oct. 2013) The Ottawa Sun
 
 (1)
    
    A unit is the critical component of a press that determines color and page count
capacity. All presses listed have between six and 15 units. 55




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##### Table of Contents



Le Journal de Montréal
 Television Broadcasting
  Leisure and Entertainment segment and Interactive Technologies and Communications segment
  Liens and charges
  Regulation
 Ownership and Control of Canadian Broadcast Undertakings
  Ineligibility of Non-Canadians
 56




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##### Table of Contents



Broadcasting Act
  Jurisdiction Over Canadian Broadcast Undertakings
 Broadcasting Act Broadcasting
Act Radiocommunication Act
 57




---



##### Table of Contents



Broadcasting Act
 Canadian Broadcast Distribution (Cable Television)
 Licensing of Canadian Broadcasting Distribution Undertakings
      58




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##### Table of Contents



Distribution of Canadian Content
 Broadcasting Distribution Regulations Broadcasting Act
   1998 Broadcasting Distribution Regulations
  59




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##### Table of Contents




    
    Competition, Carriage Rules and Signal Substitution.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.
    
    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 less than 2,000 customers, are required to contribute at least 5%
of their gross annual broadcast revenues to the creation and presentation of Canadian
programming including community programming. However, the allocation of these
contributions between broadcast and community programming can vary depending on the
type and size of the distribution system involved.
    
    Inside Wiring Rules.The CRTC determined that the inside wiring portion of cable
networks creates a bottleneck facility that could affect competition if open access is
not provided to other distributors. Incumbent cable companies may retain the ownership
of the inside wiring but must allow usage by competitive undertakings to which the
cable company may charge a just and reasonable fee for the use of the inside wire. On
September 3, 2002, the CRTC established a fee of $0.52 per customer per month for the
use of cable inside wire in MDUs. On October 9, 2002, the CRTC, had ordered Câblage QMI
and Videotron to comply with the inside wiring access rules. In Broadcasting Decision
CRTC 2005-223 of May 31, 2005, the CRTC rescinded the Mandatory Order issued against
Videotron and its subsidiaries. In Broadcasting Public Notice CRTC 2005-83 of August
15, 2005, the CRTC called for comments on possible regulatory amendments that would
expand competitive access to inside wire owned by a cable licensee and installed in
properties, such as hotels, hospitals, nursing homes and other commercial or
institutional premises that are used to house transient residents as well as in office
buildings, retail stores or other types of non-residential properties. Videotron has
opposed this expansion of the regulations because such access would make what we have
considered commercial accounts more vulnerable to competition.
 Rates
   (1)
    
    30% or more of the households in the licensed service area have access to the
services of another broadcasting distribution undertaking. The CRTC has advised that as
of August 31, 1997, the 30% availability criterion was satisfied for all licensed cable
areas; and
 60




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##### Table of Contents



(2)
    
    the number of customers for basic cable service has decreased by at least 5%
since the date on which a competitor started offering its basic cable service in the
particular area.
     Winback Restrictions
    Copyright Board Proceedings
  61




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##### Table of Contents



Royalties for the Retransmission of Distant Signals
 Copyright
Act
 Copyright Act
  Royalties for the Transmission of Pay and Specialty Services
 Copyright Act
  Royalties for Pay Audio Services
  62




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##### Table of Contents



Tariff in Respect of Internet Service Provider Activities
 Copyright Act
 Proposed Tariffs in Respect of Online Activities
  Canadian Broadcast Programming (Television Stations)
 Programming of Canadian Content
  63




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##### Table of Contents



Advertising
  Broadcasting License Fees
  Canadian Telecommunications Services
 Jurisdiction
 Telecommunications Act Telecommunications Act
 Telecommunications Act Telecommunications Act Telecommunications Act
 64




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##### Table of Contents



Overview of the Telecommunications Competition Framework
 Review of Regulatory Framework Local Competition
 Application of Canadian Telecommunications Regulation
 Telecommunications Act
 i.e.
    65




---



##### Table of Contents



Right to Access to Telecommunications and Hydro-Electric Support Structures
 Telecommunications Act Telecommunications Act
 An Act respecting certain public utility installations (Québec)
  Access by Third Parties to Cable Networks
 66




---



##### Table of Contents



Foreign Ownership Restrictions
  Canadian Publishing
 Income Tax Act Income Tax Act
 67




---



##### Table of Contents



ITEM 4A  UNRESOLVED STAFF COMMENTS
  68




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##### Table of Contents



ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion and analysis provides information concerning our operating results
and financial condition. This discussion should be read in conjunction with our consolidated
financial statements and the accompanying notes included under Item 17. Financial Statements. Our
consolidated financial statements have been prepared in accordance with Canadian GAAP, which
differs from U.S. GAAP in certain respects. For a discussion of the principal differences between
Canadian GAAP and U.S. GAAP, and the extent to which these differences affect our consolidated
financial statements, see note 25 to our audited consolidated financial statements for the years
ended December 31, 2003, 2004 and 2005. 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 above under Forward-Looking Statements and in
Item 3. Key Information  Risk Factors.
 Overview
    Lines of Business
  Cable segment
 illico Digital TV
 69




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##### Table of Contents



Newspapers segment
  Broadcasting segment
 Mystère Argent Canal
Évasion Men TV Mystery
 Leisure and Entertainment segment
 archambault.ca ZIK.ca
 Business Telecommunications segment
  Interactive Technologies and Communications segment
  70




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##### Table of Contents



Internet/Portals segment
 canoe.ca, canoe.qc.ca, toile.com money.canoe.ca argent.canoe.com jobboom.com autonet.ca flirt.canoe.ca reseaucontact.com micasa.ca classifiedextra.ca classeesextra.ca tva.canoe.com lcn.canoe.com occupationdouble.com staracademie.ca Jobboom Carrières davenir
 2005 Highlights
   Significant developments since the end of 2004 include:
  Ø
    
    On January 17, 2006, Quebecor Media issued US$525.0 million aggregate principal
amount of 7 3/4 % Senior Notes due March 2016. The Company also established new credit
facilities consisting of a five-year term loan A facility in the amount of $125.0
million, maturing in 2011, a seven-year term loan B facility in the amount of US$350.0
million, maturing in 2013, and a five-year revolving credit facility in the amount of
$100.0 million, maturing in 2011. The facilities also provide for an uncommitted $350
million incremental facility that may be available to Quebecor Media under certain
conditions.Ø
    
    Quebecor Media used the proceeds from its new Senior Notes, the full amount of its
new term loan A and term loan B, and amounts received from its subsidiaries ($251.7
million from Videotron, drawn on its existing revolving credit facilities and cash on
hand, and $40.0 million from Sun Media, drawn on its new credit facility), to finance
the repurchase, on January 17, 2006, of US$561.6 million aggregate principal amount of
its 11 1/8% Senior Notes and US$275.6 million aggregate principal amount at maturity of
its 13 3/4% Senior Discount Notes (representing 95.7% and 97.4%, respectively, of these
notes outstanding at that date). Quebecor Media paid a total cash consideration of $1.3
billion to purchase the notes, including the premium and the cost of settlement of
cross-currency swap agreements. Consequently, Quebecor Media will recognize a loss on
settlement of debt estimated at $206.0 million, net of income tax, including the amount
by which the disbursements exceeded the book value of the
 71




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##### Table of Contents



repurchased notes and the
related cross-currency swap agreements, as well as the write-down of deferred financing
expenses.Ø
    
    On September 16, 2005, Videotron successfully closed a private placement of US$175.0
million aggregate principal amount
of6 3/8% Senior Notes due December 15, 2015. The
total net proceeds of $205.1 million from the sale of Senior Notes and the Companys
cash assets were used to finance the repurchase of Senior Notes of Videotrons CF Cable
TV subsidiary for a cash consideration of $99.3 million, and the repurchase of US$128.2
million aggregate principal amount of its 11 1/8% Senior Notes and US$12.1 million
aggregate principal amount of its 13 3/4% Senior Discount Notes by Quebecor Media on July
19, 2005. Quebecor Media paid a total cash consideration of $215.3 million to purchase
the Notes, including the premium and the cost of settlement of cross-currency swap
agreements. Consequently, Quebecor Media recognized a loss on settlement of debt of
$41.0 million, net of income tax, in the third quarter of 2005.
 illico
 Argent
     Non-GAAP Financial Measures
  Operating Income.
 72




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##### Table of Contents



Free Cash Flow from Operations.
 ARPU.
 Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004
   73




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Quarter Ended December 31, 2005 Compared to Quarter Ended December 31, 2004
  74




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Segment Analysis
  Restricted Subsidiaries
  Cable segment
  illico Digital TV illico Digital TV illico on Demand
 illico Digital TV see Table 1 illico Digital TV illico Digital TV illico Digital TV
 (see Table 1)
 75




---



##### Table of Contents



(see Table 1).
 Table 1
 
 (see Table 2)
 Table 2
 
 76




---



##### Table of Contents



(see Table 3).
 TABLE 3
 
     i.e
 Table 4
 77




---



##### Table of Contents



Table 4: Cable segment
Operating income
 2003
    
    
    2004
    
    
    2005Operating income before cost of equipment
subsidies to customers
    
    $
    310.9
    
    
    $
    377.9
    
    
    $
    418.7Cost of equipment subsidies to customers
    
    
    (35.6
    )
    
    
    (36.7
    )
    
    
    (36.7
    )Operating income
    
    $
    275.3
    
    
    $
    341.2
    
    
    $
    382.0
 see Table 5
 Table 5: Cable segment
Free cash flow from operations
 2003
    
    
    2004
    
    
    2005Cash flow from operating activities before
undernoted item
    
    $
    220.4
    
    
    $
    291.7
    
    
    $
    321.8Net change in non-cash balances related to operations
    
    
    (45.2
    )
    
    
    19.0
    
    
    
    32.6Cash flow from operating activities
    
    
    175.2
    
    
    
    310.7
    
    
    
    354.4Additions to property, plant and equipment
    
    
    (90.3
    )
    
    
    (123.1
    )
    
    
    (191.8
    )Proceeds from disposal of assets
    
    
    3.8
    
    
    
    1.4
    
    
    
    1.3Free cash flow from operations
    
    $
    88.7
    
    
    $
    189.0
    
    
    $
    163.9
    78




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##### Table of Contents



illico Digital TV
  Newspapers segment
 24 heures Montréal
Métropolitain mc 24 Hours
 24 Hours
 (see Table 6). Le Journal de Montréal, The
Toronto Sun The London Free Press.
 79




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##### Table of Contents



Table
6: Newspapers segment Free cash flows from operations
 2003
    
    
    2004
    
    
    2005Cash flows from continuing operating activities
before undernoted item
    
    $
    199.8
    
    
    $
    187.1
    
    
    $
    184.6Net change in non-cash balances related to operations
    
    
    25.2
    
    
    
    (9.7
    )
    
    
    (3.2
    )Cash flows from continuing operating activities
    
    
    225.0
    
    
    
    177.4
    
    
    
    181.4Additions to property, plant and equipment
    
    
    (14.3
    )
    
    
    (18.8
    )
    
    
    (74.0
    )Proceeds from disposal of assets
    
    
    0.3
    
    
    
    0.6
    
    
    
    0.5Free cash flows from operations
    
    $
    211.0
    
    
    $
    159.2
    
    
    $
    107.9
  Journal de Montréal .
  Morinville Mirror Redwater Tribune The Weekender LHorizon The Londoner Journal La
Vallée Beauport Express
 24 Hours
 Broadcasting segment
 argent
 80




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##### Table of Contents



White Noise, C.R.A.Z.Y. Le coeur a ses raisons
 argent White Noise C.R.A.Z.Y.
  The Toronto Sun 24 Hours canoe.ca
 Star 2005
   argent
 Leisure and Entertainment segment
  81




---



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Briser le silence Les aliments contre cancer Les recettes de Janette Le Guide de lauto En toutes lettres
 Business Telecommunications segment
    Internet/Portals segment
  82




---



##### Table of Contents



jobboom.com.
   micasa.ca micasa.ca micasa.ca
 toile.com argent Défi Santé Canoë Santé 24 heures Montréal Métropolitain mc 24 Hours Star Académie
 Unrestricted Subsidiary
  Interactive Technologies and Communications segment
 llc
    83




---



##### Table of Contents



Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003
        84




---



##### Table of Contents



Cable segment
 illico Digital TV
 illico Digital TV
  tm
   Newspapers segment
  85




---



##### Table of Contents



24 heures Montréal
Métropolitain mc 24 Hours
  Broadcasting segment
  Leisure and Entertainment segment
  Business Telecommunications segment
  Interactive Technologies and Communications segment
  86




---



##### Table of Contents



Internet/Portals segment
 jobboom.com
 Liquidity and Capital Resources
 Sources and Uses of Liquidity and Capital Resources
  
    
    funds from operations; and
    
    access to unused portions of its credit facilities.
  
    
    capital expenditures to grow or upgrade its fixed assets;
    
    servicing and repayment of debt, and servicing of other contractual obligations; and
    
    business acquisitions.
 Operating Activities
     Financing Activities
  87




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3 4
   1 8
 88




---



##### Table of Contents



Investing Activities
  Le Journal de
Montréal The Toronto Sun The London Free Press
  89




---



##### Table of Contents



Contractual Obligations
  Table 7: Contractual obligations
(in millions of Canadian dollars)
 Less than
    
    
    
    
    
    
    
    
    
    
    5 yearsTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    and moreLong-term debt
    
    $
    2,533.2
    
    
    $
    2.7
    
    
    $
    5.4
    
    
    $
    330.1
    
    
    $
    2,195.0Interest payments(1)
    
    
    1,492.4
    
    
    
    167.6
    
    
    
    464.0
    
    
    
    425.8
    
    
    
    435.0Operating leases
    
    
    188.3
    
    
    
    38.8
    
    
    
    58.8
    
    
    
    39.6
    
    
    
    51.1Capital asset purchases
and other commitments
    
    
    143.1
    
    
    
    94.1
    
    
    
    44.1
    
    
    
    4.9
    
    
    
    Total contractual obligations
    
    $
    4,357.0
    
    
    $
    303.2
    
    
    $
    572.3
    
    
    $
    800.4
    
    
    $
    2,681.1
 (1)
    
    Estimate of interest to be paid on long-term debt based on the interest rates and
foreign exchange rate as at December 31, 2005. Journal de Montréal
   90




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The Carlyle Group
    Financial Instruments
     91




---



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92




---



##### Table of Contents



see Table 8
 Table 8: Quebecor Media Inc.
Fair value of derivative financial instruments
 As at December 31, 2005Notional
    
    
    Carrying amount
    
    Fair value ofvalue
    
    
    of asset (liability)
    
    asset (liability)Derivative financial instrumentsInterest rate swap agreements
    
    $
    95.0
    CAD
    
    $     (0.9
    )
    
    $     (0.9
    )Foreign exchange forward contractsin US$
    
    
    8.8
    US$
    
    
    
    
    
    (0.2
    )in EUR
    
    
    40.6
    EUR
    
    
    
    
    
    
    (1.7
    )in CHF
    
    
    13.2
    CHF
    

    
    
    
    
    
    (0.1
    )Cross-currency interest rate swap agreements
    
    $
    2,099.0
    US$
    
    $(248.5
    )
    
    $(582.9
    )
 Financial Position
      93




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Related Party Transactions
  Management Arrangements
   Lease Arrangements
  Commercial Printing and Other Services
     94




---



##### Table of Contents



Tax benefit transactions
   Off-Balance Sheet Arrangements
 Guarantees
  Operating lease agreements
  Business and asset disposals
  Long-term debt
  95




---



##### Table of Contents



Outsourcing companies and suppliers
  Seasonality
  Risks and uncertainties
  Labour agreements
  
    
    Videotrons 4 collective bargaining agreements, representing 2,199, or 100%, of its
unionized employees, have been recently renewed and are scheduled to expire on
respective dates between December 2009 and August 2011;
    
    20 of Sun Medias collective bargaining agreements, representing approximately 388,
or 19%, of its unionized employees, have expired. Negotiations regarding these 20
collective bargaining agreements are either in progress or will be undertaken in 2006.
Furthermore, eight of Sun Medias collective bargaining agreements, covering 484
employees, expire in 2006, while Sun Medias 21 other collective bargaining agreements,
representing approximately 1,137 unionized employees, are scheduled to expire on
respective dates between December 2007 and June 2010;
    
    12 of TVA Groups 15 collective bargaining agreements, representing approximately
379, or 41%, of its unionized employees, will expire between April 2007 and the end of
December 2008, one of its collective bargaining agreements, representing approximately
516, or 56%, of its unionized employees, will expire at the end of December 2006 and
two collective bargaining agreements, representing 26, or 3%, of its employees, have
expired and negotiations regarding these collective bargaining agreements will be
undertaken in 2006. A group of 53 employees is currently in the process of being
unionized;
    
    three of our other collective bargaining agreements, representing approximately 126,
or 13%, of our other unionized employees, have expired. Negotiations regarding these
collective bargaining agreements are either in progress or will be undertaken in 2006.
Another seven of our collective bargaining agreements,
 96




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##### Table of Contents



representing approximately 859,
or 87%, of our other unionized employees, expire at various dates between the end of
December 2006 and March 2010.
  Contingencies
    Credit Risks
   Financial Risks
   97




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##### Table of Contents



Foreign Currency Risk
  Interest Rate Risk
 see Table 9 see Table 10
 Table 9: Interest Rate Swaps
As at December 31, 2005
 Notional
    
    
    Pay/
    
    
    Fixed
    
    FloatingMaturity
    
    
    amount
    
    
    receive
    
    
    rate
    
    rateVideotron Ltd. and its subsidiariesMay 2006
    
    $
    90.0
    
    
    Pay fixed/receive
floating
    
    
    5.41
    %
    
    Bankers acceptance
3 monthsSeptember 2007
    
    $
    5.0
    
    
    Pay fixed/
    
    
    3.75
    %
    
    Bankers acceptancereceive floating
    
    
    
    
    
    3 months
 98




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##### Table of Contents



Table 10: Cross-currency Interest Rate Swaps
As at December 31, 2005
 Exchange rateof interestAnnual
    
    
    Annual
    
    
    and capitaleffective
    
    
    nominal
    
    
    payments perPeriod
    
    
    Notional
    
    
    interest
    
    
    interest
    
    
    CDN dollar forcovered
    
    
    amount
    
    
    rate
    
    
    rate
    
    
    one US dollarQuebecor Media Inc.Senior Notes
    
    
    2001 to 2011
    
    
    US$
    586.8
    
    
    
    11.98
    %
    
    
    11.125
    %
    
    
    1.5255Senior Discount Notes
    
    
    2001 to 2011
    
    
    US$
    282.9
    
    
    
    14.60
    %
    
    
    13.75
    %
    
    
    1.58221
    (1)Videotron Ltd. and
its subsidiariesSenior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    
    

    Bankers
    
    
    
    6.875
    %
    
    
    1.2000acceptance3 months+ 2.80
    %Senior Notes
    
    
    2004 to 2014
    
    
    US$
    125.0
    
    
    
    7.45
    %
    
    
    6.875
    %
    
    
    1.1950Senior Notes
    
    
    2003 to 2014
    
    
    US$
    200.0
    
    
    

    Bankers
    
    
    
    6.875
    %
    
    
    1.3425acceptance3 months+ 2.73
    %Senior Notes
    
    
    2003 to 2014
    
    
    US$
    135.0
    
    
    
    7.66
    %
    
    
    6.875
    %
    
    
    1.3425Senior Notes
    
    
    2005 to 2015
    
    
    US$
    175.0
    
    
    
    5.98
    %
    
    
    6.375
    %
    
    
    1.1781Sun Media Corporation
and its subsidiariesSenior Notes
    
    
    2003 to 2008
    
    
    US$
    155.0
    
    
    
    8.17
    %
    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    
    2008 to 2013
    
    
    US$
    155.0
    
    

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

    Bankers
    
    

    
    7.625
    %
    
    
    1.5227acceptance3 months+ 3.70
    %Term-loan
B credit facility
    
    
    2003 to 2009
    
    
    US$
    199.3
    
    
    Bankers
    
    LIBOR
    
    
    1.5175acceptance
    
    
    
    + 2.00
    %3 months+ 2.48
    %
 (1)
    
    As per the agreement, the exchange rate includes an exchange fee. Commodity Price Risk
  99




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Fair value of financial instruments
  Table 11: Carrying value and fair value
As at December 31, 2005
 2004
    
    
    
    2005Carrying
    
    
    Fair
    
    
    Carryingvalue
    
    
    value
    
    
    value
    
    
    Fair valueQuebecor Media Inc.Long-term debt(1)
    
    
    (1,140.7
    )
    
    
    (1,332.9
    )
    
    
    (988.1
    )
    
    
    (1,078.8
    )Cross-currency interest rate swaps
    
    
    (3.9
    )
    
    
    (241.9
    )
    
    
    (21.5
    )
    
    
    (261.3
    )Foreign forward exchange contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.8
    )Videotron Ltd. and its subsidiariesLong-term debt(1)
    
    
    (888.9
    )
    
    
    (901.1
    )
    
    
    (971.7
    )
    
    
    (967.4
    )Interest rate swaps
    
    
    (4.6
    )
    
    
    (4.6
    )
    
    
    (0.9
    )
    
    
    (0.9
    )Cross-currency interest rate swaps
    
    
    (45.5
    )
    
    
    (72.3
    )
    
    
    (73.7
    )
    
    
    (135.0
    )Foreign exchange forward contract
    
    
    (8.4
    )
    
    
    (8.4
    )
    
    
    
    
    
    
    (0.2
    )Sun Media Corporation and its subsidiariesLong-term debt(1)
    
    
    (484.3
    )
    
    
    (507.7
    )
    
    
    (466.3
    )
    
    
    (476.1
    )Cross-currency interest rate swaps and
foreign exchange forward contract
    
    
    (147.4
    )
    
    
    (169.8
    )
    
    
    (154.1
    )
    
    
    (186.5
    )TVA Group Inc. and its subsidiariesLong-term debt
    
    
    (34.9
    )
    
    
    (34.9
    )
    
    
    (107.1
    )
    
    
    (107.1
    )
 (1)
    
    Including current portion. Material limitations
  Principal repayments
  Twelve
month period ending
December 31,(1)2006
    
    $
    2.72007
    
    
    2.72008
    
    
    2.72009
    
    
    223.02010
    
    
    107.12011 and thereafter
    
    $
    2,195.0
 
 (1)
    
    Does not reflect the impact of the refinancing that the Company completed on
January 17, 2006. 100




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Critical Accounting Policies and Estimates
 Revenue Recognition
 Cable Segment
   Newspapers segment
  Broadcasting segment
  dvd
 Leisure and Entertainment segment
  101




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Goodwill
           Impairment of Long-Lived Assets
 CICA Handbook Impairment of Long-Lived Assets
 102




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Derivative Financial Instruments
        Pension Plans and Postretirement Benefits
   103




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Allowance for Doubtful Accounts
  Business Combinations
    Future Income Taxes
   Changes in Accounting Policies
  104




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Revenue recognition and revenue arrangements with multiple deliverables
   Hedging relationships
 Hedging
Relationships
 Subscriber equipment and hook-up costs
   Stock based compensation
   Recent Accounting Developments in Canada
 105




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Non-Monetary Transactions
 Conditional Asset Retirement Obligations CICA Handbook
 Financial Instruments  Recognition and Measurement Hedges Comprehensive Income
  Hedging
Relationships Foreign Currency Translation
   Recent Accounting Developments in the United States
 Accounting Changes and Error Corrections
 Accounting for Conditional Asset Retirement Obligations
 Share-Based Payment Share-Based Payment Accounting for Stock-Based
Compensation
 106




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Exchanges of Nonmonetary Assets
 Inventory Costs
 107




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ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 Directors and Senior Management
  Name and Municipality of Residence
    
    Age
    
    PositionSerge
GouinOutremont,
Québec
    
    62
    
    Director, Chairman of the Board of
Directors and Chairman of the
Compensation
CommitteeJean La Couture, FCA(1)
    
    59
    
    Director and Chairman of the Audit CommitteeMontréal, QuébecAndré Delisle(1)
    
    59
    
    DirectorMontréal, QuébecA. Michel Lavigne, FCA(1)(2)
    
    55
    
    DirectorBrossard, QuébecSamuel Minzberg(2)
    
    56
    
    DirectorWestmount, QuébecThe Right Honourable BrianMulroney P.C., C.C., LL.D.
    
    66
    
    DirectorWestmount, QuébecJean Neveu(2)
    
    64
    
    DirectorLongueuil, QuébecÉrik Péladeau
    
    49
    
    Director and Vice Chairman of the Board of DirectorsRosemère, QuébecPierre Karl Péladeau
    
    43
    
    DirectorMontréal, QuébecNormand Provost
    
    51
    
    DirectorLongueuil, QuébecPierre Francoeur
    
    53
    
    President and Chief Operating OfficerSte-Adèle, QuébecLuc Lavoie
    
    49
    
    Executive Vice President, Corporate AffairsMontréal, QuébecMark DSouza
    
    45
    
    Vice President, FinanceBeaconsfield, QuébecSylvain Chamberland
    
    43
    
    Vice President, Business/Media DevelopmentIle Dupas, QuébecRichard Soly
    
    68
    
    Executive Vice President, Marketing & ContentMontréal, QuébecLouis St-Arnaud
    
    59
    
    Senior Vice President, Legal Affairs and SecretaryMont-Saint-Hilaire, QuébecBruno Péloquin
    
    41
    
    Senior Vice President, Strategic
Development, Customer RelationsMontréal, QuébecPierre Lampron
    
    59
    
    Vice President, Institutional RelationsOutremont, QuébecMichel Ethier
    
    51
    
    Vice President, TaxationMontréal, QuébecJean-François Pruneau
    
    35
    
    TreasurerRepentigny, QuébecJean-François Richard
    
    47
    
    Vice President, Advertising ConvergenceKirkland, Québec
 108




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Name and Municipality of Residence
    
    Age
    
    PositionDenis Sabourin
    
    45
    
    Vice President and Corporate ControllerKirkland, QuébecClaudine Tremblay
    
    52
    
    Senior Director, Corporate Secretariat and Assistant SecretaryNuns Island, QuébecEdouard G. Trépanier
    
    55
    
    Vice President, Regulatory AffairsBoucherville, QuébecSylvie Cordeau
    
    41
    
    Vice President, CommunicationsVerdun, Québec
 
 (1)
    
    Member of the Audit Committee.(2)
    
    Member of the Compensation Committee. Serge Gouin
 Jean La Couture, Regroupement des assureurs de personnes à charte du Québec
 André Delisle, Caisse de dépôt et placement du Québec Barreau du Québec
 A. Michel Lavigne Caisse de dépôt et placement
du Québec
 109




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Ordre des comptables agréés du Québec École des Hautes
Études Commerciales
 Samuel Minzberg
 The Right Honourable Brian Mulroney
 Jean Neveu
 Érik Péladeau
 Pierre Karl Péladeau
 110




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Normand Provost Caisse de dépôt et placement du Québec Caisse de
dépôt et placement du Québec
 Pierre Francoeur Le Journal de Montréal Le Journal de Montréal Le Journal de
Montréal LHebdo de Laval Le Journal de
Montréal
 Luc Lavoie
 Mark DSouza
 Sylvain Chamberland
 Richard Soly
 111




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Louis St-Arnaud
 Bruno Péloquin
 Pierre Lampron
 Michel Ethier
 Jean-François Pruneau
 Jean-François Richard
 Denis Sabourin
 Claudine Tremblay
 112




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Edouard G. Trépanier
 Sylvie Cordeau Barreau du Québec Université Catholique de Louvain
 Board of Directors
  Board Practices
  Audit Committee
   113




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Compensation Committee
  Compensation
 Compensation of Directors
     114




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Compensation of Executive Officers
   Quebecor Medias Stock Option Plan
   115




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Quebecor Inc.s Stock Option Plan
 1 3 2 3
  Pension Benefits
 Income Tax Act Income Tax Act
  116




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Income Tax Act Income Tax Act
   Years of MembershipCompensation
    
    10
    
    
    15
    
    
    20
    
    
    25
    
    
    30$105,550 or more
    
    $
    21,110
    
    
    $
    31,665
    
    
    $
    42,220
    
    
    $
    52,775
    
    
    $
    63,330
 Supplemental Retirement Benefit Plan for Designated Executives
     117




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##### Table of Contents



Years of Credited ServiceCompensation
    
    10
    
    
    15
    
    
    20
    
    
    25
    
    
    30$   200,000
    
    $
    18,890
    
    
    $
    28,335
    
    
    $
    37,780
    
    
    $
    47,225
    
    
    $
    56,670$   300,000
    
    $
    38,890
    
    
    $
    58,335
    
    
    $
    77,780
    
    
    $
    97,225
    
    
    $
    116,670$   400,000
    
    $
    58,890
    
    
    $
    88,335
    
    
    $
    117,780
    
    
    $
    147,225
    
    
    $
    176,670$   500,000
    
    $
    78,890
    
    
    $
    118,335
    
    
    $
    157,780
    
    
    $
    197,225
    
    
    $
    236,670$   600,000
    
    $
    98,890
    
    
    $
    148,335
    
    
    $
    197,780
    
    
    $
    247,225
    
    
    $
    296,670$   800,000
    
    $
    138,890
    
    
    $
    208,335
    
    
    $
    277,780
    
    
    $
    347,225
    
    
    $
    416,670$1,000,000
    
    $
    178,890
    
    
    $
    268,335
    
    
    $
    357,780
    
    
    $
    447,225
    
    
    $
    536,670$1,200,000
    
    $
    218,890
    
    
    $
    328,335
    
    
    $
    437,780
    
    
    $
    547,225
    
    
    $
    656,670
 Liability Insurance
  Employees
  Total number
    
    Number of employees under
    
    Number ofOperations
    
    of employees
    
    collective agreements
    
    collective agreementsCable
    
    
    3,344
    
    
    
    2,199
    
    
    
    4Newspapers
    
    
    6,083
    
    
    
    2,009
    
    
    
    49Broadcasting
    
    
    1,512
    
    
    
    921
    
    
    
    15Leisure and Entertainment
    
    
    1,615
    
    
    
    335
    
    
    
    7Business Telecommunications
    
    
    444
    
    
    
    152
    
    
    
    2Interactive
Technologies and Communications
    
    
    553
    
    
    
    0
    
    
    
    0Internet / Portals
    
    
    303
    
    
    
    0
    
    
    
    0Others
    
    
    673
    
    
    
    498
    
    
    
    1Total
    
    
    14,527
    
    
    
    6,114
    
    
    
    78
  
    
    Videotrons 4 collective bargaining agreements, representing 2,199, or 100%, of its
unionized employees, have been recently renewed and are scheduled to expire on
respective dates between December 2009 and August 2011;
    
    20 of Sun Medias collective bargaining agreements, representing approximately 388,
or 19%, of its unionized employees, have expired. Negotiations regarding these 20
collective bargaining agreements are either in progress or will be undertaken in 2006.
Furthermore, eight of Sun Medias collective bargaining agreements, covering 484
employees, expire in 2006, while Sun Medias 21 other collective bargaining agreements,
representing approximately 1,137 unionized employees, are scheduled to expire on
respective dates between December 2007 and June 2010;
    
    12 of TVA Groups 15 collective bargaining agreements, representing approximately
379, or 41%, of its unionized employees, will expire between April 2007 and the end of
December 2008, one of its collective
 118




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bargaining agreements, representing approximately 516, or 56%, of its unionized
employees, will expire at the end of December 2006 and two collective bargaining
agreements, representing 26, or 3%, of its employees, have expired and negotiations
regarding these collective bargaining agreements will be undertaken in 2006. A group of
53 employees is currently in the process of being unionized;
    
    three of our other collective bargaining agreements, representing approximately 126,
or 13%, of our other unionized employees, have expired. Negotiations regarding these
collective bargaining agreements are either in progress or will be undertaken in 2006.
Another seven of our collective bargaining agreements, representing approximately 859,
or 87%, of our other unionized employees, expire at various dates between the end of
December 2006 and March 2010.
 Share Ownership
  119




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ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 Major Shareholders
 Caisse de dépôt et placement du Québec
  Consolidated and Amended Shareholders Agreement
   (a)
    
    standard rights of first refusal with respect to certain transfers of QMI Shares;(b)
    
    standard preemptive rights which permit shareholders to maintain their respective
holdings of QMI Shares on a fully diluted basis in the event of issuances of additional
QMI Shares or our convertible securities;(c)
    
    rights of representation on our Board of Directors in proportion to
shareholdings, with Quebecor initially having five nominees (now six nominees) and
Capital CDPQ having four nominees to our Board of Directors;(d)
    
    consent rights in certain circumstances with respect to matters relating to us
and our non-reporting issuer (public) subsidiaries, including (1) a substantial change
in the nature of our business and our subsidiaries taken as a whole, (2) an amendment to
our articles or certain of our subsidiaries, (3) the merger or amalgamation of us or
certain of our subsidiaries with a person other than an affiliate, (4) the issuance by
us or certain of our subsidiaries of shares or of securities convertible into shares
except in the event of an initial public offering of QMI Shares, (5) any transaction
having a value of more than $75,000,000, other than the sale of goods and services in
the normal course of business, (6) a business acquisition in a business sector unrelated
to sectors in which we and certain of our subsidiaries are involved, and (7) in respect
of capital expenditures in excess of certain amounts for each of the first five years of
our operations;(e)
    
    standard rights of first refusal in favor of Capital CDPQ with respect to the
sale of all or substantially all of the shares or assets of TVA Group or Videotron;(f)
    
    so long as Capital CDPQ holds at least 22.5% of the QMI Shares on a fully diluted
basis, if the Péladeau family (as defined in the shareholders agreement) ceases to
control Quebecor, Capital CDPQ shall have at its option either a call on Quebecors
interest in us at fair market value, or a put right in respect of Capital CDPQs
interest in us to Quebecor or its new controlling shareholder at fair market value,
provided that the
 120




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##### Table of Contents



call right shall not apply if the Péladeau family (as defined in the
shareholders agreement) has offered a standard right of first refusal on its Quebecor
control block to Capital CDPQ before selling control of Quebecor, and all of the
above-mentioned rights shall cease to apply five years following the approval by the
CRTC of the acquisition by us of Videotron; and(g)
    
    a non-competition covenant by Quebecor in respect of it and its affiliates
pursuant to which Quebecor and its affiliates shall not compete with QMI and its
subsidiaries in their areas of activity so long as Quebecor has de jure or de facto
control of us, subject to certain limited exceptions.
    Certain Relationships and Related Party Transactions
  Management Arrangements
   Lease Arrangements
  Commercial Printing and Other Services
  121




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Caisse de dépôt et placement du Québec
 Caisse de dépôt et placement du Québec
 Tax Consolidation Transactions
  Issuance and Redemption of Convertible Obligations and Investments in Quebecor Media
Preferred Shares
   Issuance of Subordinated Loans and Investments in Quebecor Media Preferred Shares
  122




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Other Income Tax Transactions
   Interests of Experts and Counsel
  
 ITEM 8  FINANCIAL INFORMATION
 Consolidated Statements and Other Financial Information
  Legal Proceedings
   123




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Dividend Policy and Dividends
 Dividend Policies and Payments
  
    
    123,602,807 common shares outstanding, of which 67,636,713 were held by Quebecor and
55,966,094 were held by Capital CDPQ;
    
    990,000 Cumulative First Preferred Shares, Series A, outstanding, which were held by
Sun Media, Bowes Publishers Limited and Sun Media (Toronto) Corporation;
    
    147,950 Cumulative First Preferred Shares, Series C, outstanding, which were held by
Archambault Group and CEC Publishing of the Leisure and Entertainment segment; and
    
    255,000 Cumulative First Preferred Shares, Series F, outstanding, which Series F
Shares were held by subsidiaries of Sun Media.
      124




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Significant Changes
  
 ITEM 9  THE OFFER AND LISTING
 Offer and Listing Details
  Plan of Distribution
  Markets
 Outstanding Notes
 1 8 3 4 1 8 3 4 1 8 3 4
  1 8 3 4
 3 4 3 4 3 4
 125




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3 4
 1 8 3 4 7 3/4%
 Selling Shareholders
  Dilution
  Expenses of the Issuer
  
 ITEM 10  ADDITIONAL INFORMATION
 Share Capital
       126




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Memorandum and Articles of Association
  1.
    
    
    
    We were incorporated, in Canada, under Part IA of the
Companies Act(Québec) (the Companies Act) as 9093-9687
Québec Inc. on August 8, 2000 under registration number
1149501992. On August 18, 2000, a Certificate of Amendment
was filed to change our name to Media Acquisition Inc. Our
name was further changed to Quebecor Media Inc. on September
26, 2000. Our Articles do not describe our object and
purpose.2.
    
    (a)
    
    Our by-laws provide that we may transact business with one or
more of our directors or with any firm of which one or more
of our directors are members or employees or with any
corporation or association of which one or more of our
directors are shareholders, directors, officers or employees.
The director who has an interest in the transaction shall
disclose his interest to us and to the other directors and
shall abstain from discussing and voting on the transaction,
except if his vote is required to bind us in respect of the
transaction.(b)
    
    Neither the Articles nor our by-laws contain provisions with
respect to directors power, in the absence of an independent
quorum, to determine their remuneration.(c)
    
    Subject to any restriction which may from time to time be
included in the Articles or our by-laws, or the terms, rights
or restrictions of any of our shares or securities
outstanding, the directors may authorize us to borrow money
and obtain advances upon the credit of our company, from any
bank, corporation, firm, association or person, upon such
terms and conditions, in all respects, as they think fit. The
directors may authorize the issuance of bonds or other
evidences of indebtedness of our company, and may authorize
the pledge or sale of the same upon such terms and
conditions, in all respects, as they think fit. The directors
are also authorized to hypothecate the property, undertaking
and assets, movable or immovable, of our company to secure
payment for any bonds or other evidences of indebtedness or
otherwise give guarantees to secure the payment of loans.
  3.
    
    
    
    The rights, preferences and restrictions attaching to our Common
Shares, Cumulative First Preferred Shares (consisting of the Series A
Shares, the Series B Shares, the Series C Shares, the Series D Shares
and the Series F Shares) and our Preferred Shares, Series E are set
forth below:
 127




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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.(e)
    
    Redemption provisions: None(f)
    
    Sinking fund provisions: None(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Québec) and as determined by the Board of Directors. Our
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of common
shares as a result of such holder owning a substantial number of shares: None
  Cumulative First Preferred Shares
  Companies Act pari passu
 128




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##### Table of Contents



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 voluntarily or involuntarily, the holders of
Series A Shares shall be entitled to receive, in preference to
the holders of common shares, an amount equal to $1,000 per Series A Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series A Shares may require us to redeem the
Series A preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at our
option, redeem the Series A Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series A
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series B (Series B Shares)
 (a)
    
    Dividend rights: The holders of record of the Series B Shares shall be entitled
to receive a single dividend, payable in cash, in an amount to be determined by our
Board of Directors in accordance with the Articles, which dividend, once determined by
our Board of Directors, shall be paid on the date of conversion of the Series B Shares
into our common shares. No dividends may be paid on any shares ranking junior to the
Series B Shares unless all dividends which shall have become payable on the Series B
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series B Shares, as such, shall not be entitled to
receive notice of, and to attend or vote at, any meeting of our shareholders, unless we
shall have failed to pay the dividend due to such holders. In that event and only for so
long as the said dividend remains in arrears, the holders of Series B Shares shall be
 129




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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.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series B
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series C (Series C Shares)
 (a)
    
    Dividend rights: The holders of record of the Series C Shares shall be entitled
to receive in each fiscal year fixed cumulative preferred dividends at the rate of
11.25% per share per annum. No dividends may be paid on any shares ranking junior to the
Series C Shares unless all dividends which shall have become payable on the Series C
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series C Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay certain dividends on the Series C Shares. In that event and only for
so long as the dividend remains in arrears, the holders of Series C Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series C Share shall entitle the holder
thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series C Shares are entitled to receive a 11.25% cumulative preferential
dividend) and paragraph (d) below (the holders of Series C Shares are entitled to
receive, in preference to the holders of Common Shares, an amount equal to $1,000 per
Series C Share and any accumulated and unpaid dividends with respect thereto in the
event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation:In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or
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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(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series C
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series D (Series D Shares)
 (a)
    
    Dividend rights: The holders of record of the Series D Shares shall be entitled
to receive in each fiscal year fixed cumulative preferred dividends at the rate of 11.0%
per share per annum. No dividends may be paid on any shares ranking junior to the Series
D Shares unless all dividends which shall have become payable on the Series D Shares
have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series D Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay certain dividends on the Series D Shares. In that event and only for
so long as the dividend remains in arrears, the holders of Series D Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series D Share shall entitle the holder
thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series D Shares are entitled to receive a 11.0% cumulative preferential
dividend) and paragraph (d) below (the holders of Series D Shares are entitled to
receive, in preference to the holders of Common Shares, an amount equal to $1,000 per
Series D Share and any accumulated and unpaid dividends with respect thereto in the
event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series D Shares shall be entitled to receive, in preference to the holders of Common
Shares, an amount equal to $1,000 per Series D Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series D Shares may require us to redeem the
Series D preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at its
option, redeem the Series D Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.
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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(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series D
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series F (Series F Shares)
 (a)
    
    Dividend rights: The holders of record of the Series F Shares shall be entitled
to receive in each fiscal year fixed cumulative semi-annual dividends at the rate of
10.85% per share per annum. No dividends may be paid on any shares ranking junior to the
Series F Shares unless all dividends which shall have become payable on the Series F
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series F Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay eight semi-annual dividends on the Series F Shares. In that event and
only for so long as the dividend remains in arrears, the holders of Series F Shares
shall be entitled to receive notice of, and to attend and vote at, all shareholders
meetings, except meetings at which only holders of another specified series or class of
shares are entitled to vote. At each such meeting, each Series F Share shall entitle the
holder thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above
(holders of Series F Shares are entitled to receive a 10.85% cumulative preferential
semi-annual dividend) and paragraph (d) below (the holders of Series F Shares are
entitled to receive, in preference to the holders of common shares, an amount equal to
$1,000 per Series F Share and any accumulated and unpaid dividends with respect thereto
in the event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series F Shares shall be entitled to receive, in preference to
the holders of common shares, an amount equal to $1,000 per Series F Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series F Shares may require us to redeem the
Series F preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at our
option, redeem the Series F Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Québec) and as determined by the Board of Directors. The
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series F
Shares as a result of such holders owning a substantial number of shares: None.
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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 us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series E
Shares: None.
 4.
    
    For a description of the action necessary to change the rights of
holders of our Cumulative First Preferred Shares, see Section 3.
Cumulative First Preferred Shares above. As regards our Preferred
Shares, Series E, we will not, unless consented to by the holders of
the Series E Shares and upon compliance with the provisions of the
Companies Act(Québec), repeal, amend or otherwise alter any
provisions of the Articles relating to the Series E Shares. Under the
general provisions of the Companies Act(Québec), (i) our Articles may
be amended by the affirmative vote of the holders of two-thirds
(2/3) of
the vote cast by the shareholders at a special meeting, and (ii) our
by-laws may be amended by our directors and ratified by a majority of
the vote cast by the shareholders at a meeting called for such
purpose.5.
    
    Our by-laws provide that the annual meetings of the shareholders shall
be held at such time, on such date and at such place as the Board of
Directors determines from time to time. Annual meetings of the
shareholders may be called at any time by order of the Board of
Directors, the chairman of the board, or, provided they are directors
of our company, by the president or any vice president. Special
general meetings of the shareholders shall be held at
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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.
    
    There is no limitation imposed by Canadian law or by the Articles or
other constituent documents on the right of nonresidents or foreign
owners to hold or vote shares, other than as provided in the
Investment Canada Act(Canada). The Investment Canada Actrequires
non-Canadian (as defined in the Investment Canada Act) (Canada)
individuals, governments, corporations and other entities who wish to
acquire control of a Canadian business (as defined in the Investment
Canada Act(Canada)) to file either an application for review (when
certain asset value thresholds are met) or a post closing notification
with the Director of Investments appointed under the Investment Canada
Act(Canada), unless a specific exemption applies. The Investment
Canada Act(Canada) requires that, when an acquisition of control of a
Canadian business by a non-Canadian is subject to review, it must be
approved by the Minister responsible for the Investment Canada Act
(Canada) on the basis that the Minister is satisfied that the
acquisition is likely to be of net benefit to Canada, having regard
to criteria set forth in the Investment Canada Act(Canada).7.
    
    The Articles provide that none of our shares may be transferred
without the consent of the directors expressed in a resolution duly
adopted by them. In addition, the total number of shareholders of our
company is limited to fifty, exclusive of present or former employees
of our company or a subsidiary.A register of transfers containing the date and particulars of all
transfers of shares of our share capital shall be kept either at our
head office or at another of our offices or at such other place in the
Province of Québec as may be determined, from time to time, by the
Board of Directors.8.
    
    Not applicable.9.
    
    Not applicable.10.
    
    Not applicable.
 Material Contracts
  (a)
    
    Indenture relating to US$525,000,000 of our 7 3/4% Senior Notes due March 15, 2016,
dated as of January 17, 2006, by and between Quebecor Media Inc., and U.S. Bank National
Association, as trustee.
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On January 17, 2006, we issued US$525,000,000 aggregate principal amount of our 7 3/4%
Senior Notes due March 15, 2016 pursuant to an Indenture, dated as of January 17, 2006,
by and between Quebecor Media and U.S. Bank National Association, as trustee. These
notes are unsecured and are due on March 15, 2016. Interest on these notes is payable
semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15,
2006. These notes are not guaranteed by our subsidiaries. These notes are redeemable, at
our option, under certain circumstances and at the redemption prices set forth in these
indentures. These indentures contain customary restrictive covenants with respect to
Quebecor Media and certain of its subsidiaries and customary events of default. If an
event of default occurs and is continuing, other than our bankruptcy or insolvency, the
trustee or the holders of at least 25% in principal amount at maturity of the
then-outstanding notes may declare all the notes to be due and payable immediately.In connection with the issuance of these notes, we have agreed to file, within 120 days
after the issue date of the notes, a registration statement relating to the exchange of
these privately placed notes for publicly registered exchange notes with substantially
identical terms evidencing the same continuing indebtedness. We have also agreed to use
our best efforts to cause the registration statement to become effective within 210 days
after the issue date of the notes and to consummate the exchange offer with 255 days
after the issue date of the notes.(b)
    
    Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media Inc.,
as Borrower, the financial institutions party thereto from time to time, as Lenders, and
Bank of America, N.A., as Administrative Agent.On January 17, 2006, in connection with our refinancing plan, we entered into Senior
Secured Credit Facilities comprised of (i) a 5-year $100.0 million revolving credit
facility that matures in January 2011, (ii) a 5-year $125.0 million term loan A that
matures in January 2011, and (iii) a 7-year US$350.0 million term loan B facility that
matures in January 2013. The Senior Secured Credit Facilities also include an
uncommitted $350 million incremental facility that may be available to us, subject to
compliance at all times with all financial covenants, absence of default and lenders
being willing to fund the incremental amount. This incremental facility will have a term
to be agreed with the lenders, although the maturity of borrowings under the incremental
facility will be required to have a maturity falling on or extending beyond the maturity
of the term loan B facility. We may draw Letters of Credit under the Senior Secured
Credit Facilities. The proceeds of the term loan A and term loan B were used to
refinance existing debt. The proceeds of our revolving facility may be used for our
general corporate purposes.Borrowings under the revolving credit facility, term loan A and term loan B bear
interest at the Canadian prime rate, the U.S. prime rate, the bankers acceptance rate
or LIBOR, plus, in each case, an applicable margin.Borrowings under the revolving credit facility are repayable in full in January 2011.
Borrowings under our term loan A facility are repayable in full in January 2011 and
borrowing under our term loan B facility are repayable in full in January 2013. We are
also required to make specified quarterly repayments of amounts borrowed under the term
loan A and term loan B.Borrowings under the senior secured credit facilities and under eligible derivative
instruments are secured by a first-ranking hypothec and security agreement (subject to
certain permitted encumbrances) on all of our movable property and first-ranking pledges
of all of the shares (subject to certain permitted encumbrances) of Sun Media and
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,
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the breach of any financial covenant, the failure to perform or observe any
other covenant, certain bankruptcy events relating to Quebecor Media and its
subsidiaries, and the occurrence of a change of control.
 (c)
    
    Indenture relating to US$650,000,000 of Videotrons 6 7/8% Senior Notes due January
15, 2014, dated as of October 8, 2003, by and among Vidéotron Ltée, the guarantors party
thereto and Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National
Association) as trustee, as supplemented.On October 8, 2003, Videotron issued
US$335.0 million aggregate principal amount of 6 7/8%
Senior Notes due January 15, 2014 and, on November 19, 2004, Videotron issued an
additional US$315.0 million in aggregate principal amount of these notes, pursuant to an
Indenture, dated as of October 8, 2003, by and among Videotron, the guarantors party
thereto and Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National
Association), as trustee. These notes are unsecured and are due January 15, 2014.
Interest on these notes is payable semi-annually in arrears on January 15 and July 15 of
each year, beginning on July 15, 2004. These notes are guaranteed on a senior unsecured
basis by most, but not all, of Videotrons subsidiaries. The notes are redeemable, at
Videotrons option, under certain circumstances and at the redemption prices set forth
in the indenture. The indenture contains customary restrictive covenants with respect to
Videotron and certain of its subsidiaries and customary events of default. If an event
of default occurs and is continuing (other than Videotrons bankruptcy or insolvency)
the trustee or the holders of at least 25% in principal amount at maturity of the
then-outstanding notes may declare all the notes to be due and payable immediately.(d)
    
    Indenture relating to US$175,000,000 of Videotrons
6 3/8% Senior Notes due December
15, 2015, dated as of September 16, 2005, by and among Videotron Ltée, the guarantors
party thereto, and Wells Fargo, National Association, as trustee.On September 16, 2005, Videotron issued US$175,000,000 aggregate principal amount of its
6 3/8  Senior Notes due December 15, 2015, pursuant to an Indenture, dated as of September
16, 2005, by and among Videotron, the guarantors party thereto, and Wells Fargo,
National Association, as trustee. These notes are unsecured and are due on December 15,
2015. Interest on these notes is payable semi-annually in arrears on June 15 and
December 15 of each year, beginning on December 15, 2005. These notes are guaranteed on
a senior unsecured basis by most, but not all, of Videotrons subsidiaries. These notes
are redeemable, at Videotrons option, under certain circumstances and at the redemption
prices set forth in the indenture. The indenture contains customary restrictive
covenants with respect to Videotron and certain of its subsidiaries, and customary
events of default. If an event of default occurs and is continuing, other than
Videotrons bankruptcy or insolvency, the trustee or the holders of at least 25% in
principal amount at maturity of the then-outstanding notes may declare all the notes to
be due and payable immediately.(e)
    
    Amended and Restated Credit Agreement, dated as of November 19, 2004, by and
among Vidéotron Ltée, as borrower, the guarantors party thereto, the financial
institutions party thereto from time to time, as lenders, and Royal Bank of Canada, as
administrative agent.On November 19, 2004, concurrently with the closing of the private placement of a new
series of Videotrons 6 7/8% Senior Notes due January 15, 2014, Videotron amended and
restated its credit agreement, dated as of November 28, 2000, by executing and
delivering the seventh amending agreement to its credit agreement. Pursuant to this
amendment, Videotrons amended and restated credit agreement provides for a $450.0
million revolving credit facility maturing in 2009. The proceeds of Videotrons
revolving credit facility are to be used for Videotrons general corporate purposes,
including for distributions to Videotrons shareholder in certain circumstances.Borrowings under Videotrons amended and restated credit facility bear interest at the
Canadian prime rate, the bankers acceptance rate or LIBOR, plus, in each case, an
applicable margin. Borrowings under Videotrons revolving credit facility are repayable
in full in November 2009.Borrowings under this amended and restated credit facility and under eligible derivative
instruments are secured by a first-ranking hypothec or security interest (subject to certain permitted
encumbrances) on all of
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Videotrons current and future assets, as well as those
of the guarantors party thereto, including most but not all of Videotrons subsidiaries (the
Videotron Group), guarantees of all the members of the
Videotron Group, pledges of the shares of Videotron and the members of the Videotron Group, and other security.
 This amended and restated credit facility contains customary covenants that restrict and
limit the ability of Videotron and the members of the Videotron Group to, among other
things, enter into merger or amalgamation transactions, grant encumbrances, sell assets,
pay dividends or make other distributions, issue shares of capital stock, incur
indebtedness and enter into related party transactions. In addition, this amended and
restated credit facility contains customary financial covenants. It also contains
customary events of default including the non-payment of principal or interest, the
breach of any financial covenant, the failure to perform or observe any other covenant,
certain bankruptcy events relating to Videotron and the members of the Videotron Group,
and the occurrence of a change of control.(f)
    
    Indenture relating to US$205,000,000 of Sun Medias 7 5/8% Senior Notes due
February 15, 2013, dated as of February 7, 2003 by and among Sun Media Corporation, the
guarantors party thereto, and National City Bank, as trustee, as supplemented.On February 7, 2003 Sun Media issued US$205.0 million aggregate principal amount of its
7 5/8% Senior Notes due February 15, 2013 under an Indenture, dated as of February 7,
2003, as supplemented, by and among Sun Media, the guarantors party thereto, and
National City Bank, as trustee. These notes are unsecured and are due February 15,
2013. Interest on these notes is payable semi-annually in arrears on February 15 and
August 15 of each year, beginning on August 15, 2003. These notes are guaranteed on a
senior unsecured basis by most, but not all, of Sun Medias subsidiaries. These notes
are redeemable, at Sun Medias option, under certain circumstances and at the redemption
prices set forth in the indenture. The indenture contains customary restrictive
covenants with respect to Sun Media and certain of its subsidiaries and customary events
of default. If an event of default occurs and is continuing, other than Sun Medias
bankruptcy or insolvency, the trustee or the holders of at least 25% in principal amount
at maturity of the then-outstanding notes may declare all the notes to be due and
payable immediately.(g)
    
    Credit Agreement, dated as of February 7, 2003, by and among Sun Media
Corporation, the guarantors party thereto, Banc of America Securities LLC, Credit Suisse
First Boston Canada, the lenders party thereto, and Bank of America, N.A., as
Administrative Agent, as amended.On February 7, 2003, as part of the refinancing of its indebtedness, Sun Media entered
into a secured credit facility consisting of a five-year revolving credit facility of
$75.0 million and a six-year term loan B of US$230.0 million. In connection with
Quebecor Medias refinancing plan completed in January 2006, Sun Medias credit facility
was amended for the addition of a $40.0 million term loan C.Borrowings under the revolving credit facility are repayable in full in February 2008.
Borrowings under the term loan B and term loan C facilities are repayable in full in
February 2009. Sun Media is also required to make specified quarterly repayments of
amounts borrowed under the term loan B and term loan C facilities.Borrowings under the term loan B facility are in US dollars and bear interest at LIBOR
plus an applicable margin. Borrowings under the revolving credit facility and the term
loan C facility are in Canadian dollars and bear interest at the Canadian prime rate or
the bankers acceptance rate plus an applicable margin. The proceeds of the term loan B
and and term loan C were used to refinance existing debt and for permitted distributions
to Sun Medias shareholder. The proceeds of Sun Medias revolving facility may be used
for general corporate purposes including distributions to Sun Medias shareholder in
certain circumstances.Borrowings under this amended and restated credit facility and under eligible derivative
instruments are secured by a first-ranking hypothec and security agreement (subject to
certain permitted encumbrances) on all of Sun Medias current and future assets, as well
as those of the guarantors party thereto, including most, but not all, of Sun Medias
subsidiaries (the Sun Media Group), guarantees of all the members of the Sun
Media Group, pledges of shares of the members of the Sun Media Group, and other
security.
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This credit facility contains customary covenants that restrict and limit the ability of
Sun Media and its subsidiaries to, among other things, enter into merger or amalgamation
transactions, grant encumbrances, sell assets, pay dividends or make other
distributions, issue shares of capital stock, incur indebtedness and enter into related
party transactions. In addition, this credit facility contains customary financial
covenants. This credit facility also contains customary events of default including the
non-payment of principal or interest, the breach of any financial covenant, the failure
to perform or observe any other covenant, certain bankruptcy events relating to Sun
Media and members of the Sun Media Group, and the occurrence of a change of control.(h)
    
    Indenture relating to US$715,000,000 of our 11 1/8% Senior Notes due July 15, 2011,
dated as of July 6, 2001, by and between Quebecor Media Inc. and National City Bank (now
U.S. Bank Corporate Trust Services), as trustee, as amended, and Indenture relating to
US$295,000,000 of our 13 3/4% Senior Discount Notes due July 15, 2011, dated as of July 6,
2001, by and between Quebecor Media Inc. and National City Bank (now U.S. Bank Corporate
Trust Services), as trustee, as amended.We issued US$715.0 million aggregate principal amount of
our 11 1/8% Senior
Notes due 2011 and US$295.0 million aggregate principal amount
at maturity of our 13 3/4%
Senior Discount Notes due 2011 under two separate indentures, each dated as of July 6,
2001, by and between us and National City Bank (now U.S. Bank Corporate Trust Services),
as trustee. These notes are unsecured and are due on July 15, 2011. Interest on these
notes is payable semi-annually in arrears on January 15 and July of each year.On December 16, 2005, we announced tender offers and consent solicitations pursuant to
which we offered to repurchase and retire any and all of our
outstanding 11 1/8% Senior Notes due 2011 and 13 3/4% Senior Discount Notes due 2011 and sought
consents to eliminate substantially all of the restrictive covenants contained in the
indentures governing these notes. On December 30, 2005, we announced that we had
obtained the requisite majority consents to amend the respective indentures governing
our Senior Notes due 2011 and Senior Discount Notes due 2011, thereby removing the
principal restrictive covenants and certain events of default in respect of these notes.
These amendments became effective on January 17, 2006 upon our purchase of the tendered
Senior Notes due 2011 and Senior Discount Notes due 2011. In these tender offers, we
repurchased US$561.6 million in aggregate principal amount of Senior Notes due 2011
(representing 95.7% of the Senior Notes due 2011 outstanding) and US$275.6 million in
aggregate principal amount at maturity of Senior Discount Notes due 2011 (representing
97.4% of the Senior Discount Notes due 2011 outstanding). We intend to redeem any
remaining outstanding Senior Notes due 2011 and Senior Discount Notes due 2011 on July
15, 2006 at a price equal to 105.563% of the principal amount of such Senior Notes and
106.875% of the principal amount at maturity of such Senior Discount Notes, pursuant to
the terms of the respective indentures governing these notes.(i)
    
    Share Purchase Agreement dated December 22, 2003 between Carlyle VTL Holdings,
L.P. and Carlyle Partners III (Videotron), L.P., and Quebecor Media Inc. and 9101-0827
Québec Inc. relating to the purchase 9101-0827 Québec Inc. of 5,000 Class C Preferred
Shares of 3662527 Canada Inc., as amended by a First Amendment to Share Purchase
Agreement dated as of December 31, 2004.On December 22, 2003, 9101-0827 Québec Inc., a wholly-owned subsidiary of Quebecor Media
entered into an agreement with Carlyle VTL Holdings, L.P. and Carlyle Partners III
(Videotron), L.P. (collectively Carlyle) to purchase the 5,000 Class C Preferred
Shares held by Carlyle in 3662527 Canada Inc., the parent company of Videotron Télécom
Ltd., Quebecor Medias business telecommunications venture. The acquisition was made for
a purchase price with a value estimated at approximately $125 million at closing. A
payment of $55 million was made to Carlyle at closing on December 22, 2003. The balance
of the purchase price is subject to variation on the basis of the valuation of the
common shares of Quebecor Media and is payable on demand at any time after December 15,
2004, but no later than December 15, 2008. If the Company files a prospectus for an
initial public offering, the holder has the right to require the Company to
pay the additional amount payable by delivering 3,740,682 Common Shares of the Company.
The Company holds an option to pay this additional amount in cash, at its fair value for
a period of 30 days following each of June 15, 2007 and June 15, 2008. Quebecor Media
may, under certain conditions and if its shares are publicly
 138




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traded at that time, pay
the deferred purchase price by delivering 3,740,682 common shares to Carlyle
(123,602,807 common shares of QMI were outstanding as of December 22, 2003).
 Exchange Controls
    Taxation
 Certain U.S. Federal Income Tax Considerations
 3 4
  
    
    dealers in stocks, securities or currencies;
    
    securities traders that use a mark-to-market accounting method;
    
    banks and financial institutions;
    
    insurance companies;
    
    tax-exempt organizations;
    
    persons holding notes as part of a hedging or conversion transaction or a straddle;
    
    persons deemed to sell notes under the constructive sale provisions of the Code;
    
    persons who or that are, or may become, subject to the expatriation provisions of the Code;
    
    persons whose functional currency is not the U.S. dollar; and
    
    direct, indirect or constructive owners of 10% or more of our outstanding voting shares.
 139




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
    
    an individual citizen or resident alien of the United States;
    
    a corporation or other entity treated as such formed in or under the laws of
the United States, any state thereof or the District of Columbia;
    
    an estate, the income of which is subject to U.S. federal income taxation
regardless of its source; or
    
    a trust, if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more U.S. persons
(within the meaning of the Code) have the authority to control all substantial
decisions of the trust, or if a valid election is in effect to be treated as a
U.S. person.
   To ensure compliance with requirements imposed by the IRS, we inform you that the United
States tax advice contained herein: (i) is written in connection with the promotion or marketing by
Quebecor Media Inc. of the transactions or matters addressed herein, and (ii) is not intended or
written to be used, and cannot be used by any taxpayer, for the purpose of avoiding United States
tax penalties. Each taxpayer should seek advice based on the taxpayers particular circumstances
from an independent tax advisor.
  
 Interest on the Notes
   140




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##### Table of Contents



Sale, Exchange or Retirement of a Note
  
    
    the amount of cash and the fair market value of any property received (less
any portion allocable to the payment of accrued interest not previously included
in income, which amount will be taxable as ordinary interest income); and
    
    the U.S. Holders tax basis in the notes.
  Exchange of Notes Into Exchange Notes
  Information Reporting and Backup Withholding
  
    
    fails to furnish a social security number or other taxpayer identification
number (TIN) certified under penalty of perjury within a reasonable time after the request for the TIN;]
    
    furnishes an incorrect TIN;
    
    is notified by the IRS that is has failed to report properly interest or dividends; or
 141




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##### Table of Contents




    
    under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and that
such holder is not subject to backup withholding.
 provided provided
  Certain Canadian Federal Income Tax Considerations for Non-Residents of Canada
 The following summary fairly describes the main Canadian federal income tax consequences
applicable to you if you invest in the notes and, for purposes of the Income Tax Act(Canada),
which we refer to as the Act, you hold such notes as capital property. Generally, a note will be
considered to be capital property to a holder providedthe holder does not hold the note in the
course of carrying on a business and has not acquired the 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 prospectus 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, for the purposes of the Convention and
the Act, is not and is not deemed to be a resident of Canada during any taxation year in which it
owns the notes and does not use or hold, and is not deemed to use or hold the notes in the course
of carrying on a business in Canada, who we refer to as a Non-Resident Holder.
 Interest Payments
  Dispositions
   .
 Dividends and Paying Agents
  142




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Statement by Experts
  Documents on Display
   Subsidiary Information
  143




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ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign currency risk
  Interest rate risk
  Interest Rate Swaps
As at December 31, 2005  (in millions of dollars)
 Notional
    
    
    Pay/

    
    Fixed
    
    
    FloatingMaturity
    
    amount
    
    
    receive

    
    rate
    
    
    rateVideotron Ltd. and its subsidiariesMay 2006
    
    $
    90.0
    
    
    Pay fixed/
    
    
    5.41
    %
    
    Bankers acceptancereceive floating
    
    
    
    
    
    3 monthsSeptember 2007
    
    $
    5.0
    
    
    Pay fixed/
    
    
    3.75
    %
    
    Bankers acceptancereceive floating
    
    
    
    
    
    3 months
 144




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##### Table of Contents



Cross-currency Interest Rate Swaps
As at December 31, 2005  (in millions of dollars)
 Annual
    
    
    Annual
    
    
    Exchange rate ofeffective
    
    
    nominal
    
    
    interest and capitalPeriod
    
    
    Notional
    
    
    interest
    
    
    interest
    
    
    payments per CDNcovered
    
    
    amount
    
    
    rate
    
    
    rate
    
    
    for one US dollarQuebecor Media Inc.Senior Notes
    
    
    2001 to 2011
    
    
    US$
    586.8
    
    
    
    11.98
    %
    
    
    11.125
    %
    
    
    1.5255Senior Discount Notes
    
    
    2001 to 2011
    
    
    US$
    282.9
    
    
    
    14.60
    %
    
    
    13.75
    %
    
    
    1.5822
    (1)Videotron Ltd. and
its subsidiariesSenior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    
    Bankers
    
    
    
    6.875
    %
    
    
    1.2000acceptance3 months+ 2.80
    %Senior Notes
    
    
    2004 to 2014
    
    
    US$
    125.0
    
    
    
    7.45
    %
    
    
    6.875
    %
    
    
    1.1950Senior Notes
    
    
    2003 to 2014
    
    
    US$
    200.0
    
    
    Bankers
    
    
    
    6.875
    %
    
    
    1.3425acceptance3 months+ 2.73
    %Senior Notes
    
    
    2003 to 2014
    
    
    US$
    135.0
    
    
    
    7.66
    %
    
    
    6.875
    %
    
    
    1.3425Senior Notes
    
    
    2005 to 2015
    
    
    US$
    175.0
    
    
    
    5.98
    %
    
    
    6.375
    %
    
    
    1.1781Sun Media Corporation
and its subsidiariesSenior Notes
    
    
    2003 to 2008
    
    
    US$
    155.0
    
    
    
    8.17
    %
    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    
    2008 to 2013
    
    
    US$
    155.0
    
    
    Bankers
    
    
    
    7.625
    %
    
    
    1.5227acceptance3 months+ 3.70
    %Senior Notes
    
    
    2003 to 2013
    
    
    US$
    50.0
    
    
    Bankers
    
    
    
    7.625
    %
    
    
    1.5227acceptance3 months+ 3.70
    %Term-loan
B credit facility
    
    
    2003 to 2009
    
    
    US$
    199.3
    
    
    Bankers
    
    
    LIBOR
    
    
    
    1.5175acceptance
    
    
    
    + 2.00
    %3 months+ 2.48
    %
 
 (1)
    
    As per the agreement, the exchange rate includes an exchange fee. Commodity Price risk
  145




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Credit risk
   Fair value of financial instruments
  Carrying value and fair value
As at December 31, 2005  (in millions of dollars)
 2004
    
    
    2005Carrying
    
    
    Fair
    
    
    Carryingvalue
    
    
    value
    
    
    value
    
    
    Fair valueQuebecor Media Inc.Long-term debt(1)
    
    
    (1,140.7
    )
    
    
    (1,332.9
    )
    
    
    (988.1
    )
    
    
    (1,078.8
    )Cross-currency interest rate swaps
    
    
    (3.9
    )
    
    
    (241.9
    )
    
    
    (21.5
    )
    
    
    (261.3
    )Foreign forward exchange contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.8
    )Videotron Ltd. and its subsidiariesLong-term debt(1)
    
    
    (888.9
    )
    
    
    (901.1
    )
    
    
    (971.7
    )
    
    
    (967.4
    )Interest rate swaps
    
    
    (4.6
    )
    
    
    (4.6
    )
    
    
    (0.9
    )
    
    
    (0.9
    )Cross-currency interest rate swaps
    
    
    (45.5
    )
    
    
    (72.3
    )
    
    
    (73.7
    )
    
    
    (135.0
    )Foreign exchange forward contract
    
    
    (8.4
    )
    
    
    (8.4
    )
    
    
    
    
    
    
    (0.2
    )Sun Media Corporation and its subsidiariesLong-term debt(1)
    
    
    (484.3
    )
    
    
    (507.7
    )
    
    
    (466.3
    )
    
    
    (476.1
    )Cross-currency interest rate swaps and foreign exchange forward contract
    
    
    (147.4
    )
    
    
    (169.8
    )
    
    
    (154.1
    )
    
    
    (186.5
    )TVA Group Inc. and its subsidiariesLong-term debt
    
    
    (34.9
    )
    
    
    (34.9
    )
    
    
    (107.1
    )
    
    
    (107.1
    )
 
 (1)
    
    Including current portion. Material limitations
  Principal repayments
 146




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##### Table of Contents



Twelve month period ending December 31,(1)2006
    
    $
    2.72007
    
    
    2.72008
    
    
    2.72009
    
    
    223.02010
    
    
    107.12011 and thereafter
    
    $
    2,195.0
 
 (1)
    
    Does not reflect the impact of the refinancing that the Company completed on
January 17, 2006. 
 ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  147




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##### Table of Contents



PART II
 
 ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
   
 ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 Material Modifications to the Rights of Security Holders
  Use of Proceeds
  
 ITEM 15  CONTROLS AND PROCEDURES
   
 ITEM 16 [RESERVED]
 
 ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B  CODE OF ETHICS
  148




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##### Table of Contents



ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
   2004
    
    
    2005Audit Fees(1)
    
    $
    2,157,149
    
    
    $
    2,422,696Audit-related Fees(2)
    
    
    435,497
    
    
    
    462,030Tax Fees(3)
    
    
    250,679
    
    
    
    186,447All Other Fees(4)
    
    
    214,993
    
    
    
    349,125Total
    
    $
    3,058,318
    
    
    $
    3,420,298
 
 (1)
    
    Audit Fees consist of fees approved for the annual audit of the Companys consolidated
financial statements and quarterly reviews of interim financial statements of the Company with
the SEC, including required assistance or services that only the external auditor reasonably
can provide and accounting consultations on specific issues.(2)
    
    Audit-related Fees consist of fees billed for assurance and related services that are
traditionally performed by the external auditor, and include consultations concerning
financial accounting and reporting standards on proposed transactions, review of security
controls and operational effectiveness of systems, due diligence or accounting work related to
acquisitions; employee benefit plan audits, internal control reviews and audit or attestation
services not required by statute or regulation and audit and attestation services required by
statute or regulation, such as comfort letters and consents, SEC prospectus and registration
statements, other filings and other offerings, including annual reports and SEC forms,
statutory audits, and reports on internal controls required by the Sarbanes-Oxley Act of 2002
or other regulations.(3)
    
    Tax Fees include fees billed for tax compliance services, including tax consultations, such
as assistance and representation in connection with tax audits and appeals, tax advice related
to mergers, acquisitions and divestitures, transfer pricing, and requests for advance tax
rulings or technical interpretations.(4)
    
    All Other Fees include fees billed for forensic accounting, assistance with respect to
internal controls over financial reporting and disclosure controls and procedures. 
 ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 PART III
 
 ITEM 17  FINANCIAL STATEMENTS
  149




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ITEM 18
  
 ITEM 19
 EXHIBITS
  ExhibitNumber
    
    
    
    
    
    Description1.1
    
    
    
    
    
    Articles of Incorporation of Quebecor Media Inc. (translation) (incorporated by reference to
Exhibit 3.1 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5,
2001, Registration Statement No. 333-13792).1.2
    
    
    
    
    
    Certificate of Amendment of Articles of Incorporation filed February 3, 2003 (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2002 which was filed on March 31, 2003).1.3
    
    
    
    
    
    By-laws of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 3.2 to
Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001, Registration
Statement No. 333-13792).1.4
    
    
    
    
    
    Certificate of Amendment of Articles of Incorporation filed December 5, 2003 (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2003 which was 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 which was 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, which was filed on March 31, 2005).1.7
    
    
    
    
    
    By-law number 2004-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.7 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2004,
which was filed on March 31, 2005).1.8
    
    
    
    
    
    By-law number 2004-2 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.8 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2004,
which was filed on March 31, 2005).1.9
    
    
    
    
    
    Certificate of Amendment of Articles of Incorporation of Quebecor Media Inc., as of January 14,
2005 (translation).1.10
    
    
    
    
    
    By-law number 2005-1 of Quebecor Media Inc. (translation).2.1
    
    
    
    
    
    Form of
11 1/8% Senior Note due 2011 (included in Exhibit A to Exhibit 2.3 below) (incorporated
by reference to Exhibit 4.1 to Quebecor Media Inc.s Registration Statement on Form F-4 dated
September 5, 2001, Registration Statement No. 333-13792).2.2
    
    
    
    
    
    Form of 13 3/4% Senior Discount Note due 2011 (included in Exhibit A to Exhibit 2.4 below)
(incorporated by reference to Exhibit 4.2 to Quebecor Media Inc.s Registration Statement on
Form F-4 dated September 5, 2001, Registration Statement No. 333-13792).2.3
    
    
    
    
    
    11 1/8% Senior Note Indenture, dated as of July 6, 2001, by and between Quebecor Media Inc. and
National City Bank, as trustee (incorporated by reference to Exhibit 4.3 to Quebecor Media
Inc.s Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No.
333-13792).2.4
    

    
    
    
    
    13 3/4% Senior Discount Note Indenture, dated as of July 6, 2001, by and between Quebecor Media
Inc. and National City Bank, as trustee (incorporated by reference to Exhibit 4.4 to Quebecor
Media Inc.s
 150




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##### Table of Contents



ExhibitNumber
    
    
    
    
    
    DescriptionRegistration Statement on Form F-4 dated September 5, 2001, Registration Statement
No. 333-13792).2.5
    
    
    

    
    
    First Supplemental Indenture, dated as of December 30, 2005, to the Indenture, dated as of July
6, 2001, relating to Quebecor Media Inc.s 11
1/8% Senior Notes due 2011, by and between Quebecor
Media Inc. and U.S. Bank Corporate Trust Services (as successor to National City Bank), as
trustee.2.6
    
    
    

    
    
    First Supplemental Indenture, dated as of December 30, 2005, to the Indenture, dated as of July
6, 2001, relating to Quebecor Media Inc.s 13 3/4% Senior Discount Notes due 2011,, by and
between Quebecor Media Inc. and U.S. Bank Corporate Trust Services (as successor to National
City Bank), as trustee.2.7
    
    
    

    
    
    Form of 7 3/4% Senior Note due 2016 (included as Exhibit A to Exhibit 2.8 below).2.8
    
    
    

    
    
    7 3/4% Senior Notes Indenture, dated as of January 17, 2006, by and between Quebecor Media Inc.,
and U.S. Bank National Association, as trustee.2.9
    
    
    

    
    
    Form of Sun Media Corporation 7
5/8% Senior Note due 2013 (included in Exhibit A to Exhibit 2.10
below) (incorporated by reference to Exhibit A to Exhibit 4.2 to Sun Media Corporations
Registration Statement on Form F-4 dated April 10, 2003, Registration Statement No.
333-103998).2.10
    
    
    

    
    
    Indenture relating to Sun Media
Corporation 7
5/8% Senior Notes due 2013, dated as of
February 7, 2003, among Sun Media Corporation, the subsidiary guarantors signatory thereto, and
National City Bank, as trustee (incorporated by reference to Exhibit 4.2 to Sun Media
Corporations Registration Statement on Form F-4 dated April 10, 2003, Registration Statement
No. 333-103998).2.11
    
    
    

    
    
    Sun Media Corporation First Supplemental Indenture, dated as of July 30, 2004, by and among Sun
Media Corporation, the subsidiary guarantors signatory thereto, and U.S. Bank Corporate Trust
Services (formerly National City Bank), as trustee (incorporated by reference to Exhibit 2.4 of
Sun Media Corporations annual report on Form 20-F for the year ended December 31, 2004, filed
on March 24, 2005).2.12
    
    
    

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

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

    
    
    Indenture relating to
Vidéotron Ltée 6
7/8% Notes due 2014, dated as of October 8, 2003, by and
among Vidéotron Ltée, the subsidiary guarantors signatory thereto and Wells Fargo Bank
Minnesota, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Vidéotron Ltées
Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No.
333-110697).2.15
    
    
    

    
    
    Vidéotron Ltée First Supplemental Indenture, dated as of July 12, 2004, by and among Vidéotron
Ltée, SuperClub Videotron Canada inc., Les Propriétés SuperClub inc. and Wells Fargo Bank,
National Association, as trustee (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).2.16
    
    
    

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

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

    
    
    Indenture relating to
Vidéotron Ltée 6 3/8% Senior Notes, dated as of September 16, 2005, by and
between Videotron Ltée, the guarantors party thereto, and Wells Fargo, National Association, as
trustee (incorporated by reference to Exhibit 4.3 of Vidéotron Ltées Registration Statement
on Form F-4 dated October 14, 2005, Registration Statement No. 333-128998).3.1
    
    
    

    
    
    Shareholders Agreement dated December 11, 2000 by and among Quebecor Inc., Capital
Communications CDPQ inc. (now known as Capital dAmérique CDPQ inc.) and Quebecor Media,
together with a summary thereof in the English language (incorporated by reference to Exhibit
9.1 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001,
Registration Statement No. 333-13792).3.2
    
    
    

    
    
    Letter Agreement dated December 11, 2000 between Quebecor Inc. and Capital Communications CDPQ
inc. (now known as Capital dAmérique CDPQ inc.) (translation) (incorporated by reference to
Exhibit 9.2 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001
Registration Statement 333-13792).3.3
    
    
    

    
    
    Written Resolution adopted by the Shareholders of Quebecor Media Inc. on May 5, 2003 relating
to the increase in the size of the Board of Directors of Quebecor Media Inc. (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended
 151




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##### Table of Contents



ExhibitNumber

    
    
    
    
    
    DescriptionDecember 31, 2003 which was filed on March 31, 2004).4.1
    
    
    

    
    
    Lease Agreement dated November 24, 1993 between Le Groupe Videotron Ltée and National Bank of
Canada for the property located at 300 Viger Avenue East, Montréal, Province of Québec, Canada,
together with a summary thereof in the English language (incorporated by reference to Exhibit
10.3 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001,
Registration Statement No. 333-13792).4.2
    
    
    

    
    
    Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media Inc., as Borrower,
the financial institutions party thereto from time to time, as Lenders, and Bank of America,
N.A., as Administrative Agent.4.3
    
    
    

    
    
    Credit Agreement dated as of February 7, 2003 among Sun Media Corporation, as borrower, Bank of
America, N.A., Banc of America Securities LLC and Credit Suisse First Boston Corporation, as
arrangers, Bank of America, N.A., as administrative agent, and the financial institutions
signatory thereto, as lenders (incorporated by reference to Exhibit 10.4 to Sun Media
Corporations Registration Statement on Form F-4 dated April 10, 2003, Registration Statement
No. 333-103998).4.4
    
    
    

    
    
    First Amending Agreement, dated as of December 3, 2003, amending the Credit Agreement dated as
of February 7, 2003 among Sun Media Corporation, Banc of America Securities LLC and Credit
Suisse First Boston Canada and the lenders thereto (incorporated by reference to the applicable
exhibit to Sun Medias Annual Report on Form 20-F for the year ended December 31, 2003, filed
on March 30, 2004).4.5
    
    
    

    
    
    Second Amending Agreement, dated as of October 12, 2004, amending the Credit Agreement dated as
of February 7, 2003 among Sun Media Corporation, Banc of America Securities LLC and Credit
Suisse First Boston Canada and the lenders thereto (incorporated by reference to Exhibit 4.5 of
Sun Media Corporations Annual Report on Form 20-F for the year ended December 31, 2004, filed
on March 24, 2005, Commission file No. 333-6690).4.6
    
    
    

    
    
    Third Amending Agreement, dated as
of January 17, 2006, amending the Credit Agreement dated as
of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC,
Credit Suisse First Boston Canada, the lenders party thereto, and Bank of America, N.A., as
Administrative Agent (incorporated by reference to Exhibit 4.6 of Sun Media Corporations
Annual Report on Form 20-F for the year ended December 31, 2005, filed on March 21, 2006,
Commission file no. 333-6690).4.7
    
    
    

    
    
    Credit Agreement dated as of November 28, 2000 among Vidéotron Ltée, RBC Dominion Securities
Inc., Royal Bank of Canada and the co-arrangers and lenders thereto, together with the First
Amending Agreement dated as of January 5, 2001 and the Second Amending Agreement dated as of
June 29, 2001 (incorporated by reference to Exhibit 10.5 to Quebecor Media Inc.s Registration
Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792).4.8
    
    
    

    
    
    Sixth Amending Agreement, dated as of October 8, 2003, to the Credit Agreement dated as of
November 28, 2000, among Vidéotron Ltée, Royal Bank of Canada, as administrative agent, and the
financial institutions signatory thereto and acknowledged by Le SuperClub Vidéotron Ltée,
Groupe de Divertissement SuperClub inc., Videotron (1998) ltée, CF Cable TV Inc., Videotron
(Regional) Ltd, Télé-Câble Charlevoix (1997) inc., Videotron TVN inc. and Câblage QMI inc., as
guarantors and by Quebecor Media Inc. (incorporated by reference to Exhibit 10.1 to Vidéotron
Ltées Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No.
333-110697).4.9
    
    
    

    
    
    Seventh Amending Agreement dated as of November 19, 2004 to the Credit Agreement dated as of
November 28, 2000, among Vidéotron Ltée, Royal Bank of Canada, as administrative agent, and the
financial institutions signatory thereto and acknowledged by Le SuperClub Vidéotron Ltée,
Groupe de Divertissement SuperClub inc., Videotron (1998) ltée, CF Cable TV Inc., Videotron
(Regional) Ltd., 9139-3256 Québec inc., Videotron TVN inc., Les Propriétés SuperClub inc. and
SuperClub Videotron Canada inc., as guarantors (the Guarantors), and by Quebecor Media Inc.
(incorporated by reference to Exhibit 10.2 to Vidéotron Ltées Registration Statement on Form
F-4 dated January 18, 2005, Registration Statement No. 333-121032).4.10
    
    
    

    
    
    Form of Amended and Restated Credit Agreement entered into as of November 28, 2000, as amended
by a First Amending Agreement dated as of January 5, 2001, as Second Amending Agreement dated
as of June 29, 2001, a Third Amending Agreement dated December 12, 2001 and accepted by the
Lenders as of December 21, 2001, a Fourth Amending Agreement dated as of December 23, 2002, a
Fifth Amending Agreement dated as of March 24, 2003, a Sixth Amending Agreement dated as of
October 8, 2003 and a
 152




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##### Table of Contents



ExhibitNumber
    
    
    
    
    
    DescriptionSeventh Amending Agreement dated as of November 19, 2004, among Vidéotron
Ltée, Royal Bank of Canada, as administrative agent, and the financial institutions signatory
thereto (incorporated by reference to Schedule 2 to Exhibit 10.2 to Videotrons Registration
Statement on Form F-4 dated January 18, 2005, Registration Statement No. 333-121032).4.11
    
    
    

    
    
    Form of Guarantee under the Vidéotron Ltée Credit Agreement (incorporated by reference to
Schedule D of Exhibit 10.5 to Quebecor Medias Registration Statement on Form F-4 dated
September 5, 2001, Registration Statement No. 333-13792).4.12
    
    
    

    
    
    Form of Share Pledge of the shares of Vidéotron Ltée and of the guarantors of the Vidéotron
Ltée Credit Agreement (incorporated by reference to Schedule E of Exhibit 10.5 to Videotrons
Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No.
333-13792).4.13
    
    
    

    
    
    Share Purchase Agreement dated December 22, 2003 between Carlyle VTL Holdings, L.P. and Carlyle
Partners III (Videotron), L.P., and Quebecor Media Inc. and 9101-0827 Québec Inc. relating to
the purchase 9101-0827 Québec Inc. of 5,000 Class C Preferred Shares of 3662527 Canada Inc.
(incorporated by reference to Exhibit 4.11 of Quebecor Medias Annual Report on Form 20-F for
the fiscal year ended December 31, 2003, filed on March 31, 2004).4.14
    
    
    

    
    
    First Amendment to Share Purchase Agreement dated as of December 31, 2004 between Carlyle VTL
Holdings, L.P. and Carlyle Partners III (Videotron), L.P. and Quebecor Media Inc. and 9101-0827
Québec Inc. (incorporated by reference to Exhibit 4.18 of Quebecor Medias Annual Report on
Form 20-F for the fiscal year ended December 31, 2004, filed on March 31, 2005).7.1
    
    
    

    
    
    Statement regarding calculation of ratio of earnings to fixed charges.8.1
    
    
    

    
    
    Subsidiaries of Quebecor Media Inc.11.1
    
    
    

    
    
    Code of Ethics (incorporated by reference to Exhibit 11.1 of Quebecor Medias Annual Report on
Form 20-F for fiscal year ended December 31, 2003 which was filed on March 31, 2004).12.1
    
    
    

    
    
    Certification of Pierre Francoeur, President and Chief Operating Officer of Quebecor Media
Inc., pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.12.2
    
    
    

    
    
    Certification of Mark DSouza, Vice President, Finance (Principal Financial Officer) of
Quebecor Media Inc., pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.13.1
    
    
    

    
    
    Certification of Pierre Francoeur, President and Chief Operating Officer of Quebecor Media
Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.13.2
    
    
    

    
    
    Certification of Mark DSouza, Vice President, Finance (Principal Financial Officer) of
Quebecor Media Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 153




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##### Table of Contents



SIGNATURE
  QUEBECOR MEDIA INC.By:
    /s/ Mark DSouzaName:
    Mark DSouzaTitle:
    Vice President, Finance  154




---



##### 



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Index to Consolidated Financial Statements
  
 Report
of Independent Registered Public Accounting
Firm
to the Board of Directors and to the Shareholders of Quebecor
Media Inc.
    
    F-2Financial StatementsConsolidated Statements of Income
    
    F-3Consolidated Statements of Shareholders Equity
    
    F-4Consolidated Statements of Cash Flows
    
    F-5Consolidated Balance Sheets
    
    F-7Segmented Information
    
    F-9Notes to Consolidated Financial Statements
    
    F-12


F-1



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##### Table of Contents



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




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated Statements of Income
 
 2003
    
    
    2004
    
    
    2005Revenues
    
    $
    2,298.1
    
    
    $
    2,462.4
    
    
    $
    2,702.9Cost of sales and selling and administrative expenses
    
    
    (1,686.3
    )
    
    
    (1,765.2
    )
    
    
    (1,969.3
    )Amortization
    
    
    (226.6
    )
    
    
    (225.9
    )
    
    
    (231.9
    )Financial expenses (note 2)
    
    
    (300.1
    )
    
    
    (314.6
    )
    
    
    (285.3
    )Reserve for restructuring of operations, impairment of assets
and other special charges (note 3)
    
    
    (1.8
    )
    
    
    (2.8
    )
    
    
    0.2Gain (loss) on debt refinancing and on repurchase of redeemable
preferred shares of a subsidiary (note 4)
    
    
    144.1
    
    
    
    (4.8
    )
    
    
    (60.0
    )(Loss) gain on sale of businesses and other
assets
    
    
    (1.1
    )
    
    
    9.3
    
    
    
    0.1Write-down of goodwill (note 12)
    
    
    (0.5
    )
    
    
    
    
    
    
    Income before income taxes
    
    
    225.8
    
    
    
    158.4
    
    
    
    156.7Income taxes (note 6)
    
    
    (12.5
    )
    
    
    37.4
    
    
    
    44.0238.3
    
    
    
    121.0
    
    
    
    112.7Non-controlling interest
    
    
    (34.6
    )
    
    
    (31.7
    )
    
    
    (16.2
    )Income from continuing operations
    
    
    203.7
    
    
    
    89.3
    
    
    
    96.5Income (loss) from discontinued operations (note 7)
    
    
    0.2
    
    
    
    (1.1
    )
    
    
    Net income
    
    $
    203.9
    
    
    $
    88.2
    
    
    $
    96.5
 
 F-3




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated Statements of shareholders equity
 
 Contributed
    
    
    
    
    
    
    Translation
    
    
    Total shareholdersCapital Stock

    
    
    surplus
    
    
    Deficit
    
    
    adjustment
    
    
    equityBalance as at December 31, 2002
    
    $
    1,341.8
    
    
    $
    3,214.6
    
    
    $
    (2,801.7
    )
    
    $
    (2.8
    )
    
    $
    1,751.9Issuance of new shares (note 17)
    
    
    431.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    431.9Purchase of
tax credits from a company under common control
    
    
    
    
    
    
    6.0
    
    
    
    
    
    
    
    
    
    
    
    6.0Net income
    
    
    
    
    
    
    
    
    
    
    203.9
    
    
    
    
    
    
    
    203.9Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    
    1.3Balance as at December 31, 2003
    
    
    1,773.7
    
    
    
    3,220.6
    
    
    
    (2,597.8
    )
    
    
    (1.5
    )
    
    
    2,395.0Purchase of
tax credits from a company under common control
    
    
    
    
    
    
    (3.8
    )
    
    
    
    
    
    
    
    
    
    
    (3.8
    )Dividends
    
    
    
    
    
    
    
    
    
    
    (20.0
    )
    
    
    
    
    
    
    (20.0
    )Net income
    
    
    
    
    
    
    
    
    
    
    88.2
    
    
    
    
    
    
    
    88.2Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.5Balance as at December 31, 2004
    
    
    1,773.7
    
    
    
    3,216.8
    
    
    
    (2,529.6
    )
    
    
    (1.0
    )
    
    
    2,459.9Dividends
    
    
    
    
    
    
    
    
    
    
    (105.0
    )
    
    
    
    
    
    
    (105.0
    )Net income
    
    
    
    
    
    
    
    
    
    
    96.5
    
    
    
    
    
    
    
    96.5Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.3
    )
    
    
    (1.3
    )Balance as at December 31, 2005
    
    $
    1,773.7
    
    
    $
    3,216.8
    
    
    $
    (2,538.1
    )
    
    $
    (2.3
    )
    
    $
    2,450.1
 
 F-4




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 
 2003
    
    
    2004
    
    
    2005Cash flows related to operations:Income from continuing operations
    
    $
    203.7
    
    
    $
    89.3
    
    
    $
    96.5Adjustments for:Amortization of property, plant and equipment
    
    
    215.1
    
    
    
    218.1
    
    
    
    225.3Amortization of deferred charges and write-down of goodwill
    
    
    12.0
    
    
    
    7.8
    
    
    
    6.6Amortization of deferred financing costs and
of long-term debt discount
    
    
    53.7
    
    
    
    56.9
    
    
    
    62.7(Gain) loss on ineffective derivative instruments and on
foreign currency translation on unhedged long-term debt
    
    
    (22.0
    )
    
    
    8.0
    
    
    
    4.4Loss on revaluation of the additional amount payable (note 13)
    
    
    4.5
    
    
    
    26.9
    
    
    
    10.1Loss (gain) on sale of businesses, other assets
and property, plant and equipment
    
    
    20.3
    
    
    
    3.1
    
    
    
    (1.7
    )(Gain) loss on debt refinancing and on repurchase
of redeemable preferred shares of a subsidiary (note 4)
    
    
    (144.1
    )
    
    
    4.8
    
    
    
    60.0Future income taxes
    
    
    (28.0
    )
    
    
    16.5
    
    
    
    25.0Non-controlling interest
    
    
    34.6
    
    
    
    31.7
    
    
    
    16.2Interest on redeemable preferred shares of a subsidiary
    
    
    24.5
    
    
    
    
    
    
    
    Other
    
    
    8.0
    
    
    
    (1.8
    )
    
    
    (1.5
    )382.3
    
    
    
    461.3
    
    
    
    503.6Net change in non-cash balances related to operations
    
    
    (17.5
    )
    
    
    38.6
    
    
    
    (32.2
    )Cash flows provided by continuing operations
    
    
    364.8
    
    
    
    499.9
    
    
    
    471.4Cash flows (used in) provided by discontinued operations
    
    
    (1.2
    )
    
    
    0.6
    
    
    
    Cash flows provided by operations
    
    
    363.6
    
    
    
    500.5
    
    
    
    471.4Cash flows related to financing activities:Net (decrease) increase in bank indebtedness
    
    
    (8.9
    )
    
    
    (4.2
    )
    
    
    12.3Net borrowings under revolving bank facilities
    
    
    70.1
    
    
    
    (86.4
    )
    
    
    72.2Issuance of long-term debt, net of financing fees
    
    
    1,553.2
    
    
    
    389.5
    
    
    
    200.9Repayments of long-term debt and unwinding of hedging contracts
    
    
    (2,053.3
    )
    
    
    (384.9
    )
    
    
    (318.9
    )Net increase in prepayments under cross-currency
swap agreements
    
    
    (118.1
    )
    
    
    (184.4
    )
    
    
    (34.1
    )Repayments under an interest rate swap
    
    
    
    
    
    
    
    
    
    
    (3.6
    )Dividends
    
    
    
    
    
    
    (20.0
    )
    
    
    (45.0
    )Dividends paid to non-controlling shareholders
    
    
    (5.4
    )
    
    
    (5.0
    )
    
    
    (5.2
    )Issuance of capital stock by subsidiaries
    
    
    1.2
    
    
    
    2.6
    
    
    
    Repurchase of redeemable preferred shares of
a subsidiary (note 4)
    
    
    (55.0
    )
    
    
    
    
    
    
    Proceeds from issuance of capital stock
    
    
    431.9
    
    
    
    
    
    
    
    Cash flows used in financing activities
    
    
    (184.3
    )
    
    
    (292.8
    )
    
    
    (121.4
    )Sub-total, balance carried forward
    
    $
    179.3
    
    
    $
    207.7
    
    
    $
    350.0
 F-5




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Consolidated Statements of Cash Flows ( )
 
 2003
    
    
    2004
    
    
    2005Sub-total, balance brought forward
    
    $
    179.3
    
    
    $
    207.7
    
    
    $
    350.0Cash flows related to investing activities:Business acquisitions, net of cash and cash equivalents (note 5)
    
    
    (76.2
    )
    
    
    (112.5
    )
    
    
    (110.5
    )Proceed from disposal of businesses, net of cash and cash
equivalents disposed (notes 5 and 7)
    
    
    24.7
    
    
    
    (7.8
    )
    
    
    4.3Additions to property, plant and equipment
    
    
    (131.2
    )
    
    
    (181.1
    )
    
    
    (315.5
    )Net (increase) decrease in temporary investments
    
    
    (106.8
    )
    
    
    94.5
    
    
    
    59.1Proceeds from disposal of assets
    
    
    4.3
    
    
    
    7.5
    
    
    
    5.5Decrease (increase) in advances receivable from parent company
    
    
    26.1
    
    
    
    
    
    
    
    (15.9
    )Proceeds from disposal of tax deductions to the parent company
    
    
    
    
    
    
    
    
    
    
    15.9Other
    
    
    (3.3
    )
    
    
    (3.7
    )
    
    
    (3.6
    )Cash flows used in investing activities
    
    
    (262.4
    )
    
    
    (203.1
    )
    
    
    (360.7
    )Net (decrease) increase in cash and cash equivalents
    
    
    (83.1
    )
    
    
    4.6
    
    
    
    (10.7
    )Effect of exchange rate changes on cash and cash equivalents
denominated in foreign currencies
    
    
    (1.6
    )
    
    
    0.6
    
    
    
    (0.7
    )Cash and cash equivalents at beginning of year
    
    
    188.3
    
    
    
    103.6
    
    
    
    108.8Cash and cash equivalents at end of year
    
    $
    103.6
    
    
    $
    108.8
    
    
    $
    97.4Cash and cash equivalents consist of:Cash
    
    $
    43.0
    
    
    $
    8.0
    
    
    $
    14.9Cash equivalents
    
    
    60.6
    
    
    
    100.8
    
    
    
    82.5$
    103.6
    
    
    $
    108.8
    
    
    $
    97.4Additional 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
    
    $
    11.9
    
    
    $
    (10.9
    )
    
    $
    (57.6
    )Inventories and investments in televisual products and movies
    
    
    15.9
    
    
    
    5.3
    
    
    
    (20.3
    )Accounts payable and accrued charges
    
    
    (85.2
    )
    
    
    15.0
    
    
    
    43.7Other
    
    
    39.9
    
    
    
    29.2
    
    
    
    2.0$
    (17.5
    )
    
    $
    38.6
    
    
    $
    (32.2
    )Non-cash transaction related to financing activities:Issuance of additional amount payable
    
    $
    70.0
    
    
    $
    
    
    
    $
    Cash interest payments
    
    $
    236.4
    
    
    $
    239.6
    
    
    $
    230.5Cash payments (net of refunds) for income taxes
    
    
    (20.9
    )
    
    
    8.8
    
    
    
    13.5
  F-6




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated Balance Sheets
 
 2004
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    108.8
    
    
    $
    97.4Temporary investments (market value of $99.7 million in 2004
and $40.6 million in 2005)
    
    
    99.7
    
    
    
    40.6Accounts receivable (note 8)
    
    
    342.9
    
    
    
    415.7Income taxes
    
    
    24.2
    
    
    
    9.3Advances receivable from parent company and companies under common control
    
    
    
    
    
    
    15.6Inventories and investments in televisual products and movies (note 9)
    
    
    134.7
    
    
    
    155.5Prepaid expenses
    
    
    21.4
    
    
    
    22.4Future income taxes (note 6)
    
    
    70.6
    
    
    
    98.7802.3
    
    
    
    855.2Long-term investments (market value of $13.0 million in 2004 and $11.2 million in 2005)
    
    
    13.0
    
    
    
    11.2Property, plant and equipment (note 10)
    
    
    1,522.1
    
    
    
    1,631.5Future income taxes (note 6)
    
    
    80.8
    
    
    
    57.5Other assets (note 11)
    
    
    240.0
    
    
    
    248.2Goodwill (note 12)
    
    
    3,851.0
    
    
    
    3,871.9$
    6,509.2
    
    
    $
    6,675.5
 F-7




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 consolidated balance sheets ( )
 
 2004
    
    
    2005Liabilities and Shareholders EquityCurrent liabilities:Bank indebtedness
    
    $
    
    
    
    $
    12.7Accounts payable and accrued charges
    
    
    546.2
    
    
    
    608.8Deferred revenue
    
    
    143.7
    
    
    
    155.2Income taxes
    
    
    13.4
    
    
    
    13.4Dividends payable
    
    
    
    
    
    
    60.0Advances payable to parent company and companies under common control
    
    
    16.7
    
    
    
    Additional amount payable (note 13)
    
    
    101.4
    
    
    
    111.5Current portion of long-term debt (note 14)
    
    
    2.8
    
    
    
    2.7824.2
    
    
    
    964.3Long-term debt (note 14)
    
    
    2,546.0
    
    
    
    2,530.5Other liabilities (note 15)
    
    
    297.0
    
    
    
    359.3Future income taxes (note 6)
    
    
    189.4
    
    
    
    227.0Non-controlling interest (note 16)
    
    
    192.7
    
    
    
    144.3Shareholders equity:Capital stock (note 17)
    
    
    1,773.7
    
    
    
    1,773.7Contributed surplus
    
    
    3,216.8
    
    
    
    3,216.8Deficit
    
    
    (2,529.6
    )
    
    
    (2,538.1
    )Translation adjustment
    
    
    (1.0
    )
    
    
    (2.3
    )2,459.9
    
    
    
    2,450.1Commitments and contingencies (note 19)Guarantees (note 20)Subsequent events (note 24)$
    6,509.2
    
    
    $
    6,675.5
   /s/ Serge Gouin
    
    /s/ Jean La CoutureSerge Gouin, Chairman of the Board
    
    Jean La Couture, Director
 F-8




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Segmented Information
 
     2003
    
    
    2004
    
    
    2005Revenues:Cable
    
    $
    805.0
    
    
    $
    871.6
    
    
    $
    1,002.0Newspapers
    
    
    845.9
    
    
    
    888.1
    
    
    
    915.6Broadcasting
    
    
    340.9
    
    
    
    358.0
    
    
    
    401.4Leisure and Entertainment
    
    
    205.0
    
    
    
    241.7
    
    
    
    255.4Business Telecommunications
    
    
    77.7
    
    
    
    78.6
    
    
    
    102.1Interactive Technologies and Communications
    
    
    44.8
    
    
    
    51.9
    
    
    
    65.1Internet/Portals
    
    
    28.2
    
    
    
    34.5
    
    
    
    50.0Head Office and inter-segment
    
    
    (49.4
    )
    
    
    (62.0
    )
    
    
    (88.7
    )$
    2,298.1
    
    
    $
    2,462.4
    
    
    $
    2,702.9
 F-9




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##### Table of Contents



QUEBECOR
MEDIA INC. AND ITS SUBSIDIARIES
 Segmented
Information
 
 2003
    
    
    2004
    
    
    2005Income before amortization, financial
expenses, reserve for restructuring of
operations, impairment of assets and other
special charges, gain (loss) on debt
refinancing and on repurchase of redeemable
preferred shares of a subsidiary, (loss)
gain on sale of businesses and other assets
and write-down of goodwill:Cable
    
    $
    275.3
    
    
    $
    341.2
    
    
    $
    382.0Newspapers
    
    
    224.8
    
    
    
    227.8
    
    
    
    222.2Broadcasting
    
    
    81.5
    
    
    
    80.5
    
    
    
    53.0Leisure and Entertainment
    
    
    14.7
    
    
    
    22.7
    
    
    
    27.0Business Telecommunications
    
    
    14.4
    
    
    
    22.6
    
    
    
    31.3Interactive Technologies and Communications
    
    
    1.1
    
    
    
    2.3
    
    
    
    3.9Internet/Portals
    
    
    3.1
    
    
    
    4.5
    
    
    
    10.5614.9
    
    
    
    701.6
    
    
    
    729.9General corporate (expenses) revenues
    
    
    (3.1
    )
    
    
    (4.4
    )
    
    
    3.7$
    611.8
    
    
    $
    697.2
    
    
    $
    733.62003
    
    
    
    2004
    
    
    
    2005Amortization:Cable
    
    $
    141.8
    
    
    $
    143.5
    
    
    $
    145.2Newspapers
    
    
    27.6
    
    
    
    26.0
    
    
    
    30.3Broadcasting
    
    
    12.2
    
    
    
    11.9
    
    
    
    13.7Leisure and Entertainment
    
    
    4.1
    
    
    
    5.6
    
    
    
    4.3Business Telecommunications
    
    
    35.9
    
    
    
    33.6
    
    
    
    34.5Interactive Technologies and Communications
    
    
    2.4
    
    
    
    1.7
    
    
    
    1.7Internet/Portals
    
    
    1.3
    
    
    
    0.7
    
    
    
    0.8Head Office
    
    
    1.3
    
    
    
    2.9
    
    
    
    1.4$
    226.6
    
    
    $
    225.9
    
    
    $
    231.92003
    
    
    
    2004
    
    
    
    2005Additions to property, plant and equipment:Cable
    
    $
    90.3
    
    
    $
    123.1
    
    
    $
    191.8Newspapers
    
    
    14.3
    
    
    
    18.8
    
    
    
    74.0Broadcasting
    
    
    5.7
    
    
    
    10.1
    
    
    
    12.9Leisure and Entertainment
    
    
    1.3
    
    
    
    3.3
    
    
    
    7.9Business Telecommunications
    
    
    17.9
    
    
    
    21.4
    
    
    
    23.8Interactive Technologies and Communications
    
    
    0.9
    
    
    
    1.2
    
    
    
    1.4Internet/Portals
    
    
    0.3
    
    
    
    0.8
    
    
    
    0.7Head Office
    
    
    0.5
    
    
    
    2.4
    
    
    
    3.0$
    131.2
    
    
    $
    181.1
    
    
    $
    315.5
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Segmented
Information
 
 2004
    
    
    2005Assets:Cable
    
    $
    3,912.7
    
    
    $
    3,986.2Newspapers
    
    
    1,443.4
    
    
    
    1,503.5Broadcasting
    
    
    549.7
    
    
    
    585.3Leisure and Entertainment
    
    
    126.7
    
    
    
    183.1Business Telecommunications
    
    
    266.3
    
    
    
    265.5Interactive Technologies and Communications
    
    
    64.3
    
    
    
    71.0Internet/Portals
    
    
    57.5
    
    
    
    59.0Head Office
    
    
    88.6
    
    
    
    21.9$
    6,509.2
    
    
    $
    6,675.5
 F-11




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
 
  1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:The consolidated financial statements are prepared in conformity with Canadian generally
accepted accounting principles (GAAP). The significant differences between generally
accepted accounting principles in Canada and in the United States are described in note 25.
 (a)
    
    Basis of presentation:The consolidated financial statements include the accounts of Quebecor Media Inc. (the
Company) and all its subsidiaries. Intercompany transactions and balances are eliminated
on consolidation.Certain comparative figures for the years 2003 and 2004 have been reclassified to conform
with the presentation adopted for the year ended December 31, 2005.(b)
    
    Foreign currency translation:Financial statements of self-sustaining foreign operations are translated using the rate in
effect at the balance sheet date for asset and liability items, and using the average
exchange rates during the year for revenues and expenses. Adjustments arising from this
translation are deferred and recorded in translation adjustment and are included in income
only when a reduction in the investment in these foreign operations is realized.Other foreign currency transactions are translated using the temporal method. Translation
gains and losses are included in financial expenses.(c)
    
    Use of estimates:The preparation of consolidated financial statements in conformity with Canadian GAAP
requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, related amounts of revenues and expenses, and disclosure of
contingent assets and liabilities. Significant areas requiring the use of management
estimates relate to the determination of pension and other employee benefits, key economic
assumptions used in determining the allowance for doubtful accounts, the provision for
obsolescence, the allowance for sales returns, reserves for the restructuring of
operations, the useful life of assets for amortization and evaluation of expected future
cash flows to be generated by assets, the determination of the fair value of assets
acquired and liabilities assumed in business combinations, implied fair value of goodwill,
provisions for income taxes and determination of future income tax assets and liabilities,
and the determination of fair value of financial instruments. Actual results could differ
from these estimates.(d)
    
    Impairment of long-lived assets:The Company reviews, when a triggering event occurs, the carrying values of its long-lived
assets by comparing the carrying amount of the asset or group of assets to the expected
future undiscounted cash flows to be generated by the asset or group of assets. An
impairment loss is recognized when the carrying amount of an asset or group of assets held
for use exceeds the sum of the undiscounted cash flows expected from its use and eventual
disposition. The impairment loss is measured as the amount by which the assets carrying
amount exceeds its fair value, based on quoted market prices, when available, or on the
estimated present value of future cash flows.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
 (e)
    
    Revenue recognition:The Company recognizes its operating revenues when the following criteria are met:
 
    
    persuasive evidence of an arrangement exists;
    
    delivery has occurred or services have been rendered;
    
    the sellers price to the buyer is fixed or determinable; and
    
    the collection of the sale is reasonably assured.
 The portion of unearned revenue is recorded under Deferred revenue when customers are
invoiced.Revenue recognition policies for each of the Companys main segments are as follows:Cable segmentThe Cable segment provides services under arrangement with multiple deliverables comprised
of a separate unit of accounting for subscriber services (connecting fees and operating
services) and a separate unit of accounting for sales of equipment to subscribers.Connection fee revenues of the Cable segment are deferred and recognized as revenues over
the estimated average thirty-month period that subscribers are expected to remain connected
to the network. The incremental and direct costs related to connection fees, in an amount
not exceeding the revenue, are deferred and recognized as an operating expense over the
same thirty-month period. Operating revenue from cable and other services, such as Internet
access and telephony, is recognized when services are provided. Revenue from sales of
equipment to subscribers and costs of equipment are recognized in income when the equipment
is delivered. Revenues from video rentals are recorded as revenue when services are
provided. Promotion offers are accounted for as a reduction in the related service revenue
when customers take advantage of the offer.Newspapers segmentRevenues of the Newspapers segment, derived from circulation and advertising from
publishing activities, are recognized in accordance with the revenue recognition policy
used by the Newspaper segment for its publishing activities. Revenue from the distribution
of publications and products is recognized upon delivery, net of provisions for estimated
returns. Revenue from commercial printing contracts is recognized once the product is
delivered.Broadcasting segmentRevenues of the Broadcasting segment derived from the sale of advertising airtime are
recognized when the advertising has been broadcast. Revenues derived from circulation and
advertising from publishing activities are recognized when publication is delivered.
Revenues derived from specialty television channels are recognized on a monthly basis at
the time the service is rendered.Revenues derived from the sale and distribution of film and from television program rights
are recognized when the following conditions are met: (a) persuasive evidence of a sale or
a licensing agreement with a customer exists and is provided solely by a contract or other
legally enforceable documentation that sets forth, at a minimum (i) the licence period,
(ii) the film or group of films affected, (iii) the consideration to be received for the
rights transferred; (b) the film is complete and has been delivered or is available for
delivery; (c) the licence period of the arrangement has begun and the customer can begin
its exploitation, exhibition, or sale; (d) the arrangement fee is fixed or determinable;
(e) the collection of the arrangement fee is reasonably assured.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to Consolidated Financial Statements
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (e)
    
    Revenue recognition (continued):Broadcasting segment (continued)Theatrical revenues are recognized over the period of presentation and when all of the
above conditions are met. Theatrical revenues are based on a percentage of revenues
generated by movie theatres. Revenues generated from video are recognized at the time of
delivery of the videocassettes and DVDs, less a provision for future returns, or are
accounted for based on a percentage of retail sales and when the aforementioned conditions
are met.Leisure and Entertainment segmentRevenues derived from retail stores, book publishing and distribution activities are
recognized upon delivery of the products, net of provisions for estimated returns based on
the segment historical rate of return.
 (f)
    
    Barter transactions:In the normal course of operations, the Newspapers, the Broadcasting and the
Internet/Portals segments offer advertising in exchange for goods and services. Revenues
thus earned and expenses incurred are accounted for on the basis of the fair value of the
goods and services obtained.For the year ended December 31, 2005, the Company recorded $17.7 million of barter
advertising ($16.3 million in 2003 and $13.1 million in 2004).
 (g)
    
    Cash and cash equivalents:Cash and cash equivalents include highly liquid investments purchased three months or less
from maturity and are stated at cost, which approximates market value. As at December 31,
2005, these highly liquid investments consist of commercial paper and bankers acceptance
bearing interest from 3.24% to 3.32% and maturing in January 2006.
 (h)
    
    Temporary investments:Temporary investments are recorded at the lower of cost and market value. Temporary
investments consist of commercial paper bearing interest from 3.33% to 3.40% and maturing
between April and May 2006.
 (i)
    
    Trade receivable:The Company establishes an allowance for doubtful accounts based on the specific credit
risk of its customers and historical trends.
 (j)
    
    Tax credits and government assistanceThe Broadcasting and Leisure and Entertainment segments have access to several government
programs designed to support production and distribution of televisual products and movies
and magazine and book publishing in Canada. The financial aid for production is accounted
for as reduction in expenses in compliance with the subsidiarys accounting policy for the
recognition of revenue from completed televisual products and movies. The financial aid
for broadcast rights is applied against investments in televisual products or used directly
to reduce operating expenses during the year. The financial aid for magazine and book
publishing is accounted for in revenues when the conditions for acquiring the government
assistance are met.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to Consolidated Financial Statements
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (j)
    
    Tax credits and government assistance (continued):The Interactive Technologies and Communications and Leisure and Entertainment segments
receive tax credits mainly related to their research and development activities and
publishing activities. These tax credits are accounted for using the cost reduction
method. Under this method, tax credits related to eligible expenses are accounted for as a
reduction in related costs, whether they are capitalized or expensed, in the year the
expenses are incurred, as long as there is reasonable assurance of their realization.(k)
    
    Inventories:Inventories are valued at the lower of cost, determined by the first-in, first-out method
or the weighted-average cost method, and net realizable value. Net realizable value
represents the market value for all inventories, except for raw materials and supplies, for
which it is replacement cost. Work in process is valued at the pro-rata billing value of
the work completed.(l)
    
    Investments in televisual products and movies:
 (i)
    
    Programs produced and productions in progressPrograms produced and productions in progress related to broadcast activities are
accounted for at the lower of cost and net realizable value. Cost includes direct
charges for goods and services and the share of labour and general expenses relating to
each production. The cost of each program is charged to cost of sales when the program
is broadcasted or when a loss can be estimated.
 (ii)
    
    Broadcast rightsBroadcast rights are essentially contractual rights allowing limited or unlimited
broadcast of televisual products or movies. The Broadcasting segment records an asset
for the broadcast rights acquired and a liability for obligations incurred under a
licence agreement when the broadcast licence period begins and all of the following
conditions have been met: the cost of each program, movies or series is known or can be
reasonably determined; the programs, movies or series have been accepted in accordance
with the conditions of the broadcast licence agreement; the programs, movies or series
are available for the first showing or telecast.Amounts paid for broadcast rights before all of the above conditions are met are
recorded as prepaid broadcast rights.Broadcast rights are classified as short or long term, based on managements estimates
of the broadcast period. These rights are amortized upon the broadcast of televisual
products and movies over the contract period, based on the estimated number of showings,
using an amortization method based on future revenues. This amortization is presented in
cost of sales and selling and administrative expenses. Broadcast rights are valued at
the lower of unamortized cost or net realizable value. Broadcast rights payable are
classified as current or long-term liabilities based on the payment terms included in
the licence.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to Consolidated Financial Statements
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (l)
    
    Investment in televisual products and movies (continued):
 (iii)
    
    Distribution rights:Distribution rights relate to the distribution of televisual products and movies. The
costs include costs for movies acquisition rights and other operating costs incurred,
which provide future economic benefits. The net realizable value of distribution rights
represents the Broadcasting segments share of future estimated revenues to be derived,
net of future costs. The Broadcasting segment records an asset and a liability for the
distribution rights and obligations incurred under a licence agreement when the
televisual product and movie has been accepted in accordance with the conditions of the
licence agreement, the televisual product or movie is available for broadcast and the
cost of the licence is known or can be reasonably estimated.Amounts paid for distribution rights prior to the conditions of recording the asset
being met are recorded as prepaid distribution rights. Distribution rights are amortized
using the individual film forecast computation method based on actual revenues realized
over total expected revenues.Estimates of revenues related to television products and movies are examined
periodically by Broadcasting segment management and revised as necessary. The value of
unamortized costs is reduced to net realizable value, as necessary, based on this
assessment. The amortization of distribution rights is presented in cost of sales and
selling and administrative expenses.
 (m)
    
    Income taxes:The Company follows the asset and liability method of accounting for income taxes. Under
this method, future income tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Future
income tax assets and liabilities are measured using enacted or substantively enacted tax
rates in effect for the year in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on future income tax assets and
liabilities is recognized in income in the period that includes the enactment or
substantive enactment date. A valuation allowance is recorded if the realization of future
income tax assets is not considered more likely than not.
 (n)
    
    Long-term investments:Investments in joint ventures are accounted for using the proportionate consolidation
method. Joint ventures represent a negligible portion of the Companys operations.
Investments in companies subject to significant influence are accounted for by the equity
method. Portfolio investments are accounted for by the cost method. Carrying values of
investments recorded for by the equity or cost method are reduced to estimated market
values if there is other than a temporary decline in the value of the investment.
 (o)
    
    Property, plant and equipment:Property, plant and equipment are stated at cost, net of government grants and investment
tax credits. Cost represents acquisition or construction costs, including preparation,
installation and testing charges and interest incurred with respect to the property, plant
and equipment until they are ready for commercial production. In the case of projects to
construct and connect receiving and distribution networks of cable, cost includes
equipment, direct labour and direct overhead costs. Projects under development may also be
comprised of advances for equipment under construction. Expenditures for additions,
improvements and replacements are capitalized, whereas maintenance and repair expenditures
are charged to cost of sales.
 F-16




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##### Table of Contents








QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES


Notes to Consolidated Financial Statements





1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):


(o)
    
    Property, plant and equipment (continued):Amortization is principally calculated on the straight-line basis over the following
estimated useful lives:


Asset
    
    Estimated useful lifeBuildings
    
    
    25 to 40 yearsMachinery and equipment
    
    
    3 to 20 yearsReceiving, distribution and telecommunications networks
    
    
    3 to 20 years






(p)
    
    Goodwill and other intangible assets:Goodwill and intangible assets with indefinite useful lives, are not amortized.Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The impairment test is carried
out in two steps. In the first step, the carrying amount of the reporting unit is compared
to its fair value. When the fair value of a reporting unit exceeds its carrying amount,
then the goodwill of the reporting unit is considered not to be impaired and the second
step is not required. The second step of the impairment test is carried out when the
carrying amount of a reporting unit exceeds its fair value, in which case the implied fair
value of the reporting units goodwill is compared to its carrying amount to measure the
amount of the impairment loss, if any. When the carrying amount of the reporting units
goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized
in an amount equal to the excess and is presented as a separate item in the income
statement before discontinued operations.Intangible assets acquired, such as broadcasting licences, that have an indefinite useful
life, are also tested for impairment annually, or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The impairment test compares the
carrying amount of the intangible asset to its fair value, and an impairment loss is
recognized in the statement of income for the excess, if any.Intangible assets with definite useful lives, such as customer relationships and
non-competition agreements, are amortized over their useful life using the straight-line
method over a period of three to ten years.(q)
    
    Deferred start-up costs and financing fees:Deferred start-up costs are recorded at cost and include development costs related to new
specialty services and pre-operating expenditures and are amortized when commercial
operations begin using the straight-line method over periods of three to five years.
Financing fees related to long-term financing are amortized using the interest rate method
and the straight-line method over the term of the related long-term debt. F-17




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to Consolidated Financial Statements
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (r)
    
    Stock-based compensation:The compensation cost attributable to stock-based awards to employees that call for
settlement in cash or other assets, at the option of the employee, is recognized in
operating expenses over the vesting period. Changes in the intrinsic value of the stock
options awards between the grant date and the measurement date result in a change in the
measurement of the liability and compensation cost. Other stock options awards to employees
are measured based on the fair value of the options at the grant date and a compensation
expense is recognized over the vesting period of the options, with a corresponding increase
to additional paid-in capital. When the stock options are exercised, capital stock is
credited by the sum of the consideration paid, together with the related portion previously
recorded to paid-in capital.In the case of the employee share purchase plans of Companys subsidiaries, the
contribution paid by the subsidiaries on behalf of their employees is considered a
compensation expense. The contribution paid by employees for the purchase of shares is
credited to the subsidiarys capital stock.(s)
    
    Derivative financial instruments:The Company uses various derivative financial instruments to manage its exposure to
fluctuations in foreign currency exchange rates and interest rates. The Company does not
hold or use any derivative instruments for trading purposes. The Company documents all
relationships between derivatives and hedged items, its strategy for using hedges and its
risk-management objective. The Company assesses the effectiveness of derivatives when the
hedge is put in place and on an ongoing basis.The Company enters into foreign exchange forward contracts to hedge anticipated
foreign-denominated equipment purchases. Under hedge accounting, foreign exchange
translation gains and losses are recognized as an adjustment to the cost of property, plant
and equipment, when the transaction is recorded. The portion of the forward premium or
discount on the contract relating to the period prior to consummation of the transaction is
also recognized as an adjustment to the cost of property, plant and equipment, when the
transaction is recorded.The Company enters into foreign exchange forward contracts and cross-currency swaps to
hedge some of its long-term debt. Under hedge accounting, foreign exchange translation
gains and losses are recorded under other assets or other liabilities. The fees on forward
foreign exchange contracts and on cross-currency swaps are recognized as an adjustment to
interest expenses over the term of the agreement.The Company also enters into interest rate swaps in order to manage the impact of
fluctuations in interest rates on its long-term debt. These swap agreements require the
periodic exchange of payments without the exchange of the notional principal amount on
which the payments are based. The Company designates its interest rate hedge agreements as
hedges of the interest cost on the underlying debt. Interest expense on the debt is
adjusted to include the payments made or received under the interest rate swaps on an
accrual basis.Some of the Companys cross-currency swap agreements are subject to a floor limit on
negative fair market value, below which the Company can be required to make prepayments to
reduce the lenders exposure. Such prepayments are reimbursed by reductions in the
Companys future payments under the agreements. The portion of these reimbursements
related to interest is accounted for as a reduction in financial expenses. The prepayments
are presented on the balance sheet as a reduction in the liability of the derivative
instrument.Realized and unrealized gains or losses associated with derivative instruments, that have
been terminated or cease to be effective prior to maturity, are deferred under other
current or non-current assets or liabilities on the balance sheet and recognized in income
in the period in which the underlying hedged transaction is recognized. In the event a
designated hedged item is sold, extinguished or matures prior to the termination of the
related derivative instrument, any realized or unrealized gain or loss on such derivative
instrument is recognized in income.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to Consolidated Financial Statements
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (s)
    
    Derivative financial instruments (continued):Derivative instruments that are ineffective or that are not designated as an hedge are
reported on a market-to-market basis in the consolidated financial statements. Any change
in the fair value of these derivative instruments is recorded in income.(t)
    
    Pension plans and postretirement benefits:
 (i)
    
    Pension plans:The Company offers defined benefit pension plans and defined contribution pension plans
to some of its employees. Defined benefit pension plan costs are determined using
actuarial methods and are funded through contributions determined in accordance with the
projected benefit method pro-rated on service, which incorporates managements best
estimate of future salary levels, other cost escalations, retirement ages of employees
and other actuarial factors. Pension plan expense is charged to operations and
includes:
 
    
    Cost of pension plan benefits provided in exchange for employee services
rendered during the year;
    
    Amortization of the initial net transition asset, prior service costs and
amendments on a straight-line basis over the expected average remaining service
period of the active employee group covered by the plans; and
    
    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% of the greater of the accrued benefit obligation or the fair value
of plan assets over the expected average remaining service period of the active
employee group covered by the plans.
 When an event gives rise to both a curtailment and a settlement, the curtailment is
accounted for prior to the settlement.Actuarial gains and losses arise from the difference between the actual long-term rate
of return on plan assets for a period and the expected long-term rate of return on plan
assets for that period or from changes in actuarial assumptions used to determine the
accrued benefit obligation.The Company uses the fair value at year-end to evaluate plan assets for the purpose of
calculating the expected return on plan assets.(ii)
    
    Postretirement benefits:The Company offers health, life and dental insurance plans to some of its retired
employees. The Company accrues the cost of postretirement benefits, other than
pensions. These benefits are funded by the Company as they become due. The Company
amortizes the cumulative unrecognized net actuarial gains and losses in excess of 10% of
the accrued benefit obligation over the expected average remaining service life of the
active employee group covered by the plans.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 Notes to Consolidated Financial Statements
 
 2. FINANCIAL EXPENSES:
 2003
    
    
    2004
    
    
    2005Interest on long-term debt
    
    $
    242.0
    
    
    $
    224.1
    
    
    $
    212.7Amortization of deferred financing costs and long-term debt discount
    
    
    53.7
    
    
    
    56.9
    
    
    
    62.7(Gain) loss on ineffective derivative instruments and on foreign
currency translation on unhedged long-term debt
    
    
    (22.0
    )
    
    
    8.0
    
    
    
    4.4Loss on revaluation of the additional amount payable
    
    
    4.5
    
    
    
    26.9
    
    
    
    10.1Interest on redeemable preferred shares of a subsidiary
    
    
    27.5
    
    
    
    
    
    
    
    Other
    
    
    0.6
    
    
    
    3.6
    
    
    
    0.9Investment income
    
    
    (6.2
    )
    
    
    (4.9
    )
    
    
    (4.5
    )$
    300.1
    
    
    $
    314.6
    
    
    $
    286.3Interest capitalized to the cost of property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    (1.0
    )$
    300.1
    
    
    $
    314.6
    
    
    $
    285.3
 3. RESERVE FOR RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL CHARGES:
 2003During the year ended December 31, 2003, the Company and its subsidiaries recorded asset
write-downs totalling $1.3 million and severance costs and other restructuring charges of $0.5
million.2004During the year ended December 31, 2004, a write-down of deferred costs of $0.8 million in the
Broadcasting segment, and an additional charge of $2.0 million in the Business
Telecommunications segment for the settlement of a litigation related to the 2001 operations
restructuring program were recorded.2005During the year ended December 31, 2005, the Broadcasting segment recorded a net reversal of
$0.2 million related to restructuring initiatives of prior years.
 F-20




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 4.
    
    GAIN (LOSS) ON DEBT REFINANCING AND ON REPURCHASE OF REDEEMABLE PREFERRED SHARES OF A
SUBSIDIARY:
 (a)
    
    Quebecor Media Inc.As a result of the repurchase of a portion of its Notes on July 19, 2005, the Company
recorded a loss of $60.8 million, comprised of the excess of the consideration paid over
the carrying value of the Notes and of the hedging contracts, and the write-off of related
deferred financing costs. The Company repurchased US$128.2 and US$12.1 million in aggregate
principal amounts of its Senior Notes and Senior Discount Notes (note 14(ii) and (iii)),
bearing interest at 11.125% and 13.750% respectively, pursuant to the tender offers
announced on June 20, 2005. Under these offers, the total consideration was a fixed price
of US$1,112.50 per US$1,000 principal amount for each Senior Note and a fixed price of
US$1,007.50 per US$1,000 principal amount at maturity for each Discount Note, which
includes an early tender premium in the amount of US$30.00 per US$1,000 of principal (or
principal amount at maturity, in the case of the Discount Notes). The Company paid cash
considerations totalling $215.3 million for the repurchase of the Notes, including the
premiums and disbursements for unwinding hedging contracts(b)
    
    Videotron Ltd.:On October 8, 2003, net proceeds from the issuance of a first series of the 6.875% Senior
Notes (note 14(vi)) were used to repay Videotron Ltd.s term-loan credit facilities A and
B, in place as at December 31, 2002, as well as amounts outstanding on its revolving
credit facilities. As a result of the debt refinancing, Videotron Ltd. recorded a loss of
$17.1 million, comprised of a loss on the unwinding of hedging contracts and the write-off
of deferred financing costs.On November 19, 2004, the net proceeds from the issuance of a second series of the 6.875%
Senior Notes (note 14(vi)) were used to repay in full Videotron Ltd.s term loan credit
facility C in place as at December 31, 2003. As a result of the refinancing of the term
loan, Videotron Ltd. recorded a loss of $4.8 million, comprised of a loss of $4.6 million
on the marked-to-market of a derivative instrument and the write-off of $0.2 million in
deferred financing costs.On July 15, 2005, Videotron Ltd., Cable segment, repurchased the entire aggregate principal
amount of its subsidiary, CF Cable TV Inc., Senior Secured First Priority Notes, which bore
interest at 9.125% and were due in 2007, for a total cash consideration of $99.3 million.
The repurchase resulted in a gain of $0.8 million including the cost of unwinding a hedging
contract.(c)
    
    Sun Media Corporation:On February 7, 2003, net proceeds from the issuance of the 7.625% Senior Notes (note 14(x))
and from the new credit facilities were used to reimburse, in their entirety, the Senior
Bank Credit facility of Sun Media Corporation and the two series of Senior Subordinated
Notes at December 31, 2002. As a result of the debt refinancing, Sun Media Corporation
recorded a net gain of $7.5 million in 2003, comprised of a cash gain of $10.3 million from
unwinding hedging contracts, offset by the write-off of related deferred financing costs.(d)
    
    Videotron Telecom Ltd.:On December 22, 2003, the Company repurchased the redeemable preferred shares issued by
Videotron Telecom Ltd., Business Telecommunications segment, for a cash consideration of
$55.0 million and an additional amount payable of $70.0 million (see note 13). As the
carrying value of these preferred shares, classified as a liability instrument, was $278.7
million at the date of the transaction, a gain of $153.7 million was recorded in the
consolidated statement of income.
 F-21




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 5.
    
    BUSINESS ACQUISITIONS AND DISPOSALS:Business acquisitions:During the years ended December 31, 2003, 2004 and 2005, the Company acquired or increased its
interest in several businesses and has accounted for these by the purchase method. Certain
purchase price allocations are preliminary and should be finalized as soon as Companys
management has gathered all the significant information believed to be available and considered
necessary. The results of operations of these businesses have been included in the Companys
consolidated financial statements from their date of acquisition.2003
 
    
    A total of 1,452,200 Class B Non-Voting Common Shares of TVA Group Inc. were
repurchased for a cash consideration of $25.8 million, resulting in additional goodwill of
$5.9 million.
    
    On October 15, 2003, Quebecor Media Inc. increased its interest in CEC Publishing Inc.,
Leisure and Entertainment segment, from 50% to 100%, for a cash consideration of $15.0
million, resulting in a preliminary additional goodwill of $9.4 million, which was reduced
by $5.5 million in 2004 when the purchase price allocation was finalized.
    
    On November 3, 2003, Sun Media Corporation, Newspapers segment, completed the
acquisition of the newspaper operations of Annex Publishing & Printing Inc. for a cash
consideration of $34.2 million, subject to certain purchase equation adjustments,
resulting in additional goodwill of $20.8 million. The newspaper operations are located in
Southern Ontario and include two daily newspapers, one semi-weekly and six weekly
publications, two shopping guides, as well as a commercial printing operation.
    
    Other businesses were acquired for cash considerations totalling $3.6 million,
resulting in additional goodwill of $0.1 million.
 2004
 
    
    A total of 1,892,500 Class B non-voting Common Shares of TVA Group Inc. were
repurchased for a cash consideration of $41.0 million, resulting in additional goodwill of
$10.2 million.
    
    All minority interests in Canoe Inc., Internet/Portals segment, directly owned by
minority shareholders, were acquired for a cash consideration of $25.2 million, resulting
in additional goodwill of $4.8 million.
    
    On December 2, 2004, TVA Group Inc. and Sun Media Corporation, two subsidiaries of the
Company, completed the acquisition of Sun TV (formerly Toronto 1). The purchase price paid
at the closing was $43.2 million, $32.4 million of which was paid in cash by TVA Group
Inc. for its 75% interest in Sun TV. Sun Media Corporation paid $2.8 million in cash and
transferred to CHUM Limited its 29.9% interest in CablePulse24 (CP24), a 24-hour news
station in Toronto, for its 25% interest in Sun TV. In December 2005, TVA Group Inc. and
Sun Media Corporation recorded a balance payable of $3.6 million in respect with the final
purchase price adjustment. The acquisition resulted in a preliminary goodwill of $11.2
million, which was reduced by $0.5 million in 2005 when the purchase price allocation was
finalized. Also, the transfer of Sun Media Corporations interest in CP24 to CHUM Limited
resulted in a gain on disposal of $8.0 million.
    
    Other businesses were acquired for cash considerations totalling $13.3 million,
resulting in additional goodwill of $8.8 million.
 F-22




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 5.
    
    BUSINESS ACQUISITIONS AND DISPOSALS (continued):Business acquisitions (continued):2005
 
    
    A total of 3,739,599 Class B non-voting Common Shares of TVA Group Inc., Broadcasting
segment, were repurchased for a cash consideration of $81.9 million, resulting in an
additional goodwill of $22.3 million on a preliminary basis.
    
    On December 12, 2005, the Company acquired Sogides Ltée, a major book publishing and
distribution group in Quebec, for a cash consideration of $24.0 million and an additional
contingent payment of $5.0 million based on the achievement of specific conditions in
2008. This acquisition resulted in an additional goodwill of $7.8 million on a
preliminary basis.
    
    Other businesses were acquired for cash considerations totalling $4.6 million and the
operating assets of the community newspaper Beauport Express, resulting in additional
goodwill of $3.5 million.
  2003
    
    
    2004
    
    
    2005Assets acquired:Cash and cash equivalents
    
    $
    2.4
    
    
    $
    2.2
    
    
    $
    Non-cash current operating assets
    
    
    10.0
    
    
    
    11.4
    
    
    
    20.5Property, plant and equipment
    
    
    2.6
    
    
    
    15.5
    
    
    
    4.6Other assets
    
    
    22.8
    
    
    
    32.8
    
    
    
    6.3Future income taxes
    
    
    
    
    
    
    20.3
    
    
    
    Goodwill
    
    
    30.7
    
    
    
    35.0
    
    
    
    33.1Non-controlling interest
    
    
    23.3
    
    
    
    31.8
    
    
    
    60.391.8
    
    
    
    149.0
    
    
    
    124.8Liabilities assumed:Bank indebtness
    
    
    
    
    
    
    
    
    
    
    (0.4
    )Non-cash current operating liabilities
    
    
    (5.9
    )
    
    
    (15.2
    )
    
    
    (7.1
    )Other liabilities
    
    
    (0.1
    )
    
    
    
    
    
    
    Future income taxes
    
    
    (7.2
    )
    
    
    (11.1
    )
    
    
    (2.1
    )(13.2
    )
    
    
    (26.3
    )
    
    
    (9.6
    )Net assets acquired at fair value
    
    $
    78.6
    
    
    $
    122.7
    
    
    $
    115.2Consideration:Cash
    
    $
    78.6
    
    
    $
    114.7
    
    
    $
    110.5Balance payable
    
    
    
    
    
    
    
    
    
    
    3.6Community newspaper (Beauport Express)
    
    
    
    
    
    
    
    
    
    
    1.1Investment in CP24
    
    
    
    
    
    
    8.0
    
    
    
    $
    78.6
    
    
    $
    122.7
    
    
    $
    115.2
 Business disposals
 
    
    In 2003 and 2005, the Company sold businesses for cash considerations of $2.0 million
and $0.5 million, resulting in a loss on disposal of $1.1 million and a gain on disposal
of $0.1 million, respectively.
 F-23




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 6.
    
    INCOME TAXES:Income taxes on continuing operations are as follows:
 2003
    
    
    2004
    
    
    2005Current
    
    $
    15.5
    
    
    $
    20.9
    
    
    $
    19.0Future
    
    
    (28.0
    )
    
    
    16.5
    
    
    
    25.0$
    (12.5
    )
    
    $
    37.4
    
    
    $
    44.0
  2003
    
    
    2004
    
    
    2005Statutory tax rate
    
    
    33.1
    %
    
    
    31.0
    %
    
    
    31.0
    %Increase (reduction) resulting from:Effect of provincial and foreign tax rates differences
    
    
    
    
    
    
    0.2
    
    
    
    (0.2
    )Effect of non-deductible charges and/or tax rate deductions
    
    
    2.7
    
    
    
    4.4
    
    
    
    4.2Change in valuation allowance
    
    
    (20.0
    )
    
    
    (6.3
    )
    
    
    (4.8
    )Change in future income tax balances due to a tax rate increase
    
    
    
    
    
    
    
    
    
    
    7.6Tax consolidation transaction with the parent company
    
    
    
    
    
    
    
    
    
    
    (10.1
    )Other
    
    
    (0.1
    )
    
    
    (5.7
    )
    
    
    0.4Effective tax rate before the following items
    
    
    15.7
    
    
    
    23.6
    
    
    
    28.1Effect of the non-taxable net gain on debt refinancing
and on repurchase of redeemable preferred shares
    
    
    (21.2
    )
    
    
    
    
    
    
    Effective tax rate
    
    
    (5.5
    )%
    
    
    23.6
    %
    
    
    28.1
    %
 F-24




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 6.
    
    INCOME TAXES (continued):The tax effects of significant items comprising the Companys net future income tax liabilities
are as follows:
 2004
    
    
    2005Loss carryforwards
    
    $
    257.1
    
    
    $
    296.0Accounts payable and accrued charges
    
    
    32.3
    
    
    
    32.2Property, plant and equipment
    
    
    (235.8
    )
    
    
    (226.0
    )Goodwill and other assets
    
    
    (21.3
    )
    
    
    (33.2
    )Deferred charges
    
    
    (7.1
    )
    
    
    (13.3
    )Other
    
    
    19.2
    
    
    
    25.844.4
    
    
    
    81.5Valuation allowance
    
    
    (82.4
    )
    
    
    (152.3
    )Net future income tax liabilities
    
    $
    (38.0
    )
    
    $
    (70.8
    )
  2004
    
    
    2005Future income tax assets:Current
    
    $
    70.6
    
    
    $
    98.7Long-term
    
    
    80.8
    
    
    
    57.5151.4
    
    
    
    156.2Future income tax liabilities:Long-term
    
    
    (189.4
    )
    
    
    (227.0
    )Net future income tax liabilities
    
    $
    (38.0
    )
    
    $
    (70.8
    )
    F-25




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 6.
    
    INCOME TAXES (continued):During the years ended December 31, 2003 and 2004, some of the Companys subsidiaries acquired
tax benefits amounting to $13.7 million and $12.9 million, respectively, from Quebecor World
Inc., a company under common control. Of this amount, $13.4 million and $12.9 million were
recorded as income taxes receivable in 2003 and 2004, respectively, while $0.3 million was
recorded as long-term future income tax assets in 2003. These transactions allowed the Company
to realize gains of $2.1 million and $0.1 million, respectively (net of non-controlling
interest) which are recorded as contributed surplus. Additional tax benefits of $8.0 million
will be recognized into the statement of income as a reduction of income taxes expenses when
the new deduction multiple applied on the tax benefits bought in 2003 and 2004 will be
officially enacted. However, if the new deduction multiple does not become enacted, $6.0
million will be recorded as contributed surplus since the amount paid to Quebecor World Inc.
will be recovered by an equal amount.On December 14, 2005, the Company entered into a tax consolidation transaction by which the
Company has transferred to its parent company $192.0 million of capital losses for a cash
consideration of $15.9 million. In addition, in 2006, the parent company will transfer to the
Company $75.0 million of non-capital losses in exchange of a cash consideration of $16.3
million. Cash considerations have been negotiated on an arms-length basis between the parties
and represent the fair value of tax deductions being transferred. As a result of these
transactions, the Company has recorded a reduction of $15.9 million of its income tax expense
in 2005 and expects to reduce its income tax expense by $8.5 million in the future.The Company has not recognized a future income tax liability for the undistributed earnings of
its subsidiaries in the current or prior years since the Company does not expect to sell or
repatriate funds from those investments. Any such liability cannot reasonably be determined at
the present time.7.
    
    DISCONTINUED OPERATIONS:On March 14, 2003, Nurun Inc. closed the sale of its interest in Nurun Technologies S.A. for a
cash consideration of $0.3 million, resulting in a loss on disposal of $0.1 million (net of
income taxes and non-controlling interest).On May 5 and 8, 2003, Sun Media Corporation, Newspapers segment, concluded the sale of its
operating businesses in Florida and British Columbia for a total cash consideration of $22.4
million, resulting in a gain on disposal of $0.3 million (net of income taxes and
non-controlling interest). These operations included 13 weekly publications as well as
commercial printing operations.On May 25, 2004, in response to a partial takeover bid for Mindready Solutions Inc., 6.75
million Common Shares of Mindready Solutions Inc. held by Nurun Inc., Interactive Technologies
and Communications segment, were sold for a cash consideration of $7.8 million, of which $4.4
million was received on the closing date of the bid and the balance of $3.4 million in February
2005. In March 2005, Nurun Inc. sold its 9.6% remaining interest in Mindready Solutions Inc.
for cash proceeds of $0.4 million. The sale resulted in a loss on disposal of $0.3 million (net
of income taxes and non-controlling interest).The results of the disposed businesses were reclassified and disclosed in the consolidated
statements of income as Income (loss) from discontinued operations, while the cash flows
related to the operations of the disposed businesses were reclassified and disclosed in the
consolidated statements of cash flows as Cash flows provided by (used in) discontinued
operations.
 F-26




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 7.
    
    DISCONTINUED OPERATIONS (continued) :The following tables provide additional financial information related to the operations from
the above discontinued operations for the years ended December 31, 2003 and 2004.Combined and consolidated statements of income
 2003
    
    
    2004Revenues
    
    $
    29.5
    
    
    $
    8.0Cost of sales and selling and administrative expenses
    
    
    (29.0
    )
    
    
    (9.7
    )Amortization
    
    
    (1.1
    )
    
    
    (0.3
    )Financial income
    
    
    
    
    
    
    0.2Reserve for restructuring of operations
    
    
    0.2
    
    
    
    Loss before income taxes
    
    
    (0.4
    )
    
    
    (1.8
    )Income taxes
    
    
    0.3
    
    
    
    0.1(0.7
    )
    
    
    (1.9
    )Non-controlling interest
    
    
    0.6
    
    
    
    1.1Gain (loss) on disposal of businesses (net of income taxes
and of non-controlling interest)
    
    
    0.3
    
    
    
    (0.3
    )Income (loss) from discontinued operations
    
    $
    0.2
    
    
    $
    (1.1
    )
 8.
    
    ACCOUNTS RECEIVABLE:
 2004
    
    
    2005Trade
    
    $
    310.0
    
    
    $
    360.5Other
    
    
    32.9
    
    
    
    55.2$
    342.9
    
    
    $
    415.7
 9.
    
    INVENTORIES AND INVESTMENTS IN TELEVISUAL PRODUCTS AND MOVIES:
 2004
    
    
    2005Raw materials and supplies
    
    $
    35.2
    
    
    $
    32.0Work in process
    
    
    7.5
    
    
    
    9.7Finished goods
    
    
    56.2
    
    
    
    68.7Investments in televisual products and movies
    
    
    35.8
    
    
    
    45.1$
    134.7
    
    
    $
    155.5
 F-27




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 10.
    
    PROPERTY, PLANT AND EQUIPMENT:
 2004AccumulatedCost
    
    
    amortization
    
    
    Net amountLand
    
    $
    33.0
    
    
    $
    
    
    
    $
    33.0Buildings and leasehold improvements
    
    
    169.9
    
    
    
    33.5
    
    
    
    136.4Machinery and equipment
    
    
    710.1
    
    
    
    397.7
    
    
    
    312.4Receiving, distribution and telecommunication networks
    
    
    1,384.2
    
    
    
    359.2
    
    
    
    1,025.0Projects under development
    
    
    15.3
    
    
    
    
    
    
    
    15.3$
    2,312.5
    
    
    $
    790.4
    
    
    $
    1,522.1
 2005AccumulatedCost
    
    
    amortization
    
    
    Net amountLand
    
    $
    32.7
    
    
    $
    
    
    
    $
    32.7Buildings and leasehold improvements
    
    
    179.6
    
    
    
    44.9
    
    
    
    134.7Machinery and equipment
    
    
    818.3
    
    
    
    476.2
    
    
    
    342.1Receiving, distribution and telecommunication networks
    
    
    1,521.8
    
    
    
    478.1
    
    
    
    1,043.7Projects under development
    
    
    78.3
    
    
    
    
    
    
    
    78.3$
    2,630.7
    
    
    $
    999.2
    
    
    $
    1,631.5
 11.
    
    OTHER ASSETS:
 2004
    
    
    2005Broadcasting licenses
    
    $
    109.7
    
    
    $
    109.3Deferred financing costs, net of accumulated amortization
    
    
    49.2
    
    
    
    42.6Investments in televisual products and movies
    
    
    22.3
    
    
    
    28.0Customer relationships and non-competition agreements, net of accumulated amortization
    
    
    20.9
    
    
    
    21.9Deferred connection costs
    
    
    9.4
    
    
    
    15.5Deferred asset related to the discontinuation of hedge accounting
    
    
    12.5
    
    
    
    11.7Deferred pension charge (note 23)
    
    
    8.1
    
    
    
    8.2Other
    
    
    7.9
    
    
    
    11.0$
    240.0
    
    
    $
    248.2
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 12.
    
    GOODWILL:For the years ended December 31, 2003, 2004 and 2005, the changes in the carrying amounts of
goodwill were as follows:
 2003Adjustment ofBalance as at
    
    
    Business
    
    
    
    
    
    
    
    
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    Discontinued
    
    
    
    
    
    
    allocation and
    
    
    December 31,2002
    
    
    (disposals)
    
    
    operations
    
    
    Write-down
    
    
    other
    
    
    2003Cable
    
    $
    2,662.7
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (1.6
    )
    
    $
    2,661.1Newspapers
    
    
    1,000.1
    
    
    
    20.8
    
    
    
    (10.1
    )
    
    
    
    
    
    
    
    
    
    
    1,010.8Broadcasting
    
    
    158.6
    
    
    
    6.7
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    165.0Leisure and
Entertainment
    
    
    34.9
    
    
    
    8.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43.6Business
Telecommunications
    
    
    0.9
    
    
    
    (0.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Internet/Portals
    
    
    26.2
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    25.7Total
    
    $
    3,883.4
    
    
    $
    35.3
    
    
    $
    (10.1
    )
    
    $
    (0.5
    )
    
    $
    (1.9
    )
    
    $
    3,906.2
 2004Adjustment ofBalance as at
    
    
    Business
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    allocation and
    
    
    December 31,2003
    
    
    (disposals)
    
    
    other
    
    
    2004Cable
    
    $
    2,661.1
    
    
    $
    5.2
    
    
    $
    (84.5
    )1
    
    $
    2,581.8Newspapers
    
    
    1,010.8
    
    
    
    0.4
    
    
    
    
    
    
    
    1,011.2Broadcasting
    
    
    165.0
    
    
    
    20.3
    
    
    
    
    
    
    
    185.3Leisure and Entertainment
    
    
    43.6
    
    
    
    1.0
    
    
    
    (5.5
    )
    
    
    39.1Interactive Technologies
and Communications
    
    
    
    
    
    
    2.8
    
    
    
    0.3
    
    
    
    3.1Internet/Portals
    
    
    25.7
    
    
    
    4.8
    
    
    
    
    
    
    
    30.5Total
    
    $
    3,906.2
    
    
    $
    34.5
    
    
    $
    (89.7
    )
    
    $
    3,851.0
 F-29




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 12.
    
    GOODWILL (continued):
 2005Adjustment ofBalance as at
    
    
    Business
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    allocation and
    
    
    December 31,2004
    
    
    (disposals)
    
    
    other
    
    
    2005Cable
    
    $
    2,581.8
    
    
    $
    
    
    
    $
    
    
    
    $
    2,581.8Newspapers
    
    
    1,011.2
    
    
    
    1.0
    
    
    
    (10.2
    )1
    
    
    1,002.0Broadcasting
    
    
    185.3
    
    
    
    22.3
    
    
    
    (0.5
    )
    
    
    207.1Leisure and Entertainment
    
    
    39.1
    
    
    
    7.8
    
    
    
    
    
    
    
    46.9Interactive Technologies
and Communications
    
    
    3.1
    
    
    
    1.3
    
    
    
    (0.8
    )
    
    
    3.6Internet/Portals
    
    
    30.5
    
    
    
    
    
    
    
    
    
    
    
    30.5Total
    
    $
    3,851.0
    
    
    $
    32.4
    
    
    $
    (11.5
    )
    
    $
    3,871.9
 1
    
    Recognition of tax benefits not recognized as at the business acquisition date. 13.
    
    ADDITIONAL AMOUNT PAYABLE:The value of the additional amount payable resulting from the repurchase of the redeemable
preferred shares (note 4 (d)) fluctuates based on the market value of the Companys Common
Shares. Until the Company is listed on a stock exchange, the value of the additional amount
payable is based on a formula established in the agreement. At the date of the transaction,
both parties had agreed to an initial value of $70.0 million. As at December 31, 2005, the
additional amount payable is valued at $111.5 million ($101.4 million as at December 31, 2004).
Change in the amount payable is recorded as a financial expense in the statement of income. The
additional amount payable matures on December 15, 2008. The holder has the right to require
payment at any time since December 15, 2004. If the Company files a prospectus for an initial
public offering, the holder has the right to require the Company to pay the additional amount
payable by delivering 3,740,682 Common Shares of the Company, adjusted to take into account
certain shareholders equity transactions. The Company holds an option to pay this additional
amount in cash, for a period of 30 days following each of June 15, 2007 and June 15, 2008. The
Company may, under certain conditions and if its shares are publicly traded at that time, pay
the additional amount by delivering 3,740,682 Common Shares to the holder.
 F-30




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 14.
    
    LONG-TERM DEBT:
 Effectiveinterest rate as at
    
    
    Year ofDecember 31, 2005
    
    
    maturity
    
    
    2004
    
    
    2005Quebecor Media Inc.:Credit facility (i)
    
    
    
    
    
    
    2007
    
    
    $
    
    
    
    $
    Senior Notes (ii)
    
    
    11.50
    %
    
    
    2011
    
    
    
    844.7
    
    
    
    672.0Senior Discount Notes (iii)
    
    
    13.75
    %
    
    
    2011
    
    
    
    296.0
    
    
    
    316.11,140.7
    
    
    
    988.1Videotron Ltd. and its subsidiaries (iv):Credit facility (v)
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    
    Senior Notes (vi)
    
    
    6.59
    %
    
    
    2014
    
    
    
    796.6
    
    
    
    769.2Senior Notes (vii)
    
    
    6.44
    %
    
    
    2015
    
    
    
    
    
    
    
    202.5Senior Secured First Priority Notes (viii)
    
    
    7.59
    %
    
    
    2007
    
    
    
    92.3
    
    
    
    888.9
    
    
    
    971.7Sun Media Corporation and its subsidiaries (iv):Credit facilities (ix)
    
    
    6.24
    %
    
    
    2008-2009
    
    
    
    241.6
    
    
    
    231.1Senior Notes (x)
    
    
    7.88
    %
    
    
    2013
    
    
    
    242.7
    
    
    
    235.2484.3
    
    
    
    466.3TVA Group Inc. and its subsidiaries (iv):Revolving bank loan (xi)
    
    
    4.02
    %
    
    
    2010
    
    
    
    34.9
    
    
    
    107.12,548.8
    
    
    
    2,533.2Less current portion:Sun Media Corporation and its subsidiaries
    
    
    
    
    
    
    
    
    
    
    2.8
    
    
    
    2.7$
    2,546.0
    
    
    $
    2,530.5
 (i)
    
    The credit facility of $75.0 million ($135.0 million in 2004), available for general
liquidity purposes, is a one-year revolving credit facility that can be extended on a
yearly basis, which was refinanced in January 2006 (see note 24). The credit facility is
secured by a first ranking moveable hypothec on all tangible and intangible assets,
current and future, of the Company. As at December 31, 2005, the carrying value of assets
guaranteeing the credit facility is $6,675.5 million. The credit facility in aggregate is
secured by the Companys shareholders. The borrowed amounts bear interest at floating
rates based on bankers acceptance rate or bank prime rate. As at December 31, 2005, no
amount was drawn on the credit facility.(ii)
    
    The Senior Notes, for a principal amount of US$586.8 million, net of the partial
repurchase in July 2005 (see note 4 (a)) were issued at discount for net proceeds of
US$573.8 million. These notes bear interest at a rate of 11.125%, payable semi-annually,
since January 15, 2002. Notes contain certain restrictions for the Company, including
limitations on its ability to incur additional indebtedness. The notes are unsecured and
are redeemable at the option of the Company at a decreasing premium, commencing on July
15, 2006. The Company has fully hedged the foreign currency risk associated with the
Senior Notes by using a cross-currency interest rate swap, under which all payments were
set in Canadian dollars. On January 17, 2006, the Company repurchased US$561.6 million in
aggregate principal amounts of the notes (note 24). F-31




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 14.
    
    LONG-TERM DEBT (continued):
 (iii)
    
    The Senior Discount Notes, for a principal amount of US$282.9 million, net of the
partial repurchase in July 2005 (see note 4(a)), were issued at discount for net proceeds
of US$145.0 million. These notes bear interest at a rate of 13.75%, payable semi-annually,
commencing January 15, 2007. Notes contain certain restrictions for the Company, including
limitations on its ability to incur additional indebtedness. The notes are unsecured and
are redeemable at the option of the Company at a decreasing premium, commencing on July
15, 2006. The Company has fully hedged the foreign currency risk associated with the
Senior Discount Notes by using a cross-currency interest rate swap agreement, under which
all payments were set in Canadian dollars. On January 17, 2006, the Company repurchased
US$275.6 million in aggregate principal amounts at maturity of the notes (note 24).(iv)
    
    The debt of these subsidiaries is non-recourse to the parent company, Quebecor Media
Inc.(v)
    
    The credit facility of $450.0 million is a revolving credit facility maturing in
November 2009 and bears interest at bankers acceptance or LIBOR rates, plus a margin,
depending on Videotron Ltd.s leverage ratio. The credit facility is secured by a first
ranking hypothec on the universality of all tangible and intangible assets, current and
future, of Videotron Ltd. and its subsidiaries. As at December 31, 2005, the carrying
value of assets guaranteeing the credit facility of Videotron Ltd. was $3,986.2 million.
The credit facility contains covenants such as maintaining certain financial ratios and
some restrictions on the payment of dividends and asset acquisitions and dispositions. As
at December 31, 2005, no amount was drawn on the credit facility.(vi)
    
    In October 2003, a first series of Senior Notes was issued at discount for net
proceeds of US$331.9 million, before issuance fees of US$5.7 million. In November 2004, a
second series of Senior Notes was sold at premium on their face amount of US$315.0 million
resulting in gross proceeds of US$331.0 million before accrued interest and issuance fees
of US$6.2 million. These notes bear interest at a rate of 6.875%, payable every six months
on January 15 and July 15, and mature in January 2014. The notes contain certain
restrictions for Videotron Ltd., including limitations on its ability to incur additional
indebtedness, and are unsecured. Videotron Ltd. has fully hedged the foreign currency risk
associated with the Senior Notes by using cross-currency interest rate swaps, under which
all payments were set in Canadian dollars. The notes are redeemable, in whole or in part,
at any time on or after January 15, 2009, with a premium.(vii)
    
    On September 16, 2005, Senior Notes were issued at discount for net proceeds of
US$174.1 million, before issuance fees of $3.8 million. These Notes bear interest at a
rate of 6.375% payable every six months on December 15 and June 15, and mature on
December 15, 2015. The Notes contain certain restrictions for Videotron Ltd., including
limitations on its ability to incur additional indebtedness, and are unsecured.
Videotron Ltd. has fully hedged the foreign currency risk associated with the Senior
Notes by using cross-currency interest rate swaps, under which all payments were set in
Canadian dollars. The notes are redeemable, in whole or in part, at any time on or after
December 15, 2010, with a premium.(viii)
    
    The Senior Secured First Priority Notes were repurchased on July 15, 2005 (note 4 (b)).
 F-32




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 14.
    
    LONG-TERM DEBT (continued):
 (ix)
    
    The bank credit facilities comprise a revolving credit facility amounting to $75.0
million, maturing in 2008, and a term loan B credit facility amounting to US$230.0
million, excluding issuance fees of US$0.5 million, maturing in 2009, and 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 that restrict the declaration and payment of dividends and other
distributions, as well as financial ratios. As at December 31, 2005, the carrying value of
assets guaranteeing the bank credit facilities was $ 1,503.5 million. Any amount borrowed
under the revolving credit facility bears interest at Canadian bankers acceptance and/or
Canadian prime rate plus an applicable margin determined by financial ratios. On October
12, 2004, the bank credit facilities were amended such that advances under the term loan
B credit facility bear interest at LIBOR plus a margin of 2.00% per annum, or at U.S.
prime rate plus a margin of 1.00% per annum, with the possibility of such margins being
reduced under certain circumstances. Sun Media Corporation has fully hedged the foreign
currency risk associated with the term B loan by using cross-currency interest rate swaps,
under which all payments were set in Canadian dollars. As at December 31, 2005, no amount
had been drawn on the revolving credit facility, while the term loan B credit facility
was in use for an amount of US$198.7 million.(x)
    
    The Senior Notes were issued at discount for net proceeds of US$201.5 million, before
issuance fees of US$4.1 million. These notes bear interest at a rate of 7.625% and mature
in 2013. The notes contain certain restrictions for Sun Media Corporation, including
limitations on its ability to incur additional indebtedness, and are unsecured. The Senior
Notes are guaranteed by specific subsidiaries of Sun Media Corporation Inc. Sun Media
Corporation has fully hedged the foreign currency risk associated with the Senior Notes by
using cross-currency interest rate swaps and a foreign exchange forward contract, under
which all payments were set in Canadian dollars. The notes are redeemable, in whole or in
part, at any time on or after February 15, 2008, with a premium.(xi)
    
    The credit agreement amended in 2005, consists of a revolving term bank loan of a
maximum of $160.0 million ($65.0 million in 2004), bearing interest at the prime rate of a
Canadian chartered bank or bankers acceptances rates, plus a variable margin determined
by certain financial ratios. In 2005, the revolving term loan maturity was extended until
June 15, 2010. The credit facility contains certain restrictions, including the obligation
to maintain certain financial ratios.
   2006
    
    $
    2.72007
    
    
    2.72008
    
    
    2.72009
    
    
    223.02010
    
    
    107.12011 and thereafter
    
    
    2,195.0
 F-33




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 15.
    
    OTHER LIABILITIES:
 2004
    
    
    2005Cross-currency interest-rate swap agreements and other derivative instruments
    
    $
    209.8
    
    
    $
    261.0Accrued stock-based compensation
    
    
    22.0
    
    
    
    32.8Deferred revenues
    
    
    16.0
    
    
    
    23.4Accrued post-retirement benefits liability (note 23)
    
    
    29.5
    
    
    
    30.3Accrued pension benefit liability (note 23)
    
    
    12.3
    
    
    
    7.2Other
    
    
    7.4
    
    
    
    4.6$
    297.0
    
    
    $
    359.3
 16.
    
    NON-CONTROLLING INTEREST:Non-controlling interest includes the interest of non-controlling shareholders in the
participating shares of the Companys subsidiaries. As at December 31, 2005, the most
significant non-controlling interests were as follows:
 Non-controllingSubsidiary
    
    Segment
    
    
    interestTVA Group Inc.
    
    Broadcasting
    
    
    54.77
    %Nurun Inc.
    
    Interactive Technologies and Communications
    
    
    42.10
    %
 17.
    
    CAPITAL STOCK:
 (a)
    
    Authorized capital stock:An unlimited number of Common Shares, without par value;An unlimited number of Cumulative First Preferred Shares, without par value; the number of
preferred shares in each series and the related characteristics, rights and privileges are
to be determined by the Board of Directors prior to each issue;
 
    
    An unlimited number of Cumulative First Preferred Shares, Series A (Preferred
A Shares), carrying a 12.5% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series B (Preferred
B Shares), carrying a fixed cumulative preferential dividend generally equivalent
to the Companys credit facility interest rate, redeemable at the option of the
holder and retractable at the option of the Company
    
    An unlimited number of Cumulative First Preferred Shares, Series C (Preferred
C Shares), carrying an 11.25% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series D (Preferred
D Shares), carrying an 11.00% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
 F-34




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 17.
    
    CAPITAL STOCK (continued):
 (a)
    
    Authorized capital stock (continued):
 
    
    An unlimited number of Cumulative First Preferred Shares, Series F (Preferred
F Shares), carrying a 10.85% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company.
  (b)
    
    Issued capital stock:
 Common Shares
    
    
    Preferred B SharesNumber
    
    
    Amount
    
    
    Number
    
    
    AmountBalance as at December 31, 2002
    
    
    95,131,972
    
    
    
    1,341.8
    
    
    
    
    
    
    
    Issuance of new shares
    
    
    14,221,664
    
    
    
    215.8
    
    
    
    216,145,684
    
    
    
    216.1Conversion of Preferred B
Shares into Common Shares
    
    
    14,249,171
    
    
    
    216.1
    
    
    
    (216,145,684
    )
    
    
    (216.1
    )Balance as at December 31, 2003,
2004 and 2005
    
    
    123,602,807
    
    
    $
    1,773.7
    
    
    
    
    
    
    $
    
 As at December 31, 2005, Sun Media Corporation and its subsidiaries, Newspaper segment,
owned 990,000 Preferred A Shares (1,140,000 Preferred A Shares in 2004) and 255,000
Preferred F Shares, for a total amount of $1,245.0 million (1,140.0 million in 2004), and
9101-0835 Quebec Inc., Leisure and Entertainment segment, owned 147,950 Preferred C Shares
(270,000 Preferred C Shares in 2004) for an amount of $147.9 million (270.0 million in
2004). These shares are eliminated on consolidation.(c)
    
    Transactions during the year:2003At the beginning of 2003, the Company issued 216,145,684 Preferred B Shares, for a cash
consideration of $216.1 million.On April 22, 2003, all of the issued and outstanding Preferred B Shares were converted into
14,249,171 Common Shares. On the same day, the Company issued 14,221,664 Common Shares for
a cash consideration of $215.8 million.A dividend of $3.0 million was declared on the Preferred B Shares on April 22, 2003 and
paid in July 2003. This amount is recorded in financial expenses in the consolidated
statements of income, since the Preferred B Shares were classified as a liability while
outstanding.During the year ended December 31, 2003, the Company redeemed 360,000 Cumulative First
Preferred Shares, Series A, for an amount of $360.0 million owned by its wholly owned
subsidiary, Sun Media Corporation.
 F-35




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 17.
    
    CAPITAL STOCK (continued):
 (c)
    
    Transactions during the year (continued):2004On January 14, 2004, the Company redeemed 450,000 Preferred A Shares owned by its wholly
owned subsidiary, Sun Media Corporation, Newspapers segment, for an amount of $450.0
million.On January 16, June 1 and October 7, 2004, the Company issued 70,000, 100,000 and 100,000
Preferred C Shares respectively, for a total amount of $270.0 million, to its indirectly
wholly owned subsidiary, 9101-0835 Québec Inc., Leisure and Entertainment segment.On January 16, 2004, the Company issued 1,100,000 Preferred D Shares, for an amount of
$1,100.0 million, to its indirectly wholly owned subsidiary, Vidéotron (1998) ltée, Cable
segment. On December 16, 2004, the Company redeemed the shares for an amount of $1,100.0
million.On November 30, 2004, the Company issued one Preferred E share, for an amount of $3.6
million to its wholly owned subsidiary, Sun Media Corporation, Newspapers segment. On the
same day, the Company redeemed the shares for an amount of $3.6 million.2005On January 14, 2005, the Company redeemed 150,000 Preferred A Shares for an amount of
$150.0 million from Sun Media Corporation and its subsidiaries, Newspaper segment, and
issued 255,000 Preferred F Shares for an amount of $255.0 million to Sun Media Corporation
and its subsidiaries.On March 9, 2005 and April 29, 2005, the Company issued 61,950 Preferred C Shares to
9101-0835 Quebec inc., Leisure and Entertainment segment, for a total amount of $61.9
million. On August 2, 2005, the Company redeemed 184,000 Preferred C Shares for an amount
of $184.0 million.
 18.
    
    SHARE PURCHASE PLANS:
 (a)
    
    Quebecor Media Inc. stock option plan:Under a stock option plan established by the Company, 6,185,714 Common Shares of the
Company were set aside for officers, senior employees and other key employees of the
Company and its subsidiaries. Each option may be exercised within a maximum period of 10
years following the date of grant at an exercise price not lower than, as the case may be,
the fair market value of the Common Shares of Quebecor Media Inc. at the date of grant, as
determined by its Board of Directors (if the Common Shares of Quebecor Media Inc. are not
listed on a stock exchange at the time of the grant) or the trading price of the Common
Shares of the Company on the stock exchanges where such shares are listed at the time of
grant. Unless authorized by the the Company Compensation Committee in the context of a
change of control, no options may be exercised by an optionee if the shares of the Company
have not been listed on a recognized stock exchange. On December 31, 2007, if the shares of
the Company have not been so listed, optionees may exercise, between January 1 and January
31 of each year, starting January 1st, 2008, their right to receive an amount in
cash equal to the difference between the fair market value, as determined by the Companys
Board of Directors, and the exercise price of their vested options. 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% vesting on the third anniversary of the date of
grant.
 F-36




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 18.
    
    SHARE PURCHASE PLANS (continued):
 (a)
    
    Quebecor Media Inc. stock option plan (continued):The following table gives summary information on outstanding options granted as at December 31, 2004 and 2005:
 2004
    
    
    
    
    
    
    2005Weighted average
    
    
    
    
    
    
    Weighted averageOptions
    
    
    exercise price
    
    
    Options
    
    
    exercise priceBalance at beginning of year
    
    
    2,607,537
    
    
    $
    16.93
    
    
    
    3,135,040
    
    
    $
    17.99Granted
    
    
    663,930
    
    
    
    21.84
    
    
    
    255,630
    
    
    
    28.96Cancelled
    
    
    (136,427
    )
    
    
    16.48
    
    
    
    (162,349
    )
    
    
    17.13Balance at end of year
    
    
    3,135,040
    
    
    $
    17.99
    
    
    
    3,228,321
    
    
    $
    18.90Vested options at end of year
    
    
    268,282
    
    
    $
    16.51
    
    
    
    939,965
    
    
    $
    17.20
  Outstanding options
    
    
    
    
    
    
    Vested optionsWeighted average
    
    
    
    
    
    
    Weighted averageRange of exercise price
    
    Number
    
    
    years to maturity
    
    
    Number
    
    
    exercise price$   15.19 to 21.77
    
    
    2,921,392
    
    
    
    7.0
    
    
    
    936,335
    
    
    $
    17.1821.77 to 31.55
    
    
    306,929
    
    
    
    9.2
    
    
    
    3,630
    
    
    
    22.98$  15.19 to 31.55
    
    
    3,228,321
    
    
    
    7.2
    
    
    
    939,965
    
    
    $
    17.20
 For the year ended December 31, 2005, a charge of $10.8 million related to the plan is
included in income ($6.6 million in 2003 and 15.1 million in 2004).
 F-37




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 18.
    
    SHARE PURCHASE PLANS (continued):
 (b)
    
    TVA Group Inc. plans:
 (i)
    
    Stock option plan for senior executivesUnder this stock option plan, 1,400,000 Class B shares of TVA Group Inc. have been set
aside for senior executives of TVA Group Inc. and its subsidiaries. The terms and the
conditions of options granted are determined by TVA Group Inc.s Compensation Committee.
The subscription price of an option cannot be less than the closing price of Class B
            shares on the Toronto Stock Exchange the day before the option is granted. Options
granted under the plan may generally vest over a five-year period on the basis of 25%
each year, starting on the second anniversary of the grant. The term of an option cannot
exceed 10 years. Holders of options under the plan have the choice, at the time of
exercising their options, to opt to receive from TVA Group Inc. a cash payment equal to
the number of shares corresponding to the options exercised, multiplied by the
difference between the market value and the purchase price of the shares under the
option. The market value is defined by the average closing market price of the Class B
share for the last five trading days preceding the date on which the option was
exercised.The following table gives details on changes to outstanding options for the years ended
December 31, 2004 and 2005:
 2004
    
    
    
    
    
    
    2005Weighted average
    
    
    
    
    
    Weighted averageOptions
    
    
    exercise price
    
    
    Options
    
    
    exercise priceBalance at beginning of year
    
    300,300
    
    
    $
    16.55
    
    
    215,000
    
    
    $
    $19.81Granted
    
    
    126,500
    
    
    
    20.75
    
    
    
    115,630
    
    
    
    20.85Exercised
    
    
    (161,800
    )
    
    
    16.52
    
    
    
    (6,000
    )
    
    
    14.00Cancelled
    
    
    (50,000
    )
    
    
    13.24
    
    
    
    (14,453
    )
    
    
    20.85Balance at end of year
    
    
    215,000
    
    
    $
    19.81
    
    
    
    310,177
    
    
    $
    20.27Vested options at end of year
    
    
    73,500
    
    
    $
    19.39
    
    
    
    72,500
    
    
    $
    18.50
  Outstanding options
    
    
    
    
    
    
    
    
    
    
    Vested optionsWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    averageRange of
    
    
    
    
    
    average years
    
    
    exercise
    
    
    
    
    
    
    exerciseexercise price
    
    Number
    
    
    to maturity
    
    
    price
    
    
    Number
    
    
    price$14.00 to 18.85
    
    
    47,500
    
    
    
    4.7
    
    
    $
    15.85
    
    
    
    47,500
    
    
    $
    15.8518.86 to 25.50
    
    
    262,677
    
    
    
    8.5
    
    
    
    21.06
    
    
    
    25,000
    
    
    
    23.52$14.00 to 25.50
    
    
    310,177
    
    
    
    7.9
    
    
    $
    20.27
    
    
    
    72,500
    
    
    $
    18.50
 F-38




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 18.
    
    SHARE PURCHASE PLANS (continued):
 (b)
    
    TVA Group Inc. plans (continued):
 (i)
    
    Stock option plan for senior executives (continued)Had the vested options been exercised as at December 31, 2005, Quebecor Media Inc.s
interest in TVA Group Inc. would have decreased from 45.23% to 45.11% (39.73% to 39.64%
as at December 31, 2004).A reversal of $0.1 million of the compensation cost was recorded for the TVA Group Inc.
plan for the year ended December 31, 2005 (none in 2003 and a charge of $0.2 million in
2004).(ii)
    
    Share purchase plan for executives and employeesIn 1998, TVA Group Inc. introduced a share purchase plan relating to 375,000 TVA Group
Inc. Class B shares for its executives and a share purchase plan relating to 375,000 TVA
Group Inc. Class B shares for its employees. The plans provide that participants can
acquire shares on certain terms related to their salary. The shares can be acquired at a
price equal to 90% of the average closing market price of TVA Group Inc. Class B shares.
The plans also provide financing terms free of interest. No Class B shares were issued
under the plans during the years ended December 31, 2003, 2004 and 2005. The remaining
balance that may be issued under the share purchase plan for executives is 332,643 TVA
Group Inc. Class B shares as at December 31, 2004 and 2005. The remaining balance that
may be issued under the share purchase plan for employees is 229,753 TVA Group Inc.
Class B shares as at December 31, 2004 and 2005.(iii)
    
    Deferred share unit planIn 2000, TVA Group Inc. introduced a long-term profit sharing plan for certain members
of senior management of TVA Group Inc., and its subsidiaries. The deferred share units
(DSUs) are redeemable only upon termination of the participants employment. The
redemption price is payable in cash or, at TVA Group Inc.s discretion, in Class B
shares of TVA Group Inc. or by a combination of cash and shares. Under this plan, a
maximum of 25,000 Class B shares of TVA Group Inc. can be issued. No DSUs were issued
under this plan during the years ended December 31, 2004 and 2005.
 F-39




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 19.
    
    COMMITMENTS AND CONTINGENCIES:
 (a)
    
    Leases: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 $331.4 million. The minimum
payments for the coming years are as follows:
 OtherLeases
    
    
    commitments2006
    
    $
    38.8
    
    
    $
    94.12007
    
    
    32.1
    
    
    
    36.62008
    
    
    26.7
    
    
    
    7.52009
    
    
    21.9
    
    
    
    4.92010
    
    
    17.7
    
    
    
    2011 and thereafter
    
    
    51.1
    
    
    
    
 Operating lease rentals amounted to $40.9 million, $35.1 million and $42.4 million for the
years ended December 31, 2003, 2004 and 2005, respectively.(b)
    
    Long-term agreement:Newsprint represents a significant component of operating costs for the Newspapers segment.
Sun Media Corporation uses one newsprint manufacturer to supply its requirements, and has
entered into a long-term agreement with this supplier which expired December 31, 2005. The
Company is currently renegotiating the contract for the period ending December 31, 2006
under principally the same terms and conditions. The terms of the expired agreement provide
the Company with an ongoing discount to market prices and commit Sun Media Corporation to
purchase an annual minimum of 15,000 tonnes of newsprint exclusively from this supplier.(c)
    
    Other commitments:The Broadcasting segment has commitments to invest $62.5 million over an eight-year period
ending in 2012 in the Canadian TV industry and in the Canadian communications industry to
promote Canadian TV content and the development of communications. As at December 31, 2005,
$18.7 million remained to be invested.(d)
    
    Contingencies:On March 13, 2002, legal action was initiated by the shareholders of a cable company
against Videotron Ltd., Cable segment. They contend that Videotron Ltd. did not honor its
commitment related to a stock purchase agreement signed in August 2000. The plaintiffs are
requesting compensation totaling $26.0 million. Videotron Ltd.s management claims the
suit is not justified and intends to vigorously defend its case in Court.A number of other legal proceedings against the Company and its subsidiaries are still
outstanding. In the opinion of the management of the Company and its subsidiaries, the
outcome of these proceedings is not expected to have a material adverse effect on the
Companys results or its financial position.
 F-40




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 20.
    
    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 with expiry dates between 2006 and 2010 to the benefit of the lessor. Should the Company
terminate these leases prior to term (or at the end of these lease term) and should the fair
value of the assets be less than the guaranteed residual value, then the Company must, under
certain conditions, compensate the lessor for a portion of the shortfall. In addition, the
Company has provided guarantees to the lessor of certain premise leases, with expiry dates
through 2016. Should the lessee default under the agreement, the Company must, under certain
conditions, compensate the lessor. As at December 31, 2005, the maximum exposure with respect
to these guarantees is $16.9 million and no liability has been recorded in the consolidated
balance sheet since the Company does not expect to make any payments pertaining to these
guarantees.Business and asset disposals:In the sale of all or part of a business or an asset, in addition to possible indemnification
relating to failure to perform covenants and breach of representations or warranties, the
Company may agree to indemnify against claims related to its past conduct of the business.
Typically, the term and amount of such indemnification will be limited by the agreement. The
nature of these indemnification agreements prevents the Company from estimating the maximum
potential liability it could be required to pay to guaranteed parties. Also, in connection with
the sale of Mindready Solutions Inc., the Company has guaranteed, up to a maximum amount of
$1.0 million, that companys commitments related to a lease of premises that expires in 2011.
The Company has not accrued any amount in respect of these items in the consolidated balance
sheet.Long-term debt:Under the terms of their respective U.S. indebtedness, the Company and certain of its
subsidiaries have agreed to indemnify their respective lenders against changes in withholding
taxes. These indemnifications extend for the term of the indebtedness and do not have a limit
on the maximum potential liability. The nature of the indemnification agreement prevents the
Company from estimating the maximum potential liability it could be required to pay to lenders.
Should such amounts become payable, the Company and its subsidiaries would have the option of
repaying those debts. No amount has been accrued in the consolidated financial statements with
respect to these indemnifications.Outsourcing companies and suppliers:In the normal course of its operations, the Company enters into contractual agreements with
outsourcing companies and suppliers. In some cases, the Company agrees to provide
indemnifications in the event of legal procedures initiated against them. In other cases, the
Company provides indemnification to counterparties for damages resulting from the outsourcing
companies and suppliers. The nature of the indemnification agreements prevents the Company
from estimating the maximum potential liability it could be required to pay. No amount has
been accrued in the consolidated financial statements with respect to these indemnifications.
 F-41




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 21.
    
    FINANCIAL INSTRUMENTS:The Company is exposed to risks relating to foreign exchange fluctuations and is also subject
to risks relating to interest rate fluctuations. To reduce these risks, the Company and its
subsidiaries use derivative financial instruments. None of these instruments are held or
issued for speculative purposes.
 (a)
    
    Description of derivative financial instruments:
 (i)
    
    Foreign exchange forward contracts:
 Average
    
    
    NotionalCurrencies (sold/bought)
    
    Maturing
    
    
    exchange rate
    
    
    amountQuebecor Media Inc.$/Euro
    
    August 2007
    
    
    
    1.4310
    
    
    $
    58.1$/CHF
    
    February 2007
    
    
    
    0.9050
    
    
    
    11.9Sun Media Corporation$/ US$
    
    February 15, 2013
    
    
    
    1.5227
    
    
    
    312.2Videotron Ltd. and its subsidiaries:$/ US$
    
    Less than 1 year
    
    
    
    1.1790
    
    
    
    10.4
 F-42




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 21.
    
    FINANCIAL INSTRUMENTS (CONTINUED):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii)
    
    Cross-currency interest rate swaps:
 Exchange rateof interestAnnual
    
    
    Annual
    
    
    and capitaleffective
    
    
    nominal
    
    
    payments perPeriod
    
    
    Notional
    
    
    interest
    
    
    interest
    
    
    CDN dollar forcovered
    
    
    amount
    
    
    rate
    
    
    rate
    
    
    one US dollarQuebecor Media Inc.:Senior Notes
    
    
    2001 to 2011
    
    
    US$
    586.8
    
    
    
    11.98
    %
    
    
    11.125
    %
    
    
    1.5255Senior Discount Notes
    
    
    2001 to 2011
    
    
    US$
    282.9
    
    
    
    14.60
    %
    
    
    13.75
    %
    
    
    1.5822
    (1)Videotron Ltd. and
its subsidiaries:Senior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    
    Bankers
    
    
    
    6.875
    %
    
    
    1.2000acceptances3 monthsplus 2.80
    %Senior Notes
    
    
    2004 to 2014
    
    
    US$
    125.0
    
    
    
    7.45
    %
    
    
    6.875
    %
    
    
    1.1950Senior Notes
    
    
    2003 to 2014
    
    
    US$
    200.0
    
    
    Bankers
    
    
    
    6.875
    %
    
    
    1.3425acceptances3 monthsplus 2.73
    %Senior Notes
    
    
    2003 to 2014
    
    
    US$
    135.0
    
    
    
    7.66
    %
    
    
    6.875
    %
    
    
    1.3425Senior Notes
    
    
    2005 to 2015
    
    
    US$
    175.0
    
    
    
    5.98
    %
    
    
    6.375
    %
    
    
    1.1781Sun Media Corporation
and its subsidiaries:Senior Notes
    
    
    2003 to 2008
    
    
    US$
    155.0
    
    
    
    8.17
    %
    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    
    2008 to 2013
    
    
    US$
    155.0
    
    
    Bankers
    
    
    
    7.625
    %
    
    
    1.5227acceptances3 monthsplus 3.70
    %Senior Notes
    
    
    2003 to 2013
    
    
    US$
    50.0
    
    
    Bankers
    
    
    
    7.625
    %
    
    
    1.5227acceptances3 monthsplus 3.70
    %Term-loan B credit
    
    
    2003 to 2009
    
    
    US$
    199.3
    
    
    Bankers
    
    
    LIBOR
    
    
    1.5175facility
    
    
    
    
    
    
    
    
    
    acceptances
    
    
    plus 2.00
    %3 monthsplus 2.48
    %
 
 1
    
    As per the agreement, the exchange rate includes an exchange fee. F-43




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 21.
    
    FINANCIAL INSTRUMENTS (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii)
    
    Cross-currency interest rate swaps (continued):Some of these cross-currency swap agreements are subject to a ceiling on negative fair
market value, below which the Company may be required to make prepayments to limit the
exposure of the counterparties. Such prepayments are offset by equal reductions in the
Company.s commitments under the agreements. Because of the appreciation of the Canadian
dollar against the U.S. dollar, the Company was required to make prepayments of $197.7
million in 2004 and $75.9 million in 2005. These prepayments were financed from the
Companys available cash and from its existing credit facilities. As part of the
refinancing of its debts on January 17, 2006 (see note 24), the Company settled these
existing cross-currency swap agreements and entered into new hedging contracts under
which the Company is not required to make prepayments in the future.Also, certain cross-currency interest rate swaps entered into by the Company and its
subsidiaries include an option that allows each party to unwind the transaction on a
specific date or at any time, from an anniversary date of the transaction to maturity,
at the then-market value.(iii)
    
    Interest-rate swaps:Videotron Ltd. has entered into interest rate swaps to manage its interest rate exposure
and has committed to exchange, at specific intervals, the difference between the fixed
and floating interest rates calculated by reference to the notional amounts.The amounts of outstanding contracts as at December 31, 2005 by Videotron Ltd. are shown
in the table below:
 Notional
    
    
    Pay/

    
    Fixed
    
    
    FloatingMaturity
    
    amount
    
    
    receive
    
    rate
    
    
    rateVideotron Ltd. and its subsidiariesMay 2006
    
    $
    90.0
    
    
    Pay fixed/
    
    
    5.41
    %
    
    Bankers acceptancereceive floating
    
    
    
    
    
    3 monthsSeptember 2007
    
    $
    5.0
    
    
    Pay fixed/
    
    
    3.75
    %
    
    Bankers acceptancereceive floating
    
    
    
    
    
    3 months
 (b)
    
    Fair value of financial instruments:The carrying amount of cash and cash equivalents, temporary investments, accounts
receivable, bank indebtedness, accounts payable and accrued charges, dividend payable,
advances receivable from parent company and companies under common control and the
additional amount payable approximates their fair value since these items will be realized
or paid within one year or are due on demand.
 F-44




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 21. FINANCIAL INSTRUMENTS (continued):
 (b)
    
    Fair value of financial instruments (continued):Financial instruments with a fair value that is different from their carrying amount as at
December 31, 2004 and 2005 are as follows:
 2004
    
    2005Carrying
    
    
    
    
    
    
    Carryingvalue
    
    
    Fair value
    
    
    value
    
    
    Fair valueQuebecor Media Inc.Long-term debt
    
    
    (1,140.7
    )
    
    
    (1,332.9
    )
    
    
    (988.1
    )
    
    
    (1,078.8
    )Cross-currency interest rate swaps
    
    
    (3.9
    )
    
    
    (241.9
    )
    
    
    (21.5
    )
    
    
    (261.3
    )Foreign forward exchange contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.8
    )Videotron Ltd. and its subsidiariesLong-term debt
    
    
    (888.9
    )
    
    
    (901.1
    )
    
    
    (971.7
    )
    
    
    (967.4
    )Interest rate swaps
    
    
    (4.6
    )
    
    
    (4.6
    )
    
    
    (0.9
    )
    
    
    (0.9
    )Cross-currency interest rate swaps
    
    
    (45.5
    )
    
    
    (72.3
    )
    
    
    (73.7
    )
    
    
    (135.0
    )Foreign exchange forward contract
    
    
    (8.4
    )
    
    
    (8.4
    )
    
    
    
    
    
    
    (0.2
    )Sun Media Corporation and its subsidiariesLong-term debt1
    
    
    (484.3
    )
    
    
    (507.7
    )
    
    
    (466.3
    )
    
    
    (476.1
    )Cross-currency interest rate swaps and
foreign exchange forward contract
    
    
    (147.4
    )
    
    
    (169.8
    )
    
    
    (154.1
    )
    
    
    (186.5
    )TVA Group Inc. and its subsidiariesLong-term debt
    
    
    (34.9
    )
    
    
    (34.9
    )
    
    
    (107.1
    )
    
    
    (107.1
    )
 
 1
    
    Including current portion
 The fair value of the financial liabilities are estimated based on discounted cash flows
using year-end market yields or market value of similar instruments with the same maturity.
The fair value of the derivative financial instruments is estimated using year-end market
rates, and reflects the amount the Company would receive or pay if the instruments were
closed out at those dates.(c)
    
    Credit risk management:The Company is exposed to credit losses resulting from defaults by counterparties when
using financial instruments.When the Company enters into derivative contracts, the counterparties are international and
Canadian banks that have a minimum credit rating of A- from Standard & Poors or A3 from
Moodys and are subject to concentration limits. The Company does not foresee any failure
by counterparties in meeting their 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 at December 31,
2005, 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.
 F-45




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 21. FINANCIAL INSTRUMENTS (continued):
 (c)
    
    Credit risk management (continued):The Company believes that the product-line diversity of its customer base is instrumental
in reducing its credit risk, as well as the impact of fluctuations in product-line demand.
The Company does not believe that it is exposed to an unusual level of customer credit
risk.
 22. RELATED PARTY TRANSACTIONS:
      23. PENSION PLANS AND POSTRETIREMENT BENEFITS:
   F-46




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 23. PENSION PLANS AND POSTRETIREMENT BENEFITS:
  Pension benefits
    
    
    Postretirement benefits2004
    
    
    2005
    
    
    2004
    
    
    2005Change in benefit obligations:Benefit obligations at beginning of year
    
    $
    410.8
    
    
    $
    444.9
    
    
    $
    28.6
    
    
    $
    35.5Service costs
    
    
    11.9
    
    
    
    15.3
    
    
    
    1.5
    
    
    
    1.8Interest costs
    
    
    26.2
    
    
    
    27.7
    
    
    
    1.9
    
    
    
    2.2Plan participants contributions
    
    
    7.3
    
    
    
    10.4
    
    
    
    
    
    
    
    Actuarial loss
    
    
    6.6
    
    
    
    68.7
    
    
    
    2.6
    
    
    
    4.5Benefits and settlements paid
    
    
    (18.2
    )
    
    
    (16.7
    )
    
    
    (1.0
    )
    
    
    (1.2
    )Plan amendments
    
    
    0.3
    
    
    
    5.6
    
    
    
    Curtailment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.4
    )Other
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    Benefit obligations at end of year
    
    $
    444.9
    
    
    $
    555.9
    
    
    $
    35.5
    
    
    $
    40.4
 Pension benefits
    
    
    Postretirement benefits2004
    
    
    2005
    
    
    2004
    
    
    2005Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    377.1
    
    
    $
    421.8
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    38.6
    
    
    
    47.2
    
    
    
    
    
    
    
    Employer contributions
    
    
    17.0
    
    
    
    18.1
    
    
    
    1.0
    
    
    
    1.2Plan participants contributions
    
    
    7.3
    
    
    
    10.4
    
    
    
    
    
    
    
    Benefits and settlements paid
    
    
    (18.2
    )
    
    
    (16.7
    )
    
    
    (1.0
    )
    
    
    (1.2
    )Fair value of plan assets at end of year
    
    $
    421.8
    
    
    $
    480.8
    
    
    $
    
    
    
    $
    
 The plan assets are comprised of:
 2004
    
    
    2005Equity securities
    
    
    53.2
    %
    
    
    55.8
    %Debt securities
    
    
    45.5
    
    
    
    43.4Other
    
    
    1.3
    
    
    
    0.8100.0
    %
    
    
    100.0
    %
 F-47




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 23. PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):
  Pension benefits
    
    
    Postretirement benefits2004
    
    
    2005
    
    
    2004
    
    
    2005Reconciliation of funded status:Excess of benefit obligations over fair
value of plan assets at end of year
    
    $
    (23.1
    )
    
    $
    (75.1
    )
    
    $
    (35.5
    )
    
    $
    (40.4
    )Unrecognized actuarial loss
    
    
    27.4
    
    
    
    81.1
    
    
    
    7.3
    
    
    
    11.2Unrecognized net transition (asset) obligation
    
    
    (6.2
    )
    
    
    (5.7
    )
    
    
    0.6
    
    
    
    0.5Unrecognized prior service cost (benefit)
    
    
    14.1
    
    
    
    18.1
    
    
    
    (1.9
    )
    
    
    (1.6
    )Valuation allowance
    
    
    (16.4
    )
    
    
    (17.4
    )
    
    
    
    
    
    
    Net amount recognized
    
    $
    (4.2
    )
    
    $
    1.0
    
    
    $
    (29.5
    )
    
    $
    (30.3
    )
  Pension benefits
    
    
    Postretirement benefits2004
    
    
    2005
    
    
    2004
    
    
    2005Benefit obligations
    
    $
    (272.7
    )
    
    $
    (549.5
    )
    
    
    $(35.5
    )
    
    $
    (40.4
    )Fair value of plan assets
    
    
    240.6
    
    
    
    473.6
    
    
    
    
    
    
    
    Funded status  plan deficit
    
    $
    (32.1
    )
    
    $
    (75.9
    )
    
    
    $(35.5
    )
    
    $
    (40.4
    )
  Pension benefits
    
    
    Postretirement benefits2004
    
    
    2005
    
    
    2004
    
    
    2005Accrued benefit liability
    
    $
    (12.3
    )
    
    $
    (7.2
    )
    
    $
    (29.5
    )
    
    $
    (30.3
    )Deferred pension charge
    
    
    8.1
    
    
    
    8.2
    
    
    
    
    
    
    
    Net amount recognized
    
    $
    (4.2
    )
    
    $
    1.0
    
    
    $
    (29.5
    )
    
    $
    (30.3
    )
 F-48




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 23. PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):
  Pension benefits
    
    
    
    
    
    
    Postretirement benefits2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005Service costs
    
    $
    8.1
    
    
    $
    11.9
    
    
    $
    15.3
    
    
    $
    1.3
    
    
    $
    1.5
    
    
    $
    1.8Interest costs
    
    
    24.2
    
    
    
    26.2
    
    
    
    27.7
    
    
    
    1.9
    
    
    
    1.9
    
    
    
    2.2Actual return on plan assets
    
    
    (56.4
    )
    
    
    (38.6
    )
    
    
    (47.2
    )
    
    
    
    
    
    
    
    
    
    
    Current actuarial loss
    
    
    30.4
    
    
    
    6.6
    
    
    
    68.7
    
    
    
    0.9
    
    
    
    2.6
    
    
    
    4.5Current prior service
costs (benefits)
    
    
    2.3
    
    
    
    0.3
    
    
    
    5.6
    
    
    
    (0.3
    )
    
    
    
    
    
    
    Curtailment (gain) loss and other
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    (1.6
    )Elements of net benefit
costs before adjustments to
recognize the long-term nature
and valuation allowance
    
    
    8.4
    
    
    
    6.4
    
    
    
    70.1
    
    
    
    3.8
    
    
    
    7.9
    
    
    
    6.9Difference between actual and
expected return on plan assets
    
    
    31.7
    
    
    
    9.2
    
    
    
    15.1
    
    
    
    
    
    
    
    
    
    
    
    Deferral of amounts arising
during the period:Actuarial gain
    
    
    (30.4
    )
    
    
    (6.6
    )
    
    
    (68.7
    )
    
    
    (0.9
    )
    
    
    (2.6
    )
    
    
    (4.5
    )Prior service costs
    
    
    (2.3
    )
    
    
    (0.3
    )
    
    
    (5.6
    )
    
    
    0.3
    
    
    
    
    
    
    
    Amortization of previously
deferred amounts:Net actuarial loss
    
    
    0.8
    
    
    
    1.3
    
    
    
    (0.2
    )
    
    
    0.2
    
    
    
    
    
    
    
    (0.1
    )Prior service costs (benefits)
    
    
    1.2
    
    
    
    1.2
    
    
    
    1.6
    
    
    
    (0.3
    )
    
    
    (0.3
    )
    
    
    (0.3
    )Transitional obligations
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Other
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total adjustments to recognize the
long-term nature of benefit costs
    
    
    0.9
    
    
    
    4.3
    
    
    
    (58.3
    )
    
    
    (0.6
    )
    
    
    (2.8
    )
    
    
    (4.8
    )Valuation allowance
    
    
    1.1
    
    
    
    2.6
    
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    Net benefit costs
    
    $
    10.4
    
    
    $
    13.3
    
    
    $
    12.8
    
    
    $
    3.2
    
    
    $
    5.1
    
    
    $
    2.1
   F-49




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 23. PENSION PLANS AND POSTRETIREMENT BENEFITS
  Pension benefits
    
    
    
    
    
    
    Postretirement benefits2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005Benefit obligationsRates as at year-end:Discount rate
    
    
    6.25
    %
    
    
    6.00
    %
    
    
    5.00
    %
    
    
    6.25
    %
    
    
    6.00
    %
    
    
    5.00
    %Rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50Current periodic costsRates as at preceding year-end:Discount rate
    
    
    6.75
    %
    
    
    6.25
    %
    
    
    6.00
    %
    
    
    6.75
    %
    
    
    6.25
    %
    
    
    6.00
    %Expected return on plan assets 1
    
    
    7.75
    
    
    
    7.75
    
    
    
    7.50
    
    
    
    
    
    
    
    
    
    
    
    Rate of compensation increase
    
    
    3.78
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.78
    
    
    
    3.50
    
    
    
    3.50
 
 1
    
    After management and professional fees
  Postretirementbenefits1%
    
    
    1%Sensitivity analysis
    
    increase
    
    
    decreaseEffect on service and interest costs
    
    $
    0.9
    
    
    $
    (0.8
    )Effect on benefit obligations
    
    
    8.6
    
    
    
    (6.6
    )
 F-50




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 24.
    
    SUBSEQUENT EVENTS
  F-51




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 25.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES:
  (a)
    
    Consolidated statements of income:
 2003
    
    
    2004
    
    
    2005Net income, as reported in the consolidated
statements of income per GAAP in Canada
    
    $
    203.9
    
    
    $
    88.2
    
    
    $
    96.5Adjustments:Development, pre-operating and start-up costs (i)
    
    
    3.2
    
    
    
    (2.1
    )
    
    
    (1.3
    )Pension and postretirement benefits (ii)
    
    
    (0.4
    )
    
    
    0.9
    
    
    
    2.1Change in fair value and ineffective portion
of derivative instruments (iii)
    
    
    (167.5
    )
    
    
    6.6
    
    
    
    11.3Income taxes (iv) (v)
    
    
    1.3
    
    
    
    (4.4
    )
    
    
    31.1Non-monetary transactions (vi)
    
    
    
    
    
    
    
    
    
    
    1.5Gain on repurchase of redeemable preferred
shares of a subsidiary (vii)
    
    
    (153.7
    )
    
    
    
    
    
    
    Other
    
    
    16.7
    
    
    
    6.9
    
    
    
    Net (loss) income, as adjusted per GAAP in the
United States (in Canadian dollars)
    
    $
    (96.5
    )
    
    $
    96.1
    
    
    $
    141.2
 (b)
    
    Comprehensive (loss) income:
  2003
    
    
    2004
    
    
    2005Net (loss) income, as adjusted per GAAP in the United States
    
    $
    (96.5
    )
    
    $
    96.1
    
    
    $
    141.2Derivative instruments (iii)
    
    
    (63.9
    )
    
    
    (105.7
    )
    
    
    (22.0
    )Pension and post-retirement benefits (ii)
    
    
    (0.1
    )
    
    
    (4.4
    )
    
    
    (18.8
    )Translation adjustment 1
    
    
    1.3
    
    
    
    0.5
    
    
    
    (1.3
    )Income taxes (iv)
    
    
    3.5
    
    
    
    2.2
    
    
    
    73.3Comprehensive (loss) income per GAAP in the United States
    
    $
    (155.7
    )
    
    $
    (11.3
    )
    
    $
    172.4
 1
    
    Change for the year.
 F-52




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
 
 25.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (b)
    
    Comprehensive (loss) income (continued):
  2003
    
    
    2004
    
    
    2005Derivative instruments (iii)
    
    $
    (48.7
    )
    
    $
    (154.4
    )
    
    $
    (176.4
    )Pension and post-retirement benefits (ii)
    
    
    (7.0
    )
    
    
    (11.4
    )
    
    
    (30.2
    )Translation adjustment
    
    
    (1.5
    )
    
    
    (1.0
    )
    
    
    (2.3
    )Income taxes (iv)
    
    
    2.3
    
    
    
    4.5
    
    
    
    77.8Accumulated other comprehensive loss at end of year
    
    $
    (54.9
    )
    
    $
    (162.3
    )
    
    $
    (131.1
    )
 (c)
    
    Consolidated balance sheets:
 2004
    
    2005Canada
    
    
    United States
    
    
    Canada
    
    
    United StatesGoodwill
    
    
    3,851.0
    
    
    
    3,846.3
    
    
    
    3,871.9
    
    
    
    3,868.0Future income tax assets
    
    
    80.8
    
    
    
    81.7
    
    
    
    57.5
    
    
    
    57.5Other assets
    
    
    240.0
    
    
    
    214.7
    
    
    
    248.2
    
    
    
    240.7Long-term debt
    
    
    (2,546.0
    )
    
    
    (2,512.1
    )
    
    
    (2,530.5
    )
    
    
    (2,465.8
    )Other liabilities
    
    
    (297.0
    )
    
    
    (541.5
    )
    
    
    (359.3
    )
    
    
    (684.5
    )Future income tax liabilities
    
    
    (189.4
    )
    
    
    (189.0
    )
    
    
    (227.0
    )
    
    
    (103.8
    )Non-controlling interest
    
    
    (192.7
    )
    
    
    (194.9
    )
    
    
    (144.3
    )
    
    
    (144.0
    )Contributed surplus (v)(vii)
    
    
    (3,216.8
    )
    
    
    (3,370.5
    )
    
    
    (3,216.8
    )
    
    
    (3,386.4
    )Deficit
    
    
    2,529.6
    
    
    
    2,763.5
    
    
    
    2,538.1
    
    
    
    2,727.3Accumulated other comprehensive loss
    
    
    1.0
    
    
    
    162.3
    
    
    
    2.3
    
    
    
    131.1
 (i)
    
    Under GAAP in Canada, certain development and pre-operating costs that
satisfy specified criteria for recoverability are deferred and amortized. Also, under
GAAP in Canada, certain start-up costs incurred in connection with various projects
have been recorded in the consolidated balance sheets under the item Other assets,
and are amortized over a period not exceeding five years. Under GAAP in the United
States, these costs must be included in income as incurred.
 F-53




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 25.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c)
    
    Consolidated balance sheets (continued):
 (ii)
    
    Under GAAP in Canada, when a defined benefit plan gives rise to an accrued
benefit asset, a company must recognize a valuation allowance for the excess of the
adjusted benefit asset over the expected future benefit to be realized from the plan
asset. GAAP in the United States does not provide for a valuation allowance against
pension assets.Under GAAP in the United States, if the accumulated benefit obligation exceeds the fair
value of a pension plans assets, the Company is required to recognize a minimum accrued
liability equal to the unfunded accumulated benefit obligation, which is recorded in
accumulated other comprehensive loss.Further differences result from the different transition rules and timing of the
adoption of the current standards in Canada and in the United States for pension and
postretirement benefits.(iii)
    
    Under GAAP in United States, Statement of Financial Accounting Standards
No.133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133)
establishes accounting and reporting standards for derivative instruments and hedging
activities and requires that all derivatives be recorded as either assets or
liabilities in the balance sheet at fair value. In accordance with SFAS 133, for
derivative instruments designated as fair value hedges, such as certain cross-currency
interest rate swaps of Videotron Ltd. and Sun Media Corporation, changes in the fair
value of the derivative instrument are substantially offset in the statement of income
by changes in the fair value of the hedged item. For derivative instruments designated
as cash flow hedges, such as the Companys cross-currency interest rate swaps and
certain cross-currency interest rate swaps or forward exchange contracts of Videotron
Ltd. and Sun Media Corporation, the effective portion of any hedge is reported in
other comprehensive income (loss) until it is recognized in income during the same
period in which the hedged item affects income, while the current ineffective portion
of hedges is recognized in the statement of income each period.Under GAAP in Canada, derivative financial instruments are accounted for on an accrual
basis. Realized and unrealized gains and losses are deferred and recognized in income
in the same period and in the same financial statement category as the income or expense
arising from the corresponding hedged positions.Further differences result from the different transition rules and timing of the
adoption of the current standards in Canada and in the United States for derivative
financial instruments and hedge accounting.(iv)
    
    This adjustment represents the tax impact of United States GAAP adjustments.
Furthermore, the Company concluded, in 2005, that the realization of future income tax
assets related to its derivative financial instruments was now considered more likely
than not. Consequently, the tax benefits were recognized in the
statement of income and in the statement of comprehensive income.(v)
    
    In 2005, the Company entered into a tax consolidation transaction by which
the Company has transferred to its parent company capital losses for a cash
consideration of $15.9 million (note 6). Under GAAP in Canada, the transaction was
recorded in accordance with CICA Handbook 3840, Related Party Transactions, and
resulted in a reduction of $15.9 million of the Companys income tax expense. Under
GAAP in the United States, since this transaction related to an asset transfer from a
subsidiary to its parent company, the difference between the carrying value of the tax
benefits transferred and the cash consideration received has been recognized in
contributed surplus.
 F-54




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 25.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c)
    
    Consolidated balance sheets (continued):
 (vi)
    
    In April 2005, Sun Media Corporation, Newspaper segment, exchanged a
community publication for another community publication. Under U.S GAAP, this exchange
of businesses is recorded in accordance with FASB Statement No. 141, Business
Combinations and the cost of the purchase should be determined as the fair value of
the consideration given or the fair value of the net assets or equity interest
received, whichever is more reliably measurable. Under Canadian GAAP, since this
exchange of businesses is a non-monetary transaction, it is accounted for in
accordance with CICA Handbook 3830, Non-monetary Transactions, and recorded at the
carrying value of the asset or service given up in the exchange adjusted by any
monetary consideration received or given.Accordingly, under US GAAP, this transaction resulted in a gain on disposal of a
publication and also resulted in an increase of the purchase price of the publication
acquired.(vii)
    
    Under GAAP in Canada, the gain on repurchase of redeemable preferred shares of a
subsidiary is included in income. Under GAAP in the United States, any such gain
would be included in contributed surplus.
 F-55




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 25.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (d)
    
    Additional disclosures required under GAAP in the United States:
 (i)
    
    Pension plans
    2006
    
    $
    19.62007
    
    
    19.32008
    
    
    20.52009
    
    
    21.32010
    
    
    23.12011-2015
    
    
    143.2
  (ii)
    
    Allowance for doubtful accountsUnder GAAP in the United States, allowance for doubtful accounts must be disclosed.
Accordingly, allowance for doubtful accounts, which is recorded in reduction of accounts
receivable amounted to $17.3 million and $19.8 million as at December 31, 2004 and 2005,
respectively.(iii)
    
    Accrued liabilitiesUnder GAAP in the United States, items which comprise more than 5% of total current
liabilities must be disclosed separately. Accrued interest expenses of $99.9 million and
$82.6 million and employees salaries and dues of $91.2 million and $101.7 million as at
December 31, 2004 and 2005, respectively, are included in accounts payable and accrued
charges.
 F-56




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 25.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (d)
    
    Additional disclosures required under GAAP in the United States (continued):
 (iv)
    
    Statement of cash flowsThe disclosure of a subtotal of the amount of cash flows provided by operations before
net change in non-cash balances related to operations in the consolidated statement of
cash flows is permitted under GAAP in Canada while it is not allowed by GAAP in the
United States.(v)
    
    Advertising costUnder GAAP in the United States and GAAP in Canada, advertising costs are expensed as
incurred and amounted to $49.3 million, $54.4 million and $65.8 million during the years
ended December 31, 2003, 2004 and 2005, respectively.(vi)
    
    Under GAAP in the United States, cost of sales and other expenses must be
disclosed separately in the statement of income.These costs are as follows:
 2003
    
    
    2004
    
    
    2005Cost of sales
    
    $
    1,092.9
    
    
    $
    1,130.2
    
    
    $
    1,233.8General, selling and administrative expenses
    
    
    593.4
    
    
    
    635.0
    
    
    
    735.5$
    1,686.3
    
    
    $
    1,765.2
    
    
    $
    1,969.3
 (vii)
    
    Derivative instrumentsUnder GAAP in the United States, the amount of ineffectiveness related to fair value and
cash flow hedges must be disclosed separately. The Company recorded ineffectiveness
gains related to its fair value hedges of $8.4 million and $15.1 million in 2004 and
2005, respectively, and an ineffectiveness loss of $7.8 million in 2003. The Company
recorded ineffectiveness losses for its cash flow hedges of $4.7 million, $0.6 million
and $ 15.1 million in 2003, 2004 and 2005.The reconciliation of the beginning and ending accumulated comprehensive derivative gain
(loss) related to cash flow hedges is as follows:
 Accumulated comprehensive derivative gain as at December 31, 2002
    
    $
    15.2Reclassification to income
    
    
    (15.2
    )Effective portion of hedges
    
    
    (48.7
    )Accumulated comprehensive derivative loss as at December 31, 2003
    
    
    (48.7
    )Reclassification to income
    
    
    0.3Effective portion of hedges
    
    
    (106.0
    )Accumulated comprehensive derivative loss as at December 31, 2004
    
    
    (154.4
    )Reclassification to income
    
    
    29.2Effective portion of hedges
    
    
    (51.2
    )Accumulated comprehensive derivative loss as at December 31, 2005
    
    $
    (176.4
    )
  F-57




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 25.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (d)
    
    Additional disclosures required under GAAP in the United States (continued):
 (viii)
    
    Restrictions of dividends paymentsSubstantially all of the assets of the Company are restricted net assets of subsidiaries
subject to restrictions which limit the payment of dividends.
 26.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF 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.The Company has access to the cash flow generated by its subsidiaries by way of dividends
declared by its public subsidiaries and dividends and advances from its private subsidiaries.
However, some of the Companys subsidiaries have restrictions, based on contractual debt
obligations and corporate solvency tests, regarding the amounts of dividends and advances that
could be paid to the Company. The non-consolidated and condensed financial statements of the
Company prepared under Canadian GAAP are as follows:Non-consolidated and condensed statements of income
 2003
    
    
    2004
    
    
    2005RevenuesManagement fees
    
    $
    17.1
    
    
    $
    20.4
    
    
    $
    30.0Interest on loan to subsidiaries
    
    
    5.5
    
    
    
    6.0
    
    
    
    6.9Other
    
    
    20.1
    
    
    
    20.8
    
    
    
    28.042.7
    
    
    
    47.2
    
    
    
    64.9ExpensesGeneral and administrative
    
    
    (40.5
    )
    
    
    (46.4
    )
    
    
    (53.7
    )Depreciation and amortization
    
    
    (1.7
    )
    
    
    (1.4
    )
    
    
    (1.2
    )Financial
    
    
    (181.2
    )
    
    
    (181.0
    )
    
    
    (171.3
    )Loss before undernoted items
    
    
    (180.7
    )
    
    
    (181.6
    )
    
    
    (161.3
    )Gain on disposal of investments
    
    
    
    
    
    
    1.4
    
    
    
    Loss on debt refinancing
    
    
    
    
    
    
    
    
    
    
    (60.8
    )Loss before income taxes
    
    
    (180.7
    )
    
    
    (180.2
    )
    
    
    (222.1
    )Income taxes
    
    
    (28.2
    )
    
    
    (48.2
    )
    
    
    (24.9
    )(152.5
    )
    
    
    (132.0
    )
    
    
    (197.2
    )Equity income from subsidiaries
    
    
    356.4
    
    
    
    220.2
    
    
    
    293.7Net income
    
    $
    203.9
    
    
    $
    88.2
    
    
    $
    96.5
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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 26.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):Non-consolidated and condensed statements of cash flows
 2003
    
    
    2004
    
    
    2005Cash flows related to operationsNet income
    
    $
    203.9
    
    
    $
    88.2
    
    
    $
    96.5Amortization of plant, property and equipment
    
    
    1.7
    
    
    
    1.4
    
    
    
    1.2Amortization of deferred financing costs and of long
term debt discount
    
    
    48.3
    
    
    
    55.0
    
    
    
    61.2Gain on disposal of investments
    
    
    
    
    
    
    (1.4
    )
    
    
    Loss on debt refinancing
    
    
    
    
    
    
    
    
    
    
    60.8Future income taxes
    
    
    (29.4
    )
    
    
    (48.5
    )
    
    
    (25.7
    )Excess (shortage) of equity distribution over equity income
from subsidiaries
    
    
    57.0
    
    
    
    (76.1
    )
    
    
    (111.2
    )Net change in non-cash balances related to operations
    
    
    (83.5
    )
    
    
    9.4
    
    
    
    (29.7
    )Cash flows provided by operations
    
    
    198.0
    
    
    
    28.0
    
    
    
    53.1Cash flows related to financing activitiesProceeds from issuance of redeemable preferred shares
    
    
    431.9
    
    
    
    1,370.0
    
    
    
    316.9Repurchases of redeemable preferred shares
    
    
    (360.0
    )
    
    
    (1,550.0
    )
    
    
    (334.0
    )Net borrowings (repayments) of revolving credit facilities
    
    
    97.0
    
    
    
    (97.0
    )
    
    
    Repayments of long-term debt and unwinding of
hedging contracts
    
    
    (429.0
    )
    
    
    
    
    
    
    (215.7
    )Net increase in prepayments under cross-currency
swap agreements
    
    
    (118.8
    )
    
    
    (184.4
    )
    
    
    (34.1
    )Dividends on common shares
    
    
    
    
    
    
    (20.0
    )
    
    
    (45.0
    )(Increase) decrease in advances to subsidiaries
    
    
    (150.2
    )
    
    
    180.0
    
    
    
    (1.5
    )(Decrease) increase in advances from subsidiaries
    
    
    (1.2
    )
    
    
    74.3
    
    
    
    (18.3
    )Cash flows used in financing activities
    
    
    (530.9
    )
    
    
    (227.1
    )
    
    
    (331.7
    )Cash flows related to investing activitiesNet acquisitions of investments in subsidiaries
    
    
    (17.7
    )
    
    
    (26.3
    )
    
    
    (39.9
    )Dividends received in excess of accumulated equity income from subsidiaries
    
    
    20.0
    
    
    
    205.2
    
    
    
    210.0Proceeds from disposal of investments in subsidiaries
    
    
    361.0
    
    
    
    
    
    
    
    Proceeds from disposal of tax
deductions to a subsidiary
    
    
    
    
    
    
    
    
    
    
    35.2Net (increase) decrease in temporary investments
    
    
    (18.4
    )
    
    
    (59.9
    )
    
    
    78.4Other
    
    
    3.7
    
    
    
    1.4
    
    
    
    (1.6
    )Cash flows provided by (used in) investing activities
    
    
    348.6
    
    
    
    120.4
    
    
    
    282.1Net increase (decrease) in cash and cash equivalents
    
    
    16.3
    
    
    
    (78.7
    )
    
    
    3.5Cash and cash equivalents at beginning of year
    
    
    76.9
    
    
    
    93.2
    
    
    
    14.5Cash and cash equivalents at end of year
    
    $
    93.2
    
    
    $
    14.5
    
    
    $
    18.0
 F-59




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 26.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):Non-consolidated and condensed balance sheets
 2004
    
    
    2005AssetsCurrent assets
    
    $
    221.5
    
    
    $
    153.6Advances to subsidiaries
    
    
    157.3
    
    
    
    175.9Investments in subsidiaries
    
    
    3,684.2
    
    
    
    3,372.9Convertible obligation and notes receivable  subsidiaries
    
    
    1,410.0
    
    
    
    1,392.9Other assets
    
    
    71.7
    
    
    
    84.8$
    5,544.7
    
    
    $
    5,180.1Liabilities and Shareholders equityCurrent liabilities
    
    $
    144.1
    
    
    $
    207.8Long-term debt
    
    
    1,140.7
    
    
    
    988.2Advances from subsidiaries
    
    
    354.4
    
    
    
    77.7Other liabilities
    
    
    35.6
    
    
    
    63.4Redeemable preferred shares issued to subsidiaries
    
    
    1,410.0
    
    
    
    1,392.9Shareholders equity
    
    
    2,459.9
    
    
    
    2,450.1$
    5,544.7
    
    
    $
    5,180.1
 27.
    
    RESTRICTED AND UNRESTRICTED SUBSIDIARIES:The Company is subject to certain reporting requirements pursuant to the indentures governing
the Companys Senior Notes and Senior Discount Notes issued in July 2001. The financial
condition and results of operations of the Company and its Restricted Subsidiaries must be
disclosed separately from the financial condition and results of operations of the Unrestricted
Subsidiaries, as shown in the following condensed and consolidated statements of income and
balance sheets.Following the acquisition in September 2004 of all minority interests directly owned by
minority shareholders of Canoe Inc., the Company decided to reassign Canoe Inc. as a
Restricted Subsidiary. Accordingly, the Company reclassified the figures for the previous
periods to reflect this change. As at December 31, 2005, the only designated Unrestricted
Subsidiary is Nurun Inc. Moreover, the gain an disposal on the Companys investment in
Mircocell Telecommunications in 2004, has been included in the condensed and consolidated
statements of income of the Unrestricted Subsidiary.
 F-60




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 27.
    
    RESTRICTED AND UNRESTRICTED SUBSIDIARIES (continued):Restricted Subsidiaries and the Company:Condensed and consolidated statements of income
 2003
    
    
    2004
    
    
    2005Revenues
    
    $
    2,253.3
    
    
    $
    2,411.5
    
    
    $
    2,637.8Cost of sales and selling and administrative expenses
    
    
    (1,642.6
    )
    
    
    (1,716.6
    )
    
    
    (1,908.1
    )Amortization
    
    
    (224.2
    )
    
    
    (224.2
    )
    
    
    (230.2
    )Financial expenses
    
    
    (299.9
    )
    
    
    (315.1
    )
    
    
    (286.1
    )Reserve for restructuring of operations, impairment of assets, and
other special charges
    
    
    (0.8
    )
    
    
    (2.8
    )
    
    
    0.2Gain (loss) on debt refinancing and on repurchase of
redeemable preferred shares of a subsidiary
    
    
    144.1
    
    
    
    (4.8
    )
    
    
    (60.0
    )(Loss) gain on sale of businesses and other assets
    
    
    (1.1
    )
    
    
    8.0
    
    
    
    0.1Write-down of goodwill
    
    
    (0.5
    )
    
    
    
    
    
    
    Income before income taxes
    
    
    228.3
    
    
    
    156.0
    
    
    
    153.7Income taxes (credit)
    
    
    (12.9
    )
    
    
    37.2
    
    
    
    44.7241.2
    
    
    
    118.8
    
    
    
    109.0Non-controlling interest
    
    
    (35.6
    )
    
    
    (31.4
    )
    
    
    (14.6
    )Income from continuing operations
    
    
    205.6
    
    
    
    87.4
    
    
    
    94.4Income from discontinued operations
    
    
    0.7
    
    
    
    
    
    
    
    Net income
    
    $
    206.3
    
    
    $
    87.4
    
    
    $
    94.4
  2003
    
    
    2004
    
    
    2005Cable
    
    $
    275.3
    
    
    $
    341.2
    
    
    $
    382.0Newspapers
    
    
    224.8
    
    
    
    227.8
    
    
    
    222.2Broadcasting
    
    
    81.5
    
    
    
    80.5
    
    
    
    53.0Leisure and Entertainment
    
    
    14.7
    
    
    
    22.7
    
    
    
    27.0Business Telecommunications
    
    
    14.4
    
    
    
    22.6
    
    
    
    31.3Internet/Portals
    
    
    3.1
    
    
    
    4.5
    
    
    
    10.5613.8
    
    
    
    699.3
    
    
    
    726.0General corporate expenses
    
    
    (3.1
    )
    
    
    (4.4
    )
    
    
    3.7$
    610.7
    
    
    $
    694.9
    
    
    $
    729.7
 F-61




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 27.
    
    RESTRICTED AND UNRESTRICTED SUBSIDIARIES (continued):Restricted Subsidiaries and the Company:Condensed and consolidated balance sheets
 2004
    
    
    2005AssetsCurrent assets
    
    $
    747.9
    
    
    $
    794.0Property, plant and equipment
    
    
    1,519.0
    
    
    
    1,628.6Other assets
    
    
    329.7
    
    
    
    313.3Goodwill
    
    
    3,847.9
    
    
    
    3,868.36,444.5
    
    
    
    6,604.2LiabilitiesCurrent liabilities
    
    
    810.7
    
    
    
    946.8Long-term debt
    
    
    2,546.0
    
    
    
    2,530.5Other liabilities
    
    
    486.4
    
    
    
    586.3Non-controlling interest
    
    
    169.0
    
    
    
    118.84,012.1
    
    
    
    4,182.4Net investment in Restricted Subsidiaries and the Company
    
    $
    2,432.4
    
    
    $
    2,421.8
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to Consolidated Financial Statements
 
 27.
    
    RESTRICTED AND UNRESTRICTED SUBSIDIARIES (continued):Unrestricted Subsidiary:Condensed and consolidated statements of income
 2003
    
    
    2004
    
    
    2005Revenues
    
    $
    44.8
    
    
    $
    51.9
    
    
    $
    65.1Cost of sales and selling and administrative expenses
    
    
    (43.7
    )
    
    
    (49.6
    )
    
    
    (61.2
    )Amortization
    
    
    (2.4
    )
    
    
    (1.7
    )
    
    
    (1.7
    )Financial (expenses) revenues
    
    
    (0.2
    )
    
    
    0.5
    
    
    
    0.8Reserve for restructuring of operations
    
    
    (1.0
    )
    
    
    
    
    
    
    Gain on disposal of a portfolio investment
    
    
    
    
    
    
    1.3
    
    
    
    (Loss) income before income taxes
    
    
    (2.5
    )
    
    
    2.4
    
    
    
    3.0Income taxes
    
    
    0.4
    
    
    
    0.2
    
    
    
    (0.7
    )(2.9
    )
    
    
    2.2
    
    
    
    3.7Non-controlling interest
    
    
    1.0
    
    
    
    (0.3
    )
    
    
    (1.6
    )(Loss) income from continuing operations
    
    
    (1.9
    )
    
    
    1.9
    
    
    
    2.1Loss from discontinued operations
    
    
    (0.5
    )
    
    
    (1.1
    )
    
    
    Net (loss) income
    
    $
    (2.4
    )
    
    $
    0.8
    
    
    $
    2.1
  2004
    
    
    2005AssetsCurrent assets
    
    $
    54.4
    
    
    $
    61.2Property, plant and equipment
    
    
    3.1
    
    
    
    2.9Other assets
    
    
    4.1
    
    
    
    3.6Goodwill
    
    
    3.1
    
    
    
    3.664.7
    
    
    
    71.3LiabilitiesCurrent liabilities
    
    
    13.5
    
    
    
    17.5Non-controlling interest
    
    
    23.7
    
    
    
    25.537.2
    
    
    
    43.0Net investment in Unrestricted Subsidiary
    
    $
    27.5
    
    
    $
    28.3
 F-63