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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the fiscal year ended December 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period
from                    to
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Date
of event requiring this shell company report
 Commission file number: 333-13792
 QUEBECOR MEDIA INC.
  Province of Québec, Canada   612 Saint-Jacques Street
Montréal, Québec, Canada H3C 4M8
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  None
  73/4% Senior Notes due March 2016
  123,602,807 Common Shares
110,000 Cumulative First Preferred Shares, Series C
2,555,000 Cumulative First Preferred Shares, Series G
  o þ
  o þ
  þ o
  o o þ
  þ o
  o þ




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##### 



TABLE OF CONTENTS
 PageExplanatory Notes
    
    iiIndustry and Market Data
    
    iiPresentation of Financial Information
    
    iiExchange Rate Information
    
    iiiCautionary Statement Regarding Forward-Looking Statements
    
    ivPART IITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    1ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    1ITEM 3  KEY INFORMATION
    
    
    1ITEM 4  INFORMATION ON THE COMPANY
    
    
    21ITEM 4A  UNRESOLVED STAFF COMMENTS
    
    
    74ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    75ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    120ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    132ITEM 8  FINANCIAL INFORMATION
    
    
    136ITEM 9  THE OFFER AND LISTING
    
    
    138ITEM 10  ADDITIONAL INFORMATION
    
    
    139ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    160ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    161PART IIITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    162ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    162ITEM 15  CONTROLS AND PROCEDURES
    
    
    162ITEM 16  [RESERVED]
    
    
    163ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    163ITEM 16B  CODE OF ETHICS
    
    
    163ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    163ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    164ITEM 16E  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    164PART IIIITEM 17  FINANCIAL STATEMENTS
    
    
    164ITEM 18  FINANCIAL STATEMENTS
    
    
    164ITEM 19  EXHIBITS
    
    
    164Signature
    
    
    169Index to Consolidated Financial Statements
    
    
    170Certificate of AmendmentBy-Law No 2007-2Fourth Amended and Restated Credit AgreementCalculation of Ratio of Earnings to Fixed ChargesSubsidiaries of Quebecor Media Inc.Certification of Pierre Karl Peladeau (S.302)Certification of Louis Morin (S.302)Certification of Pierre Karl Peladeau (S.906)Certification of Louis Morin (S.906)




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EXPLANATORY NOTES
 Companies Act
  3 4 3 4
 
 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, 2007
    
    
    0.9309
    
    
    
    1.0908
    
    
    
    0.8437
    
    
    
    1.0120December 31, 2006
    
    
    0.8818
    
    
    
    0.9100
    
    
    
    0.8528
    
    
    
    0.8582December 31, 2005
    
    
    0.8254
    
    
    
    0.8690
    
    
    
    0.7872
    
    
    
    0.8579December 31, 2004
    
    
    0.7682
    
    
    
    0.8493
    
    
    
    0.7158
    
    
    
    0.8309December 31, 2003
    
    
    0.7139
    
    
    
    0.7738
    
    
    
    0.6349
    
    
    
    0.7738
 Month Ended:
    
    Average(2)
    
    High
    
    Low
    
    Period EndMarch 2008 (through March 14, 2008)
    
    
    1.0100
    
    
    
    1.0162
    
    
    
    1.0025
    
    
    
    1.0135February 29, 2008
    
    
    1.0014
    
    
    
    1.0291
    
    
    
    0.9815
    
    
    
    1.0061January 31, 2008
    
    
    0.9902
    
    
    
    1.0096
    
    
    
    0.9714
    
    
    
    0.9982December 31, 2007
    
    
    0.9979
    
    
    
    1.0221
    
    
    
    0.9789
    
    
    
    1.0120November 30, 2007
    
    
    1.0351
    
    
    
    1.0908
    
    
    
    0.9993
    
    
    
    0.9993October 31, 2007
    
    
    1.0255
    
    
    
    1.0531
    
    
    
    0.9998
    
    
    
    1.0531September 30, 2007
    
    
    0.9754
    
    
    
    1.0041
    
    
    
    0.9482
    
    
    
    1.0041
 
 (1)
    
    The average of the exchange rates for all days during the applicable year.(2)
    
    The average of the exchange rates for all days during the applicable month. iii




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




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




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CANADIAN GAAP DATA
 Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(in millions, except ratio)STATEMENT OF INCOME DATA:RevenuesCable
    
    $
    1,552.6
    
    
    $
    1,309.5
    
    
    $
    1,080.3
    
    
    $
    937.6
    
    
    $
    862.8Newspapers
    
    
    1,028.1
    
    
    
    928.2
    
    
    
    915.6
    
    
    
    888.1
    
    
    
    845.9Broadcasting
    
    
    415.5
    
    
    
    393.3
    
    
    
    401.4
    
    
    
    358.0
    
    
    
    340.9Leisure and Entertainment
    
    
    329.8
    
    
    
    315.8
    
    
    
    255.4
    
    
    
    241.7
    
    
    
    205.0Interactive Technologies and
Communications
    
    
    82.0
    
    
    
    73.9
    
    
    
    65.1
    
    
    
    51.9
    
    
    
    44.8Internet/Portals
    
    
    48.3
    
    
    
    41.6
    
    
    
    35.2
    
    
    
    26.5
    
    
    
    21.6Head office and inter-segment
    
    
    (90.4
    )
    
    
    (63.7
    )
    
    
    (57.6
    )
    
    
    (46.9
    )
    
    
    (29.1
    )3,365.9
    
    
    
    2,998.6
    
    
    
    2,695.4
    
    
    
    2,456.9
    
    
    
    2,291.9Cost of sales, selling and administrative
expenses
    
    
    (2,402.0
    )
    
    
    (2,199.0
    )
    
    
    (1,963.3
    )
    
    
    (1,759.7
    )
    
    
    (1,680.3
    )Amortization
    
    
    (290.4
    )
    
    
    (260.7
    )
    
    
    (231.9
    )
    
    
    (225.9
    )
    
    
    (226.6
    )Financial expenses
    
    
    (240.0
    )
    
    
    (224.6
    )
    
    
    (285.3
    )
    
    
    (314.6
    )
    
    
    (300.1
    )Reserve for restructuring of operations,
impairment of assets and other special
charges
    
    
    (11.6
    )
    
    
    (18.9
    )
    
    
    0.2
    
    
    
    (2.8
    )
    
    
    (1.8
    )(Loss) gain on debt refinancing and on
repurchase of redeemable preferred shares
of a subsidiary
    
    
    (1.0
    )
    
    
    (342.6
    )
    
    
    (60.0
    )
    
    
    (4.8
    )
    
    
    144.1Gain (loss) on sale of businesses and other
assets
    
    
    0.4
    
    
    
    2.2
    
    
    
    0.1
    
    
    
    9.3
    
    
    
    (1.1
    )Impairment of goodwill and intangible assets
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Income taxes
    
    
    (74.8
    )
    
    
    53.7
    
    
    
    (43.5
    )
    
    
    (37.4
    )
    
    
    12.5Non-controlling interest
    
    
    (19.2
    )
    
    
    (0.4
    )
    
    
    (16.2
    )
    
    
    (31.7
    )
    
    
    (34.5
    )Income (loss) from discontinued operations
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (1.1
    )
    
    
    0.3Net income (loss)
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
    
    
    $
    203.9OTHER FINANCIAL DATA AND RATIO:Operating income(1)
    
    $
    963.9
    
    
    $
    799.6
    
    
    $
    732.1
    
    
    $
    697.2
    
    
    $
    611.6Additions to property, plant and equipment
    
    
    468.7
    
    
    
    435.5
    
    
    
    319.8
    
    
    
    181.1
    
    
    
    131.2Comprehensive income (loss)(2)
    
    
    373.1
    
    
    
    (168.5
    )
    
    
    95.2
    
    
    
    88.7
    
    
    
    205.2Ratio of earnings to fixed charges or
coverage deficiency (3)(4) (unaudited)
    
    
    2.7x
    
    
    $
    231.1
    
    
    
    1.5x
    
    
    
    1.5x
    
    
    
    1.7x
 At December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(in millions)BALANCE SHEET DATA:Cash and cash equivalents
    
    $
    26.1
    
    
    $
    34.1
    
    
    $
    97.4
    
    
    $
    108.8
    
    
    $
    103.6Total assets
    
    
    7,560.9
    
    
    
    6,583.9
    
    
    
    6,675.5
    
    
    
    6,509.2
    
    
    
    6,610.6Total debt (current and long-term portions)
    
    
    3,027.5
    
    
    
    2,796.1
    
    
    
    2,533.2
    
    
    
    2,548.8
    
    
    
    2,756.8Capital stock
    
    
    1,752.4
    
    
    
    1,752.4
    
    
    
    1,773.7
    
    
    
    1,773.7
    
    
    
    1,773.7Shareholders equity
    
    
    2,450.3
    
    
    
    2,237.0
    
    
    
    2,450.1
    
    
    
    2,459.9
    
    
    
    2,395.0Cash dividends declared
    
    
    110.0
    
    
    
    23.7
    
    
    
    105.0
    
    
    
    20.0
    
    
    
    Number of common shares outstanding
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
 2




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U.S. GAAP DATA
 Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(in millions, except ratio)STATEMENT OF INCOME DATA:RevenuesCable
    
    $
    1,552.0
    
    
    $
    1,312.2
    
    
    $
    1,086.5
    
    
    $
    946.9
    
    
    $
    862.8Newspapers
    
    
    1,028.1
    
    
    
    928.2
    
    
    
    915.6
    
    
    
    888.1
    
    
    
    845.9Broadcasting
    
    
    415.5
    
    
    
    393.3
    
    
    
    401.4
    
    
    
    358.0
    
    
    
    340.9Leisure and Entertainment
    
    
    329.8
    
    
    
    315.8
    
    
    
    255.4
    
    
    
    241.7
    
    
    
    205.0Interactive Technologies and
Communications
    
    
    82.0
    
    
    
    73.9
    
    
    
    65.1
    
    
    
    51.9
    
    
    
    44.8Internet/Portals
    
    
    48.3
    
    
    
    41.6
    
    
    
    35.2
    
    
    
    26.5
    
    
    
    21.6Head office and inter-segment
    
    
    (90.4
    )
    
    
    (63.7
    )
    
    
    (57.6
    )
    
    
    (46.9
    )
    
    
    (29.1
    )3,365.3
    
    
    
    3,001.3
    
    
    
    2,701.6
    
    
    
    2,466.2
    
    
    
    2,291.9Cost of sales, selling and administrative
expenses
    
    
    (2,406.5
    )
    
    
    (2,207.8
    )
    
    
    (1,967.5
    )
    
    
    (1,758.8
    )
    
    
    (1,677.0
    )Amortization
    
    
    (287.7
    )
    
    
    (257.9
    )
    
    
    (229.6
    )
    
    
    (225.7
    )
    
    
    (226.6
    )Financial expenses
    
    
    (229.1
    )
    
    
    (220.0
    )
    
    
    (304.0
    )
    
    
    (322.2
    )
    
    
    (467.6
    )Reserve for restructuring of operations,
impairment of assets and other special
charges
    
    
    (11.6
    )
    
    
    (18.9
    )
    
    
    0.2
    
    
    
    (2.8
    )
    
    
    (1.8
    )Loss on debt refinancing
    
    
    (1.0
    )
    
    
    (275.7
    )
    
    
    (48.5
    )
    
    
    (4.8
    )
    
    
    (9.6
    )Gain (loss) on sales of businesses and
other assets
    
    
    0.4
    
    
    
    2.2
    
    
    
    1.6
    
    
    
    9.3
    
    
    
    (1.1
    )Impairment of goodwill and intangible assets
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Income taxes
    
    
    (99.7
    )
    
    
    13.3
    
    
    
    (7.6
    )
    
    
    (43.4
    )
    
    
    13.8Non-controlling interest
    
    
    (17.0
    )
    
    
    (1.3
    )
    
    
    (18.4
    )
    
    
    (35.1
    )
    
    
    (34.5
    )Other (expenses) revenues and (loss) income
from discontinued operations
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (0.8
    )
    
    
    16.5Net income (loss)
    
    $
    312.9
    
    
    $
    (142.8
    )
    
    $
    128.8
    
    
    $
    81.9
    
    
    $
    (96.5
    )OTHER FINANCIAL DATA AND RATIO:Operating income(1)
    
    $
    958.8
    
    
    $
    793.5
    
    
    $
    734.1
    
    
    $
    707.4
    
    
    $
    614.9Additions to property, plant and equipment
    
    
    468.7
    
    
    
    435.5
    
    
    
    319.8
    
    
    
    181.1
    
    
    
    131.2Comprehensive (loss) income
    
    
    356.9
    
    
    
    (56.4
    )
    
    
    160.0
    
    
    
    (25.5
    )
    
    
    (155.7
    )Ratio of earnings to fixed charges or
coverage deficiency (3)(4) (unaudited)
    
    
    2.7x
    
    
    $
    162.9
    
    
    
    1.5x
    
    
    
    1.5x
    
    
    $
    76.0
 At December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(in millions)BALANCE SHEET DATA:Cash and cash equivalents
    
    $
    26.1
    
    
    $
    34.1
    
    
    $
    97.4
    
    
    $
    108.8
    
    
    $
    103.6Total assets
    
    
    7,523.4
    
    
    
    6,533.4
    
    
    
    6,664.1
    
    
    
    6,480.1
    
    
    
    6,602.2Total debt (current and long-term portion)
    
    
    3,016.1
    
    
    
    2,766.3
    
    
    
    2,501.1
    
    
    
    2,529.0
    
    
    
    2,736.1Capital stock
    
    
    1,752.4
    
    
    
    1,752.4
    
    
    
    1,773.7
    
    
    
    1,773.7
    
    
    
    1,773.7Shareholders equity
    
    
    2,407.9
    
    
    
    2,155.3
    
    
    
    2,275.2
    
    
    
    2,204.3
    
    
    
    2,253.3Cash dividends declared
    
    
    110.0
    
    
    
    23.7
    
    
    
    105.0
    
    
    
    20.0
    
    
    
    Number of common shares outstanding
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
    
    
    
    123.6
 
 (1)
    
    Quebecor Media defines operating income, reconciled to net income (loss) under Canadian GAAP,
as net income (loss) before amortization, financial expenses, reserve for restructuring of
operations, impairment of assets and other special charges, (loss) gain on debt refinancing
and on repurchase of redeemable preferred shares of a subsidiary, gain (loss) on sales of
businesses and other assets, impairment of goodwill and intangible assets, income taxes,
non-controlling interest and income (loss) from discontinued operations. Quebecor Media
defines operating income, reconciled to net income (loss) under
U.S. GAAP, as net income (loss) before amortization, financial expenses, reserve for
restructuring of operations, impairment of assets and other 3




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special charges, loss on debt
refinancing, gain (loss) on sale of businesses and other assets, impairment of goodwill and
intangible assets, income taxes, non-controlling interest, and other (expenses) revenues and
(loss) income from discontinued operations. Operating income as defined above is not a
measure of results that is consistent with Canadian GAAP or U.S. GAAP. It is not intended to
be regarded as an alternative to other financial operating performance measures or to the
statement of cash flows as a measure of liquidity and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with Canadian GAAP or
U.S. GAAP. Our parent company, Quebecor, considers the media segment as a whole and uses
operating income in order to assess the performance of its investment in Quebecor Media. Our
management and Board of Directors use this measure in evaluating Quebecor Medias
consolidated results as well as results of Quebecor Medias operating segments. As such, this
measure eliminates the significant level of non-cash depreciation of tangible assets and
amortization of certain intangible assets, and it is unaffected by the capital structure or
investment activities of Quebecor Media and of its segments. Operating income is also
relevant because it is a significant component of Quebecor Medias annual incentive
compensation programs. A limitation of this measure, however, is that it does not reflect the
periodic costs of capitalized tangible and intangible assets used in generating revenues in
Quebecor Medias segments. Quebecor Media uses other measures that do reflect such costs,
such as cash flows from segment operations and free cash flows from continuing operations. In
addition, measures like operating income are commonly used by the investment community to
analyze and compare the performance of companies in the industries in which we are engaged.
Our definition of operating income may not be the same as similarly titled measures reported
by other companies. The following table provides a reconciliation under Canadian GAAP of
operating income to net income (loss) as presented in our consolidated financial statements: Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Reconciliation of operating income to net income (loss)
(Canadian GAAP)
(in millions of Canadian dollars)Operating incomeCable
    
    $
    642.7
    
    
    $
    512.5
    
    
    $
    413.3
    
    
    $
    363.8
    
    
    $
    289.7Newspapers
    
    
    225.9
    
    
    
    207.6
    
    
    
    222.2
    
    
    
    227.8
    
    
    
    224.8Broadcasting
    
    
    59.4
    
    
    
    42.1
    
    
    
    53.0
    
    
    
    80.5
    
    
    
    81.5Leisure and Entertainment
    
    
    27.0
    
    
    
    19.3
    
    
    
    27.0
    
    
    
    22.7
    
    
    
    14.7Interactive Technologies and Communications
    
    
    2.8
    
    
    
    7.5
    
    
    
    3.9
    
    
    
    2.3
    
    
    
    1.1Internet/Portals
    
    
    6.9
    
    
    
    10.1
    
    
    
    9.0
    
    
    
    4.5
    
    
    
    2.9Head office
    
    
    (0.8
    )
    
    
    0.5
    
    
    
    3.7
    
    
    
    (4.4
    )
    
    
    (3.1
    )963.9
    
    
    
    799.6
    
    
    
    732.1
    
    
    
    697.2
    
    
    
    611.6Amortization
    
    
    (290.4
    )
    
    
    (260.7
    )
    
    
    (231.9
    )
    
    
    (225.9
    )
    
    
    (226.6
    )Financial expenses
    
    
    (240.0
    )
    
    
    (224.6
    )
    
    
    (285.3
    )
    
    
    (314.6
    )
    
    
    (300.1
    )Reserve for restructuring of operations,
impairment of assets and other special charges
    
    
    (11.6
    )
    
    
    (18.9
    )
    
    
    0.2
    
    
    
    (2.8
    )
    
    
    (1.8
    )(Loss) gain on debt refinancing and on repurchase
of redeemable preferred shares of a subsidiary
    
    
    (1.0
    )
    
    
    (342.6
    )
    
    
    (60.0
    )
    
    
    (4.8
    )
    
    
    144.1Gain (loss) on sale of businesses and other assets
    
    
    0.4
    
    
    
    2.2
    
    
    
    0.1
    
    
    
    9.3
    
    
    
    (1.1
    )Impairment of goodwill and intangible assets
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Income taxes
    
    
    (74.8
    )
    
    
    53.7
    
    
    
    (43.5
    )
    
    
    (37.4
    )
    
    
    12.5Non-controlling interest
    
    
    (19.2
    )
    
    
    (0.4
    )
    
    
    (16.2
    )
    
    
    (31.7
    )
    
    
    (34.5
    )Income (loss) from discontinued operations
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (1.1
    )
    
    
    0.3Net income (loss)
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
    
    
    $
    203.9
 4




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##### Table of Contents



Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Reconciliation of operating income to net income (loss)
(U.S. GAAP) (in millions of Canadian dollars)Operating IncomeCable
    
    $
    640.4
    
    
    $
    508.8
    
    
    $
    411.4
    
    
    $
    362.2
    
    
    $
    292.6Newspapers
    
    
    224.8
    
    
    
    206.9
    
    
    
    221.6
    
    
    
    232.4
    
    
    
    224.4Broadcasting
    
    
    62.1
    
    
    
    43.4
    
    
    
    58.3
    
    
    
    87.5
    
    
    
    81.7Leisure and Entertainment
    
    
    26.9
    
    
    
    19.3
    
    
    
    26.2
    
    
    
    22.9
    
    
    
    15.0Interactive Technologies and Communications
    
    
    2.8
    
    
    
    7.5
    
    
    
    3.9
    
    
    
    2.3
    
    
    
    1.4Internet/Portals
    
    
    6.9
    
    
    
    10.1
    
    
    
    9.0
    
    
    
    4.5
    
    
    
    2.9Head office
    
    
    (5.1
    )
    
    
    (2.5
    )
    
    
    3.7
    
    
    
    (4.4
    )
    
    
    (3.1
    )958.8
    
    
    
    793.5
    
    
    
    734.1
    
    
    
    707.4
    
    
    
    614.9Amortization
    
    
    (287.7
    )
    
    
    (257.9
    )
    
    
    (229.6
    )
    
    
    (225.7
    )
    
    
    (226.6
    )Financial expenses
    
    
    (229.1
    )
    
    
    (220.0
    )
    
    
    (304.0
    )
    
    
    (322.2
    )
    
    
    (467.6
    )Reserve for restructuring of operations,
impairment of assets and other special charges
    
    
    (11.6
    )
    
    
    (18.9
    )
    
    
    0.2
    
    
    
    (2.8
    )
    
    
    (1.8
    )Loss on debt refinancing
    
    
    (1.0
    )
    
    
    (275.7
    )
    
    
    (48.5
    )
    
    
    (4.8
    )
    
    
    (9.6
    )Gain (loss) on sale of businesses and other assets
    
    
    0.4
    
    
    
    2.2
    
    
    
    1.6
    
    
    
    9.3
    
    
    
    (1.1
    )Impairment of goodwill and intangible assets
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Income taxes
    
    
    (99.7
    )
    
    
    13.3
    
    
    
    (7.6
    )
    
    
    (43.4
    )
    
    
    13.8Non-controlling interest
    
    
    (17.0
    )
    
    
    (1.3
    )
    
    
    (18.4
    )
    
    
    (35.1
    )
    
    
    (34.5
    )Other (expenses) revenues and (loss) income from
discontinued operations
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (0.8
    )
    
    
    16.5Net income (loss)
    
    $
    312.9
    
    
    $
    (142.8
    )
    
    $
    128.8
    
    
    $
    81.9
    
    
    $
    (96.5
    )
 
 (2)
    
    Effective January 1, 2007, the Company adopted new financial instruments, hedges and
comprehensive income standards pursuant to Canadian GAAP. See see Note 1(b) to our
consolidated financial statements included under Item 17. Financial Statements of this
annual report.(3)
    
    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.(4)
    
    Our 2006 coverage deficiency was significant due to the non-cash charge related to an
impairment of goodwill and intangible assets in the amount of $180.0 million and to our loss
on debt refinancing in the amount of $342.6 million pursuant to Canadian GAAP ($275.7 million
pursuant to U.S. GAAP). We believe cash flows from continuing operating activities and
available sources of financing will be sufficient to cover our operating, investing and
financing needs during the twelve months following December 31, 2007. B   Capitalization and Indebtedness
  C   Reasons for the Offer and Use of Proceeds
  5




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D  Risk Factors
 This section describes some of the risks that could affect our business, financial condition
and results of operations as well as the market value of our issued and outstanding Senior Notes.
The factors below should be considered in connection with any forward-looking statements in this
document and with the cautionary statements contained in the Cautionary Statement Regarding
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 with emerging technological developments, and our
inability to effectively compete could have a material adverse effect on our business, prospects,
financial condition and results of operations.
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Certain risks associated with our participation in Canadas Auction for Spectrum Licenses for
Advanced Wireless Services and other Spectrum in the 2GHz range.
  ,
    7




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We compete, and will continue to compete, with alternative technologies, and we may be required to
invest a significant amount of capital to address continuing technological evolution and
development.
  We are regularly required to make capital expenditures to remain technologically and economically
competitive. We may not be able to obtain additional capital to continue the development of our
business.
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##### Table of Contents



We may not successfully implement our business and operating strategies.
  We have grown rapidly and are seeking to continue our growth. This rapid growth presents
significant strains on our management. If we do not effectively manage our growth, our financial
results and operations could be adversely affected.
  We may not successfully integrate the operations of Osprey Media.
  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 and prevailing economic
conditions, which may cause our results to vary. In addition, traditional television audiences are
being fragmented.
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##### Table of Contents



We provide our digital television, Internet access and telephony services through a single
clustered network, which may be more vulnerable to widespread disruption.
  We depend on third-party suppliers and providers for services and other items critical to our
operations.
  We are dependent upon our information technology systems and those of certain third-parties and the
inability to enhance our systems or a security breach or disaster could have an adverse impact on
our financial results and operations.
  Malicious and abusive Internet practices could impair our cable data services.
  11




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##### Table of Contents



We may not be able to protect our services from piracy, which may have a negative effect on our
customer base and lead to a possible decline in revenues.
  We may be adversely affected by variations in the cost of newsprint. In addition, our operations
are labour-intensive, resulting in a relatively high fixed-cost structure.
    We may be adversely affected by strikes and other labour protests.
  
    
    Videotron is party to 5 collective bargaining agreements, representing approximately
2,558 employees. Of these collective bargaining agreements, one (representing
approximately 40 employees) has expired. Negotiations regarding this collective
bargaining agreement will be undertaken in 2008. Two others, representing approximately
2,308 employees, or 90% of Videotrons unionized employees, will expire in December
2009. The remaining two collective bargaining agreements, representing 210 employees,
or 8% of Videotrons unionized workforce, will expire between January 2010 and August
2011;
    
    Sun Media is party to 48 collective bargaining agreements, representing
approximately 2,004 employees. Of these, 12 collective bargaining agreements,
representing approximately 941 employees, or 47% of Sun Medias unionized workforce,
have expired. Negotiations regarding these 12 collective bargaining agreements are
either in progress or will be undertaken in 2008. The other 36 of Sun Medias
collective bargaining agreements,
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##### Table of Contents



representing approximately 1,063 employees, or 53% of
its unionized workforce, are scheduled to expire on various dates through December
2010;
 
    
    Osprey Media is party to 40 collective bargaining agreements, representing
approximately 820 employees. All of Osprey Medias collective bargaining agreements
are scheduled to expire on various date between June 2008 and April 2011;
    
    TVA Group is party to 15 collective bargaining agreements, representing
approximately 830 employees. Of this number, 7 collective bargaining agreements,
representing approximately 120 employees, or 14% of its unionized workforce, are
expired. Negotiations regarding these 7 collective bargaining agreements are either in
progress or will be undertaken in 2008. 8 of TVA Groups collective bargaining
agreements, representing
approximately 710 employees, or 86% of its unionized workforce, will expire between
October 2008 and the end of December 2009; and
    
    The other 7 collective bargaining agreements, representing approximately 370 or 6%
of our unionized employees, will expire between the end of April 2009 and June 2010.
 Journal de Québec Journal de Montréal
 We may be adversely affected by litigation and other claims.
  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 for us to fulfill our
obligations, including our obligations under our Senior Notes.
  13




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##### Table of Contents




    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from continuing
operations to make interest and principal payments on our indebtedness, reducing the
availability of our cash flow to fund capital expenditures, working capital and other
general corporate purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our businesses and
the industries in which we operate;
    
    place us at a competitive disadvantage compared to our competitors that have less
debt or greater financial resources; and
    
    limit, along with the financial and other restrictive covenants in our indebtedness,
among other things, our ability to borrow additional funds on commercially reasonable
terms, if at all.
  Restrictive covenants in our outstanding debt instruments may reduce our operating and financial
flexibility, which may prevent us from capitalizing on certain business opportunities.
  
    
    borrow money or sell preferred stock;
    
    issue guarantees of debt;
    
    make certain types of investments;
    
    pay dividends and make other restricted payments;
    
    create or permit certain liens;
    
    use the proceeds from sales of assets and subsidiary stock;
    
    enter into asset sales;
    
    create or permit restrictions on the ability of our restricted subsidiaries, if any,
to pay dividends or make other distributions;
    
    engage in certain transactions with affiliates; and
    
    enter into mergers, consolidations and transfers of all or substantially all of our
assets.
  14




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##### Table of Contents



We are a holding company and depend on our subsidiaries to generate sufficient cash flow to meet
our debt service obligations, including payments on our Senior Notes.
   We may need to refinance certain of our indebtedness. Our inability to do so on favourable terms,
or at all, could have a material adverse effect on us.
  We may be adversely affected by exchange rate fluctuations.
    15




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##### Table of Contents



We are subject to extensive government regulation. Changes in government regulation could adversely
affect our business, financial condition, prospects and results of operations.
  Broadcasting Act Telecommunications Act Broadcasting Act Telecommunications Act Broadcasting Act Telecommunications Act Radiocommunication Act Competition Act
   16




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##### Table of Contents



Broadcasting Act
 Radiocommunication Act i.e. i.e. Radiocommunication Act
 Telecommunications
Act
    The CRTC may not renew our existing distribution licenses or grant us new licenses on acceptable
terms, or at all.
 17




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##### Table of Contents



We are required to provide third-party Internet service providers with access to our cable systems,
which may result in increased competition.
     We may have to support increasing costs in securing access to support structures needed for our
network.
 Telecommunications Act
  We are subject to a variety of environmental laws and regulations.
  18




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##### Table of Contents



Our auditors are not required to issue a report on our internal control over financial reporting in
this annual report.
   There is no public market for our Senior Notes.
   Non-U.S. holders of our Senior Notes are subject to restrictions on the resale or transfer of our
notes.
  We may not be able to finance an offer to purchase our Senior Notes as required by the respective
indentures governing our notes following a change of control 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.
  19




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##### Table of Contents



Canadian bankruptcy and insolvency laws may impair the trustees ability to enforce remedies under
our Senior Notes.
 Bankruptcy and Insolvency Act Companies
Creditors Arrangement Act
 Bankruptcy and Insolvency Act Companies Creditors Arrangement Act
 U.S. investors in our Senior Notes may have difficulties enforcing civil liabilities.
  20




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##### Table of Contents



ITEM 4   INFORMATION ON THE COMPANY
 A  History and Development of Quebecor Media
 CT
Corporation System
 Companies Act
   
    
    On January 9, 2008, Quebecor Media, through a wholly-owned subsidiary, commenced an
offer (the Offer) to purchase for cash all of the issued and outstanding common
shares of Nurun (including common shares issuable upon the exercise of outstanding
options, conversion or exchange rights) not already held by Quebecor Media and its
affiliates, at a price of $4.75 per common share. As of January 9, 2008, Quebecor
Media, together with its affiliates, held 19,576,605 common shares of Nurun,
representing approximately 57.5% of the currently issued and outstanding common shares.
The Offer was open until February 19, 2008. On February 19, 2008, Quebecor Media
announced that it had taken up and acquired an aggregate of 14,640,550 Nurun common
shares, representing 91.54% of all Nurun common shares not previously held by Quebecor
Media and its affiliates, resulting in Quebecor Media owning, directly and indirectly,
96.20% of all issued and outstanding Nurun common shares, and, on February 26, 2008,
Quebecor Media announced that it had acquired the remaining Nurun common shares by
means of a statutory compulsory acquisition procedure (commonly known as a squeeze-out)
under the applicable provisions of the Canada Business Corporations Actat the same
price as the offer price. The Nurun common shares were delisted from the Toronto Stock
Exchange on February 27, 2008. The aggregate cash consideration paid by Quebecor Media
pursuant to the Offer was approximately $75.4 million.
    
    On October 31, 2007, Sun Media entered into a subordinated loan agreement with
Quebecor Media of $237.5 million. Sun Media used the proceeds of this subordinated
financing and $43.4 million of cash from continuing operations to repay the balance of
its Term Loan B, and settle related hedging contracts for a total cash consideration of
$277.8 million. In addition, on October 31, 2007, Sun Media entered into a Fifth
Amending Agreement to its credit agreement. The agreement extends the term to October
31, 2012 and modifies covenants related to leverage and interest coverage ratios,
removes the fixed charge ratio and modifies certain definitions.
 21




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##### Table of Contents




    
    On October 5, 2007, Quebecor Media completed a placement of US$700.0 million
aggregate principal amount of its 7 3/4% senior notes due 2016. Quebecor Media used the
net proceeds of $672.2 million (including accrued interest of $16.6 million and before
financing costs of $9.8 million) from the placement, as well as its cash and cash
equivalents, to repay $420.0 million drawn on the senior bridge credit facility entered
into to finance the acquisition of Osprey Media, to repay US$179.7 million outstanding
under Sun Media Corporations Term Loan B, and to settle the $106.0 million liability
related to derivative financial instruments connected to the Sun Media Corporation Term
Loan B. The new senior notes were offered on a private placement basis principally in
the United States. Pursuant to the terms and conditions set forth in a registration
rights agreement, we agreed to file an exchange offer registration statement with the
SEC with respect to a registered offer to exchange without novation these
privately-placed notes for our new SEC-registered 7 3/4 % Senior Notes due 2016
evidencing the same continuing indebtedness and having substantially identical terms.
We filed a registration statement on Form F-4 with the SEC on November 20, 2007 and
commenced the registered exchange offer on February 21, 2008. We currently anticipate
completing the registered exchange offer in early April 2008.
    
    In early August 2007, Quebecor Media completed its acquisition of Osprey Media for
an aggregate purchase price of approximately $414.4 million (excluding assumed Osprey
Media debt of $161.8 million). The purchase price was financed through a senior bridge
credit facility that Quebecor Media fully repaid with a portion of the proceeds of the
offering of its Senior Notes in October 2007. Osprey Media is one of Canadas leading
publishers of daily and non-daily newspapers, magazines and specialty publications.
With the acquisition of Osprey Media, Quebecor Media became the largest newspaper
publisher in Canada, based on total paid and unpaid circulation.
    
    On November 28, 2007 and December 14, 2007, Industry Canada released a policy
framework and a licensing framework, respectively, for the 3G Spectrum Auction.
Several of the framework elements are expressly intended to encourage new entrants into
the Canadian mobile wireless industry, most notably the setting aside of 40 MHz (out of
a total of 105 MHz) of spectrum nationally for new entrants, and a decision to mandate
digital roaming and antenna tower and site sharing by way of new licence conditions
applicable to all existing and new mobile wireless licensees. These licence conditions
were finalized on February 29, 2008. The 3G Spectrum Auction is scheduled to commence
on May 27, 2008. We have announced that we have filed an application to participate in
this auction.
    
    During the financial years ended December 31, 2006 and 2005, Quebecor Medias
interest in TVA Group increased as a result of the Substantial Issuer Bid dated May 19,
2005 and various Normal Course Issuer Bids. In 2006 and 2005 respectively, 9,800 and
3,739,599 Class B shares were repurchased under the Normal Course Issuer Bids and the
Substantial Issuer Bid and for cash consideration of $0.2 million and $81.9 million,
respectively. As a result of these repurchases, Quebecor Medias interest in TVA Group
increased by 5.5 percent, from 39.7% on January 1, 2005 to 45.2% as of December 31,
2007.
    
    Between the refinancing on January 17, 2006 and the end of 2006, the balance of
Videotrons revolving credit facility was reduced by $188.0 million, using cash flows
provided by operating activities, and repayments and repurchases totalling $39.0
million were made with respect to the bank credit facilities of Sun Media Corporation
and Quebecor Media. On December 29, 2006, Sun Media Corporation repurchased a portion
of its term loan B for $15.0 million and closed out the corresponding portion of its
hedge agreements.
    
    On January 17, 2006, Quebecor Media issued US$525.0 million aggregate principal
amount of its 7 3/4% Senior Notes due March 2016. Quebecor Media also established new
credit facilities consisting of a Term Loan A credit facility in the amount of $125.0
million, maturing in 2011, a Term Loan B credit facility in the amount of US$350.0
million, maturing in 2013, and a five-year revolving credit facility in the amount of
$100.0 million, expiring in 2011.
    
    Also on January 17, 2006, Quebecor Media repurchased US$561.6 million in aggregate
principal amount of its Senior Notes due 2011 (representing 95.7% of the Senior Notes
due 2011 outstanding) and US$275.6 million in aggregate principal amount at maturity of
our Senior Discount Notes due 2011 (representing 97.4% of the Senior Discount Notes due
2011 outstanding). On July 15, 2006, Quebecor Media purchased the balance of its
then-outstanding Senior Notes due 2011 and Senior Discount Notes due 2011. Quebecor
Media paid total cash consideration of US$1.4 billion to purchase the notes, including
the premium and the cost of settlement of
 22




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cross-currency swap agreements. The
refinancing entailed disbursements exceeding the book value of the
repurchased notes, including repayment of liabilities related to cross-currency swap
agreements and disbursements related to the loss on debt refinancing and on swap
agreements, by $380.0 million, which was financed by issuing long-term debt. In respect
of these repurchases, Quebecor Media recognized a $342.1 million loss on debt
refinancing ($218.7 million net of income tax) in 2006. See also Item 5. Operating and
Financial Review and Prospects in this annual report.
 
    
    On December 12, 2005, Quebecor Media completed its acquisition of Sogides Ltée (now
Groupe Sogides inc.), which we refer to as Sogides, a major Québec-based book
publishing and distribution group which owns the publishing houses Les Éditions de
lHomme, Le Jour, Utilis, Les Presses Libres and Groupe Ville-Marie Littérature inc.
(which includes LHexagone, VLB Éditeur and Typo), and owns the distributor Messageries
ADP, which is a distributor for more than 160 Québec-based and foreign publishing
houses. With this acquisition, Quebecor Media offers a more complete selection of books
by Québec authors, will be able to promote Québec writers in Europe through the Sogides
network on that continent, and becomes the largest Québec-based publisher and
distributor of French-language books in the Province of Québec. For the acquisition of
Sogides, we paid cash consideration of $24.0 million, and an additional contingent
amount of $5.0 million, which was paid in January 2008.
    
    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 due 2011 and Senior Discount Notes due
2011.
    
    In August 2005, we announced a plan to invest in a new printing facility located in
Toronto, Ontario. In early 2007, Sun Media transferred the printing of 24 Hours
Torontoto this new facility and, in late 2007, began printing a portion of the Toronto
Sunat this site. In addition, in August 2005, we announced a plan to relocate the
printing of certain Sun Media publications to a new 235,000 square foot printing
facility owned by us, located in Saint-Janvier-de-Mirabel, Québec. During the fourth
quarter of 2006, this new printing facility began printing certain Québec community
publications, as well as the Ottawa Sun, 24 Hoursin Ottawa and 24 Heures(Montréal and
Ottawa-Gatineau). In 2007, portions of the Journal de Montréaland the Journal de
Québecwere also printed at this site. The new facilities should make it possible to
further consolidate some of Quebecor Medias printing operations in Ontario and Québec,
improve the quality of its newspaper products and create additional revenue
opportunities as well as strengthen the convergence among our Toronto media properties.
Since the implementation of the Toronto and Saint-Janvier-de-Mirabel, Québec
initiatives, Quebecor Media has acquired Osprey Media and has been actively reviewing
Osprey Medias operations in order to leverage the synergies between its current
operations and those of Osprey Media. In addition, Quebecor Media has undertaken a
number of production and sales initiatives with its clients with a view to improving
the product and service offering with more types of printed products as well as
improving the turnaround time for the printing of daily publications. Such integration,
production and sales initiatives will require additional printing capacity. On October
11, 2007, Quebecor Media acquired a building from Quebecor World for a total net
consideration of $62.5 million. At the same time, Quebecor World signed a long term
operating lease with Quebecor Media to rent a small part of the building for a 17-year
period. The two transactions were settled by means of the payment of a net cash
consideration of $43.9 million to Quebecor World on the transaction date, and an
undertaking by Quebecor Media to pay a sale price balance of $7.0 million in 2013. The
building houses three new presses owned by Quebecor Media and is used to print some of
its Ontario newspapers.
    
    On July 19, 2005, we repurchased and retired US$128.2 million in aggregate principal
amount of our 11
1/8Senior Notes due 2011 and US$12.1 million in aggregate
principal amount at maturity of our 13 3/4% Senior Discount Notes due 2011 pursuant to
cash tender offers commenced on June 20, 2005. We paid aggregate cash consideration of
$215.3 million to purchase these notes, including the redemption premium and the cost
of settlement of related cross-currency swap agreements, recognizing a $60.8 million
loss on settlement of debt ($41.0 million after taxes).
 23




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##### Table of Contents




    
    In January 2005, Vidéotron launched its telephony services in the Province of
Québec, using VoIP technology. Vidéotron became the first major cable company in Canada
to offer consumers residential telephone service over cable. See Business Overview 
Cable below.
 B  Business Overview
 Overview
    Competitive Strengths
  
    
    cross-promote our brands, programs and other content across multiple media
platforms;
    
    provide advertisers with an integrated solution for local, regional and national
multi-platform advertising;
    
    offer a differentiated, bundled suite of entertainment, information and
communication services and products, including digital television, cable Internet
access, video-on-demand and other interactive television services, as well as
residential and commercial cable telephony services using VoIP technology, and mobile
wireless telephony services on an MVNO-basis utilizing wireless voice and data services
provided by Rogers Wireless Inc. (Rogers Wireless), a subsidiary of Rogers
Communications Inc.;
 24




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##### Table of Contents




    
    deliver high-quality services and products, including, for example, our standard
cable Internet access service that enables our customers to download data at a higher
speed than that currently offered by standard digital subscriber line, or DSL,
technology, and the widest range of French-language programming in Canada;
    
    leverage our content, management, sales and marketing and production resources to
provide superior information and entertainment services to our customers;
    
    extend our market reach by leveraging our multimedia platform and cross-marketing
expertise and experience to enhance our national media platform;
    
    leverage our single, highly contiguous network that covers approximately 80% of
Québecs total addressable market and five of the provinces top six urban areas. We
believe that our single cluster and network architecture provides many benefits,
including a higher quality and more reliable network, the ability to rapidly and
efficiently launch and deploy new products and services, and a lower cost structure
through reduced maintenance and technical support costs; and
    
    leverage our advanced broadband network, 99% of which is bi-directional which allows
us to offer a wide range of advanced services on the same media, such as analog and
digital television, video-on-demand, cable Internet access and cable telephony
services. We are committed to maintaining and upgrading our network capacity and, to
that end, we currently anticipate that future capital expenditures over the next five
years will be required to accommodate the evolution of our products and services and to
meet the demand for increased capacity resulting from the launch of our telephony
service and the offering of our other advanced products and services.
  Our Strategy
  
    
    Introduce new and enhanced products and services.We expect a significant portion
of our growth in our Cable segment revenues to be driven by the introduction of new
products and services (such as Wideband internet technology that is expected to enable
us to offer customers internet access speeds of up to 100 mbps) and by the continuing
penetration of our existing suite of products and services such as digital cable
services, cable Internet access, cable telephony services, high-definition television,
video-on-demand and interactive television. Our objective is also to increase our
revenue per subscriber by focusing sales and marketing efforts on the bundling of these
value-added products and services.
    
    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 largest newspaper publisher, and a
 25




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##### Table of Contents



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 Videotron subsidiary holds cable licenses that
cover approximately 80% of Québecs approximately 3.3 million homes and commercial
premises passed by cable. Geographic clusters facilitate bundled service offerings and,
in addition, allow us to tailor our offerings to certain demographic markets. We aim to
leverage the highly clustered nature of our systems to enable us to use marketing
dollars
more efficiently and to enhance customer awareness, increase use of products and
services and build brand support.
    
    Maximize customer satisfaction and build customer loyalty.Across our media
platform, we believe that maintaining a high level of customer satisfaction is critical
to future growth and profitability. An important factor in our historical growth and
profitability has been our ability to attract and satisfy customers with high quality
products and services and we will continue our efforts to maximize customer
satisfaction and build customer loyalty.
    
    Manage expenses through success-driven capital spending and technology improvements.
In our Cable segment, we aim to support the growth in our customer base and bandwidth
requirements through strategic success-driven modernizations of our network and
increases in network capacity. In our Newspaper segment, we have undertaken
restructurings of certain printing facilities and news production operations, and
invested in certain technology improvements with a view to modernizing our operations
and cost structure. In addition, we continuously seek to manage our salaries and
benefits expenses, which comprise a significant portion of our costs.
  Cable
    26




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##### Table of Contents



Cable Television Industry Overview
  Twelve Months Ended August 31,2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    CAGR(1)(Homes passed and basic cable customers in millions, dollars in billions)CanadaIndustry Revenue
    
    $
    4.0
    
    
    $
    4.4
    
    
    $
    4.7
    
    
    $
    4.9
    
    
    $
    6.0
    
    
    
    10.7
    %Homes Passed(2)
    
    
    10.5
    
    
    
    10.9
    
    
    
    10.5
    
    
    
    11.2
    
    
    
    12.7
    
    
    
    4.9
    %Basic Cable Customers
    
    
    7.2
    
    
    
    7.1
    
    
    
    6.8
    
    
    
    6.8
    
    
    
    7.4
    
    
    
    0.7
    %Basic Penetration
    
    
    68.6
    %
    
    
    65.1
    %
    
    
    64.8
    %
    
    
    60.7
    %
    
    
    58.3
    %
    
    
    (4.0
    )%
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Twelve Months Ended August 31,2003
    
    2004
    
    2005
    
    2006
    
    2007
    
    CAGR(3)(Homes passed and basic cable customers in millions, dollars in billions)U.S.Industry Revenue
    
    US$
    51.3
    
    
    US$
    57.6
    
    
    US$
    62.3
    
    
    US$
    68.2
    
    
    US$
    74.7
    
    
    
    7.8
    %Homes Passed(2)
    
    
    102.9
    
    
    
    108.2
    
    
    
    110.8
    
    
    
    111.6
    
    
    
    123.0
    
    
    
    3.6
    %Basic Cable Customers
    
    
    66.0
    
    
    
    65.4
    
    
    
    65.4
    
    
    
    65.6
    
    
    
    65.1
    
    
    
    (0.3
    )%Basic Penetration
    
    
    64.1
    %
    
    
    60.7
    %
    
    
    59.0
    %
    
    
    58.8
    %
    
    
    52.9
    %
    
    
    (4.7
    )%
 
 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 2002 through 2006.(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 2003 through 2007.   Expansion of Digital Distribution and Programming
    28




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Products and Services
     Traditional Cable Television Services
   29




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
    
    Basic Service.All of our customers receive a package of basic programming,
consisting of local broadcast television stations, the four U.S. commercial networks
and PBS, selected Canadian specialty programming services, and local and regional
community programming. Our basic service customers generally receive 27 channels on
basic cable.
    
    Extended Basic Service.This expanded programming level of services, which is
generally comprised of approximately 18 channels, includes a package of French- and
English-language specialty television programming and U.S. cable channels in addition
to the basic service channel line-up described above. Branded as Telemax, this
service was introduced in almost all of our markets largely to satisfy customer demand
for greater flexibility and choice.
 Advanced Products and Services
  
    
    Cable Internet Access.Leveraging our advanced cable infrastructure, we offer cable
Internet access to our residential customers primarily via cable modems attached to
personal computers. We provide this service at speeds of up to 360 times the speed of a
conventional telephone modem. In February 2008, we also effected a limited launch (to
our customers in Laval, Québec only) of our Wideband services, which offer speeds of up
to 900 times the speed of a conventional telephone modem. We currently plan to extend
the coverage of this offering later in 2008. As of December 31, 2007, we had 932,989
cable Internet access customers, representing 57.0% of our basic customers and 37.4% of
our total homes passed. Based on internal estimates, we are the largest provider of
Internet access services in the areas we serve with an estimated market share of 52.9%
as of December 31, 2007.
    
    Digital Television.We have installed headend equipment capable of delivering
digitally encoded transmissions to a two-way digital-capable set-top box in the
customers home. This digital connection provides significant advantages. In
particular, it increases channel capacity, which allows us to increase both programming
and service offerings while providing increased flexibility in packaging our services.
Our basic digital package includes 25 television channels, 45 audio services providing
CD-quality music, 16 AM/FM radio channels, an interactive programming guide as well as
television-based e-mail capability. Our extended digital basic television offering,
branded as à la carte (i.e.individual channel selections), offers customers the
ability to select more than 200 additional channels of their choice, including U.S.
super-stations and other special entertainment programs, allowing them to customize
their choices. This also offers customers significant programming flexibility including
the option of French-language only, English-language only or a combination of French-
and English-language programming, as well as many foreign-language channels. We also
offer pre-packaged themed service tiers in the areas of news, sports and discovery.
Customers who purchase basic service and one customized package can also purchase
channels on an à la cartebasis at a specified cost per channel per month. As part of
our digital service offering, customers can also purchase near-video-on-demand services
on a per-event basis. As of December 31, 2007, we had 768,211 customers for our digital
television service, representing 46.9% of our basic customers and 30.8% of our total
homes passed. Our customers currently have the option to purchase or lease the digital
set-top boxes required for digital service. We believe that the sale of equipment to
customers improves customer retention, and, as of December 31, 2007, we had over
953,000 set-top boxes deployed, of which approximately 96% were sold to customers and
4% were leased.
    
    Cable Telephony. In January 2005, we launched our cable telephony service using
VoIP technology in selected areas of the Province of Québec, and since then we have
been progressively rolling-out this offering among our other residential and commercial
customers in the Province of Québec. As of December 31, 2007, our cable telephony
service is available to 96.9% of our homes passed. Our cable telephony service includes
both local and long-distance calling, and permits all of our telephony customers, both
residential and commercial, to access all service features mandated by CRTC Decision
97-8 and other regulatory decisions and orders,
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##### Table of Contents



including: enhanced 911 Emergency
service; number portability from and to any local exchange carrier; a message relay
service allowing subscribers to communicate with the hearing impaired; and a variety of
personal privacy features including universal call tracing. We also offer free basic
listings in local telephone directories, as well as full operator assistance,
including: operator-assisted calls; collect and third-party calls; local, national and
international directory assistance; person-to-person calls; and busy-line verification.
Finally, we offer as part of our telephony service a host of convenient, optional
features, including: name and number caller ID; call waiting with long-distance distinctive ring and audible indicator tone; name and number
caller ID on call waiting; visual indicator of a full voice mail box and audible message
waiting indicators; automatic call forwarding; three-way conference calling; automatic
recalling; and last incoming call identification and recall. VoIP allows us to deliver
new cutting-edge features, such as voice-mail to e-mail functionality launched in
December 2005, which allows customers to access their voice-mail via e-mail in the form
of audio-file attachments. In keeping with our competitive strength of providing
differentiated, bundled service offerings, we offer free installation of our telephony
service to existing cable television and/or Internet customers and to new bundled
customers. We also offer discounts to our bundled customers, when compared to the sum of
the prices of the individual services provided to these customers. In addition, we
offer discounts for a second telephone line subscription. On October 24, 2007, we
launched our Softphone service, our new computer-based service providing users with more
flexibility when traveling, the ability to make local calls anywhere in the world, and
new communications management capabilities. As of December 31, 2007, we had 636,666
subscribers to our cable telephony service (including 314 Softphone customers),
representing a penetration rate of 38.8% of our basic cable subscribers and 25.5% of our
homes passed.
    
    Mobile Wireless Telephony Services. On August 10, 2006, we launched our MVNO-based
mobile wireless telephony services in the Québec City area, utilizing the Rogers
Wireless GSM/GPRS network. Since then, the service has been completely rolled out
throughout the Province of Québec. Through our strategic relationship with Rogers
Wireless, the operator of Canadas largest integrated wireless voice and data network,
we offer Québec consumers a quadruple play of television, broadband Internet, cable
telephony and Videotron branded mobile wireless telephony services. Our services
include international roaming and popular options such as voicemail, call waiting, call
display, call forwarding, text messaging and conference calling. We are responsible for
acquiring and billing customers, as well as for providing customer support under our
own brand. As of December 31, 2007, over 45,682 lines had been activated. In order to
offer our customers integrated mobile multimedia services and be more competitive, we
have filed an application to participate in Canadas 3G Spectrum Auction, which is
scheduled to commence on May 27, 2008.
    
    Video-On-Demand.Video-on-demand service enables digital cable customers to rent
from a library of movies, documentaries and other programming through their digital
set-top box. Our digital cable customers are able to rent their video-on-demand
selections for a period of 24 hours, which they are then able to watch at their
convenience with full stop, rewind, fast forward, pause and replay functionality during
that period. Our video-on-demand service is available to 99% of the homes passed by us.
We also offer pay television channels on a subscription basis that permit our customers
to access and watch any of their video-on-demand selections at any time at their
convenience.
    
    Other Products and Services.To maintain and enhance our market position, we are
focused on increasing penetration of high-definition television and personal video
recorders, as well as other high-value products and services.
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##### Table of Contents



As of December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003Homes passed(1)
    
    
    2,497,403
    
    
    
    2,457,213
    
    
    
    2,419,335
    
    
    
    2,383,443
    
    
    
    2,351,344CableBasic customers(2)
    
    
    1,638,097
    
    
    
    1,572,411
    
    
    
    1,506,113
    
    
    
    1,452,554
    
    
    
    1,424,144Penetration(3)
    
    
    65.6
    %
    
    
    64.0
    %
    
    
    62.3
    %
    
    
    60.9
    %
    
    
    60.6
    %Digital customers
    
    
    768,211
    
    
    
    623,646
    
    
    
    474,629
    
    
    
    333,664
    
    
    
    240,863Penetration(4)
    
    
    46.9
    %
    
    
    39.7
    %
    
    
    31.5
    %
    
    
    23.0
    %
    
    
    16.9
    %Number of digital set-top boxes
    
    
    953,393
    
    
    
    738,530
    
    
    
    537,364
    
    
    
    362,053
    
    
    
    257,350Dial-up Internet AccessDial-up customers
    
    
    9,052
    
    
    
    13,426
    
    
    
    18,034
    
    
    
    23,973
    
    
    
    28,821Cable Internet AccessCable modem customers
    
    
    932,989
    
    
    
    791,966
    
    
    
    637,971
    
    
    
    502,630
    
    
    
    406,277Penetration(3)
    
    
    37.4
    %
    
    
    32.2
    %
    
    
    26.4
    %
    
    
    21.1
    %
    
    
    17.3
    %Telephony ServicesCable telephony customers
    
    
    636,666
    
    
    
    397,860
    
    
    
    162,979
    
    
    
    2,135
    
    
    
    Penetration(3)
    
    
    25.5
    %
    
    
    16.2
    %
    
    
    6.7
    %
    
    
    0.1
    %Wireless telephony lines
    
    
    45,682
    
    
    
    11,826
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Homes passed means the number of residential premises, such as single dwelling units or
multiple dwelling units, and commercial premises passed by the cable television distribution
network in a given cable system service area in which the programming services are offered.(2)
    
    Basic customers are customers who receive basic cable service in either the analog or digital
mode. The numbers of basic customers for the years 2003 and 2004 were restated in order to
permit such numbers to be compared to the 2005 through 2007 numbers of basic customers.(3)
    
    Represents customers as a percentage of total homes passed.(4)
    
    Represents customers for the digital service as a percentage of basic customers.  Business Telecommunications Services
  Video Stores
  32




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##### Table of Contents



Pricing of our Products and Services
    Service
    
    Price RangeBasic analog cable(1)
    
    $15.07  $29.88Extended basic analog cable(1)
    
    $28.50  $42.19Basic digital cable
    
    $13.98  $15.98Extended basic digital cable(1)
    
    $27.98  $76.98Pay-television
    
    $3.99  $29.99Pay-per-view (per movie or event)
    
    $3.99  $54.99Video-on-demand (per movie or event)
    
    $0.99  $29.99Dial-up Internet access
    
    $9.95  $19.95Cable Internet access(2)
    
    $27.95  $89.95Cable telephony
    
    $16.95  $22.95Mobile wireless telephony
    
    $22.65  $78.35
 
 (1)
    
    These rates reflect price increases, effective March 15, 2008, of $1.00
on basic analog cable, extended basic analog cable and extended basic digital
cable.(2)
    
    These rates reflect price increases, effective March 1, 2008, of $1.00
on basic internet and $2.00 on high-speed internet. Our Network Technology
   33




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##### Table of Contents



450 MHz
    
    480 to
    
    750 to
    
    Two-Wayand Under
    
    625 MHz
    
    860 MHz
    
    CapabilityDecember 31, 2003
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2004
    
    
    3
    %
    
    
    23
    %
    
    
    74
    %
    
    
    97
    %December 31, 2005
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %December 31, 2006
    
    
    2
    %
    
    
    23
    %
    
    
    75
    %
    
    
    98
    %December 31, 2007
    
    
    1
    %
    
    
    2
    %
    
    
    97
    %
    
    
    99
    %
    Marketing and Customer Care
  34




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##### Table of Contents




    
    continue to rapidly deploy advanced products and services such as cable Internet
access, digital television, cable telephony and mobile wireless telephony services;
    
    design product offerings that provide greater opportunity for customer entertainment
and information choices;
    
    target marketing opportunities based on demographic data and past purchasing
behavior;
    
    develop targeted marketing programs to attract former customers, households that
have never subscribed to our services and customers of alternative or competitive
services;
    
    enhance the relationship between customer service representatives and our customers
by training and motivating customer service representatives to promote advanced
products and services;
    
    leverage the retail presence of Le SuperClub Vidéotron and third-party commercial
retailers;
    
    cross-promote the wide variety of content and services offered within the Quebecor
Media group (including, for example, the content of TVA Group productions and the 1-900
service for audience voting during reality television shows popular in Québec) in order
to distribute our cable, data transmission, cable telephony and mobile wireless
telephony services to our existing and future customers;
    
    introduce new value-added packages of products and services, which we believe
increases average revenue per user, or ARPU, and improves customer retention; and
    
    leverage our business market, using the Videotron Telecom network and expertise with
our commercial customer base, which should enable us to offer additional bundled
services to our customers and may result in new business opportunities.
   Programming
   35




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##### Table of Contents



Competition
  
    
    Over-the-air Television and Providers of Other Entertainment.Cable television has
long competed with broadcast television, which consists of television signals that the
viewer is able to receive without charge using an over-the air antenna. The extent of
such competition is dependent upon the quality and quantity of broadcast signals
available through over-the-air reception compared to the services provided by the local
cable system. Cable systems also face competition from alternative methods of
distributing and receiving television signals and from other sources of entertainment
such as live sporting events, movie theatres and home video products, including
videotape recorders, DVD players and video games. The extent to which a cable
television service is competitive depends in significant part upon the cable systems
ability to provide a greater variety of programming, superior technical performance and
superior customer service than are available over the air or through competitive
alternative delivery sources.
 
    
    Direct Broadcast Satellite.Direct broadcast satellite, or DBS, is a significant
competitor to cable systems. DBS delivers programming via signals sent directly to
receiving dishes from medium- and high-powered satellites, as opposed to cable delivery
transmissions. This form of distribution generally provides more channels than some of
our television systems and is fully digital. DBS service can be received virtually
anywhere in Canada through the installation of a small rooftop or side-mounted antenna.
Like digital cable distribution, DBS systems use video compression technology to
increase channel capacity and digital technology to improve the quality of the signals
transmitted to their customers.
 
    
    DSL.The deployment of digital subscriber line technology, known as DSL, provides
customers with Internet access at data transmission speeds greater than that available
over conventional telephone lines. DSL service is comparable to cable-modem Internet
access over cable systems. We also face competition from other providers of DSL
service.
 
    
    VDSL.The CRTC and Industry Canada have authorized video digital subscriber line,
or VDSL, services. VDSL technology increases the capacity of DSL lines available, which
permits the distribution of digital video. We expect that we will soon face competition
from incumbent local exchange carriers, which have been granted licenses to launch
video distribution services using this technology. ILECs are currently installing this
new technology, which operates over the copper lines in phone lines, in our markets.
This technology can achieve speeds as high as 52 Mbps upstream, but VDSL can only
operate over a short distance of about 4,000 feet (1,200 metres). As a result,
telephone companies are replacing many of their main feeds with fibre-optic cable. By
placing a VDSL transceiver, a VDSL gateway, in larger multiple dwelling units, the
distance limitation is overcome. Further, as a result of such improvements in broadband
speeds over DSL and the evolution of compression technology, incumbent telephone
carriers in our service areas may be in a position to enable delivery of digital
television over their cable Internet connections (IPTV) in the coming years. Advanced
trials are underway in Canada and in other countries. Tests in our service markets are
still being performed. If successful, IPTV may provide telecommunications carriers with
a way to offer services similar to those offered by cable operators in the consumer
market.
 
    
    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.
 36




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##### Table of Contents




    
    Other Cable Distribution.Currently, a cable operator offering television
distribution and providing cable-modem Internet access service is serving the greater
Montréal area. This cable operator, which has approximately 15,000 customers, is owned
by the regional ILEC.
 
    
    Wireless Distribution.Cable television systems also compete with wireless program
distribution services such as multi-channel multipoint distribution systems, or MDS.
This technology uses microwave links to transmit signals from multiple transmission
sites to line-of-sight antennas located within the customers premises.
 
    
    Grey and Black Market DBS Providers.Cable and other distributors of television
signals continue to face competition from the use of access codes and equipment that
enable the unauthorized decoding of encrypted satellite signals, from unauthorized
access to our analog and digital cable signals (black market) and from the reception of
foreign signals through subscriptions to foreign satellite television providers that
are not lawful distributors in Canada (grey market).
 
    
    Telephony Service.Our cable telephony service competes against other telephone
companies, including both the incumbent telephone service provider in Québec, which
controls a significant portion of the telephony market in Québec, as well as other VoIP
telephony service providers and mobile wireless telephone service providers.
 
    
    Mobile wireless telephony services.Our mobile wireless telephony service competes
against a mix of competitors, some of them being active in all the products we offer,
while others only offer mobile wireless telephony services in our market. If we were
to become a facilities-based wireless provider, we would compete primarily with
established incumbent wireless service providers and MVNOs, and could in the future
compete with other new entrant companies, including other MVNOs. In addition, users of
wireless voice and data systems may find their communications needs satisfied by other
current or developing technologies, such as WIFI, hotspots or trunk radio systems,
which have the technical capability to handle mobile telephone calls. Our
facilities-based wireless provider business would also compete with rivals for dealers
and retail distribution outlets.
 
    
    Other Internet Service Providers.In the Internet access business, cable operators
compete against other Internet service providers offering residential and commercial
Internet access services. The CRTC requires the large Canadian incumbent cable
operators to offer access to their high speed Internet system to competitive Internet
service providers at mandated rates.
 Newspapers
  Journal de Montréal Toronto Sun 24 Hours Vancouver 24 Hours 24
Heures 24 Hours 24 Heures 24 Hours 24
Hours
 37




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##### Table of Contents



Acquisition of Osprey Media
  Canadian Newspaper Publishing Industry Overview
  London Free Press
  38




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##### Table of Contents



Advertising and Circulation
      Newspaper Operations
  
    
    the Urban Daily Group; and
 
    
    the Community Newspaper Group.
 39




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##### Table of Contents



24 Hours Toronto Sun Ottawa Sun 24 Hours 24 Heures Journal de Montréal Journal de Québec
 The Urban Daily Group
  Paid
daily newspapers
 London Free Press
 ®
 ®
 40




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##### Table of Contents



2007 Average Readership
    
    Market Position byNewspaper
    
    Saturday
    
    Sunday
    
    Mon-Fri
    
    Paid Circulation(1)Journal de Montréal
    
    
    611,600
    
    
    
    397,500
    
    
    
    588,000
    
    
    
    1Journal de Québec
    
    
    199,500
    
    
    
    119,900
    
    
    
    165,700
    
    
    
    1Toronto Sun
    
    
    515,200
    
    
    
    731,100
    
    
    
    638,000
    
    
    
    2London Free Press
    
    
    170,700
    
    
    
    111,600
    
    
    
    167,000
    
    
    
    1Ottawa Sun
    
    
    106,400
    
    
    
    98,000
    
    
    
    123,100
    
    
    
    2Winnipeg Sun
    
    
    97,500
    
    
    
    92,200
    
    
    
    115,700
    
    
    
    2Edmonton Sun
    
    
    131,300
    
    
    
    158,100
    
    
    
    168,100
    
    
    
    2Calgary Sun
    
    
    121,400
    
    
    
    148,100
    
    
    
    155,600
    
    
    
    2Total Average Readership
    
    
    1,953,600
    
    
    
    1,856,500
    
    
    
    2,121,200
 
 (1)
    
    Based on paid circulation data published by the Audit Bureau of Circulations in September 2007 with respect to non-national newspapers in each
relevant market. Journal de Montréal. Journal de Montréal Messageries Dynamiques Journal de Montréal Journal de Montréal La Presse Montreal Gazette
 Journal de Montréal
 Year Ended December 31,2005
    
    2006
    
    2007Journal de MontréalSaturday
    
    
    308,000
    
    
    
    309,300
    
    
    
    303,700Sunday
    
    
    259,800
    
    
    
    263,700
    
    
    
    260,600Monday to Friday
    
    
    268,200
    
    
    
    263,400
    
    
    
    262,900
 
 Source: Internal Statistics Journal de Québec. Journal de Québec Journal de Québec Journal de Québec Le Soleil
 Journal de Québec
 Year Ended December 31,2005
    
    2006
    
    2007Journal de QuébecSaturday
    
    
    123,400
    
    
    
    127,400
    
    
    
    125,200Sunday
    
    
    101,400
    
    
    
    107,300
    
    
    
    107,000Monday to Friday
    
    
    99,700
    
    
    
    104,500
    
    
    
    104,300
 
 Source: Internal Statistics 41




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Toronto Sun. Toronto Sun Toronto Sun
 Toronto Sun Toronto Star Globe & Mail National
Post Toronto Sun
 Toronto Sun
 Year Ended December 31,2005
    
    2006
    
    2007Toronto SunSaturday
    
    
    148,000
    
    
    
    149,000
    
    
    
    160,800Sunday
    
    
    326,500
    
    
    
    328,500
    
    
    
    332,500Monday to Friday
    
    
    183,600
    
    
    
    189,900
    
    
    
    188,900
 
 Source: Internal Statistics London Free Press. London Free Press
 London Free Press
 Year Ended December 31,2005
    
    2006
    
    2007London Free PressSaturday
    
    
    104,400
    
    
    
    100,400
    
    
    
    96,400Sunday
    
    
    64,600
    
    
    
    62,800
    
    
    
    61,900Monday to Friday
    
    
    87,600
    
    
    
    84,200
    
    
    
    81,600
 
 Source: Internal Statistics London Free Press The London Pennysaver
 Ottawa Sun. Ottawa Sun Ottawa Sun Ottawa Citizen Le Droit
 Ottawa Sun
 Year Ended December 31,2005
    
    2006
    
    2007Ottawa SunSaturday
    
    
    44,800
    
    
    
    44,100
    
    
    
    42,900Sunday
    
    
    51,000
    
    
    
    51,200
    
    
    
    49,700Monday to Friday
    
    
    51,200
    
    
    
    50,500
    
    
    
    49,800
 
 Source: Internal Statistics 42




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##### Table of Contents



Ottawa Sun Ottawa Pennysaver
 Winnipeg Sun. Winnipeg Sun Winnipeg Sun Winnipeg Free Press
 Winnipeg Sun
 Year Ended December 31,2005
    
    2006
    
    2007Winnipeg SunSaturday
    
    
    40,500
    
    
    
    38,200
    
    
    
    38,000Sunday
    
    
    49,100
    
    
    
    47,100
    
    
    
    46,000Monday to Friday
    
    
    40,600
    
    
    
    39,500
    
    
    
    39,000
 
 Source: Internal Statistics Edmonton Sun. Edmonton Sun Edmonton Sun Edmonton Journal
 Edmonton Sun
 Year Ended December 31,2005
    
    2006
    
    2007Edmonton SunSaturday
    
    
    68,100
    
    
    
    64,700
    
    
    
    59,100Sunday
    
    
    94,900
    
    
    
    90,500
    
    
    
    83,100Monday to Friday
    
    
    70,000
    
    
    
    68,000
    
    
    
    63,900
 
 Source: Internal Statistics Calgary Sun. Calgary Sun Calgary Sun Calgary Herald
 Calgary Sun
 Year Ended December 31,2005
    
    2006
    
    2007Calgary SunSaturday
    
    
    62,500
    
    
    
    59,000
    
    
    
    55,400Sunday
    
    
    91,500
    
    
    
    90,000
    
    
    
    82,100Monday to Friday
    
    
    62,300
    
    
    
    60,600
    
    
    
    57,000
 
 Source: Internal Statistics Free
daily newspapers
 24 Heures in Montreal . 24 Heures
 43




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24 Hours. 24 Hours 24 Hours Find-A-Rental 24 Hours
 Vancouver 24 Hours. Vancouver 24 Hours Vancouver 24 Hours Vancouver 24 Hours
 24 Hours in Ottawa and 24 Heures in Ottawa-Gatineau . 24 Hours 24 Heures
 24 Hours in Calgary and 24 Hours in Edmonton.
 Competition
  Journal de Montréal Journal de Québec Journal de
Montréal Toronto Star Journal de Montréal
 London Free Press
 Toronto Sun Toronto Sun 24 Hours Metro Toronto Sun
  44




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##### Table of Contents



The Community Newspaper Group
   Average DailyNewspaper
    
    Location
    
    Paid CirculationRecorder and Times
    
    Brockville, Ontario
    
    
    12,200Beacon Herald
    
    Stratford, Ontario
    
    
    9,900Daily Herald Tribune
    
    Grande Prairie, Alberta
    
    
    7,700Simcoe Reformer
    
    Simcoe, Ontario
    
    
    6,800St. Thomas Time-Journal
    
    St. Thomas, Ontario
    
    
    6,200Sentinel-Review
    
    Woodstock, Ontario
    
    
    5,900Fort McMurray Today
    
    Fort McMurray, Alberta
    
    
    3,300Miner & News
    
    Kenora, Ontario
    
    
    2,800The Daily Graphic
    
    Portage La Prairie, Manitoba
    
    
    2,500Total Average Daily Paid Circulation
    
    
    
    
    57,300
 
 Source: Internal Statistics  45




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##### Table of Contents



Location
    
    Average DailyNewspaper
    
    (all in Ontario)
    
    Paid CirculationSt. Catharines Standard
    
    St. Catharines
    
    
    35,500Kingston Whig-Standard
    
    Kingston
    
    
    26,100Barrie Examiner
    
    Barrie
    
    
    24,300Peterborough Examiner
    
    Peterborough
    
    
    24,100Brantford Expositor
    
    Brantford
    
    
    21,000Niagara Falls Review
    
    Niagara Falls
    
    
    20,600Sarnia Observer
    
    Sarnia
    
    
    18,200Sault Star
    
    Sault Ste Marie
    
    
    18,200Welland Tribune
    
    Welland
    
    
    17,000Sudbury Star
    
    Sudbury
    
    
    16,900Owen Sound Sun Times
    
    Owen Sound
    
    
    15,700Cornwall Standard-Freeholder
    
    Cornwall
    
    
    14,100North Bay Nuggett
    
    North Bay
    
    
    14,000Belleville Intelligencer
    
    Belleville
    
    
    13,400Chatham Daily News
    
    Chatham
    
    
    12,800Orillia Packet & Times
    
    Orillia
    
    
    11,900Timmins, The Daily Press
    
    Timmins
    
    
    8,700Pembrooke, The Daily Observer
    
    Pembrooke
    
    
    5,800Cobourg Daily Star
    
    Cobourg
    
    
    4,500Port Hope Evening Guide
    
    Port Hope
    
    
    2,400Total Average Daily Paid Circulation
    
    
    
    
    325,200
  Number ofProvince
    
    PublicationsOntario
    
    
    82Québec
    
    
    53Alberta
    
    
    43Manitoba
    
    
    12Saskatchewan
    
    
    5New Brunswick
    
    
    1Total Publications
    
    
    196
  Competition
  46




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##### Table of Contents



Other Operations
 Commercial
Printing and Distribution
     Television Station
  Seasonality and Cyclicality
   47




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##### Table of Contents



Raw Materials
   Broadcasting
  Le Banquier Les adieux de Céline à Las Vegas
 LCN Canal Évasion Canal Indigo illico sur Demande Shopping TVA Argent Mystery Mystère Prise 2 MenTV
  48




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Canadian Television Industry Overview
     Share of ProvinceNetwork
    
    of Québec TelevisionTVA Group
    
    
    26.7
    %Societé Radio-Canada
    
    
    13.0
    %Réseau TQS
    
    
    10.6
    %Télé-Québec
    
    
    3.3
    %Various French-language specialty cable channels
    
    
    38.7
    %Others
    
    
    7.7
    %
 
 Source: BBM People Meters 2007 (data is based on a measurement methodology using audimetry instead
of surveys). 49




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Transition of Over-the-air Television Broadcasting from Analog to Digital
  Television Broadcasting
 French-language Market
   English-language Market
 60 Minutes
 Advertising Sales and Revenue
  50




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##### Table of Contents



Programming
    Specialty Broadcasting
  Type of Service
    
    Language
    
    Voting InterestAnalog Specialty Services: LCN  Le
Canal Nouvelles
    
    French
    
    TVA1
    
    
    99.9
    % Canal Évasion
    
    French
    
    TVA1
    
    
    8.3
    % CPAC
    
    French and English
    
    V2
    
    
    21.7
    %Category One Digital Specialty Services: MenTV
    
    English
    
    TVA1
    
    
    51.0
    % Mystery (13th Street)
    
    English
    
    TVA1
    
    
    50.0
    % Mystère (13e rue)
    
    French
    
    TVA1
    
    
    99.9
    % Argent (LCN  Affaires)
    
    French
    
    TVA1
    
    
    99.9
    %Category Two Digital Specialty Services: Prise 2 (Nostalgie)
    
    French
    
    TVA1
    
    
    99.9
    %Pay Per View Services (terrestrial & direct broadcasting satellite): Canal Indigo
    
    French
    
    TVA1
    
    
    20.0
    %Video-on Demand Services: illico sur Demande
    
    French and English
    
    AG3
    
    
    100
    %Exempted Programming Service: Canal Shopping TVA
    
    French
    
    TVA1
    
    
    99.9
    %
 
 (1)
    
    TVA Group (TVA) controls the programming services. Quebecor Media controls TVA Group.(2)
    
    Videotron (V) controls the programming services. Quebecor Media controls Videotron.(3)
    
    Archambault Group (AG) controls the programming services. Quebecor Media controls
Archambault Group. Le Canal Nouvelles LCN
 Le Canal Nouvelles LCN LCN LCNs
 Argent
 Argent Argent Argent Argent
 51




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##### Table of Contents



Canal Évasion
 Canal Évasion Canal Évasion
 MenTV
 MenTV MenTV
 Mystery
 Mystery 13th Street Mystery
 Mystère
 Mystère 13ieme rue Mystery Mystère
 Prise 2
 Prise 2 Nostalgie Prise 2
 Canal Indigo
 Canal Indigo Canal Indigo
 Canal Shopping TVA; Home Shopping Service; Infomercials
 Shopping TVA Shopping TVA
 Canadian Public Affairs Channel (CPAC)
  Authorized Digital Specialty Services
 Humour
 52




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##### Table of Contents



Télé-Services Les idées de ma maison
 Star Système.
 Première Loge.
  Magazine Publishing
 Les idées de
ma maison Décoration Chez-Soi Rénovation-Bricolage Clin doeil Filles daujourdhui Femmes
Plus Animal
 Leisure and Entertainment
 archambault.ca ik.ca
  Cultural Products Production, Distribution and Retailing
 archambault.ca ik.ca
 53




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##### Table of Contents



Book Publishing and Distribution
   Video-On-Demand Services
  Ownership
  Interactive Technologies and Communications
     54




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##### Table of Contents



Canada Business Corporations Act
 Ownership
  Internet/Portals
    55




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##### Table of Contents



Media Properties
  
    
    Canoe (canoe.ca), a bilingual, integrated media and Internet services network and
one of Canadas leading Internet portals with more than 259 million page views in
September 2007, according to Canoe internal statistics;
    
    TVA Group and LCN (tva.canoe.comand lcn.canoe.com) dedicated websites for the TVA
television network and the LCN all-news channel, which has begun streaming TVA and LCN
programming live on the websites;also, several websites for popular TVA Group programs, such as Occupation Double
(occupationdouble.com) and Star Académie(staracademie.ca).
    
    Sun Media dedicated websites for the weeklies and dailies newspapers (such as
torontosun.com, edmontonsun.com, journaldequebec.comand canoe.com/journaldemontreal),
which provide local and national news;
    
    Canoe.tv, the first Canadian web broadcaster with unique content commissioned by
Canoe.TV in addition to content from traditional sources;
    
    Canoe Video (video.canoe.ca), launched in June 2007, offers easy access to a range
of content from sources including Quebecor Media, the Sun Media network of newspapers
and various external partners;
    
    Argent and Canoe Money (argent.canoe.caand money.canoe.ca), a financial website
which offers, among other things, a variety of services ranging from financial
information to portfolio management tools (the Argent website (formerly Webfin) was
redesigned in early 2005 in partnership with TVAs financial channel, Argent);
    
    Petitmonde (petitmonde.com), a website that Canoe acquired in September 2007
dedicated to children and families; and
    
    CanoeKlix (canoeklix.com), a pay-per-click advertising solution developed by Canoe
and launched in 2006.
 E-commerce Properties
  
    
    Jobboom.com, a unique Web-based employment site with over 2.0 million members at
December 31, 2007, which also includes Édition Jobboom (careers book editors) and
Jobboom Formation (an Internet directory of continuing education services);
    
    Autonet.ca, one of Canadas leading Internet sites devoted entirely to automobiles;
    
    Canoeclassifieds.caand Vitevitevite.ca(formerly canoeclassees.ca), classified ad
sites through which visitors can view more than 100,000 classified ads, reaching
potential purchasers across the country by integrating more than 200 dailies and
community newspapers. Since June 2007, classifiedextra.ca (vitevitevite.cain French)
operates in partnership with Sympatico.MSN.ca, which uses the classifiedextra.cabanner
for all classified advertisements, allowing it to reach more than 20 million users;
    
    Micasa.ca, one of the leading real-estate listing sites in Québec, providing
comprehensive property listing services available to all real estate brokers as well as
individual homeowners;
    
    ReseauContact.com, a French dating and friendship site with near 500,000 unique
visitors per month, as of December 31, 2007, according to internal statistics; and
    
    EspaceCanoe.ca,an advanced technology platform for social communities that supports
the sharing of videos, photos and opinions by users in an innovative Web 2.0-type
environment.
 Ownership
  56




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##### Table of Contents



Intellectual Property
    Insurance
  Environment
   C  Organizational Structure
  57




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##### Table of Contents



Caisse de dépôt et placement du Québec Caisse de dépôt et placement du Québec
 D  Property, Plants and Equipment
  Cable
   58




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##### Table of Contents



Newspapers
   Floor SpaceAddress
    
    Use of Property
    
    Press Capacity(1)
    
    Occupied (sq. ft.)Etobicoke, Ontario
    
    Operations building,
    
    3 Colorman presses
    
    531,4002250 Islington Avenue (2)
    
    including printing plant 
    
    (36 units)Toronto Sun24 Hours(Toronto)Toronto, Ontario
    
    Operations building,
    
    4 Metro presses
    
    245,900333 King Street East (2)
    
    including printing plant 
    
    (32 units) andToronto Sun
    
    1 Metroliner press(8 units)Saint-Janvier-de-Mirabel, Québec
    
    Operations building,
    
    3 Colorman presses
    
    235,0001280 Brault Street
    
    including printing plant 
    
    (52 units)Journal de MontréalJournal de QuébecOttawa Sun24 Hours(Montreal)Montréal, Québec
    
    Operations building,
    
    3 Metro presses
    
    162,0004545 Frontenac Street (3)
    
    including printing plant 
    
    (27 units)Journal de MontréalLondon, Ontario
    
    Operations building,
    
    2 Headliner presses
    
    147,600369 York Street
    
    including printing plant 
    
    (12 units) andLondon Free Press
    
    1 Urbanite press(9 units)Calgary, Alberta
    
    Operations building,
    
    1 Headliner press
    
    90,0002615-12 Street NE
    
    including printing plant 
    
    (7 units)Calgary SunSt. Catharines, Ontario
    
    Operations building 
    
    N/A
    
    75,00017 Queen Street
    
    St. Catharines StandardVanier, Québec
    
    Operations building,
    
    2 Urbanite presses
    
    74,000450 Bechard Avenue (3)
    
    including printing plant 
    
    (24 units)Journal de QuébecPeterborough, Ontario
    
    Operations building,
    
    1 Urbanite press
    
    63,500730 Kingsway
    
    including printing plant 
    
    (12 units)Peterborough ExaminerWinnipeg, Manitoba
    
    Operations building,
    
    1 Urbanite press
    
    63,0001700 Church Avenue
    
    including printing plant 
    
    (14 units)Winnipeg Sun
 59




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##### Table of Contents



Floor SpaceAddress
    
    Use of Property
    
    Press Capacity(1)
    
    Occupied (sq. ft.)Brantford, Ontario
    
    Operations building 
    
    N/A
    
    57,30053 Dalhousie Street
    
    Brantford ExpositorEdmonton, Alberta
    
    Printing plant 
    
    1 Metro press
    
    50,7009300-47 Street
    
    Edmonton Sun
    
    (8 units)Edmonton, Alberta
    
    Operations building 
    
    N/A
    
    45,2004990-92 Avenue
    
    Edmonton Sun(leased until December 2013)Gloucester, Ontario
    
    Distribution facility 
    
    N/A
    
    23,0004080 Belgreen Drive (4)
    
    Ottawa SunOttawa, Ontario
    
    Operations building
    
    N/A
    
    19,3006 Antares Drive
    
    (leased until October 2013) Ottawa Sun
 
 (1)
    
    A unit is the critical component of a press that determines color and page count
capacity. All presses listed have between 6 and 15 units.(2)
    
    In late 2007, the printing of portions of the Toronto Sunwas transferred from 333 King
Street East in Toronto to the new printing facilities in Etobicoke, Ontario.(3)
    
    In 2007, the printing of a portion of the Journal de Montréaland the Journal de Québec
was transferred to the new printing facilities in Saint-Janvier-de-Mirabel, Québec.(4)
    
    In October 2006, the press facilities of the Ottawa Sunwere transferred to the new
printing facilities in Saint-Janvier-de-Mirabel. Accordingly, this building is currently
being used principally as a distribution facility.   Television Broadcasting
  Leisure and Entertainment segment and Interactive Technologies and Communications segment
  Liens and charges
  60




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E  Regulation
 Foreign Ownership Restrictions Applicable Under the Telecom Act and the Broadcasting Act
  Afterword Broadcasting Act
 
    
    In the first phase, the Telecommunications Actshould be amended to give the federal
Cabinet authority to waive the foreign ownership and control restrictions on Canadian
telecommunications common carriers when it deems a foreign investment or class of
investments to be in the public interest. During the first phase, there should be a
presumption that investments in any new start-up telecommunications investment or in
any telecommunications common carrier with less than 10% of the revenues in any
telecommunications service market are in the public interest. This presumption could be
rebutted by evidence related to a particular investor or investment. The presumption
should apply to all investments in fixed or mobile wireless telephony markets as well
as to investments in new entrants and smaller players (i.e.,those below the 10%
limit). To encourage longer-term investment, foreign investors should remain exempt
from the foreign investment restrictions if they are successful in growing the market
share of their businesses beyond 10%.
    
    The second phase of liberalization should be undertaken after completion of the
review of broadcasting policy proposed by the Panel. At that time, there should be a
broader liberalization of the foreign investment rules in a manner that treats all
telecommunications common carriers including the cable telecommunications industry in a
fair and competitively neutral manner. The proposed liberalization should apply to the
carriage business of BDUs, and new broadcasting policies should focus any necessary
Canadian ownership restrictions on broadcasting content businesses. The Cabinet
should retain the authority to screen significant investments in the Canadian
telecommunications carriage business to ensure that they are consistent with the public
interest.
   61




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Ownership and Control of Canadian Broadcast Undertakings
  Ineligibility of Non-Canadians
 Broadcasting Act
 Diversity of Voices
  62




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##### Table of Contents



Jurisdiction Over Canadian Broadcast Undertakings
 Broadcasting Act Broadcasting
Act Radiocommunication Act
 Broadcasting Act
 Canadian Broadcast Distribution (Cable Television)
 Licensing of Canadian Broadcasting Distribution Undertakings
    63




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##### Table of Contents



Le Réseau de linformation Avis de Recherche Avis de Recherche Broadcasting Act
   Distribution of Canadian Content
 Broadcasting Distribution Regulations Broadcasting Act
 64




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##### Table of Contents



1998 Broadcasting Distribution Regulations
  
    
    Competition and Carriage Rules.The 1998 Regulations provide equitable
opportunities for all distributors of broadcasting services. Similar to the signal
carriage and substitution requirements that are imposed on existing cable television
systems, under the 1998 Regulations, new broadcasting distribution undertakings are
also subject to carriage and substitution requirements. The 1998 Regulations prohibit a
distributor from giving an undue preference to any person, including itself, or
subjecting any person to an undue disadvantage. This gives the CRTC the ability to
address complaints of anti-competitive behavior on the part of certain distributors.
    
    Signal Substitution. A significant aspect of television broadcasting in Canada is
simultaneous program substitution, or simulcasting, a regulatory requirement under
which Canadian distribution undertakings, such as cable television systems with over
6,000 customers, are required to substitute the foreign programming service, with local
Canadian signal, including Canadian commercials, for broadcasts of identical programs
by a U.S. station when both programs are exhibited at the same time. These requirements
are designed to protect the program rights that Canadian broadcasters acquire for their
respective local markets. The CRTC, however, has
 65




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##### Table of Contents



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.
 Broadcasting Act
 Rates
   (1)
    
    30% or more of the households in the licensed service area have access to the
services of another broadcasting distribution undertaking. The CRTC has advised that as
of August 31, 1997, the 30% availability criterion was satisfied for all licensed cable
areas; and(2)
    
    the number of customers for basic cable service has decreased by at least 5%
since the date on which a competitor started offering its basic cable service in the
particular area.
    66




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Winback Restrictions
  Copyright Board Proceedings
  Royalties for the Retransmission of Distant Signals
 Copyright
Act
 Copyright Act
  Royalties for the Transmission of Pay and Specialty Services
 Copyright Act
  67




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Royalties for Commercial Television
     Royalties for Pay Audio Services
    68




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##### Table of Contents



Royalties by Online Music Services
 Société du droit de reproduction des auteurs,
compositeurs et éditeurs du Canada Inc
  Royalties for Online Music
  Royalties for Ringtones
  Internet Service Provider Liability
 Copyright Act
 69




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##### Table of Contents



Copyright Act
 Canadian Broadcast Programming (Off the Air and Thematic Television)
 Programming of Canadian Content
   Advertising
 Determinations regarding certain aspects of the regulatory framework for
over-the-air television
 Broadcasting License Fees
   70




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Determinations regarding certain aspects of the
regulatory framework for over-the-air television
 Canadian Telecommunications Services
 Jurisdiction
 Telecommunications Act Act
 Telecommunications Act Telecommunications Act Telecommunications Act
  Overview of the Telecommunications Competition Framework
 Review of Regulatory Framework Local Competition
 Application of Canadian Telecommunications Regulation
 Telecommunications Act
 71




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i.e.
 i.e.
     72




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Right to Access to Telecommunications and Hydro-Electric Support Structures
 Telecommunications Act Telecommunications Act
  Access by Third Parties to Cable Networks
     73




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##### Table of Contents



Policy For Mobile Spectrum Auction
  Canadian Publishing
 General
 Income Tax Act
 Broadcasting Undertakings  Diversity of Voices
  
 ITEM 4A  UNRESOLVED STAFF COMMENTS
  74




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##### Table of Contents



ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion and analysis provides information concerning our operating results
and financial condition. This discussion should be read in conjunction with our consolidated
financial statements and accompanying notes. Our consolidated financial statements have been
prepared in accordance with Canadian GAAP, which differs from U.S. GAAP in certain respects. For a
discussion of the principal differences between Canadian GAAP and U.S. GAAP, and the extent to
which these differences affect our consolidated financial statements, see Note 26 to our audited
consolidated financial statements for the years ended December 31 2007, 2006 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 under Cautionary Statement Regarding Forward-Looking Statements and in Item 3. Key
Information   Risk Factors.
 Overview
    Trend Information
    75




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Our Segments
  Quebecor Medias Interest in its Subsidiaries
  Table 1
Quebecor Medias interest in its main subsidiaries
as at December 31, 2007
 Percentage of Equity
    
    Percentage of VotesVideotron Ltd.
    
    
    100
    %
    
    
    100
    %Sun Media Corporation
    
    
    100
    %
    
    
    100
    %Osprey Media Group Inc.
    
    
    100
    %
    
    
    100
    %TVA Group Inc.
    
    
    45.2
    %
    
    
    99.9
    %Archambault Group Inc.
    
    
    100
    %
    
    
    100
    %Quebecor Media Book Group Inc.
    
    
    100
    %
    
    
    100
    %Nurun Inc.
    
    
    57.5
    %
    
    
    57.5
    %Canoe Inc.
    
    
    92.5
    %
    
    
    99.9
    %
  76




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##### Table of Contents



Non-GAAP Financial Measures
   Operating Income
  77




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##### Table of Contents



Table 2
 Reconciliation of the operating income measure used in this annual report to net income (loss) as
presented in our consolidated financial
statements
 Three Months EndedYear Ended December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2007
    
    
    2006(unaudited)(in millions)Operating incomeCable
    
    $
    642.7
    
    
    $
    512.5
    
    
    $
    413.3
    
    
    $
    363.8
    
    
    $
    289.7
    
    
    $
    175.7
    
    
    $
    139.8Newspapers
    
    
    225.9
    
    
    
    207.6
    
    
    
    222.2
    
    
    
    227.8
    
    
    
    224.8
    
    
    
    76.6
    
    
    
    63.5Broadcasting
    
    
    59.4
    
    
    
    42.1
    
    
    
    53.0
    
    
    
    80.5
    
    
    
    81.5
    
    
    
    22.8
    
    
    
    18.9Leisure and Entertainment
    
    
    27.0
    
    
    
    19.3
    
    
    
    27.0
    
    
    
    22.7
    
    
    
    14.7
    
    
    
    10.3
    
    
    
    10.0Interactive Technologies and
Communications
    
    
    2.8
    
    
    
    7.5
    
    
    
    3.9
    
    
    
    2.3
    
    
    
    1.1
    
    
    
    
    
    
    
    3.3Internet/Portals
    
    
    6.9
    
    
    
    10.1
    
    
    
    9.0
    
    
    
    4.5
    
    
    
    2.9
    
    
    
    2.8
    
    
    
    1.5Head office
    
    
    (0.8
    )
    
    
    0.5
    
    
    
    3.7
    
    
    
    (4.4
    )
    
    
    (3.1
    )
    
    
    (1.0
    )
    
    
    1.3963.9
    
    
    
    799.6
    
    
    
    732.1
    
    
    
    697.2
    
    
    
    611.6
    
    
    
    287.2
    
    
    
    238.3Amortization
    
    
    (290.4
    )
    
    
    (260.7
    )
    
    
    (231.9
    )
    
    
    (225.9
    )
    
    
    (226.6
    )
    
    
    (75.9
    )
    
    
    (68.3
    )Financial expenses
    
    
    (240.0
    )
    
    
    (224.6
    )
    
    
    (285.3
    )
    
    
    (314.6
    )
    
    
    (300.1
    )
    
    
    (72.2
    )
    
    
    (57.6
    )Reserve for restructuring of operations,
impairment of assets and other special
charges
    
    
    (11.6
    )
    
    
    (18.9
    )
    
    
    0.2
    
    
    
    (2.8
    )
    
    
    (1.8
    )
    
    
    3.5
    
    
    
    (9.5
    )(Loss) gain on debt refinancing and on
repurchase of redeemable preferred shares
of a subsidiary
    
    
    (1.0
    )
    
    
    (342.6
    )
    
    
    (60.0
    )
    
    
    (4.8
    )
    
    
    144.1
    
    
    
    (1.0
    )
    
    
    (0.5
    )Gain (loss) on sale of businesses and other
assets
    
    
    0.4
    
    
    
    2.2
    
    
    
    0.1
    
    
    
    9.3
    
    
    
    (1.1
    )
    
    
    
    
    
    
    1.2Impairment of goodwill and intangible assets
    
    
    (5.4
    )
    
    
    (180.0
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    (5.4
    )
    
    
    (180.0
    )Income taxes
    
    
    (74.8
    )
    
    
    53.7
    
    
    
    (43.5
    )
    
    
    (37.4
    )
    
    
    12.5
    
    
    
    (15.6
    )
    
    
    (28.6
    )Non-controlling interest
    
    
    (19.2
    )
    
    
    (0.4
    )
    
    
    (16.2
    )
    
    
    (31.7
    )
    
    
    (34.6
    )
    
    
    (8.2
    )
    
    
    6.8Income (loss) from discontinued operations
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0
    
    
    
    (1.1
    )
    
    
    0.4
    
    
    
    
    
    
    
    1.1Net income (loss)
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5
    
    
    $
    88.2
    
    
    $
    203.9
    
    
    $
    112.4
    
    
    $
    (97.1
    )
 Cash Flows from Segment Operations
  Free Cash Flows from Continuing Operations
  78




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Average Revenue per User
  2007/2006 Financial Year Comparison
 2007 Highlights
  3 4
    24 Hours
  79




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Operating results
       80




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##### Table of Contents



Toronto Sun Ottawa Sun London Free Press Toronto Sun
 1 8 3 4
   Free cash flows from continuing operating activities
  81




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##### Table of Contents



Table 3
 Free cash flows from continuing operating activities
(in millions of Canadian
dollars)
 2007
    
    
    2006
    
    
    2005Cash flows from segment operations:Cable
    
    $
    314.7
    
    
    $
    210.5
    
    
    $
    194.7Newspapers
    
    
    116.0
    
    
    
    91.8
    
    
    
    149.3Broadcasting
    
    
    43.2
    
    
    
    33.4
    
    
    
    42.5Leisure and Entertainment
    
    
    24.2
    
    
    
    16.1
    
    
    
    20.1Interactive Technologies and Communications
    
    
    (0.5
    )
    
    
    5.7
    
    
    
    2.5Internet/Portals
    
    
    2.3
    
    
    
    8.2
    
    
    
    8.3Head office and other
    
    
    1.4
    
    
    
    7.8
    
    
    
    0.4501.3
    
    
    
    373.5
    
    
    
    417.8Cash interest expense(1)
    
    
    (225.3
    )
    
    
    (402.9
    )
    
    
    (211.1
    )Cash portion of restructuring of operations and other
special charges
    
    
    (11.6
    )
    
    
    (18.9
    )
    
    
    0.2Current income taxes
    
    
    (11.3
    )
    
    
    (5.4
    )
    
    
    (19.0
    )Other
    
    
    3.7
    
    
    
    2.1
    
    
    
    (3.1
    )Net change in non-cash balances related to operations
    
    
    32.7
    
    
    
    (22.2
    )
    
    
    (27.4
    )Free cash flows from continuing operating activities
    
    $
    289.5
    
    
    $
    (73.8
    )
    
    $
    157.4
 
 (1)
    
    Interest on long-term debt and other interest, less investment income and interest
capitalized to cost of property, plant and equipment (see Note 2 to our consolidated
financial statements included under Item 17 of this annual report). Table 4
 Reconciliation between free cash flows from continuing operating activities and cash flows provided
by continuing operating activities as shown in our consolidated financial statements
(in millions of Canadian dollars)
 2007
    
    
    2006
    
    
    2005Free cash flows from continuing operating activities
    
    $
    289.5
    
    
    $
    (73.8
    )
    
    $
    157.4Additions to property plant and equipment
    
    
    468.7
    
    
    
    435.5
    
    
    
    319.8Proceeds from disposal of assets
    
    
    (6.1
    )
    
    
    (9.4
    )
    
    
    (5.5
    )Cash flows from continuing operating activities
    
    $
    752.1
    
    
    $
    352.3
    
    
    $
    471.7
 82




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##### Table of Contents



Table 5
 Reconciliation between Quebecor Medias operating income and its cash flows from segment operations
(in millions of Canadian
dollars)
 2007
    
    
    2006
    
    
    2005Operating income
    
    $
    963.9
    
    
    $
    799.6
    
    
    $
    732.1Additions to property plant and equipment
    
    
    (468.7
    )
    
    
    (435.5
    )
    
    
    (319.8
    )Proceeds from disposal of assets
    
    
    6.1
    
    
    
    9.4
    
    
    
    5.5Cash flows from segment operations
    
    $
    501.3
    
    
    $
    373.5
    
    
    $
    417.8
 Segmented Analysis
 Cable segment
    (see Chart 1) i.e.
 Chart 1
 Customer base for cable television
services
 
 83




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##### Table of Contents



(see Chart 1), (see Chart 1).
 see Chart 2)
 Chart 2
 CUSTOMER BASE FOR CABLE INTERNET ACCESS
 
 see Chart 3).
 Chart 3
 Customer base for cable telephone service
 
   tm
  84




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##### Table of Contents



(see Table 6)
 Table 6: Cable Segment  Cash flows from segment operations  (in millions of Canadian dollars)
 2007
    
    
    2006
    
    
    2005Operating income
    
    $
    642.7
    
    
    $
    512.5
    
    
    $
    413.3Additions to property plant and equipment
    
    
    (330.1
    )
    
    
    (302.6
    )
    
    
    (219.9
    )Proceeds from disposal of assets
    
    
    2.1
    
    
    
    0.6
    
    
    
    1.3Cash flows from segment operations
    
    $
    314.7
    
    
    $
    210.5
    
    
    $
    194.7
  Broadcasting Licence Fee
Regulations Broadcasting Licence Fee Regulations.
   85




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##### Table of Contents



Newspapers segment
 24 Hours 24 Hours 24 Heures 24 Hours 24 Heures 24 Hours 24 Hours
  Journal de
Montréal Journal de Québec i.e. Journal de Montréal Journal de Québec
 86




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##### Table of Contents



see Table 7
 Table 7: Newspapers Segment  Cash flows from segment operations  (in millions of Canadian dollars)
 2007
    
    
    2006
    
    
    2005Operating income
    
    $
    225.9
    
    
    $
    207.6
    
    
    $
    222.2Additions to property plant and equipment
    
    
    (111.4
    )
    
    
    (116.3
    )
    
    
    (74.0
    )Proceeds from disposal of assets
    
    
    1.5
    
    
    
    0.5
    
    
    
    1.1Cash flows from segment operations
    
    $
    116.0
    
    
    $
    91.8
    
    
    $
    149.3
 24 Hours
 Journal de Montréal Journal de Montréal
 Journal de Québec Journal de Québec
 The Kingston Whig-Standard The Sudbury Star The Peterborough Examiner
  87




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##### Table of Contents



Broadcasting segment
 mentv
 Mystère,
argent, Prise 2, LCN, mentv Mystery Because I Said So TV
Hebdo TV 7 Jours
  see Table 8
 88




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##### Table of Contents



Table 8: Broadcasting Segment
Cash flows from segment operations
(in millions of Canadian dollars)
 2007
    
    
    2006
    
    
    2005Operating income
    
    $
    59.4
    
    
    $
    42.1
    
    
    $
    53.0Additions to property plant and equipment
    
    
    (16.2
    )
    
    
    (9.0
    )
    
    
    (12.9
    )Proceeds from disposal of assets
    
    
    
    
    
    
    0.3
    
    
    
    2.4Cash flows from segment operations
    
    $
    43.2
    
    
    $
    33.4
    
    
    $
    42.5
   Leisure and Entertainment segment
 ZIK.ca
    89




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see Table 9
 Table 9: Leisure and Entertainment Segment  Cash flows from segment operations  (in millions of Canadian dollars)
 2007
    
    
    2006
    
    
    2005Operating income
    
    $
    27.0
    
    
    $
    19.3
    
    
    $
    27.0Additions to property plant and equipment
    
    
    (2.9
    )
    
    
    (3.4
    )
    
    
    (7.9
    )Proceeds from disposal of assets
    
    
    0.1
    
    
    
    0.2
    
    
    
    1.0Cash flows from segment operations
    
    $
    24.2
    
    
    $
    16.1
    
    
    $
    20.1
  Interactive Technologies and Communications segment
    see Table 10
 90




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##### Table of Contents



Table 10: Interactive Technologies and Communications Segment  Cash flows from segment operations  (in millions of Canadian
dollars)
 2007
    
    
    2006
    
    
    2005Operating income
    
    $
    2.8
    
    
    $
    7.5
    
    
    $
    3.9Additions to property plant and equipment
    
    
    (3.3
    )
    
    
    (1.8
    )
    
    
    (1.4
    )Cash flows from segment operations
    
    $
    (0.5
    )
    
    $
    5.7
    
    
    $
    2.5
   Internet/Portals segment
 canoe.ca, canoe.qc.ca toile.com money.canoe.ca argent.canoe.com tva.canoe.com lcn.canoe.com occupationdouble.com . jobboom.com micasa.ca autonet.ca reseaucontact.com space.canoe.ca espace.canoe.ca classifieds.canoe.ca classees.canoe.ca canoeklix.com Jobboom Carrières davenir
   see Table 11)
 91




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##### Table of Contents



Table 11: Internet/Portals Segment  Cash flows from segment operations  (in millions of Canadian
dollars)
 2007
    
    
    2006
    
    
    2005Operating income
    
    $
    6.9
    
    
    $
    10.1
    
    
    $
    9.0Additions to property plant and equipment
    
    
    (4.6
    )
    
    
    (1.9
    )
    
    
    (0.7
    )Proceeds from disposal of assets
    
    
    
    
    
    
    
    
    
    
    Cash flows from segment operations
    
    $
    2.3
    
    
    $
    8.2
    
    
    $
    8.3
   classifiedextra.ca vitevitevite.ca
  jobboom.com
 canoe.tv canoe.tv canoe.ca
 2007/2006 Fourth Quarter Comparison
 Operating results
   92




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##### Table of Contents



Segmented analysis
 Cable segment
    93




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##### Table of Contents



Newspapers segment
  Journal de Montréal Journal de Québec Journal de Québec Journal de Montréal Journal de Québec
 Broadcasting segment
 TV
Hebdo TV 7 Jours
  94




---



##### Table of Contents



Leisure and Entertainment segment
     Interactive Technologies and Communications segment
   Internet/Portals segment
   2006/2005 Financial Year Comparison
 Operating Results
  95




---



##### Table of Contents



see Table 2 above).
 Segmented analysis
 Cable segment
  96




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##### Table of Contents



Newspapers segment
  Toronto
Sun Journal de Montréal Journal de Montréal
 see Table 7
 Broadcasting segment
 Mystère, ARGENT, Prise 2, LCN, mentv Mystery
  97




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##### Table of Contents



Leisure and Entertainment segment
   see Table 9 above
 Interactive Technologies and Communications segment
   see Table 10 above
   98




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##### Table of Contents



Internet/Portals segment
   see Table 11 above
 Cash Flows and Financial Position
 Operating Activities
   Financing Activities
 2007 financial year
  3 4 3 4
  99




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##### Table of Contents



3 4
  2006 financial year
   
  3 4
 100




---



##### Table of Contents



Investing Activities
     Financial Position
      101




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##### Table of Contents



Participation in the 3G Spectrum Auction
  Contractual Obligations
  Table 12
 Contractual obligations as of December 31, 2007
 Less than
    
    
    
    
    
    
    5yrsTotal
    
    
    1yr
    
    
    1-3yrs
    
    
    3-5yrs
    
    
    and moreLong-term debt
    
    $
    3,077.8
    
    
    $
    24.7
    
    
    $
    303.4
    
    
    $
    221.2
    
    
    $
    2,528.5Interest payments (1)
    
    
    1,796.0
    
    
    
    257.9
    
    
    
    513.9
    
    
    
    488.8
    
    
    
    535.4Operating leases
    
    
    167.0
    
    
    
    47.5
    
    
    
    61.1
    
    
    
    32.5
    
    
    
    25.9Capital asset purchases
and other commitments
    
    
    187.7
    
    
    
    143.5
    
    
    
    40.5
    
    
    
    3.7
    
    
    
    Derivative financial instruments(2)
    
    
    508.2
    
    
    
    0.6
    
    
    
    1.3
    
    
    
    1.3
    
    
    
    505.0Total contractual obligations
    
    $
    5,736.7
    
    
    $
    474.2
    
    
    $
    920.2
    
    
    $
    747.5
    
    
    $
    3,594.8
 (1)
    
    Estimate of interest to be paid on long-term debt based on the interest rates and foreign
exchange rate at December 31, 2007.(2)
    
    Estimated future disbursements on derivative financial instruments related to foreign
exchange hedging.
    102




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The Carlyle Group
   Financial instruments
       103




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##### Table of Contents



Fair value of derivative financial instruments
 see Table 13
 Table 13: Quebecor Media Inc.
Fair value of derivative financial instruments
(in millions of Canadian dollars)
 December 31, 2007Fair ValueNotional Value
    
    asset (liability)Derivative Financial InstrumentsInterest rate swap agreements
    
    CA$
    75.0
    
    
    $
    0.2Foreign-exchange forward contracts- In US$
    
    US$
    73.1
    
    
    
    (4.2
    )- In 
    
    
    13.0
    
    
    
    (0.2
    )- In CHF
    
    CHF
    6.7
    
    
    
    (0.1
    )Cross-currency interest rate swap agreements
    
    US$
    2,598.9
    
    
    
    (534.2
    )
  Related Party Transactions
  Companies Creditors Arrangement Act
 Management arrangements
  104




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##### Table of Contents



Lease arrangements
  Commercial printing and other services
       105




---



##### Table of Contents



Tax benefit transactions
   Off-balance sheet arrangements
 Guarantees
  Operating leases
  Business and asset disposals
  Outsourcing companies and suppliers
  106




---



##### Table of Contents



Risks and Uncertainties
  Labour disputes
  
    
    Videotron is party to 5 collective bargaining agreements, representing approximately
2,558 employees. Of these collective bargaining agreements, one (representing
approximately 40 employees) has expired. Negotiations regarding this collective
bargaining agreement will be undertaken in 2008. Two others, representing
approximately 2,308 employees, or 90% of Videotrons unionized employees, will expire
in December 2009. The remaining two collective bargaining agreements, representing 210
employees, or 8% of Videotrons unionized workforce, will expire between January 2010
and August 2011;
    
    Sun Media is party to 48 collective bargaining agreements, representing
approximately 2,004 employees. Of these, 12 collective bargaining agreements,
representing approximately 941 employees, or 47% of Sun Medias unionized workforce,
have expired. Negotiations regarding these 12 collective bargaining agreements are
either in progress or will be undertaken in 2008. The other 36 of Sun Medias
collective bargaining agreements, representing approximately 1,063 employees, or 53% of
its unionized workforce, are scheduled to expire on various dates through December
2010;
    
    Osprey Media is party to 40 collective bargaining agreements, representing
approximately 820 employees. All of Osprey Medias collective bargaining agreements
are scheduled to expire on various date between June 2008 and April 2011;
    
    TVA Group is party to 15 collective bargaining agreements, representing
approximately 830 employees. Of this number, 7 collective bargaining agreements,
representing approximately 120 employees, or 14% of its unionized workforce, are
expired. Negotiations regarding these 7 collective bargaining agreements are either in
progress or will be undertaken in 2008. 8 of TVA Groups collective bargaining
agreements, representing approximately 710 employees, or 86% of its unionized
workforce, will expire between October 2008 and the end of December 2009; and
    
    The other 7 collective bargaining agreements, representing approximately 370 or 6%
of our unionized employees, will expire between the end of April 2009 and June 2010.
 Journal de Québec Journal de Montréal
 Financial risks
  107




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Foreign currency risk and interest rate risk
  see Tables 14 through 16 below
 Table 14
Foreign Exchange Forward Contracts
At December 31, 2007
(in millions of dollars)
 AverageCurrencies (sold/bought)
    
    Maturing
    
    Exchange Rate
    
    Notional AmountQuebecor Media Inc.$/Euro
    
    Less than 1 year
    
    
    1.4501
    
    
    $
    18.9$/CHF
    
    Less than 1 year
    
    
    0.8897
    
    
    
    6.0Sun Media Corporation$/US$
    
    February 15, 2013
    
    
    1.5227
    
    
    
    312.2Videotron Ltd. and its subsidiaries$/US$Euro
    
    Less than 1 year
    
    
    1.0511
    
    
    
    76.8
 108




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##### Table of Contents



Table 15
Cross-currency interest rate swaps
At December 31, 2007
 CDN dollar exchangerate on interestAnnual
    
    
    Annual
    
    
    and capitalPeriod
    
    
    Notional
    
    
    effective
    
    
    nominal
    
    
    payments percovered
    
    
    amount
    
    
    interest rate
    
    
    interest rate
    
    
    one U.S. dollarQuebecor Media Inc.:Senior Notes
    
    
    2007 to 2016
    
    
    US$
    700.0
    
    
    
    7.69
    %
    
    
    7.75
    %
    
    
    0.9990Senior Notes
    
    
    2006 to 2016
    
    
    US$
    525.0
    
    
    
    7.39
    %
    
    
    7.75
    %
    
    
    1.1600Term loan B credit
facilities
    
    
    2006 to 2009
    
    
    US$
    196.5
    
    
    
    6.27
    %
    
    LIBOR
    
    
    
    1.1625plus 2.00
    %Term loan B credit
facilities
    
    
    2009 to 2013
    
    
    US$
    196.5
    
    
    Bankers
    
    
    LIBOR
    
    
    
    1.1625acceptance
    
    
    plus 2.00
    %3 monthsplus 2.22%Term loan B credit
facilities
    
    
    2006 to 2013
    
    
    US$
    147.4
    
    
    
    6.44
    %
    
    LIBOR
    
    
    
    1.1625plus 2.00
    %Videotron Ltd. and
its subsidiaries:Senior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    
    Bankers
    
    
    
    6.875
    %
    
    
    1.2000acceptance3 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
    %
    
    
    1.3425acceptance3 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
    %
    
    
    1.5227acceptance3 monthsplus 3.70
    %Senior Notes
    
    
    2003 to 2013
    
    
    US$
    50.0
    
    
    Bankers
    
    
    
    7.625
    %
    
    
    1.5227acceptance3 monthsplus 3.70
    %
 109




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Table 16
Interest Rate Swaps
At December 31, 2007
(in millions of dollars)
 Maturity
    
    Notional Amount
    
    Pay/Receive
    
    Fixed Rate
    
    Floating RateOsprey Media Publishing Inc.April 2008
    
    
    $75.0
    
    
    Pay fixed/Receive Floating
    
    4.05%
    
    Bankers acceptance
 Contingencies
     Cyclicality and Seasonality
  Commodity Price Risks
  110




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Credit Risk
   Fair Value of Financial Instruments
  111




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Table 17
Carrying Value and Fair Value of Financial Instruments
As at December 31, 2007
 
 December 31, 2007
    
    December 31, 2006(1)Carrying
    
    
    
    
    
    CarryingValue
    
    Fair Value
    
    Value
    
    Fair ValueQuebecor Media Inc.Long-term debt (2)
    
    $
    (1,664.9
    )
    
    $
    (1,646.6
    )
    
    $
    (1,191.6
    )
    
    $
    (1,206.3
    )Cross-currency interest rate swaps
    
    
    (159.8
    )
    
    
    (159.8
    )
    
    
    3.8
    
    
    
    (17.8
    )Foreign exchange forward contracts
    
    
    (0.3
    )
    
    
    (0.3
    )
    
    
    2.2
    
    
    
    2.2Videotron Ltd. and its subsidiariesLong-term debt (2)
    
    
    (973.3
    )
    
    
    (938.2
    )
    
    
    (1,021.2
    )
    
    
    (1,010.6
    )Cross-currency interest rate swaps
    
    
    (241.3
    )
    
    
    (241.3
    )
    
    
    (71.8
    )
    
    
    (141.1
    )Foreign exchange forward contracts
    
    
    (4.2
    )
    
    
    (4.2
    )
    
    
    
    
    
    
    2.1Sun Media Corporation and its subsidiariesLong-term debt (2)
    
    
    (238.0
    )
    
    
    (234.1
    )
    
    
    (486.8
    )
    
    
    (492.9
    )Cross-currency interest rate swaps and
foreign exchange forward contract
    
    
    (133.1
    )
    
    
    (133.1
    )
    
    
    (148.8
    )
    
    
    (176.1
    )Osprey Media Group Inc. and its subsidiariesLong-term debt (2)
    
    
    (145.3
    )
    
    
    (145.3
    )
    
    
    
    
    
    
    Interest rate swap
    
    
    0.2
    
    
    
    0.2
    
    
    
    
    
    
    
    TVA Group Inc. and its subsidiariesLong-term debt (2)
    
    
    (56.3
    )
    
    
    (56.3
    )
    
    
    (96.5
    )
    
    
    (96.5
    )
 (1)
    
    See  Changes in accounting policies below.(2)
    
    The carrying value of long-term debt excludes adjustments to record changes in fair value of
long-term debt related to hedged interest risk, embedded derivatives and financing fees.
 Material Limitations
  Principal repayments
  Twelve month period ending December 31,(in millions)2008
    
    $
    24.72009
    
    
    181.82010
    
    
    121.62011
    
    
    171.92012
    
    
    49.32013 and thereafter
    
    $
    2,528.5
 112




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Critical Accounting Policies and Estimates
 Revenue recognition
  
    
    persuasive evidence of an arrangement exists;
    
    delivery has occurred or services have been rendered;
    
    the sellers price to the buyer is fixed or determinable; and
    
    the collection of the sale is reasonably assured.
   Cable segment
   Newspapers segment
  Broadcasting segment
    113




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Leisure and Entertainment segment
  Goodwill
         Broadcasting Licenses
      114




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Goodwill and Broadcasting Licenses
  Impairment of Long-Lived Assets
 CICA Handbook Impairment of Long-Lived Assets
  Derivative Financial Instruments
   
    
    Quebecor Media uses foreign exchange forward contracts to hedge the foreign
currency rate exposure on (i) anticipated equipment or inventory purchases in foreign
currency and (ii) principal payments on certain long-term debt in foreign currency.
These foreign exchange forward contracts are designated as cash flow hedges.
    
    Quebecor Media uses cross-currency interest rate swaps to hedge (i) the foreign
currency rate exposure on interest and principal payments on certain foreign currency
denominated debt and/or (ii) the fair value exposure on certain debt resulting from
changes in interest rates. The cross-currency interest rate swaps that set in fixed
Canadian dollars all future interest and principal payments on U.S. denominated debt
are designated as cash flow hedges. The Companys cross-currency interest rate swaps
that set in Canadian dollars all future interest and principal payments on U.S.
denominated debt in addition to converting the interest rate from a fixed rate to a
floating rate or to converting a floating rate index to another floating rate index,
are designated as fair value hedges.
    
    Quebecor Media uses interest rate swaps to manage the fair value exposure on
certain debt resulting from changes in interest rates. These swap agreements require
a periodic exchange of payments without the exchange of the notional principal amount
on which the payments are based. These interest rate swaps are designated as fair
value hedges when they convert the interest rate from a fixed rate to a floating rate
or as cash flow hedges when they convert the interest rate from a floating rate to a
fixed rate.
  115




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Pension plans and post-retirement benefits
    Allowance for doubtful accounts
  Business combinations
  116




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##### Table of Contents



Future income taxes
   Changes in Accounting Policies
 Comprehensive Income Financial
Instruments  Recognition and Measurement Hedges
 Comprehensive income
  Financial instruments
   117




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##### Table of Contents



Hedges
     
    
    decrease in other assets of $44.4 million;
    
    increase in the liability related to derivative financial instruments of $88.9
million;
    
    decrease in long-term debt of $65.5 million;
    
    decrease in future income tax liabilities of $18.0 million;
    
    increase in deficit of $14.3 million; and
    
    increase in accumulated other comprehensive loss of $35.5 million.
  Recent Accounting Developments in Canada
 Goodwill and Intangible Assets Goodwill and Other Intangible Assets Research and Development Costs
 118




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##### Table of Contents



Revenues and Expenditures During the Pre-operating Period Enterprises in the Development Stage
 Inventories
 Financial
Instruments  Disclosures Financial Instruments  Presentation
  Recent Accounting Developments in the United States (U.S. GAAP)
 Business Combinations Noncontrolling Intesrests in Consolidated Financial Statements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Fair Value Measurements
 119




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##### Table of Contents



ITEM 6   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A  Directors and Senior Management
  Name and Municipality of Residence
    
    Age
    
    PositionSerge Gouin
Outremont, Québec
    
    
    64
    
    
    Director, Chairman of the Board of Directors and Chairman of the Compensation CommitteePierre Karl Péladeau
 Montréal, Québec
    
    
    46
    
    
    Director, Vice Chairman of the Board of Directors and Chief Executive OfficerÉrik Péladeau
    
    
    52
    
    
    Director and Vice Chairman of the Board of DirectorsRosemère, QuébecJean La Couture, FCA
    
    
    61
    
    
    Director and Chairman of the Audit CommitteeMontréal, QuébecAndré Delisle
    
    
    61
    
    
    Director and Member of the Audit CommitteeMontréal, QuébecA. Michel Lavigne, FCABrossard, Québec
    
    
    57
    
    
    Director and Member of the Audit Committee and the Compensation CommitteeSamuel Minzberg
    
    
    58
    
    
    Director Member of the Compensation CommitteeWestmount, QuébecThe Right Honourable Brian
Mulroney,P.C., C.C., LL.D.
    
    
    69
    
    
    DirectorWestmount, QuébecJean Neveu
    
    
    67
    
    
    DirectorLongueuil, QuébecNormand Provost
    
    
    53
    
    
    DirectorBrossard, QuébecPierre Francoeur
    
    
    55
    
    
    President and Chief Operating OfficerSte-Adèle, QuébecLuc Lavoie
    
    
    52
    
    
    Executive Vice President, Corporate AffairsMontréal, QuébecBruno Péloquin
    
    
    43
    
    
    Senior Vice President, Strategic Development, Customer RelationsMontréal, QuébecHughes Simard
    
    
    40
    
    
    Senior Vice President, Development and StrategyOutremont, QuébecLouis Morin
    
    
    50
    
    
    Vice President and Chief Financial OfficerKirkland, QuébecSylvie Cordeau
    
    
    43
    
    
    Vice President, CommunicationsVerdun, QuébecMichel Ethier
    
    
    53
    
    
    Vice President, TaxationMontréal, Québec
 120




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##### Table of Contents



Name and Municipality of Residence
    
    Age
    
    PositionPierre Lampron
    
    
    62
    
    
    Vice President, Institutional RelationsOutremont, QuébecBruno Leclaire
    
    
    42
    
    
    Vice President, Interactive MediaSaint-Bruno, QuébecRoger Martel
    
    
    59
    
    
    Vice President, Internal AuditMontréal, QuébecAndré Maynard
    
    
    50
    
    
    Vice President, Business OpportunitiesMontreal, QuébecDenis Sabourin
    
    
    47
    
    
    Vice President and Corporate ControllerKirkland, QuébecClaudine Tremblay
    
    
    54
    
    
    Vice President and SecretaryNuns Island, QuébecJulie Tremblay
    
    
    48
    
    
    Vice President, Human ResourcesWestmount, QuébecMarc Tremblay
    
    
    47
    
    
    Vice President, Legal AffairsWestmount, QuébecEdouard G. Trépanier
    
    
    57
    
    
    Vice President, Regulatory AffairsBoucherville, QuébecJean-François Pruneau
    
    
    37
    
    
    TreasurerRepentigny, QuébecChristian Marcoux
    
    
    33
    
    
    Assistant SecretaryLaval, QuébecDominique Poulin Gouin
    
    
    52
    
    
    Assistant SecretaryOutremont, Québec
 Serge Gouin
 Pierre Karl Péladeau
 121




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##### Table of Contents



Érik Péladeau
 Jean La Couture Regroupement des assureurs de
personnes à charte du Québec (RACQ)
 André Delisle Caisse de
dépôt et placement du Québec Barreau du Québec
 A. Michel Lavigne Caisse de dépôt et placement du Québec Ordre des comptables agréés du Québec
 Samuel Minzberg
 The Right Honourable Brian Mulroney, P.C., C.C., LL.D
 122




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##### Table of Contents



Jean Neveu
 Normand Provost Caisse de dépôt et
placement du Québec Caisse de dépôt et placement du
Québec
 Pierre Francoeur Journal de Montréal Journal de Montréal Journal de Montréal LHebdo de Laval Journal de Montréal
 Luc Lavoie
 Bruno Péloquin
 Hugues Simard
 123




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##### Table of Contents



Louis Morin
 Sylvie Cordeau Barreau du Québec Université Catholique de Louvain
 Michel Ethier
 Pierre Lampron Société de développement des entreprises culturelles (SODEC)
 Bruno Leclaire
 Roger Martel
 André Maynard
 Denis Sabourin
 124




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##### Table of Contents



Claudine Tremblay Chambre des notaires du Québec
 Julie Tremblay
 Marc Tremblay
 Edouard G. Trépanier
 Jean-François Pruneau
 Christian Marcoux
 Dominique Poulin Gouin
 125




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##### Table of Contents



B  Board of Directors
  Board Practices
  Audit Committee
   Compensation Committee
  126




---



##### Table of Contents



C   Compensation
 Compensation of Directors
         127




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##### Table of Contents



Compensation of Executive Officers
   Quebecor Medias Stock Option Plan
  st
   128




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##### Table of Contents



Quebecor Inc.s Stock Option Plan
 1 3 2 3
  Pension Benefits
 Income Tax Act Income Tax Act
   Years of ParticipationCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$116,667 or more
    
    $
    23,333
    
    
    $
    35,000
    
    
    $
    46,667
    
    
    $
    58,333
    
    
    $
    70,000
 Supplemental Retirement Benefit Plan for Designated Executives
   129




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Years of Credited ServiceCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$200,000
    
    $
    16,667
    
    
    $
    25,000
    
    
    $
    33,333
    
    
    $
    41,667
    
    
    $
    50,000$400,000
    
    $
    56,667
    
    
    $
    85,000
    
    
    $
    113,333
    
    
    $
    141,667
    
    
    $
    170,100$600,000
    
    $
    96,667
    
    
    $
    145,000
    
    
    $
    193,333
    
    
    $
    241,667
    
    
    $
    290,000$800,000
    
    $
    136,667
    
    
    $
    205,000
    
    
    $
    273,333
    
    
    $
    341,667
    
    
    $
    410,000$1,000,000
    
    $
    176,667
    
    
    $
    265,000
    
    
    $
    353,333
    
    
    $
    441,667
    
    
    $
    530,000$1,200,000
    
    $
    216,667
    
    
    $
    325,000
    
    
    $
    433,333
    
    
    $
    541,667
    
    
    $
    650,000$1,400,000
    
    $
    256,667
    
    
    $
    385,000
    
    
    $
    513,333
    
    
    $
    641,667
    
    
    $
    770,000
 D  Liability Insurance
  E  Employees
  Total number
    
    Number of employees under
    
    Number ofOperations
    
    of employees
    
    collective agreements
    
    collective agreementsCable
    
    
    4,350
    
    
    
    2,558
    
    
    
    5Newspapers
    
    
    8,260
    
    
    
    2,824
    
    
    
    88Broadcasting
    
    
    1,910
    
    
    
    830
    
    
    
    15Leisure and Entertainment
    
    
    1,480
    
    
    
    370
    
    
    
    7Interactive Technologies and Communications
    
    
    750
    
    
    
    0
    
    
    
    0Internet / Portals
    
    
    400
    
    
    
    0
    
    
    
    0Others
    
    
    150
    
    
    
    0
    
    
    
    0Total
    
    
    17,300
    
    
    
    6,582
    
    
    
    115
  
    
    Videotron is party to 5 collective bargaining agreements, representing approximately
2,558 employees. Of these collective bargaining agreements, one (representing
approximately 40 employees) has expired. Negotiations regarding this collective
bargaining agreement will be undertaken in 2008. Two others, representing
approximately 2,308 employees, or 90% of Videotrons unionized employees, will expire
in December 2009. The remaining two collective bargaining agreements, representing 210
employees, or 8% of Videotrons unionized workforce, will expire between January 2010
and August 2011;
 130




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##### Table of Contents




    
    Sun Media is party to 48 collective bargaining agreements, representing
approximately 2,004 employees. Of these, 12 collective bargaining agreements,
representing approximately 941 employees, or 47% of Sun Medias unionized workforce,
have expired. Negotiations regarding these 12 collective bargaining agreements are
either in progress or will be undertaken in 2008. The other 36 of Sun Medias
collective bargaining
agreements, representing approximately 1,063 employees, or 53% of its unionized
workforce, are scheduled to expire on various dates through December 2010;
    
    Osprey Media is party to 40 collective bargaining agreements, representing
approximately 820 employees. All of Osprey Medias collective bargaining agreements
are scheduled to expire on various date between June 2008 and April 2011;
    
    TVA Group is party to 15 collective bargaining agreements, representing
approximately 830 employees. Of this number, 7 collective bargaining agreements,
representing approximately 120 employees, or 14% of its unionized workforce, are
expired. Negotiations regarding these 7 collective bargaining agreements are either in
progress or will be undertaken in 2008. 8 of TVA Groups collective bargaining
agreements, representing approximately 710 employees, or 86% of its unionized
workforce, will expire between October 2008 and the end of December 2009; and
    
    The other 7 collective bargaining agreements, representing approximately 370 or 6%
of our unionized employees, will expire between the end of April 2009 and June 2010.
 Journal de Québec Journal de Montréal
 F  Share Ownership
  131




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ITEM 7   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A  Major Shareholders
 Caisse de dépôt et placement du Québec
  B  Consolidated and Amended Shareholders Agreement
   (a)
    
    standard rights of first refusal with respect to certain transfers of QMI Shares;(b)
    
    standard preemptive rights which permit shareholders to maintain their respective
holdings of QMI Shares on a fully diluted basis in the event of issuances of additional
QMI Shares or our convertible securities;(c)
    
    rights of representation on our Board of Directors in proportion to
shareholdings, with Quebecor initially having five nominees (now six nominees) and
Capital CDPQ having four nominees to our Board of Directors;(d)
    
    consent rights in certain circumstances with respect to matters relating to us
and our non-reporting issuer (public) subsidiaries, including (1) a substantial change
in the nature of our business and our subsidiaries taken as a whole, (2) an amendment to
our articles or certain of our subsidiaries, (3) the merger or amalgamation of us or
certain of our subsidiaries with a person other than an affiliate, (4) the issuance by
us or certain of our subsidiaries of shares or of securities convertible into shares
except in the event of an initial public offering of QMI Shares, (5) any transaction
having a value of more than $75,000,000, other than the sale of goods and services in
the normal course of business, (6) a business acquisition in a business sector unrelated
to sectors in which we and certain of our subsidiaries are involved, and (7) in respect
of capital expenditures in excess of certain amounts for each of the first five years of
our operations;(e)
    
    standard rights of first refusal in favor of Capital CDPQ with respect to the
sale of all or substantially all of the shares or assets of TVA Group or Videotron;
 132




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##### Table of Contents



(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 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.
    C  Certain Relationships and Related Party Transactions
  Management arrangements
   Lease arrangements
  133




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##### Table of Contents



Commercial printing and other services
        Caisse de dépôt et placement du Québec
 Caisse de dépôt et placement du Québec
 Tax Consolidation Transactions
  134




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##### Table of Contents



Issuance and Redemption of Convertible Obligations and Investments in Quebecor Media
Preferred Shares
      Issuance of Subordinated Loans and Investments in Quebecor Media Preferred Shares
    135




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##### Table of Contents



Tax benefit transactions
   D  Interests of Experts and Counsel
  
 ITEM 8   FINANCIAL INFORMATION
 A  Consolidated Statements and Other Financial Information
  B  Legal Proceedings
     136




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C  Dividend Policy and Dividends
 Dividend Policies and Payments
  
    
    123,602,807 common shares outstanding, of which 67,636,713 were held by Quebecor and
55,966,094 were held by Capital CDPQ; and
    
    110,000 Cumulative First Preferred Shares, Series C, outstanding, all of which were
held by 9101-0835 Québec Inc.; and
    
    2,555,000 Cumulative First Preferred Shares, Series G, outstanding, 1,995,000 of
which were held by 9101-0835 Québec Inc. and 560,000 of which were held by Bowes
Publishers Limited, a subsidiary of Sun Media.
        137




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D  Significant Changes
  
 ITEM 9   THE OFFER AND LISTING
 A   Offer and Listing Details
  B   Plan of Distribution
  C   Markets
 Outstanding Notes
 3 4 3 4 3 4 3 4 3 4
 3 4 3 4 3 4 3 4
 3 4
 138




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##### Table of Contents



D   Selling Shareholders
  E   Dilution
  F   Expenses of the Issuer
  
 ITEM 10   ADDITIONAL INFORMATION
 A  Share Capital
         139




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B  Memorandum and Articles of Association
  1.
    
    We were incorporated, in Canada, under Part IA of the
Companies Act(Québec) (the Companies Act) as 9093-9687
Québec Inc. on August 8, 2000 under registration number
1149501992. On August 18, 2000, a Certificate of Amendment
was filed to change our name to Media Acquisition Inc. Our
name was further changed to Quebecor Media Inc. on September
26, 2000. Our Articles do not describe our object and
purpose.
 2.
    
    (a)
    Our by-laws provide that we may transact business with one or
more of our directors or with any firm of which one or more
of our directors are members or employees or with any
corporation or association of which one or more of our
directors are shareholders, directors, officers or employees.
The director who has an interest in the transaction shall
disclose his interest to us and to the other directors and
shall abstain from discussing and voting on the transaction,
except if his vote is required to bind us in respect of the
transaction.
 (b)
    
    Neither the Articles nor our by-laws contain provisions with
respect to directors power, in the absence of an independent
quorum, to determine their remuneration.(c)
    
    Subject to any restriction which may from time to time be
included in the Articles or our by-laws, or the terms, rights
or restrictions of any of our shares or securities
outstanding, the directors may authorize us to borrow money
and obtain advances upon the credit of our company, from any
bank, corporation, firm, association or person, upon such
terms and conditions, in all respects, as they think fit. The
directors may authorize the issuance of bonds or other
evidences of indebtedness of our company, and may authorize
the pledge or sale of the same upon such terms and
conditions, in all respects, as they think fit. The directors
are also authorized to hypothecate the property, undertaking
and assets, movable or immovable, of our company to secure
payment for any bonds or other evidences of indebtedness or
otherwise give guarantees to secure the payment of loans.
  3.
    
    The rights, preferences and restrictions attaching to our Common
Shares, Cumulative First Preferred Shares (consisting of the Series A
Shares, the Series B Shares, the Series C Shares, the Series D Shares,
the Series F Shares and the Series G Shares) and our Preferred Shares,
Series E are set forth below:
 Common Shares
 (a)
    
    Dividend rights: Subject to the rights of the holders of our Preferred Shares,
each common share shall be entitled to receive such dividends as our Board of Directors
shall determine.(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
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which only the holders of another
specified series or class of shares are entitled to vote. At each such meeting, each
common share shall entitle the holder thereof to one vote.(c)
    
    Rights to share in our profits: Other than as provided in paragraph (a) above
(the holders of our common shares are entitled to receive dividends as determined by our
Board of Directors) and paragraph (d) below (the holders
of our common shares are entitled to participation in our remaining property and assets
available for distribution in the event of our liquidation, dissolution or
reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding up our affairs, whether voluntarily or involuntarily, the holders of
our common shares shall be entitled, subject to the rights of the holders of Preferred
Shares, to participate equally, share for share, in our remaining property and assets
available for distribution to our shareholders, without preference or distinction.(e)
    
    Redemption provisions: None(f)
    
    Sinking fund provisions: None(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Québec) and as determined by the Board of Directors. Our
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of common
shares as a result of such holder owning a substantial number of shares: None
  Cumulative First Preferred Shares
  Companies Act pari passu
 Cumulative First Preferred Shares, Series A (Series A Shares)
 (a)
    
    Dividend rights: The holders of record of the Series A Shares shall be entitled
to receive in each fiscal year fixed cumulative preferred dividends at the rate of 12.5%
per share per annum. No dividends may be paid on 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.
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(b)
    
    Voting rights: Holders of Series A Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay semi-annual dividends on the Series A Shares. In that event and only
for so long as the dividend remains in arrears, the holders of Series A Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series A Share shall entitle the holder
thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series A Shares are entitled to receive a 12.5% cumulative preferential
dividend) and paragraph (d) below (the holders of Series A Shares are entitled to
receive, in preference to the holders of common shares, an amount equal to $1,000 per
Series A Share and any accumulated and unpaid dividends with respect thereto in the
event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series A Shares shall be entitled to receive, in preference to the holders of common
shares, an amount equal to $1,000 per Series A Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series A Shares may require us to redeem the
Series A preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at our
option, redeem the Series A Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series A
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series B (Series B Shares)
 (a)
    
    Dividend rights: The holders of record of the Series B Shares shall be entitled
to receive a single dividend, payable in cash, in an amount to be determined by our
Board of Directors in accordance with the Articles, which dividend, once determined by
our Board of Directors, shall be paid on the date of conversion of the Series B Shares
into our common shares. No dividends may be paid on any shares ranking junior to the
Series B Shares unless all dividends which shall have become payable on the Series B
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series B Shares, as such, shall not be entitled to
receive notice of, and to attend or vote at, any meeting of our shareholders, unless we
shall have failed to pay the dividend due to such holders. In that event and only for so
long as the said dividend remains in arrears, the holders of Series B Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series B Share shall entitle the holder
thereof to one vote.(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
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per
Series B Share and the dividend referred to in paragraph (a) above in the event of
liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series B Shares shall be entitled to receive, in preference to the holders of common
shares, an amount equal to $1.00 per Series B Share held and the dividend referred to in
paragraph (a) above.(e)
    
    Redemption provisions: Holders of Series B Shares may require us to redeem the
Series B Shares at any time at a price of $1.00 per share plus the dividend referred to
in paragraph (a) above. In addition, we may, at our option, redeem the Series B Shares
at a price of $1.00 per share plus the dividend referred to in paragraph (a) above.(f)
    
    Sinking fund provisions:None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series B
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series C (Series C Shares)
 (a)
    
    Dividend rights: The holders of record of the Series C Shares shall be entitled
to receive in each fiscal year fixed cumulative preferred dividends at the rate of
11.25% per share per annum. No dividends may be paid on any shares ranking junior to the
Series C Shares unless all dividends which shall have become payable on the Series C
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series C Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay certain dividends on the Series C Shares. In that event and only for
so long as the dividend remains in arrears, the holders of Series C Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series C Share shall entitle the holder
thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series C Shares are entitled to receive a 11.25% cumulative preferential
dividend) and paragraph (d) below (the holders of Series C Shares are entitled to
receive, in preference to the holders of Common Shares, an amount equal to $1,000 per
Series C Share and any accumulated and unpaid dividends with respect thereto in the
event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation:In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series C Shares shall be entitled to receive, in preference to the holders of Common
Shares, an amount equal to $1,000 per Series C Share and any accumulated and unpaid
dividends with respect thereto.(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.
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(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series C
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series D (Series D Shares)
 (a)
    
    Dividend rights: The holders of record of the Series D Shares shall be entitled
to receive in each fiscal year fixed cumulative preferred dividends at the rate of 11.0%
per share per annum. No dividends may be paid on any shares ranking junior to the Series
D Shares unless all dividends which shall have become payable on the Series D Shares
have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series D Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay certain dividends on the Series D Shares. In that event and only for
so long as the dividend remains in arrears, the holders of Series D Shares shall be
entitled to receive notice of, and to attend and vote at, all shareholders meetings,
except meetings at which only holders of another specified series or class of shares are
entitled to vote. At each such meeting, each Series D Share shall entitle the holder
thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above (the
holders of Series D Shares are entitled to receive a 11.0% cumulative preferential
dividend) and paragraph (d) below (the holders of Series D Shares are entitled to
receive, in preference to the holders of Common Shares, an amount equal to $1,000 per
Series D Share and any accumulated and unpaid dividends with respect thereto in the
event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series D Shares shall be entitled to receive, in preference to the holders of Common
Shares, an amount equal to $1,000 per Series D Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series D Shares may require us to redeem the
Series D preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at its
option, redeem the Series D Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the unissued shares of our share capital
on such terms and conditions, for such consideration not contrary to law or to the
Companies Act(Québec) and as determined by the Board of Directors. The directors may,
from time to time, make calls upon the shareholders in respect of any moneys unpaid upon
their shares.(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.
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Cumulative First Preferred Shares, Series F (Series F Shares)
 (a)
    
    Dividend rights: The holders of record of the Series F Shares shall be entitled
to receive in each fiscal year fixed cumulative semi-annual dividends at the rate of
10.85% per share per annum. No dividends may be paid on any shares ranking junior to the
Series F Shares unless all dividends which shall have become payable on the Series F
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series F Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay eight semi-annual dividends on the Series F Shares. In that event and
only for so long as the dividend remains in arrears, the holders of Series F Shares
shall be entitled to receive notice of, and to attend and vote at, all shareholders
meetings, except meetings at which
only holders of another specified series or class of shares are entitled to vote. At
each such meeting, each Series F Share shall entitle the holder thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above
(holders of Series F Shares are entitled to receive a 10.85% cumulative preferential
semi-annual dividend) and paragraph (d) below (the holders of Series F Shares are
entitled to receive, in preference to the holders of common shares, an amount equal to
$1,000 per Series F Share and any accumulated and unpaid dividends with respect thereto
in the event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series F Shares shall be entitled to receive, in preference to the holders of common
shares, an amount equal to $1,000 per Series F Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series F Shares may require us to redeem the
Series F preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at our
option, redeem the Series F Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Québec) and as determined by the Board of Directors. The
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series F
Shares as a result of such holders owning a substantial number of shares: None.
 Cumulative First Preferred Shares, Series G (Series G Shares)
 (a)
    
    Dividend rights: The holders of record of the Series G Shares shall be entitled
to receive in each fiscal year fixed cumulative semi-annual dividends at the rate of
10.85% per share per annum. No dividends may be paid on any shares ranking junior to the
Series G Shares unless all dividends which shall have become payable on the Series G
Shares have been paid or set aside for payment.(b)
    
    Voting rights: Holders of Series G Shares shall not, as such, be entitled to
receive notice of, or attend or vote at, any meeting of our shareholders unless we shall
have failed to pay eight semi-annual dividends on the Series G Shares. In that event and
only for so long as the dividend remains in arrears, the holders of Series G Shares
shall be entitled to receive notice of, and to attend and vote at, all shareholders
meetings, except meetings at which
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only holders of another specified series or class of
shares are entitled to vote. At each such meeting, each Series G Share shall entitle the
holder thereof to one vote.(c)
    
    Rights to share in our profits: Except as provided in paragraph (a) above
(holders of Series G Shares are entitled to receive a 10.85% cumulative preferential
semi-annual dividend) and paragraph (d) below (the holders of Series G Shares are
entitled to receive, in preference to the holders of common shares, an amount equal to
$1,000 per Series G Share and any accumulated and unpaid dividends with respect thereto
in the event of our liquidation, dissolution or reorganization), none.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or
reorganization or any other distribution of our assets among our shareholders for the
purpose of winding-up our affairs, whether voluntarily or involuntarily, the holders of
Series G Shares shall be entitled to receive, in preference to the holders of common
shares, an amount equal to $1,000 per Series G Share and any accumulated and unpaid
dividends with respect thereto.(e)
    
    Redemption provisions: Holders of Series G Shares may require us to redeem the
Series G preferred shares at any time at a price of $1,000 per share plus any
accumulated and unpaid dividends with respect thereto. In addition, we may, at our
option, redeem the Series G Shares at a price of $1,000 per share plus any accumulated
and unpaid dividends with respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by Quebecor Media: Our by-laws provide that our
directors may, from time to time, accept subscriptions, allot, issue, grant options in
respect of or otherwise dispose of the whole or any part of the unissued shares of our
share capital on such terms and conditions, for such consideration not contrary to law
or to the Companies Act(Québec) and as determined by the Board of Directors. The
directors may, from time to time, make calls upon the shareholders in respect of any
moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series G
Shares as a result of such holders owning a substantial number of shares: None.
 Preferred Shares
 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
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shares, but subsequent to the holders of Series A Shares, Series B Shares, Series C
Shares and Series D Shares, an amount equal to the redemption price of the Series E
Shares held and the amount of any declared but unpaid dividends on the Series E Shares
referred to in paragraph (a) above.(e)
    
    Redemption provisions: Holders of Series E Shares may require us to redeem the
Series E preferred shares at any time at a price equal to the redemption price plus an
amount equal to any dividends declared thereon but unpaid up to the date of redemption.
The redemption price shall be equal to the aggregate consideration received for such
share.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to capital calls by us: Our by-laws provide that our directors may,
from time to time, accept subscriptions, allot, issue, grant options in respect of or
otherwise dispose of the whole or any part of the
unissued shares of our share capital on such terms and conditions, for such
consideration not contrary to law or to the Companies Act(Québec) and as determined by
the Board of Directors. The directors may, from time to time, make calls upon the
shareholders in respect of any moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of Series E
Shares: None.
 4.
    
    For a description of the action necessary to change the rights of
holders of our Cumulative First Preferred Shares, see Section 3.
Cumulative First Preferred Shares above. As regards our Preferred
Shares, Series E, we will not, unless consented to by the holders of
the Series E Shares and upon compliance with the provisions of the
Companies Act(Québec), repeal, amend or otherwise alter any
provisions of the Articles relating to the Series E Shares. Under the
general provisions of the Companies Act(Québec), (i) our Articles may
be amended by the affirmative vote of the holders of two-thirds
(2/3) of
the vote cast by the shareholders at a special meeting, and (ii) our
by-laws may be amended by our directors and ratified by a majority of
the vote cast by the shareholders at a meeting called for such
purpose.5.
    
    Our by-laws provide that the annual meetings of the shareholders shall
be held at such time, on such date and at such place as the Board of
Directors determines from time to time. Annual meetings of the
shareholders may be called at any time by order of the Board of
Directors, the chairman of the board, or, provided they are directors
of our company, by the president or any vice president. Special
general meetings of the shareholders shall be held at such time, on
such date and at such place as the Board of Directors determines from
time to time. Special general meetings of the shareholders may be
called at any time by order of the Board of Directors, the chairman of
the board, or, provided they are directors of our company, by the
president or any vice president.For any general meeting, our by-laws provide that a notice specifying
the date, time and place of the meeting and the items to be discussed
at the meeting must be sent to each shareholder entitled to vote at
that meeting (at the address indicated in our books) at least
twenty-one (21) days before the date of such a meeting. If the
convening of any meeting of shareholders is a matter of urgency,
notice of a meeting may be given not less than 48 hours before such
meeting is to be held.The Chairman of the Board or, in his absence, the President, if he is
a director or, in his absence, one of the Vice Presidents who is a
director of our company shall preside at all meetings of shareholders.
If all of the aforesaid officers are absent or decline to act, the
persons present and entitled to vote may choose one of their number to
act as chairman of the meeting.Our by-laws provide that the holders of not less than 50.1% of the
outstanding shares of our share capital carrying rights to vote at
such meeting, present in person or represented by proxy, shall
constitute a quorum for 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
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nonresidents or foreign owners to hold or vote shares, other than as
provided in the Investment Canada Act(Canada). The Investment Canada
Actrequires non-Canadian (as defined in the Investment Canada Act)
(Canada) individuals, governments, corporations and other entities who
wish to acquire control of a Canadian business (as defined in the
Investment Canada Act(Canada)) to file either an application for
review (when certain asset value thresholds are met) or a post closing
notification with the Director of Investments appointed under the
Investment Canada Act(Canada), unless a specific exemption applies.
The Investment Canada Act(Canada) requires that, when an acquisition
of control of a Canadian business by a non-Canadian is subject to
review, it must be approved by the Minister responsible for the
Investment Canada Act(Canada) on the basis that the Minister is
satisfied that the acquisition is likely to be of net benefit to
Canada, having regard to criteria set forth in the Investment Canada
Act(Canada).7.
    
    The Articles provide that none of our shares may be transferred
without the consent of the directors expressed in a resolution duly
adopted by them. In addition, the total number of shareholders of our
company is limited to fifty, exclusive of present or former employees
of our company or a subsidiary.A register of transfers containing the date and particulars of all
transfers of shares of our share capital shall be kept either at our
head office or at another of our offices or at such other place in the
Province of Québec as may be determined, from time to time, by the
Board of Directors.8.
    
    Not applicable.9.
    
    Not applicable.10.
    
    Not applicable.
 C  Material Contracts
  (a)
    
    Indenture relating to US$700,000,000 of our 7 3/4% Senior Notes due March 15, 2016,
dated as of October 5, 2007, by and between Quebecor Media Inc., and U.S. Bank National
Association, as trustee.On October 5, 2007, we issued US$700,000,000 aggregate principal amount of our 7 3/4%
Senior Notes due March 15, 2016 pursuant to an Indenture, dated as of October 5, 2007,
by and between Quebecor Media and U.S. Bank National Association, as trustee. These
notes are unsecured and are due on March 15, 2016. Interest on these notes is payable
semi-annually in arrears on June 15 and December 15 of each year, beginning on December
15, 2007. These notes are not guaranteed by our subsidiaries. These notes are
redeemable, at our option, under certain circumstances and at the redemption prices set
forth in these indentures. These indentures contain customary restrictive covenants with
respect to Quebecor Media and certain of its subsidiaries and customary events of
default. If an event of default occurs and is continuing, other than our bankruptcy or
insolvency, the trustee or the holders of at least 25% in principal amount at maturity
of the then-outstanding notes may declare all the notes to be due and payable
immediately.In connection with the issuance of these notes, we 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 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. In this regard, we filed a registration statement on
Form F-4 with the SEC on November 20, 2007 and commenced the registered exchange offer
on February 21, 2008. These notes were issued under a different indenture than, and do
not form a single series and are not fungible with, our 7 3/4 % Senior Notes due 2016
which we issued in 2006, as described in the next paragraph.
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(b)
    
    Indenture relating to US$525,000,000 of our 7 3/4% Senior Notes due March 15, 2016,
dated as of January 17, 2006, by and between Quebecor Media Inc., and U.S. Bank National
Association, as trustee.On January 17, 2006, we issued US$525,000,000 aggregate principal amount of our 7 3/4%
Senior Notes due March 15, 2016 pursuant to an Indenture, dated as of January 17, 2006,
by and between Quebecor Media and U.S. Bank National Association, as trustee. These
notes are unsecured and are due on March 15, 2016. Interest on these notes is payable
semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15,
2006. These notes are not guaranteed by our subsidiaries. These notes are redeemable, at
our option, under certain circumstances and at the redemption prices set forth in these
indentures. These indentures contain customary restrictive covenants with respect to
Quebecor Media and certain of its subsidiaries and customary events of default. If an
event of default occurs and is continuing, other than our bankruptcy or insolvency, the
trustee or the holders of at least 25% in principal amount at maturity of the
then-outstanding notes may declare all the notes to be due and payable immediately.In connection with the issuance of these notes, we agreed to file an exchange offer
registration statement with the SEC with respect to a registered offer to exchange
without novation the unregistered notes for our new SEC-registered 7 3/4 % Senior Notes
due 2016 evidencing the same continuing indebtedness and having substantially identical
terms. We filed a registration statement on Form F-4 with the SEC on May 8, 2006 and
completed the registered exchange offer on July 14, 2006.(c)
    
    Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media Inc.,
as Borrower, the financial institutions party thereto from time to time, as Lenders, and
Bank of America, N.A., as Administrative Agent.On January 17, 2006, in connection with our refinancing plan, we entered into Senior
Secured Credit Facilities comprised of (i) a 5-year $100.0 million revolving credit
facility that matures in January 2011, (ii) a 5-year $125.0 million term loan A that
matures in January 2011, and (iii) a 7-year US$350.0 million term loan B facility that
matures in January 2013. The Senior Secured Credit Facilities also include an
uncommitted $350 million incremental facility that may be available to us, subject to
compliance at all times with all financial covenants, absence of default and lenders
being willing to fund the incremental amount. This incremental facility will have a term
to be agreed with the lenders, although the maturity of borrowings under the incremental
facility will be required to have a maturity falling on or extending beyond the maturity
of the term loan B facility. We may draw Letters of Credit under the Senior Secured
Credit Facilities. The proceeds of the term loan A and term loan B were used to
refinance existing debt. The proceeds of our revolving facility may be used for our
general corporate purposes.Borrowings under the revolving credit facility, term loan A and term loan B bear
interest at the Canadian prime rate, the U.S. prime rate, the bankers acceptance rate
or LIBOR, plus, in each case, an applicable margin.Borrowings under the revolving credit facility are repayable in full in January 2011.
Borrowings under our term loan A facility are repayable in full in January 2011 and
borrowing under our term loan B facility are repayable in full in January 2013. We are
also required to make specified quarterly repayments of amounts borrowed under the term
loan A and term loan B.Borrowings under the Senior Secured Credit Facilities and under eligible derivative
instruments are secured by a first-ranking hypothec and security agreement (subject to
certain permitted encumbrances) on all of our movable property and first-ranking pledges
of all of the shares (subject to certain permitted encumbrances) of Sun Media and
Videotron.The Senior Secured Credit Facilities contain customary covenants that restrict and limit
our ability to, among other things, enter into merger or amalgamation transactions,
grant encumbrances, sell assets, pay dividends or make other distributions, issue shares
of capital stock, incur indebtedness and enter into related party transactions. In
addition, the Senior Secured Credit Facilities contain customary financial covenants.
The Senior Secured Credit Facilities contain customary events of default including the
non-payment of principal or
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interest, the breach of any financial covenant, the failure
to perform or observe any other covenant, certain bankruptcy events relating to Quebecor
Media and its subsidiaries, and the occurrence of a change of control.(d)
    
    Indenture relating to US$650,000,000 of Videotrons 6 7/8
% Senior Notes due January
15, 2014, dated as of October 8, 2003, by and among 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.(e)
    
    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 Vidéotron ltée, the guarantors
party thereto, and Wells Fargo, National Association, as trustee.On September 16, 2005, Videotron issued US$175,000,000 aggregate principal amount of its
6 3/8
  Senior Notes due December 15, 2015, pursuant to an Indenture, dated as of September
16, 2005, by and among Videotron, the guarantors party thereto, and Wells Fargo,
National Association, as trustee. These notes are unsecured and are due on December 15,
2015. Interest on these notes is payable semi-annually in arrears on June 15 and
December 15 of each year, beginning on December 15, 2005. These notes are guaranteed on
a senior unsecured basis by most, but not all, of Videotrons subsidiaries. These notes
are redeemable, at Videotrons option, under certain circumstances and at the redemption
prices set forth in the indenture. The indenture contains customary restrictive
covenants with respect to Videotron and certain of its subsidiaries, and customary
events of default. If an event of default occurs and is continuing, other than
Videotrons bankruptcy or insolvency, the trustee or the holders of at least 25% in
principal amount at maturity of the then-outstanding notes may declare all the notes to
be due and payable immediately.(f)
    
    Amended and Restated Credit Agreement, dated as of November 19, 2004, by and
among Vidéotron ltée, as borrower, the guarantors party thereto, the financial
institutions party thereto from time to time, as lenders, and Royal Bank of Canada, as
administrative agent, as amended.On November 19, 2004, concurrently with the closing of the private placement of a new
series of 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 most but not all
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of Videotrons current and future
assets, as well as those of the guarantors party thereto, including most but not all of
Videotrons subsidiaries (the Videotron Group), guarantees of all the members of the
Videotron Group, pledges of the shares of Videotron and the members of the Videotron
Group, and other security.This amended and restated 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.(g)
    
    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.(h)
    
    Credit Agreement, dated as of February 7, 2003, by and among Sun Media
Corporation, the guarantors party thereto, Banc of America Securities LLC, Credit Suisse
First Boston Canada, the lenders party thereto, and Bank of America, N.A., as
Administrative Agent, as amended.On February 7, 2003, as part of the refinancing of its indebtedness, Sun Media entered
into a secured credit facility consisting of a five-year revolving credit facility of
$75.0 million and a six-year US$230.0 million term loan B. In connection with Quebecor
Medias 2006 refinancing, Sun Medias credit facility was amended for the addition of a
$40.0 million term loan C in January 2006. On October 31, 2007, Sun Media repaid in full
and terminated its term loan B. In addition, on October 31, 2007, Sun Media entered
into a Fifth Amending Agreement to its credit agreement. The amendment reduced the
revolving credit facility from $75.0 million to $70.0 million, extends the term of the
credit facilities to October 31, 2012, and modifies certain definitions and covenants
related to leverage and interest coverage ratios, while removing the fixed charge ratio.Borrowings under the revolving credit facility and the term loan C are repayable in full
in October 2012. Sun Media is also required to make specified quarterly repayments of
amounts borrowed under the term loan C.Borrowings under the revolving credit facility and the term loan C facility are in
Canadian dollars and bear interest at the Canadian prime rate or the bankers acceptance
rate plus an applicable margin. The proceeds of the term loan C were used to refinance
existing debt and for permitted distributions to Sun Medias shareholder. The proceeds
of Sun Medias revolving facility may be used for general corporate purposes including
distributions to Sun Medias shareholder in certain circumstances.Borrowings under this amended and restated credit facility and under eligible derivative
instruments are secured by a first-ranking hypothec and security agreement (subject to
certain permitted encumbrances) on all of Sun Medias current and future assets, as well
as those of the guarantors party thereto, including most, but not all, of
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Sun Medias
subsidiaries (the Sun Media Group), guarantees of all the members of the Sun Media
Group, pledges of shares of the members of the Sun Media Group, and other security.This credit facility contains customary covenants that restrict and limit the ability of
Sun Media and its subsidiaries to, among other things, enter into merger or amalgamation
transactions, grant encumbrances, sell assets, pay dividends or make other
distributions, issue shares of capital stock, incur indebtedness and enter into related
party transactions. In addition, this credit facility contains customary financial
covenants. This credit facility also contains customary events of default including the
non-payment of principal or interest, the breach of any financial covenant, the failure
to perform or observe any other covenant, certain bankruptcy events relating to Sun
Media and members of the Sun Media Group, and the occurrence of a change of control.(i)
    
    Share Purchase Agreement dated December 22, 2003 between Carlyle VTL Holdings,
L.P. and Carlyle Partners III (Vidéotron), L.P., and Quebecor Media Inc. and 9101-0827
Québec Inc. relating to the purchase by 9101-0827 Québec Inc. of 5,000 Class C Preferred
Shares of 3662527 Canada Inc., as amended by a First Amendment to Share Purchase
Agreement dated as of December 31, 2004, and by an Assignment and Assumption Agreement
dated as of June 30, 2006.On December 22, 2003, 9101-0827 Québec Inc., a wholly-owned subsidiary of Quebecor Media
entered into an agreement with Carlyle VTL Holdings, L.P. and Carlyle Partners III
(Vidéotron), L.P. (collectively Carlyle) to purchase the 5,000 Class C Preferred
Shares held by Carlyle in 3662527 Canada Inc., the parent company of Vidéotron Télécom
Ltd., Quebecor Medias business telecommunications venture. The acquisition
was made for a purchase price with a value estimated at approximately $125 million at
closing. A payment of $55 million was made to Carlyle at closing on December 22, 2003.
The balance of the purchase price was subject to variation on the basis of the valuation
of the common shares of Quebecor Media and was payable on demand at any time after
December 15, 2004, but no later than December 15, 2008. Quebecor Media held an option
to pay this Additional Amount in cash, at its fair value for a period of 30 days
following each of June 15, 2007 and June 15, 2008. At the date of the transaction, both
parties had agreed that the initial value of the Additional Amount payable was $70.0
million ($122.0 million as at December 31, 2006), and on July 23, 2007, Quebecor Media
exercised its option to pay in full the Additional Amount payable to The Carlyle Group
for total cash consideration of $127.2 million.(j)
    
    Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, by
and among 4411986 Canada Inc., Osprey Media LP and Osprey Media Income Fund, as
borrowers, the financial institutions party thereto from time to time, as lenders, and
The Bank of Nova Scotia, as administrative agent, as amended.On September 28, 2007, 4411986 Canada Inc., Osprey Media LP and Osprey Media Income Fund
entered into a fourth amended and restated secured credit facility consisting of a
39-month revolving credit facility of $65.0 million and a 39-month $133.3 million term
facility. Borrowings under the revolving credit facility and the term facility are
repayable in full in January 2011.Borrowings under the revolving credit facility and the term facility are in Canadian
dollars and bear interest at the Canadian prime rate or the bankers acceptance rate
plus an applicable margin. The proceeds of the term facility were used to refinance
existing debt. The proceeds of Osprey Medias revolving facility may be used for
general corporate purposes including acquisitions, capital expenditures and
distributions to Osprey Medias shareholder (subject in each case to certain
restrictions).Borrowings under this Fourth Amended and Restated Credit Agreement and under eligible
derivative instruments are secured by a first-ranking hypothec and security agreement
(subject to certain permitted encumbrances) on all of Osprey Medias current and future
assets, as well as those of its subsidiaries (the Osprey Media Group) and other
security.This credit facility contains customary covenants that restrict and limit the ability of
Osprey Media and its subsidiaries to, among other things, enter into merger or
amalgamation transactions, grant encumbrances, sell
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assets, pay dividends or make other
distributions, issue shares of capital stock, incur indebtedness and enter into related
party transactions. In addition, this credit facility contains customary financial
covenants. This credit facility also contains customary events of default including the
non-payment of principal or interest, the breach of any financial covenant, the failure
to perform or observe any other covenant, and certain bankruptcy events relating to
Osprey Media and members of the Osprey Media Group.
 D   Exchange Controls
  Investment Canada Act North American Free Trade Agreement Implementation Act World Trade
Organization (WTO) Agreement Implementation Act
  E   Taxation
 Certain U.S. Federal Income Tax Considerations
 3 4 3 4
  
    
    dealers in stocks, securities or currencies;
    
    securities traders that use a mark-to-market accounting method;
    
    banks and financial institutions;
    
    insurance companies;
    
    regulated investment companies;
    
    real estate investment trusts;
    
    tax-exempt organizations;
    
    persons holding notes as part of a hedging or conversion transaction or a straddle;
    
    persons deemed to sell notes under the constructive sale provisions of the Code;
    
    persons who or that are, or may become, subject to the expatriation provisions of
the Code;
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
    
    persons whose functional currency is not the U.S. dollar; and
    
    direct, indirect or constructive owners of 10% or more of our outstanding voting shares.
   
    
    an individual citizen or resident alien of the United States;
    
    a corporation or other entity treated as such formed in or under the laws of the
United States, any state thereof or the District of Columbia;
    
    an estate, the income of which is subject to U.S. federal income taxation regardless
of its source; or
    
    a trust, if a court within the United States is able to exercise primary supervision
over the administration of such trust and one or more U.S. persons (within the
meaning of the Code) have the authority to control all substantial decisions of the
trust, or if a valid election is in effect to be treated as a U.S. person.
   To ensure compliance with requirements imposed by the IRS, we inform you that the United
States tax advice contained herein: (i) is written in connection with the promotion or marketing by
Quebecor Media Inc. of the transactions or matters addressed herein, and (ii) is not intended or
written to be used, and cannot be used by any taxpayer, for the purpose of avoiding United States
tax penalties. Each taxpayer should seek advice based on the taxpayers particular circumstances
from an independent tax advisor.
  
 Interest on the Notes
 Interest on the 2006 notes
  Interest on the 2007 OID notes
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i.e.
        
    
    a portion of the initial purchase price of the note is attributable to pre-issuance
accrued interest,
    
    the first stated interest payment on the note is to be made within one year of the
notes issue date, and
    
    the first stated interest payment will equal or exceed the amount of the
pre-issuance accrued interest.
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Market Discount, Acquisition Premium, and Bond Premium
 de
minimis
    Other
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Sale, Exchange or Retirement of a Note
  
    
    the amount of cash and the fair market value of any property received (less any
portion allocable to the payment of accrued interest or, in the case of 2007 OID notes,
OID not previously included in income, which amount will be taxable as ordinary
interest income); and
    
    the U.S. Holders adjusted tax basis in the notes.
  Information Reporting and Backup Withholding
  
    
    fails to furnish a social security number or other taxpayer identification number
(TIN) certified under penalty of perjury within a reasonable time after the request
for the TIN;
    
    furnishes an incorrect TIN;
    
    is notified by the IRS that is has failed to report properly interest or dividends;
or
    
    under certain circumstances, fails to provide a certified statement, signed under
penalties of perjury, that the TIN furnished is the correct number and that such holder
is not subject to backup withholding.
 provided provided
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Certain Canadian Federal Income Tax Considerations for Residents of the United States
 Income Tax Act provided
  Interest Payments
  Dispositions
   .
 F 
    
    Dividends and Paying AgentsNot applicable.G 
    
    Statement by ExpertsNot applicable.H 
    
    Documents on Display
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I 
    
    Subsidiary InformationNot applicable.
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ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign currency risk and interest rate risk
   Commodity price risk
    Credit risk
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Fair value of financial instruments
  Material limitations
  Principal repayments
  Twelve month period ending December 31,(in millions)2008
    
    $
    24.72009
    
    
    181.82010
    
    
    121.62011
    
    
    171.92012
    
    
    49.32013 and thereafter
    
    
    2,528.5
 
 ITEM 12   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
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PART I
 
 ITEM 13   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
   
 ITEM 14   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A   Material Modifications to the Rights of Security Holders
  B   Use of Proceeds
  
 ITEM 15   CONTROLS AND PROCEDURES
   Internal Control  Integrated Framework
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ITEM 16   [RESERVED]
 
 ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B  CODE OF ETHICS
  
 ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  de minimis
 2007
    
    2006Audit Fees(1)
    
    $
    2,723,699
    
    
    $
    2,520,904Audit-related Fees(2)
    
    
    921,489
    
    
    
    614,494Tax Fees(3)
    
    
    76,024
    
    
    
    23,580All Other Fees(4)
    
    
    724,564
    
    
    
    19,115Total
    
    $
    4,445,776
    
    
    $
    3,178,093
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(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, due diligence or accounting work related to acquisitions; employee
benefit plan audits, and audit or attestation services not required by statute or
regulation and audit and attestation services required by statute or regulation, such
as comfort letters and consents, SEC prospectus and registration statements, other
filings and other offerings, including annual reports and SEC forms and statutory
audits.(3)
    
    Tax Fees include fees billed for tax compliance services, including the preparation
of original and amended tax returns and claims for refunds, tax consultations, such as
assistance and representation in connection with tax audits and appeals, tax advice
related to mergers, acquisitions and divestitures, transfer pricing, and requests for
advance tax rulings or technical interpretations.(4)
    
    All Other Fees include fees billed for forensic accounting and occasional training
services, assistance with respect to internal controls over financial reporting and
disclosure controls and procedures. 
 ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 PART II
 
 ITEM 17   FINANCIAL STATEMENTS
  
 ITEM 18 FINANCIAL STATEMENTS
  
 ITEM 19 EXHIBITS
 EXHIBITS
  ExhibitNumber
    
    Description1.1
    
    Articles of Incorporation of Quebecor Media Inc. (translation) (incorporated by reference to
Exhibit 3.1 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5,
2001, Registration Statement No. 333-13792).1.2
    
    Certificate of Amendment of Articles of Incorporation filed February 3, 2003 (translation)
(incorporated by
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ExhibitNumber
    
    Descriptionreference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2002, filed on March 31, 2003).1.3
    
    By-laws of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit 3.2 to
Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001, Registration
Statement No. 333-13792).1.4
    
    Certificate of Amendment of Articles of Incorporation filed December 5, 2003 (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2003, filed on March 31, 2004).1.5
    
    Certificate of Amendment of Articles of Incorporation filed January 16, 2004 (translation)
(incorporated by reference to the applicable exhibit to Quebecor Medias Annual Report on Form
20-F for fiscal year ended December 31, 2003, filed on March 31, 2004).1.6
    
    Certificate of Amendment of Articles of Incorporation filed November 26, 2004 (translation)
(incorporated by reference to Exhibit 1.6 of Quebecor Medias Annual Report on Form 20-F for
fiscal year ended December 31, 2004, filed on March 31, 2005).1.7
    
    By-law number 2004-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.7 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2004,
filed on March 31, 2005).1.8
    
    By-law number 2004-2 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.8 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2004,
filed on March 31, 2005).1.9
    
    Certificate of Amendment of Articles of Incorporation of Quebecor Media Inc., as of January 14,
2005 (translation) (incorporated by reference to Exhibit 1.9 of Quebecor Medias Annual Report
on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).1.10
    
    By-law number 2005-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.10 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2005,
filed on March 31, 2006).1.11
    
    Certificate of Amendment of Articles of Incorporation of Quebecor Media, Inc., as of January
12, 2007 (translation) (incorporated by reference to Exhibit 1.11 of Quebecor Medias Annual
Report on Form 20-F for fiscal year ended December 31, 2006, filed on March 30, 2007).1.12
    
    By-law number 2007-1 of Quebecor Media Inc. (translation) (incorporated by reference to Exhibit
1.12 of Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2006,
filed on March 30, 2007).1.13
    
    Certificate of Amendment of Articles of Incorporation of Quebecor Media Inc., as of November
30, 2007 (translation).1.14
    
    By-law number 2007-2 of Quebecor Media Inc. (translation).2.1
    
    Form of 7 3/4 % Senior Note due 2016 originally issued on January 17, 2006 (included as Exhibit A
to Exhibit 2.2 below) (incorporated by reference to Exhibit 2.7 of Quebecor Medias Annual
Report on Form 20-F for fiscal year ended December 31, 2005, filed on March 29, 2006).2.2
    
    7 3/4% Senior Notes Indenture, dated as of January 17, 2006, by and between Quebecor Media Inc.,
and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 2.8 of
Quebecor Medias Annual Report on Form 20-F for fiscal year ended December 31, 2005, filed on
March 29, 2006).2.3
    
    Form of 7 3/4 % Senior Note due 2016 originally issued on October 5, 2007 (included as Exhibit A
to Exhibit 2.4 below) (incorporated by reference to Exhibit 4.3 of Quebecor Medias
Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No.
333-147551).2.4
    
    7 3/4% Senior Notes Indenture, dated as of October 5, 2007, by and between Quebecor Media Inc.,
and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.4 of
Quebecor Medias
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ExhibitNumber
    
    DescriptionRegistration Statement on Form F-4 dated November 20, 2007, Registration
Statement No. 333-147551).2.5
    
    Form of Sun Media Corporation 7 5/8% Senior Note due 2013 (included in Exhibit A to Exhibit 2.6
below) (incorporated by reference to Exhibit A to Exhibit 4.2 to Sun Media Corporations
Registration Statement on Form F-4 dated April 10, 2003, Registration Statement No.
333-103998).2.6
    
    Indenture relating to Sun Media Corporation 7 5/8% Senior Notes due 2013, dated as of
February 7, 2003, among Sun Media Corporation, the subsidiary guarantors signatory thereto, and
National City Bank, as trustee (incorporated by reference to Exhibit 4.2 to Sun Media
Corporations Registration Statement on Form F-4 dated April 10, 2003, Registration Statement
No. 333-103998).2.7
    
    Sun Media Corporation First Supplemental Indenture, dated as of July 30, 2004, by and among Sun
Media Corporation, the subsidiary guarantors signatory thereto, and U.S. Bank Corporate Trust
Services (formerly National City Bank), as trustee (incorporated by reference to Exhibit 2.4 of
Sun Media Corporations annual report on Form 20-F for the year ended December 31, 2004, filed
on March 24, 2005).2.8
    
    Form of Vidéotron ltée 6 7/8% Senior Notes due January 15, 2014 (incorporated by reference to
Exhibit A to Exhibit 4.3 to Vidéotrons Registration Statement on Form F-4 dated January 8,
2004, Registration Statement No. 333-110697).2.9
    
    Form of Notation of Guarantee by the subsidiary guarantors of the 6 7/8% Vidéotron ltée Senior
Notes due January 15, 2014 (incorporated by reference to Exhibit E to Exhibit 4.3 to
Vidéotrons Registration Statement on Form F-4 dated January 8, 2004, Registration Statement
No. 333-110697).2.10
    
    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).2.11
    
    Vidéotron ltée First Supplemental Indenture, dated as of July 12, 2004, by and among Vidéotron
ltée, SuperClub Vidéotron Canada inc., Les Propriétés SuperClub inc. and Wells Fargo Bank,
National Association, as trustee (incorporated by reference to Exhibit 4.4 to Vidéotrons
Registration Statement on Form F-4 dated January 18, 2005, Registration Statement No.
333-121032).2.12
    
    Form of Vidéotron ltée 6 3/8% Senior Note due 2015 (included as Exhibit A to Exhibit 2.14 below).2.13
    
    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 2.14 below).2.14
    
    Indenture relating to Vidéotron ltée 6 3/8% Senior Notes, dated as of September 16, 2005, by and
between Vidéotron ltée, the guarantors party thereto, and Wells Fargo, National Association, as
trustee (incorporated by reference to Exhibit 4.3 of Vidéotron ltées Registration Statement
on Form F-4 dated October 14, 2005, Registration Statement No. 333-128998).3.1
    
    Shareholders Agreement dated December 11, 2000 by and among Quebecor Inc., Capital
Communications 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 December 31, 2003, filed on March 31, 2004).4.1
    
    Lease Agreement dated November 24, 1993 between Le Groupe Vidéotron ltée and National Bank of
 166




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##### Table of Contents



ExhibitNumber
    
    DescriptionCanada for the property located at 300 Viger Avenue East, Montréal, Province of Québec, Canada,
together with a summary thereof in the English language (incorporated by reference to Exhibit
10.3 to Quebecor Media Inc.s Registration Statement on Form F-4 dated September 5, 2001,
Registration Statement No. 333-13792).4.2
    
    Credit Agreement, dated as of January 17, 2006, by and among Quebecor Media Inc., as Borrower,
the financial institutions party thereto from time to time, as Lenders, and Bank of America,
N.A., as Administrative Agent (incorporated by reference to Exhibit 4.2 of Quebecor Medias
Annual Report on Form 20-F for fiscal year ended
December 31, 2005, filed on March 29, 2006).4.3
    
    Credit Agreement dated as of February 7, 2003 among Sun Media Corporation, as borrower, Bank of
America, N.A., Banc of America Securities LLC and Credit Suisse First Boston Corporation, as
arrangers, Bank of America, N.A., as administrative agent, and the financial institutions
signatory thereto, as lenders (incorporated by reference to Exhibit 10.4 to Sun Media
Corporations Registration Statement on Form F-4 dated April 10, 2003, Registration Statement
No. 333-103998).4.4
    
    First Amending Agreement, dated as of December 3, 2003, amending the Credit Agreement dated as
of February 7, 2003 among Sun Media Corporation, Banc of America Securities LLC and Credit
Suisse First Boston Canada and the lenders thereto (incorporated by reference to the applicable
exhibit to Sun Medias Annual Report on Form 20-F for the year ended December 31, 2003, filed
on March 30, 2004).4.5
    
    Second Amending Agreement, dated as of October 12, 2004, amending the Credit Agreement dated as
of February 7, 2003 among Sun Media Corporation, Banc of America Securities LLC and Credit
Suisse First Boston Canada and the lenders thereto (incorporated by reference to Exhibit 4.5 of
Sun Media Corporations Annual Report on Form 20-F for the year ended December 31, 2004, filed
on March 24, 2005, Commission file No. 333-6690).4.6
    
    Third Amending Agreement, dated as of January 17, 2006, amending the Credit Agreement dated as
of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC,
Credit Suisse First Boston Canada, the lenders party thereto, and Bank of America, N.A., as
Administrative Agent (incorporated by reference to Exhibit 4.6 of Sun Media Corporations
Annual Report on Form 20-F for the year ended December 31, 2005, filed on March 21, 2006,
Commission file no. 333-6690).4.7
    
    Credit Agreement dated as of November 28, 2000 among Vidéotron ltée, RBC Dominion Securities
Inc., Royal Bank of Canada and the co-arrangers and lenders thereto, together with the First
Amending Agreement dated as of January 5, 2001 and the Second Amending Agreement dated as of
June 29, 2001 (incorporated by reference to Exhibit 10.5 to Quebecor Media Inc.s Registration
Statement on Form F-4 dated September 5, 2001, Registration Statement No. 333-13792).4.8
    
    Sixth Amending Agreement, dated as of October 8, 2003, to the Credit Agreement dated as of
November 28, 2000, among Vidéotron ltée, Royal Bank of Canada, as administrative agent, and the
financial institutions signatory thereto and acknowledged by Le SuperClub Vidéotron ltée,
Groupe de Divertissement SuperClub inc., Vidéotron (1998) ltée, CF Cable TV Inc., Videotron
(Regional) Ltd, Télé-Câble Charlevoix (1997) inc., Vidéotron TVN inc. and Câblage QMI inc., as
guarantors and by Quebecor Media Inc. (incorporated by reference to Exhibit 10.1 to Vidéotron
ltées Registration Statement on Form F-4 dated January 8, 2004, Registration Statement No.
333-110697).4.9
    
    Seventh Amending Agreement dated as of November 19, 2004 to the Credit Agreement dated as of
November 28, 2000, among Vidéotron ltée, Royal Bank of Canada, as administrative agent, and the
financial institutions signatory thereto and acknowledged by Le SuperClub Vidéotron ltée,
Groupe de Divertissement SuperClub inc., Vidéotron (1998) ltée, CF Cable TV Inc., Videotron
(Regional) Ltd., 9139-3256 Québec inc., Vidéotron TVN inc., Les Propriétés SuperClub inc. and
SuperClub Vidéotron Canada inc., as guarantors (the Guarantors), and by Quebecor Media Inc.
(incorporated by reference to Exhibit 10.2 to Vidéotron ltées Registration Statement on Form
F-4 dated January 18, 2005, Registration Statement No. 333-121032).4.10
    
    Form of Amended and Restated Credit Agreement entered into as of November 28, 2000, as amended
by a First Amending Agreement dated as of January 5, 2001, as Second Amending Agreement dated
as of
 167




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##### Table of Contents



ExhibitNumber
    
    DescriptionJune 29, 2001, a Third Amending Agreement dated December 12, 2001 and accepted by the
Lenders as of December 21, 2001, a Fourth Amending Agreement dated as of December 23, 2002, a
Fifth Amending Agreement dated as of March 24, 2003, a Sixth Amending Agreement dated as of
October 8, 2003 and a Seventh Amending Agreement dated as of November 19, 2004, among Vidéotron
ltée, Royal Bank of Canada, as administrative agent, and the financial institutions signatory
thereto (incorporated by reference to Schedule 2 to Exhibit 10.2 to Vidéotrons Registration
Statement on Form F-4 dated January 18, 2005, Registration Statement No. 333-121032).4.11
    
    Form of Guarantee under the Vidéotron ltée Credit Agreement (incorporated by reference to
Schedule D of Exhibit 10.5 to Quebecor Medias Registration Statement on Form F-4 dated
September 5, 2001, Registration Statement No. 333-13792).4.12
    
    Form of Share Pledge of the shares of Vidéotron ltée and of the guarantors of the Vidéotron
ltée Credit Agreement (incorporated by reference to Schedule E of Exhibit 10.5 to Vidéotrons
Registration Statement on Form F-4 dated September 5, 2001, Registration Statement No.
333-13792).4.13
    
    Credit Agreement, dated as of April 7, 2006, by and between Société Générale (Canada), as
lender, and Quebecor Media Inc., as borrower (incorporated by reference to Exhibit 10.3 of
Quebecor Medias Registration Statement on Form F-4 dated November 20, 2007, Registration
Statement No. 333-147551).4.14
    
    Fourth Amending Agreement, dated as of April 27, 2006, amending the Credit Agreement dated as
of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC,
Credit Suisse First Boston Canada and the lenders party thereto, and Bank of America, N.A., as
administrative agent (incorporated by reference to Exhibit 10.8 of Quebecor Medias
Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No.
333-147551).4.15
    
    Fifth Amending Agreement, dated as of October 31, 2007, amending the Credit Agreement dated as
of February 7, 2003, as amended, among Sun Media Corporation, Banc of America Securities LLC,
Credit Suisse First Boston Canada and the lenders party thereto, and Bank of America, N.A., as
administrative agent (incorporated by reference to Exhibit 10.9 of Quebecor Medias
Registration Statement on Form F-4 dated November 20, 2007, Registration Statement No.
333-147551).4.16
    
    Fourth Amended and Restated Credit Agreement, dated as of September 28, 2007, between 4411986
Canada Inc., Osprey Media LP, Osprey Media Income Fund, as borrowers, the financial
institutions party thereto, as Credit Facility lenders, the Canadian Imperial Bank of Commerce,
as syndication agent, Bank of Montreal, as documentation agent, and the Bank of Nova Scotia, as
administrative agent, including the First Amendment, made as of January 1, 2008, to the Fourth
Amended and Restated Credit Agreement.7.1
    
    Statement regarding calculation of ratio of earnings to fixed charges.8.1
    
    Subsidiaries of Quebecor Media Inc.11.1
    
    Code of Ethics (incorporated by reference to Exhibit 11.1 of Quebecor Medias Annual Report on
Form 20-F for fiscal year ended December 31, 2003, filed on March 31, 2004).12.1
    
    Certification of Pierre Karl Péladeau, Vice Chairman and Chief Executive Officer of Quebecor
Media Inc., pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.12.2
    
    Certification of Louis Morin, Vice President and Chief Financial Officer of Quebecor Media
Inc., pursuant to 15 U.S.C. Section 78(m)(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.13.1
    
    Certification of Pierre Karl Péladeau, Vice Chairman and Chief Executive Officer of Quebecor
Media Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.13.2
    
    Certification of Louis Morin, Vice President and Chief Financial Officer of Quebecor Media
Inc., pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 168




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##### Table of Contents



SIGNATURE
  QUEBECOR MEDIA INC.By:
    /s/ Louis MorinName:
    Louis MorinTitle:
    Vice President and Chief Financial Officer  169




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##### 



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2007, 2006 and 2005  
 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 comprehensive income
    
    
    F-4Consolidated statements of shareholders equity
    
    
    F-5Consolidated statements of cash flows
    
    
    F-6Consolidated balance sheets
    
    
    F-8Segmented information
    
    
    F-10Notes to consolidated financial statements
    
    
    F-13




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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
 
 2007
    
    
    2006
    
    
    2005Revenues
    
    $
    3,365.9
    
    
    $
    2,998.6
    
    
    $
    2,695.4Cost of sales and selling and administrative expenses
    
    
    2,402.0
    
    
    
    2,199.0
    
    
    
    1,963.3Amortization
    
    
    290.4
    
    
    
    260.7
    
    
    
    231.9Financial expenses (note 2)
    
    
    240.0
    
    
    
    224.6
    
    
    
    285.3Reserve for restructuring of operations, impairment
of assets and other special charges (note 3)
    
    
    11.6
    
    
    
    18.9
    
    
    
    (0.2
    )Loss on debt refinancing (note 4)
    
    
    1.0
    
    
    
    342.6
    
    
    
    60.0Gain on sale of businesses and other assets
    
    
    (0.4
    )
    
    
    (2.2
    )
    
    
    (0.1
    )Impairment of goodwill and intangible assets (note 5)
    
    
    5.4
    
    
    
    180.0
    
    
    
    Income (loss) before income taxes and
non-controlling interest
    
    
    415.9
    
    
    
    (225.0
    )
    
    
    155.2Income taxes (note 7)
    
    
    74.8
    
    
    
    (53.7
    )
    
    
    43.5Income (loss) before non-controlling interest
    
    
    341.1
    
    
    
    (171.3
    )
    
    
    111.7Non-controlling interest
    
    
    (19.2
    )
    
    
    (0.4
    )
    
    
    (16.2
    )Income (loss) from continuing operations
    
    
    321.9
    
    
    
    (171.7
    )
    
    
    95.5Income from discontinued operations (note 8)
    
    
    5.2
    
    
    
    2.0
    
    
    
    1.0Net income (loss)
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5
  F-3




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated statements of comprehensive income
 
 2007
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5Other comprehensive income (loss), net of income taxes:Unrealized (loss) gain on translation of net
investments in foreign operations
    
    
    (2.0
    )
    
    
    1.2
    
    
    
    (1.3
    )Unrealized gain on derivative instruments, including
income tax recovery of $11.5 million in 2007
    
    
    48.0
    
    
    
    
    
    
    
    46.0
    
    
    
    1.2
    
    
    
    (1.3
    )Comprehensive income (loss)
    
    $
    373.1
    
    
    $
    (168.5
    )
    
    $
    95.2
  F-4




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated statements of shareholders equity
 
 Accumulatedothercomprehensive
    
    
    TotalCapital
    
    
    Contributed
    
    
    
    
    
    
    income (loss)
    
    
    shareholdersstock
    
    
    surplus
    
    
    Deficit
    
    
    (note 20)
    
    
    equityBalance as of
December 31, 2004
    
    $
    1,773.7
    
    
    $
    3,216.8
    
    
    $
    (2,529.6
    )
    
    $
    (1.0
    )
    
    $
    2,459.9Net income
    
    
    
    
    
    
    
    
    
    
    96.5
    
    
    
    
    
    
    
    96.5Dividends
    
    
    
    
    
    
    
    
    
    
    (105.0
    )
    
    
    
    
    
    
    (105.0
    )Other comprehensive loss,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.3
    )
    
    
    (1.3
    )Balance as of
December 31, 2005
    
    
    1,773.7
    
    
    
    3,216.8
    
    
    
    (2,538.1
    )
    
    
    (2.3
    )
    
    
    2,450.1Net loss
    
    
    
    
    
    
    
    
    
    
    (169.7
    )
    
    
    
    
    
    
    (169.7
    )Dividends
    
    
    
    
    
    
    
    
    
    
    (23.7
    )
    
    
    
    
    
    
    (23.7
    )Reduction in paid-up capital
    
    
    (21.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21.3
    )Purchase of tax credits
from a company under common
control
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Other comprehensive income,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    1.2Balance as of
December 31, 2006
    
    
    1,752.4
    
    
    
    3,217.2
    
    
    
    (2,731.5
    )
    
    
    (1.1
    )
    
    
    2,237.0Cumulative effect of
changes in accounting
policies (note 1(b))
    
    
    
    
    
    
    
    
    
    
    (14.3
    )
    
    
    (35.5
    )
    
    
    (49.8
    )Net income
    
    
    
    
    
    
    
    
    
    
    327.1
    
    
    
    
    
    
    
    327.1Dividends
    
    
    
    
    
    
    
    
    
    
    (110.0
    )
    
    
    
    
    
    
    (110.0
    )Other comprehensive income,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46.0
    
    
    
    46.0Balance as of
December 31, 2007
    
    $
    1,752.4
    
    
    $
    3,217.2
    
    
    $
    (2,528.7
    )
    
    $
    9.4
    
    
    $
    2,450.3
  F-5




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated statements of cash flows
 
 2007
    
    
    2006
    
    
    2005Cash flows related to operations:Income (loss) from continuing operations
    
    $
    321.9
    
    
    $
    (171.7
    )
    
    $
    95.5Adjustments for:Amortization of property, plant and equipment
    
    
    275.4
    
    
    
    251.2
    
    
    
    225.3Amortization of deferred charges and other assets
    
    
    15.0
    
    
    
    9.5
    
    
    
    6.6Impairment of goodwill and intangible assets (note 5)
    
    
    5.4
    
    
    
    180.0
    
    
    
    Net loss on derivative instruments and on
foreign currency translation of financial instruments
    
    
    4.7
    
    
    
    1.2
    
    
    
    4.4Loss on revaluation of the Additional Amount payable (note 14)
    
    
    5.2
    
    
    
    10.5
    
    
    
    10.1Loss (gain) on sale of businesses, property, plant and
equipment, and other assets
    
    
    4.7
    
    
    
    (0.4
    )
    
    
    (1.7
    )Loss on debt refinancing (note 4)
    
    
    1.0
    
    
    
    342.6
    
    
    
    60.0Repayment of accrued interest on Senior Discount Notes
    
    
    
    
    
    
    (197.3
    )
    
    
    (3.0
    )Amortization of financing costs and
long-term debt discount
    
    
    4.8
    
    
    
    7.3
    
    
    
    62.7Future income taxes
    
    
    63.5
    
    
    
    (59.1
    )
    
    
    24.5Non-controlling interest
    
    
    19.2
    
    
    
    0.4
    
    
    
    16.2Other
    
    
    (1.4
    )
    
    
    0.3
    
    
    
    (1.5
    )719.4
    
    
    
    374.5
    
    
    
    499.1Net change in non-cash balances related to operations
    
    
    32.7
    
    
    
    (22.2
    )
    
    
    (27.4
    )Cash flows provided by continuing operations
    
    
    752.1
    
    
    
    352.3
    
    
    
    471.7Cash flows provided by discontinued operations
    
    
    1.4
    
    
    
    2.1
    
    
    
    1.0Cash flows provided by operations
    
    
    753.5
    
    
    
    354.4
    
    
    
    472.7Cash flows related to investing activities:Additions to property, plant and equipment
    
    
    (468.7
    )
    
    
    (435.5
    )
    
    
    (319.8
    )Business acquisitions, net of cash and cash equivalents (note 6)
    
    
    (438.6
    )
    
    
    (10.5
    )
    
    
    (110.5
    )Proceeds from disposal of businesses, net of cash and cash
equivalents (note 8)
    
    
    8.5
    
    
    
    0.5
    
    
    
    4.3Net decrease in temporary investments
    
    
    1.2
    
    
    
    39.2
    
    
    
    59.1Proceeds from disposal of assets
    
    
    6.1
    
    
    
    9.4
    
    
    
    5.5Acquisition of tax deductions from parent company (note 24)
    
    
    (14.9
    )
    
    
    (16.1
    )
    
    
    Decrease (increase) in advances receivable from parent company
    
    
    
    
    
    
    15.9
    
    
    
    (15.9
    )Proceeds from disposal of tax deductions to the parent company (note 24)
    
    
    
    
    
    
    
    
    
    
    15.9Other
    
    
    (1.5
    )
    
    
    (3.4
    )
    
    
    (3.6
    )Cash flows used in investing activities
    
    
    (907.9
    )
    
    
    (400.5
    )
    
    
    (365.0
    )Sub-total, balance carried forward
    
    $
    (154.4
    )
    
    $
    (46.1
    )
    
    $
    107.7
 F-6




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Consolidated statements of cash flows ( )
 
 2007
    
    
    2006
    
    
    2005Sub-total, balance brought forward
    
    $
    (154.4
    )
    
    $
    (46.1
    )
    
    $
    107.7Cash flows related to financing activities:Net (decrease) increase in bank indebtedness
    
    
    (6.6
    )
    
    
    7.9
    
    
    
    12.3Net (repayments) borrowings under revolving and bridge bank facilities
    
    
    (56.7
    )
    
    
    38.4
    
    
    
    72.2Issuance of long-term debt, net of financing fees
    
    
    756.1
    
    
    
    1,225.8
    
    
    
    200.9Repayments of long-term debt and unwinding of hedging contracts
    
    
    (301.3
    )
    
    
    (1,201.2
    )
    
    
    (315.9
    )Repayment of the Additional Amount payable (note 14)
    
    
    (127.2
    )
    
    
    
    
    
    
    Net decrease (increase) in prepayments under cross-currency swap agreements
    
    
    
    
    
    
    21.6
    
    
    
    (34.1
    )Dividends and reduction of Common Shares paid-up capital
    
    
    (110.0
    )
    
    
    (105.0
    )
    
    
    (45.0
    )Dividends paid to non-controlling shareholders
    
    
    (4.0
    )
    
    
    (4.5
    )
    
    
    (5.2
    )Other
    
    
    (3.1
    )
    
    
    (0.6
    )
    
    
    (3.6
    )Cash flow provided by (used in) financing activities
    
    
    147.2
    
    
    
    (17.6
    )
    
    
    (118.4
    )Net decrease in cash and cash equivalents
    
    
    (7.2
    )
    
    
    (63.7
    )
    
    
    (10.7
    )Effect of exchange rate changes on cash and cash equivalents
denominated in foreign currencies
    
    
    (0.8
    )
    
    
    0.4
    
    
    
    (0.7
    )Cash and cash equivalents at beginning of year
    
    
    34.1
    
    
    
    97.4
    
    
    
    108.8Cash and cash equivalents at end of year
    
    $
    26.1
    
    
    $
    34.1
    
    
    $
    97.4Cash and cash equivalents consist of:Cash
    
    $
    6.8
    
    
    $
    13.9
    
    
    $
    14.9Cash equivalents
    
    
    19.3
    
    
    
    20.2
    
    
    
    82.5$
    26.1
    
    
    $
    34.1
    
    
    $
    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
    
    $
    (41.5
    )
    
    $
    (14.5
    )
    
    $
    (57.6
    )Inventories and investments in televisual products and movies
    
    
    (6.4
    )
    
    
    (2.7
    )
    
    
    (20.3
    )Accounts payable and accrued charges
    
    
    35.5
    
    
    
    (15.8
    )
    
    
    43.7Accrued stock-based compensation (current and long-term portion)
    
    
    54.1
    
    
    
    24.4
    
    
    
    10.9Other
    
    
    (9.0
    )
    
    
    (13.6
    )
    
    
    (4.1
    )$
    32.7
    
    
    $
    (22.2
    )
    
    $
    (27.4
    )Cash interest payments
    
    $
    243.3
    
    
    $
    446.3
    
    
    $
    233.5Cash income taxes payments (net of refunds)
    
    
    (1.0
    )
    
    
    7.0
    
    
    
    13.5
  F-7




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Consolidated balance sheets
 
 2007
    
    
    2006AssetsCurrent Assets:Cash and cash equivalents
    
    $
    26.1
    
    
    $
    34.1Temporary investments
    
    
    0.2
    
    
    
    1.4Accounts receivable (note 9)
    
    
    496.0
    
    
    
    426.2Income taxes
    
    
    10.5
    
    
    
    17.3Amounts receivable from parent company and companies under
common control
    
    
    1.9
    
    
    
    Inventories and investments in televisual products and movies (note 10)
    
    
    169.0
    
    
    
    158.7Prepaid expenses
    
    
    32.7
    
    
    
    24.4Future income taxes (note 7)
    
    
    153.6
    
    
    
    65.9890.0
    
    
    
    728.0Properly, plant and equipment (note 11)
    
    
    2,110.2
    
    
    
    1,830.1Future income taxes (note 7)
    
    
    57.4
    
    
    
    61.1Other assets (note 12)
    
    
    422.0
    
    
    
    243.6Goodwill (note 13)
    
    
    4,081.3
    
    
    
    3,721.1$
    7,560.9
    
    
    $
    6,583.9
 F-8




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  consolidated balance sheets ( )
 
 2007
    
    
    2006Liabilities and shareholders equityCurrent liabilities:Bank indebtedness
    
    $
    16.3
    
    
    $
    20.6Accounts payable and accrued charges
    
    
    756.0
    
    
    
    592.4Deferred revenue
    
    
    202.7
    
    
    
    177.6Income taxes
    
    
    19.2
    
    
    
    8.8Amounts payable to parent company and companies under common control
    
    
    
    
    
    
    11.9Additional Amount payable (note 14)
    
    
    
    
    
    
    122.0Current portion of long-term debt (note 15)
    
    
    24.7
    
    
    
    23.11,018.9
    
    
    
    956.4Long-term debt (note 15)
    
    
    3,002.8
    
    
    
    2,773.0Derivative financial instruments (note 23)
    
    
    538.7
    
    
    
    231.3Other liabilities (note 16)
    
    
    103.5
    
    
    
    125.2Future income taxes (note 7)
    
    
    292.5
    
    
    
    118.9Non-controlling interest (note 17)
    
    
    154.2
    
    
    
    142.1Shareholders equity:Capital stock (note 18)
    
    
    1,752.4
    
    
    
    1,752.4Contributed surplus
    
    
    3,217.2
    
    
    
    3,217.2Deficit
    
    
    (2,528.7
    )
    
    
    (2,731.5
    )Accumulated other comprehensive income (loss) (note 20)
    
    
    9.4
    
    
    
    (1.1
    )2,450.3
    
    
    
    2,237.0Commitments and contingencies (note 21)Guarantees (note 22)Subsequent events (note 28)$
    7,560.9
    
    
    $
    6,583.9
  F-9




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Segmented information
 
     2007
    
    
    2006
    
    
    2005Revenues:Cable
    
    $
    1,552.6
    
    
    $
    1,309.5
    
    
    $
    1,080.3Newspapers
    
    
    1,028.1
    
    
    
    928.2
    
    
    
    915.6Broadcasting
    
    
    415.5
    
    
    
    393.3
    
    
    
    401.4Leisure and Entertainment
    
    
    329.8
    
    
    
    315.8
    
    
    
    255.4Interactive Technologies and Communications
    
    
    82.0
    
    
    
    73.9
    
    
    
    65.1Internet/Portals
    
    
    48.3
    
    
    
    41.6
    
    
    
    35.2Head Office and inter-segment
    
    
    (90.4
    )
    
    
    (63.7
    )
    
    
    (57.6
    )$
    3,365.9
    
    
    $
    2,998.6
    
    
    $
    2,695.4
 F-10




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Segmented information
 
 2007
    
    
    2006
    
    
    2005Income before amortization, financial
expenses, reserve for restructuring of
operations, impairment of assets and
other special charges, loss on debt
refinancing, gain on sale of businesses
and other assets and impairment of
goodwill and intangible assets:Cable
    
    $
    642.7
    
    
    $
    512.5
    
    
    $
    413.3Newspapers
    
    
    225.9
    
    
    
    207.6
    
    
    
    222.2Broadcasting
    
    
    59.4
    
    
    
    42.1
    
    
    
    53.0Leisure and Entertainment
    
    
    27.0
    
    
    
    19.3
    
    
    
    27.0Interactive Technologies and Communications
    
    
    2.8
    
    
    
    7.5
    
    
    
    3.9Internet/Portals
    
    
    6.9
    
    
    
    10.1
    
    
    
    9.0964.7
    
    
    
    799.1
    
    
    
    728.4General corporate (expenses) revenues
    
    
    (0.8
    )
    
    
    0.5
    
    
    
    3.7$
    963.9
    
    
    $
    799.6
    
    
    $
    732.1
 2007
    
    
    2006
    
    
    2005Amortization:Cable
    
    $
    219.4
    
    
    $
    198.4
    
    
    $
    179.7Newspapers
    
    
    44.7
    
    
    
    36.5
    
    
    
    30.3Broadcasting
    
    
    13.2
    
    
    
    14.3
    
    
    
    13.7Leisure and Entertainment
    
    
    7.9
    
    
    
    7.2
    
    
    
    4.3Interactive Technologies and Communications
    
    
    3.0
    
    
    
    2.3
    
    
    
    1.7Internet/Portals
    
    
    1.6
    
    
    
    1.1
    
    
    
    0.8Head Office
    
    
    0.6
    
    
    
    0.9
    
    
    
    1.4$
    290.4
    
    
    $
    260.7
    
    
    $
    231.9
 2007
    
    
    2006
    
    
    2005Additions to property, plant and equipment:Cable
    
    $
    330.1
    
    
    $
    302.6
    
    
    $
    219.9Newspapers
    
    
    111.4
    
    
    
    116.3
    
    
    
    74.0Broadcasting
    
    
    16.2
    
    
    
    9.0
    
    
    
    12.9Leisure and Entertainment
    
    
    2.9
    
    
    
    3.4
    
    
    
    7.9Interactive Technologies and Communications
    
    
    3.3
    
    
    
    1.8
    
    
    
    1.4Internet/Portals
    
    
    4.6
    
    
    
    1.9
    
    
    
    0.7Head Office
    
    
    0.2
    
    
    
    0.5
    
    
    
    3.0$
    468.7
    
    
    $
    435.5
    
    
    $
    319.8
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Segmented information
 
 2007
    
    
    2006Assets:Cable
    
    $
    4,460.1
    
    
    $
    4,253.5Newspapers
    
    
    2,364.9
    
    
    
    1,579.2Broadcasting
    
    
    407.9
    
    
    
    408.9Leisure and Entertainment
    
    
    176.9
    
    
    
    178.0Interactive Technologies and Communications
    
    
    85.9
    
    
    
    92.8Internet/Portals
    
    
    61.9
    
    
    
    59.8Head Office
    
    
    3.3
    
    
    
    11.7$
    7,560.9
    
    
    $
    6,583.9
 F-12




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 Notes to consolidated financial statements
 
  1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
  (a)
    
    Basis of presentation:
   (b)
    
    Change in accounting policies:
  (i)
    
    Comprehensive income:
  (ii)
    
    Financial instruments:
   F-13




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  Notes to consolidated financial statements (continued)
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (b)
    
    Change in accounting policies (continued):
 (ii)
    
    Financial instruments (continued):
   (iii)
    
    Hedges:
    F-14




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (b)
    
    Change in accounting policies (continued):On adoption of these new standards, the transition rules require that the Company adjust
either the opening retained earnings or accumulated other comprehensive income as if the new
rules had always been applied in the past, without restating comparative figures for prior
years. Accordingly, the following adjustments were recorded in the consolidated financial
statements as of January 1, 2007:
 
    
    Decrease in other assets of $44.4 million
    
    Increase in the liability related to derivative financial instruments of $88.9
million
    
    Decrease in long-term debt of $65.5 million
    
    Decrease in future income tax liabilities of $18.0 million
    
    Increase in deficit of $14.3 million
    
    Increase in accumulated other comprehensive loss of $35.5 million
 The adoption of the new standards resulted in a decrease of $6.0 million in net income
during the year ended December 31, 2007.(c)
    
    Foreign currency translation:Financial statements of self-sustaining foreign operations are translated using the rate in
effect at the balance sheet date for asset and liability items, and using the average
exchange rates during the year for revenues and expenses. Adjustments arising from this
translation are recorded in other comprehensive income and are reclassified in income only
when a reduction in the investment in these foreign operations is realized.Other foreign currency transactions are translated using the temporal method. Translation
gains and losses are included in financial expenses.(d)
    
    Use of estimates:The preparation of consolidated financial statements in accordance with Canadian GAAP
requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, related amounts of revenues and expenses, and disclosure of
contingent assets and liabilities. Significant areas requiring the use of management
estimates relate to the determination of pension and post-retirements benefits costs, key
economic assumptions used in determining the allowance for doubtful accounts, the provision
for obsolescence, the allowance for sales returns, legal contingencies, reserves for the
restructuring of operations, the useful life of assets for amortization and evaluation of
expected future cash flows to be generated by those assets, the determination of implied
fair value of goodwill and fair value of assets and liabilities for business purchase price
allocations purposes and goodwill impairment tests purposes, fair value of broadcasting
licences for impairment tests purposes, provisions for income taxes and determination of
future income tax assets and liabilities, and the determination of fair value of financial
instruments and derivatives instruments. Actual results could differ from these estimates.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (e)
    
    Impairment of long-lived assets:The Company reviews long-lived assets whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. An impairment loss is
recognized when the carrying amount of a group of assets held for use exceeds the sum of the
undiscounted cash flows expected from its use and eventual disposition. Measurement of an
impairment loss is based on the amount by which the group of assets carrying amount exceeds
its fair value. Fair value is determined using quoted market prices, when available, or
using accepted valuation techniques such as the discounted future cash flows method.(f)
    
    Revenue recognition:The Company recognizes its operating revenues when the following criteria are met:
 
    
    persuasive evidence of an arrangement exists;
    
    delivery has occurred or services have been rendered;
    
    the sellers price to the buyer is fixed or determinable; and
    
    the collection of the sale is reasonably assured.
 The portion of revenue that is unearned is recorded under Deferred revenue when customers
are invoiced.Revenue recognition policies for each of the Companys main segments are as follows:Cable segmentThe Cable segment provides services under arrangements with multiple deliverables, which are
comprised of two separate accounting units: one for subscriber services (cable television,
Internet, IP telephony or wireless telephone, including connecting fees) and the other for
equipment sales to subscribers.Cable connection fee revenues of the Cable segment are deferred and recognized as revenues
over the estimated average 30-month period that subscribers are expected to remain connected
to the network. The incremental and direct costs related to cable connection fees, in an
amount not exceeding the revenue, are deferred and recognized as an operating expense over
the same 30-month period. Operating revenues from cable and other services, such as
Internet access, IP telephony and wireless telephone, are recognized when services are
rendered. Revenue from equipment sales to subscribers and their costs are recognized in
income when the equipment is delivered and in the case of wireless phones, revenue from
equipment sales are recognized when the phone is delivered and activated. Revenues from
video rentals are recorded as revenue when services are provided. Promotion offers related
to subscriber services are accounted for as a reduction in the related service revenue when
customers take advantage of the offer. Promotion offers related to equipment are accounted
for as a reduction in the related equipment sales when the equipment is delivered.
Operating revenues related to service contracts are recognized in income over the life of
the specific contracts on a straight-line basis over the period in which the services are
provided.Newspapers segmentRevenues of the Newspapers segment, derived from circulation and advertising are recognized
when the publication is delivered, net of provisions for estimated returns. Revenues from
the distribution of publications and products are recognized upon delivery.
 F-16




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (f)
    
    Revenue recognition (continued):Broadcasting segmentRevenues of the Broadcasting segment derived from the sale of advertising airtime are
recognized when the advertisement has been broadcasted. Revenues derived from subscription
to speciality television channels are recognized on a monthly basis at the time service is
rendered. Revenues derived from circulation and advertising from publishing activities are
recognized when publication is delivered.Revenues derived from the distribution of televisual products and movies and from television
program rights are recognized when the customer can begin the exploitation, exhibition or
sale, or when the license period of the arrangement has begun.Theatrical revenues are recognized over the period of presentation and are based on a
percentage of revenues generated by movie theatres. Revenues generated from the distribution
of video are recognized at the time of delivery of the videocassettes and DVDs, less a
provision for future returns, or are accounted for based on a percentage of retail sales.Leisure and Entertainment segmentRevenues derived from retail stores, book publishing and distribution activities are
recognized on delivery of the products, net of provisions for estimated returns based on the
segments historical rate of products return.(g)
    
    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, 2007, the Company recorded $19.0 million of barter
advertising ($19.5 million in 2006 and $17.7 million in 2005).(h)
    
    Cash and cash equivalents:Cash and cash equivalents include highly liquid investments purchased three months or less
from maturity and are recorded at fair value. As of December 31, 2007, these highly liquid
investments consisted mainly of bankers acceptances.(i)
    
    Temporary investments:Temporary investments consisted mainly of bankers acceptances as of December 31, 2007.
These temporary investments, classified as held for trading, are recorded at fair value.(j)
    
    Trade receivable:The Company establishes an allowance for doubtful accounts based on the specific credit risk
of its customers and historical trends.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (k)
    
    Tax credits and government assistance:The Broadcasting and Leisure and Entertainment segments have access to several government
programs designed to support production and distribution of televisual products and movies
and magazine and book publishing in Canada. The financial aid for production is accounted
for as a reduction of expenses. The financial aid for broadcast rights is applied against
investments in televisual products or used directly to reduce operating expenses during the
year. The financial aid for magazine and book publishing is accounted for in revenues when
the conditions for acquiring the government assistance are met.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.(l)
    
    Inventories:Inventories are valued at the lower of cost, determined by the first-in, first-out method or
the weighted-average cost method, and net realizable value. Net realizable value represents
the market value for all inventories, except for raw materials and supplies, for which it is
replacement cost. Work in progress is valued at the pro-rata billing value of the work
completed.(m)
    
    Investments in televisual products and movies:
 (i)
    
    Programs produced and productions in progress:Programs produced and productions in progress related to broadcast activities are
accounted for at the lower of cost and net realizable value. Cost includes direct charges
for goods and services and the share of labour and general expenses relating to each
production. The cost of each program is charged to cost of sales when the program is
broadcasted.(ii)
    
    Broadcast rights:Broadcast rights are essentially contractual rights allowing limited or unlimited
broadcast of televisual products or movies. The Broadcasting segment records the
broadcast rights acquired as an asset and the obligations incurred under a licence
agreement as a liability when the broadcast licence period begins and all of the
following conditions have been met: (a) the cost of each program, movies or series is
known or can be reasonably determined; (b) the programs, movies or series have been
accepted in accordance with the conditions of the broadcast licence agreement; (c) the
programs, movies or series are available for the first showing or telecast.Amounts paid for broadcast rights before all of the above conditions are met are recorded
as prepaid broadcast rights.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (m)
    
    Investments in televisual products and movies (continued):
 (ii)
    
    Broadcast rights (continued):Broadcast rights are classified as short or long term, based on managements estimates of
the broadcast period. These rights are amortized when televisual products and movies are
broadcasted 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.(iii)
    
    Distribution rights:Distribution rights relate to the distribution of televisual products and movies. The
costs include costs for televisual products and movies distribution rights and other
operating costs incurred, which provide future economic benefits. The net realizable
value of distribution rights represents the Broadcasting segments share of future
estimated revenues to be derived, net of future costs. The Broadcasting segment records
an asset and a liability for the distribution rights and obligations incurred under a
licence agreement when (a) the cost of the licence is known or can be reasonably
estimated, (b) the televisual product and movie has been accepted in accordance with the
conditions of the licence agreement and, (c) the televisual product or movie is available
for distribution.Amounts paid for distribution rights before all of the above conditions are met are
recorded as prepaid distribution rights. Distribution rights are amortized using the
individual film forecast computation method based on actual revenues realized over total
expected revenues.Estimates of revenues related to distribution of television products and movies are
examined periodically by Broadcasting segment management and revised as necessary. The
value of unamortized costs is reduced to net realizable value, as necessary, based on
this assessment. The amortization of distribution rights is presented in cost of sales
and selling and administrative expenses.
 (n)
    
    Income taxes:The Company follows the asset and liability method of accounting for income taxes. Under
this method, future income tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. Future income
tax assets and liabilities are measured using enacted or substantively enacted tax rates in
effect for the year in which those temporary differences are expected to be recovered or
settled. The effect of a change in tax rates on future income tax assets and liabilities is
recognized in income in the period that includes the enactment or substantive enactment
date. A valuation allowance is established, if necessary, to reduce any future income tax
asset to an amount that is more likely than not to be realized.In the course of the Companys operations, there are a number of uncertain tax positions due
to the complexity of certain transactions and to the fact that related tax interpretations
and legislation are continually changing. When a tax position is uncertain, the Company
recognizes an income tax benefit or reduces an income tax liability only when the likelihood
is high that the tax benefit will be realized in the future or that the income tax liability
will be extinguished.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (o)
    
    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. As described in note 1(b)(ii), all portfolio investments are classified as
available-forsale. Accordingly, these investments are measured at fair value or at cost, in
the case that they do not have a quoted market price in an active market, and changes in
fair value are recorded in comprehensive income. Prior to 2007, all portfolio investments
were accounted for at cost. Carrying values of investments accounted for by the equity
method or at cost are reduced to estimated market values if there is other than a temporary
decline in the value of the investment.(p)
    
    Property, plant and equipment:Property, plant and equipment are stated at cost, net of government grants and investment
tax credits. Cost represents acquisition or construction costs, including preparation,
installation and testing costs and interest incurred with respect to the property, plant and
equipment until they are ready for commercial production. In the case of projects to
construct and connect receiving and distribution networks of cable, cost includes equipment,
direct labour and direct overhead costs. Projects under development may also be comprised of
advances for equipment under construction. Expenditures for additions, improvements and
replacements are capitalized, whereas maintenance and repair expenditures are expensed as
incurred.Amortization is principally calculated on the straight-line basis over the following
estimated useful lives:
 EstimatedAssets
    
    useful lifeBuildings
    
    
    25 to 40 yearsMachinery and equipment
    
    
    3 to 20 yearsReceiving, distribution and telecommunication networks
    
    
    3 to 20 years
 Leasehold improvements are amortized over the term of the lease.The Company does not record an asset retirement obligation in connection with its cable
distribution networks. The Company expects to renew all of its agreements with utility
companies to access their support structures in the future, making the retirement date,
relating to these assets, undeterminable.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (q)
    
    Goodwill and other intangible assets:Goodwill and intangible assets with indefinite useful lives are not amortized.Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. The impairment test is carried out
in two steps. In the first step, the carrying amount of the reporting unit is compared to
its fair value. When the fair value of a reporting unit exceeds its carrying amount, then
the goodwill of the reporting unit is considered not to be impaired and the second step is
not required. The second step of the impairment test is carried out when the carrying
amount of a reporting unit exceeds its fair value, in which case the implied fair value of
the reporting units goodwill is compared to its carrying amount to measure the amount of
the impairment loss, if any. When the carrying amount of the reporting units goodwill
exceeds the implied fair value of the goodwill, an impairment loss is recognized in an
amount equal to the excess.Intangible assets acquired, such as broadcasting licences and mastheads, that have an
indefinite useful life, are also tested for impairment annually, or more frequently if
events or changes in circumstances indicate that the asset might be impaired. The impairment
test compares the carrying amount of the intangible asset to its fair value, and an
impairment loss is recognized in the statement of income for the excess, if any.Intangible assets with definite useful lives, such as customer relationships and
non-competition agreements, are amortized over their useful life using the straight-line
method over a period of 3 to 10 years.During the second quarter of 2007, the Company changed the date of its annual impairment
tests for goodwill and broadcasting licenses from October 1st to April
1st.(r)
    
    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. Prior
to 2007, financing fees that related to long-term financing were capitalized as other assets
while, effective January 1, 2007, they are capitalized in reduction of long-term debt as
described in note 1(b)(ii). Financing fees are amortized using the effective interest rate
method.(s)
    
    Stock-based compensation:The compensation cost attributable to stock-based awards to employees that call for
settlement in cash or other assets, at the option of the employee is recognized in operating
expenses over the vesting period. Changes in the intrinsic value of the stock option awards
between the grant date and the measurement date result in a change in the measurement of the
liability and compensation cost.In the case of the employee share purchase plans of the Companys subsidiaries, the
contribution paid by the subsidiary on behalf of its employees is considered a compensation
expense. The contribution paid by employees for the purchase of shares is credited to the
subsidiarys capital stock.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (t)
    
    Derivative financial instruments and hedge accounting:The Company uses various derivative financial instruments to manage its exposure to
fluctuations in foreign currency exchange rates and interest rates. The Company does not
hold or use any derivative instruments for trading purposes. Under hedge accounting, the
Company documents all hedging relationships between derivatives and hedged items, its
strategy for using hedges and its risk-management objective and also designates its
derivative instruments either as fair value hedges or cash flow hedges. The Company assesses
the effectiveness of derivatives when the hedge is put in place and on an ongoing basis.The Company enters into the following types of derivative instruments:
 
    
    The Company uses foreign exchange forward contracts to hedge the foreign currency
rate exposure on (i) anticipated equipment or inventory purchases in foreign currency
and (ii) principal payments on certain long-term debt in foreign currency. These
foreign exchange forward contracts are designated as cash flow hedges.
    
    The Company uses cross-currency interest rate swaps to hedge (i) the foreign
currency rate exposure on interest and principal payments on certain foreign currency
denominated debt and/or (ii) the fair value exposure on certain debt resulting from
changes in interest rates. The cross-currency interest rate swaps that set in fixed
Canadian dollars all future interest and principal payments on U.S. denominated debt
are designated as cash flow hedges. The Companys cross-currency interest rate swaps
that set in Canadian dollars all future interest and principal payments on U.S.
denominated debt in addition to converting the interest rate from a fixed rate to a
floating rate or to converting a floating rate index to another floating rate index,
are designated as fair value hedges.
    
    The Company uses interest rate swaps to manage the fair value exposure on certain
debt resulting from changes in interest rates. These swap agreements require a periodic
exchange of payments without the exchange of the notional principal amount on which the
payments are based. These interest rate swaps are designated as fair value hedges when
they convert the interest rate from a fixed rate to a floating rate or as cash flow
hedges when they convert the interest rate from a floating rate to a fixed rate.
 Prior to 2007, under hedge accounting, the Company recorded its hedges relationships as
follows:
 
    
    For purchases hedged by foreign exchange forward contracts, foreign exchange
translation gains and losses were recognized as an adjustment to the cost of property,
plant and equipment or inventories, when the transaction was recorded.
    
    For long-term debt in foreign currency hedged by foreign exchange forward contracts
and cross-currency interest rate swaps, foreign exchange translation gains and losses
on long-term debt were deferred and recorded as derivative instruments under other
assets or other liabilities. The fees on forward foreign exchange contracts and on
cross-currency swaps were recognized as an adjustment to interest expenses over the
term of the agreement.
    
    For long-term debt hedged by interest rate swaps, interest expense on the debt was
adjusted to include payments made or received under interest rate swaps.
 
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (t)
    
    Derivative financial instruments and hedge accounting (continued):
 
    
    In addition, realized and unrealized gains or losses associated with derivative
instruments that were terminated or ceased to be effective prior to maturity for
purposes of hedge accounting, were deferred under other current or non-current assets
or liabilities on the balance sheet and recognized in income in the period in which the
underlying hedged transaction was recognized. In the event a designated hedged item
was sold, extinguished or matured prior to the termination of the related derivative
instrument, any realized or unrealized gain or loss on such derivative instrument was
recognized in income.
 Effective January 1, 2007, under hedge accounting, the Company follows the accounting
policies described in note 1(b)(iii).Interest expense on hedged long-term debt is reported at the hedged interest and foreign
currency rates.Derivative instruments that are ineffective or that are not designated as hedges 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 as financial expenses.Finally, some of the Companys cross-currency swap agreements repurchased in 2006 were
subject to a floor limit on negative fair market value, below which the Company was required
to make prepayments to reduce the lenders exposure. Such prepayments were reimbursed by
reductions in the Companys future payments under the agreements. The portion of these
reimbursements related to interest was accounted for as a reduction in financial expenses.
The prepayments were presented on the balance sheet as a reduction of the derivative
instrument liability.(u)
    
    Pension plans and postretirement benefits:
 (i)
    
    Pension plans:The Company offers defined benefit pension plans and defined contribution pension plans
to some of its employees. Defined benefit pension plan costs are determined using
actuarial methods and are funded through contributions determined in accordance with the
projected benefit method pro-rated on service, which incorporates managements best
estimate of future salary levels, other cost escalations, retirement ages of employees
and other actuarial factors. Pension plan expense is charged to operations and includes:
 
    
    Cost of pension plan benefits provided in exchange for employee services rendered
during the year.
    
    Amortization of the initial net transition asset, prior service costs and
amendments on a straight-line basis over the expected average remaining service
period of the active employee group covered by the plans.
    
    Interest cost of pension plan obligations, expected return on pension fund
assets, and amortization of cumulative unrecognized net actuarial gains and losses,
in excess of 10.0% of the greater of the accrued benefit obligation or the fair
value of plan assets, over the expected average remaining service period of the
active employee group covered by the plans.
 When an event gives rise to both a curtailment and a settlement, the curtailment is
accounted for prior to the settlement.Actuarial gains and losses arise from the difference between the actual rate of return on
plan assets for a period and the expected rate of return on plan assets for that period,
or from changes in actuarial assumptions used to determine the accrued benefit
obligation.
 F-23




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 (u)
    
    Pension plans and postretirement benefits (continued):
 (i)
    
    Pension plans (continued):The Company uses the fair value at end of the year to evaluate plan assets for the
purpose of calculating the expected return on plan assets(ii)
    
    Postretirement benefits:The Company offers health, life and dental insurance plans to some of its retired employees.
The cost of postretirement benefits is determined using actuarial methods and the related
benefits are funded by the Company as they become due. The Company amortizes the cumulative
unrecognized net actuarial gains and losses, in excess of 10.0% of the accrued benefit
obligation, over the expected average remaining service life of the active employee group
covered by the plans.
 (v)
    
    Rates subject to CRTC regulation:The Cable segment operations are subject to rate regulations on certain services based on
geographical regions, mainly by the Broadcasting Act (Canada) and the Telecommunications Act
(Canada), both managed by the Canadian Radio-television and Telecommunication Commissions.
Accordingly, the Cable segments operating revenues could be affected by changes in
regulations or decisions made by this regulating body. The Company does not select
accounting policies that would differ from GAAP, even though the Company is subject to these
regulations.(w)
    
    Future changes in accounting standardsIn December 2006, the CICA issued a new accounting standard, Section 1535, Capital
Disclosures, which requires the disclosure of both qualitative and quantitative information
that enables users of financial statements to evaluate the entitys objectives, policies and
processes for managing capital. The new standard applies to interim and annual financial
statements relating to fiscal years beginning on or after October 1, 2007.In December 2006, the CICA issued two new accounting standards, Section 3862, Financial
Instruments  Disclosures, and Section 3863, Financial Instruments  Presentation, which
require additional disclosures relating to financial instruments. The new sections apply to
interim and annual financial statements relating to fiscal years beginning on or after
October 1, 2007.In March 2007, the CICA issued a new accounting standard, Section 3031, Inventories, which
provides more extensive guidance on the recognition and measurement of inventories, and
related disclosures. This new standard applies to interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2008. The Company does not expect
this standard to have a material effect on its consolidated financial statements.In January 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, which will
replace Section 3062, Goodwill and Other Intangible Assets, and results in the withdrawal of
Section 3450, Research and Development Costs and Emerging Issues Committee (EIC) Abstract
27, Revenues and Expenditures During the Pre-operating Period, and amendments to Accounting
Guideline (AcG) 11, Enterprises in the Development Stage. The standard provides guidance
on the recognition of intangible assets in accordance with the definition of an asset and
the criteria for asset recognition as well as clarifying the application of the concept of
matching revenues and expenses, whether these assets are separately acquired or internally
developed. This standard applies to interim and annual financial statements relating to
fiscal years beginning on or after October 1, 2008. The Company is currently evaluating the
effects of adopting this standard.
 F-24




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 2.
    
    FINANCIAL EXPENSES:
 2007
    
    
    2006
    
    
    2005Interest on long-term debt
    
    $
    232.4
    
    
    $
    215.0
    
    
    $
    212.7Amortization of financing costs and long-term debt discount
    
    
    4.8
    
    
    
    7.3
    
    
    
    62.7Net loss on derivative instruments and on foreign currency
translation of financial instruments 1, 2
    
    
    4.7
    
    
    
    1.2
    
    
    
    4.4Loss on revaluation of the Additional Amount payable
    
    
    5.2
    
    
    
    10.5
    
    
    
    10.1Other
    
    
    0.7
    
    
    
    1.3
    
    
    
    0.9Investment income
    
    
    (2.8
    )
    
    
    (1.5
    )
    
    
    (4.5
    )245.0
    
    
    
    233.8
    
    
    
    286.3Interest capitalized to the cost of property, plant and equipment
    
    
    (5.0
    )
    
    
    (9.2
    )
    
    
    (1.0
    )$
    240.0
    
    
    $
    224.6
    
    
    $
    285.3
 1
    
    During the year ended December 31, 2007, the Company recorded a loss of $44.3
million on embedded derivatives not closely related to their host contract and on
derivative instruments for which hedge accounting is not used ($4.1 million in 2006 and
$13.1 million in 2005).2
    
    During the year ended December 31, 2007, the Company recorded a gain of $4.8
million for the ineffective portion of fair value hedges. 3.
    
    RESERVE FOR RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL CHARGES:
 (a)
    
    Newspapers segment:In August 2005, the Company announced a plan to invest in two new printing facilities
located in Toronto (Ontario) and in Saint-Janvier-de-Mirabel (Québec). As part of the
plan, Sun Media Corporation is transfering the printing of certain of its publications in
Ontario and Québec to the new facilities. These projects resulted in the elimination of the
production positions at The Toronto Sunand at The Ottawa Sun, and inserters positions at
Le Journal de Montréal. In 2007, special termination benefits of $6.7 million were recorded
relating to the positions at The Toronto Sunand The Ottawa Sun. In addition, an accrual of
$4.4 million relating to the closure of the printing facility in London (Ontario) was
reversed in the fourth quarter of 2007.In June 2006, the Newspapers segment announced a plan to restructure its news production
operations by introducing new content management technologies, and streamlining the news
gathering process. In 2007, the Newspapers segment recorded additional severance costs of
$2.3 million ($2.8 million in 2006) relating to the elimination of editorial positions in
operations across the organization.Finally, in 2006, Sun Media Corporation implemented a voluntary workforce reduction program
at The London Free Pressand several smaller involuntary workforce reduction programs,
namely at The Toronto Sunand Bowes Publishers. In 2007, the Newspapers segment recorded
termination benefits of $5.3 million ($3.2 million in 2006) relating to these workforce
reduction initiatives.The Company does not expect any material restructuring charges in 2008 related to these
initiatives.
 F-25




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 3.
    
    RESERVE FOR RESTRUCTURING OF OPERATIONS, IMPAIRMENT OF ASSETS AND OTHER SPECIAL CHARGES
(continued):
 (a)
    
    Newspaper segment (continued):Continuity of reserve for restructuring
 2007
    
    
    2006Balance at beginning of year
    
    $
    12.7
    
    
    $
    Workforce reduction initiatives
    
    
    9.9
    
    
    
    17.0Payments
    
    
    (16.6
    )
    
    
    (4.3
    )Balance at end of year
    
    $
    6.0
    
    
    $
    12.7
 (b)
    
    Other segments:In 2007, other segments recorded restructuring costs and other special charges of $1.7
million ($1.9 million in 2006) mainly in the Broadcasting segment.
 4.
    
    LOSS ON DEBT REFINANCING:
 (a)
    
    Quebecor Media Inc.:The Company used the net proceeds of $672.2 million (including accrued interest of $16.6
million and before financing fees of $9.8 million) from the issuance of new Senior Notes on
October 5, 2007 (note 15 (iv)) and cash on hand to (i) repay in full the $420.0 million of
advances under the Companys Senior Bridge Credit Facility entered into to finance the
acquisition of Osprey Media Publishing Inc. in August 2007 (note 6) and terminate this
facility on October 9, 2007 as well as (ii) to repay the Sun Media Term Loan B and settle
related hedging contracts on October 31, 2007 for a total cash consideration of $277.8
million, resulting in a loss of $1.0 million.On January 17, 2006, the Company recorded a loss of $331.6 million as a result of the
refinancing of substantially all of its 11.125% Senior Notes and 13.75% Senior Discount
Notes. The loss represents the excess of the consideration paid of $1.3 billion, including
debt repurchase premiums and disbursements for unwinding hedging contracts, over the book
value of the notes and the hedging contracts, and the write-off of deferred financing costs.
The refinancing transactions carried out were as follows:
 
    
    The Company issued new 7.75% Senior Notes of US$525.0 million in aggregate principal
amount (note 15 (iii)).
    
    The Company entered into new credit facilities comprised of (i) a five-year $125.0
million term loan A credit facility, (ii) a seven-year US$350.0 million term loan B
credit facility and (iii) a new $100.0 million five-year revolving credit facility
(note 15 (i)).
    
    Videotron Ltd. borrowed $237.0 million under its existing revolving credit facility
and Sun Media Corporation amended its existing credit facilities to borrow $40.0
million under a new term loan C maturing in 2009 (note 15 (ix)).
 F-26




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 4.
    
    LOSS ON DEBT REFINANCING (continued):
 (a)
    
    Quebecor Media Inc. (continued):
 
    
    The proceeds from new Senior Notes, the full amount of new term loans A and B,
the Videotron Ltd. drawing from its existing revolving credit facility and Sun Media
Corporations new term loan C were used to repurchase US$561.6 million in aggregate
principal amount of the Companys 11.125% Senior Notes and US$275.6 million in
aggregate principal amount at maturity of the Companys 13.75% Senior Discount Notes.
 On July 15, 2006, the Company repurchased the remaining balances of its 11.125% Senior Notes
and 13.75% Senior Discount Notes for a total cash consideration of $39.3 million. The
repurchase resulted in a loss of $10.5 million.On July 19, 2005, as a result of the repurchase of a first portion of its 11.125% Senior
Notes and its 13.75% Discount Notes, the Company recorded a loss of $60.8 million, comprised
of the excess of the consideration paid of $215.3 million, including debt repurchase
premiums and disbursements for unwinding hedging contracts, over the carrying value of the
notes and of the hedging contracts, and the write-off of related financing costs. The
Company repurchased US$128.2 million and US$12.1 million, respectively, in aggregate
principal amounts of its Senior Notes and Senior Discount Notes.(b)
    
    Videotron Ltd.:On July 15, 2005, Videotron Ltd., Cable segment, repurchased the entire aggregate principal
amount of its subsidiary, CF Cable TV Inc., Senior Secured First Priority Notes, which bore
interest at 9.125%, for a total cash consideration of $99.3 million, including the cost of
unwinding a hedging contract. The repurchase resulted in a gain of $0.8 million.(c)
    
    Sun Media Corporation:On December 29, 2006, Sun Media Corporation made a partial repayment of US$15.0 million on
its term loan B credit facility (note 15 (ix)) and settled a corresponding portion of its
hedging contracts. As a result, a loss of $0.5 million was recorded.
 5.
    
    IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS:In the fourth quarter 2007, the Company concluded that the goodwill of its Cable segment related
to the DVDs and games rental operations in Ontario was impaired. Accordingly, an impairment
charge of $5.4 million was recorded.In 2006, the Company completed its annual impairment test for its broadcasting licenses and
goodwill. Based on the results, the Company concluded that the carrying values of the
broadcasting licenses and goodwill of its Broadcasting segment were impaired. Conventional
television broadcasters are experiencing pressures on their advertising revenues caused by the
fragmentation of the television market. Accordingly, the Company reviewed its business plan and
recorded a total impairment charge of $179.2 million in 2006: $30.8 million for one of its
broadcasting licenses and $148.4 million for the goodwill.In addition, in 2006, the Broadcasting segment recorded an impairment charge of $0.8 million
related to an operating licence co-owned with another entity.
 F-27




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 6.
    
    BUSINESS ACQUISITIONS:During the years ended December 31, 2007, 2006 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 related to the 2007 acquisitions are preliminary and should be
finalized as soon as Companys management has gathered all the significant information believed
to be available and considered necessary. The Company is currently in the process of reviewing
Osprey Media Publishing Inc.s operations and developing its integration plan. The results of
operations of these businesses have been included in the Companys consolidated financial
statements from the dates of their respective acquisitions.2007
 
    
    In August 2007, the Company acquired all outstanding units of Osprey Media Income Fund,
which subsequently became Osprey Media Publishing Inc. as a result of a corporate
reorganisation, for a total cash consideration, excluding assumed debt, of $415.2 million
(including transaction costs of $0.8 million). As part of the acquisition, the Company
assumed the debt of $161.8 million under Osprey Media Publishing Inc.s credit facilities
(note 15(xi)). Osprey Media Publishing Inc. is one of Canadas leading publishers of daily
and non-daily newspapers, magazines and specialty publications. Its publications include
20 daily newspapers and 33 non-daily newspapers together with shopping guides, magazines
and other publications.
    
    During the year ended December 31, 2007, the Company acquired or increased its interest
in several businesses, mainly in the Newspaper segment, for total consideration of $20.5
million, resulting in preliminary goodwill of $17.4 million.
    
    In January 2007, TVA Group Inc. and Sun Media Corporation paid the balance payable in
the amount of $3.4 million related to the acquisition of SUN TV in 2004.
 2006
 
    
    Several businesses, mainly in the Interactive Technologies and Communications segment,
were acquired for a total consideration of $14.0 million, including $12.6 million in cash
and $1.4 million in Common Shares of a subsidiary, resulting in additional goodwill of $7.6
million.
 2005
 
    
    A total of 3,739,599 Class B non-voting Common Shares of TVA Group Inc., Broadcasting
segment, were repurchased for a cash consideration of $81.9 million, resulting in
preliminary additional goodwill of $22.3 million, which was reduced by $7.3 million in 2006
when the purchase price allocation was finalized.
    
    On December 12, 2005, the Company acquired Sogides Ltée, a major book publishing and
distribution group in Quebec, for a cash consideration of $24.0 million and an additional
contingent payment of $5.0 million based on the achievement of specific conditions in 2008.
This acquisition resulted in a preliminary additional goodwill of $7.8 million, which was
reduced by $2.9 million in 2006 when the purchase price allocation was finalized.
    
    Other businesses were acquired for considerations including cash of $4.6 million and the
operating assets of the community newspaper Beauport Express, resulting in additional
goodwill of $3.5 million.
 F-28




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES
 
 6.
    
    BUSINESS ACQUISITIONS (continued):Business acquisitions for 2007 are summarized as follows:
 2007Osprey MediaPublishing Inc.
    
    
    Other
    
    
    TotalAssets acquired:Cash and cash equivalents
    
    $
    
    
    
    $
    0.5
    
    
    $
    0.5Non-cash current operating assets
    
    
    38.5
    
    
    
    0.4
    
    
    
    38.9Property, plant and equipment
    
    
    54.3
    
    
    
    0.5
    
    
    
    54.8Other assets 1
    
    
    234.4
    
    
    
    0.5
    
    
    
    234.9Goodwill
    
    
    351.0
    
    
    
    17.4
    
    
    
    368.4Non-controlling interest
    
    
    
    
    
    
    1.9
    
    
    
    1.9678.2
    
    
    
    21.2
    
    
    
    699.4Liabilities assumed:Bank indebtedness
    
    
    (2.3
    )
    
    
    
    
    
    
    (2.3
    )Non-cash current operating liabilities
    
    
    (27.3
    )
    
    
    (0.7
    )
    
    
    (28.0
    )Long-term debt
    
    
    (161.8
    )
    
    
    
    
    
    
    (161.8
    )Other liabilities
    
    
    (5.4
    )
    
    
    
    
    
    
    (5.4
    )Future income taxes
    
    
    (66.2
    )
    
    
    
    
    
    
    (66.2
    )(263.0
    )
    
    
    (0.7
    )
    
    
    (263.7
    )Net assets acquired at fair value and cash consideration paid
    
    $
    415.2
    
    
    $
    20.5
    
    
    $
    435.7
 1
    
    Other assets include mainly intangible assets relating to customer relationship and
non-competition agreements with afair value of $130.3 million and mastheads
with a fair value of $103.4 million. F-29




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 6.
    
    BUSINESS ACQUISITIONS (continued):Business acquisitions for 2006 and 2005 are summarized as follows (continued):
 2006
    
    
    2005Assets acquired:Cash and cash equivalents
    
    $
    2.1
    
    
    $
    Non-cash current operating assets
    
    
    2.5
    
    
    
    13.0Property, plant and equipment
    
    
    0.2
    
    
    
    8.0Other assets
    
    
    4.4
    
    
    
    19.9Goodwill
    
    
    7.6
    
    
    
    22.9Non-controlling interest
    
    
    1.2
    
    
    
    60.318.0
    
    
    
    124.1Liabilities assumed:Bank indebtedness
    
    
    
    
    
    
    (0.4
    )Non-cash current operating liabilities
    
    
    (3.1
    )
    
    
    (3.2
    )Future income taxes
    
    
    (0.9
    )
    
    
    (5.3
    )(4.0
    )
    
    
    (8.9
    )Net assets acquired at fair value
    
    $
    14.0
    
    
    $
    115.2Consideration:Cash
    
    $
    12.6
    
    
    $
    110.5Issuance of Common Shares by Nurun Inc.
    
    
    1.4
    
    
    
    Balance payable
    
    
    
    
    
    
    3.6Community newspaper (Beauport Express)
    
    
    
    
    
    
    1.1$
    14.0
    
    
    $
    115.2
 7.
    
    INCOME TAXES:Income taxes on continuing operations are as follows:
 2007
    
    
        2006
    
    
        2005Current
    
    $
    11.3
    
    
    $
    5.4
    
    
    $
    19.0Future
    
    
    63.5
    
    
    
    (59.1
    )
    
    
    24.5$
    74.8
    
    
    $
    (53.7
    )
    
    $
    43.5
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 7.
    
    INCOME TAXES (continued):The following table reconciles income taxes at the Companys domestic statuary tax rate of 32.0%
in 2007 (32.0% in 2006 and 31.0% in 2005) and income taxes in the consolidated statement of
income:
 2007
    
    
    2006
    
    
    2005Income taxes at domestic statutory tax rate
    
    $
    133.2
    
    
    $
    (72.0
    )
    
    $
    48.1Increase (reduction) resulting from:Effect of
provincial tax rates differences
    
    
    (0.9
    )
    
    
    
    
    
    
    (0.3
    
     )Effect of non-deductible charges, non-taxable income
and differences between current and future tax rates
    
    
    (7.8
    )
    
    
    (9.8
    )
    
    
    6.6Change in valuation allowance
    
    
    (3.6
    )
    
    
    (7.8
    )
    
    
    (7.5
    )Change in future income tax balances due to a change in
enacted tax rates
    
    
    (35.9
    )
    
    
    (12.9
    )
    
    
    11.9Tax consolidation transaction with the parent company
    
    
    (7.7
    )
    
    
    
    
    
    
    (15.9
    )Impairment of goodwill
    
    
    
    
    
    
    47.5
    
    
    
    Other
    
    
    (2.5
    )
    
    
    1.3
    
    
    
    0.6Income taxes
    
    $
    74.8
    
    
    $
    (53.7
    )
    
    $
    43.5
  2007
    
    
    2006Losses carryforward
    
    $
    245.1
    
    
    $
    336.1Accounts payable and accrued charges
    
    
    55.5
    
    
    
    36.2Deferred charges
    
    
    9.9
    
    
    
    10.3Long-term debt and derivative financial instruments
    
    
    28.0
    
    
    
    Property, plant and equipment
    
    
    (228.1
    )
    
    
    (217.5
    )Goodwill and other assets
    
    
    (75.3
    )
    
    
    (27.5
    )Other
    
    
    (4.8
    )
    
    
    13.630.3
    
    
    
    151.2Valuation allowance
    
    
    (111.8
    )
    
    
    (143.1
    )Net future income tax (liabilities) assets
    
    $
    (81.5
    )
    
    $
    8.1
 F-31




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 7.
    
    INCOME TAXES (continued):The current and long-term future income tax assets and liabilities are as follows:
 2007
    
    
    2006Future income tax assets:Current
    
    $
    153.6
    
    
    $
    65.9Long-term
    
    
    57.4
    
    
    
    61.1211.0
    
    
    
    127.0Future income tax liabilities:Long-term
    
    
    (292.5
    )
    
    
    (118.9
    )Net future income tax (liabilities) assets
    
    $
    (81.5
    )
    
    $
    8.1
 Subsequent recognition of tax benefits relating to the valuation allowance as of December 31,
2007 will be reported mainly in the consolidated statement of income.As of December 31, 2007, the Company had loss carry forwards for income tax purposes of $1,104.4
available to reduce future taxable income, including $414.0 million that will expire from 2008
to 2027 and $690.4 million that can be carried forward indefinitely. Of the latter amount,
$667.4 million represent capital losses to be applied against future capital gains.The Company has not recognized a future income tax liability for the undistributed earnings of
its subsidiaries in the current or prior years since the Company does not expect to sell or
repatriate funds from those investments. Any such liability cannot reasonably be determined at
the present time.8.
    
    DISCONTINUED OPERATIONS:On June 30, 2007, the Company completed the sale of Progisia Informatique, the information
technology consulting division of Canoe Inc., Internet/Portals segment. The sale resulted in a
gain on disposal of $4.0 million (net of income tax and non-controlling interest). The results
of the disposed business were reclassified and disclosed in the consolidated statements of
income as Income from discontinued operations while the cash flows related to the operations
of this disposed business were reclassified and disclosed in the consolidated statements of cash
flows as Cash flows provided by discontinued operations.9.
    
    ACCOUNTS RECEIVABLE:
 2007
    
    
    2006Trade
    
    
    $
    442.8
    
    
    $
    383.3Other
    
    
    
    53.2
    
    
    
    42.9$
    496.0
    
    
    $
    426.2
 F-32




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 10.
    
    INVENTORIES AND INVESTMENTS IN TELEVISUAL PRODUCTS AND MOVIES:
 2007
    
    
    2006Raw materials and supplies
    
    $
    44.2
    
    
    $
    42.0Work in progress
    
    
    17.1
    
    
    
    12.8Finished goods
    
    
    61.8
    
    
    
    63.8Investments in televisual products and movies
    
    
    45.9
    
    
    
    40.1$
    169.0
    
    
    $
    158.7
 11.
    
    PROPERTY, PLANT AND EQUIPMENT:
 2007AccumulatedCost
    
    
    amortization
    
    
    Net amountLand
    
    $
    41.2
    
    
    $
    
    
    
    $
    41.2Buildings and leasehold improvements
    
    
    314.8
    
    
    
    60.7
    
    
    
    254.1Machinery and equipment
    
    
    873.2
    
    
    
    447.2
    
    
    
    426.0Receiving, distribution and telecommunication networks
    
    
    2,191.1
    
    
    
    921.1
    
    
    
    1,270.0Projects under development
    
    
    118.9
    
    
    
    
    
    
    
    118.9$
    3,539.2
    
    
    $
    1,429.0
    
    
    $
    2,110.2
 2006AccumulatedCost
    
    
    amortization
    
    
    Net amountLand
    
    $
    26.4
    
    
    $
    
    
    
    $
    26.4Buildings and leasehold improvements
    
    
    185.2
    
    
    
    48.3
    
    
    
    136.9Machinery and equipment
    
    
    698.8
    
    
    
    409.1
    
    
    
    289.7Receiving, distribution and telecommunication networks
    
    
    1,952.2
    
    
    
    756.9
    
    
    
    1,195.3Projects under development
    
    
    181.8
    
    
    
    
    
    
    
    181.8$
    3,044.4
    
    
    $
    1,214.3
    
    
    $
    1,830.1
 F-33




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 12.
    
    OTHER ASSETS:
 2007
    
    
    2006Customer relationships and non-competition agreements,
net of accumulated amortization
    
    $
    145.6
    
    
    $
    27.4Mastheads
    
    
    103.4
    
    
    
    Broadcasting licenses
    
    
    84.2
    
    
    
    84.2Investments in televisual products and movies
    
    
    27.2
    
    
    
    29.4Deferred pension charge (note 25)
    
    
    20.7
    
    
    
    9.5Deferred connection costs
    
    
    18.8
    
    
    
    18.2Long-term investments
    
    
    11.4
    
    
    
    13.0Derivative financial instruments
    
    
    0.2
    
    
    
    16.7Financing costs, net of accumulated amortization
    
    
    
    
    
    
    33.6Other
    
    
    10.5
    
    
    
    11.6$
    422.0
    
    
    $
    243.6
 13.
    
    GOODWILL:For the years ended December 31, 2007, 2006 and 2005, the changes in the carrying amounts of goodwill were as follows:
 2007Adjustment ofBalance as at
    
    
    Business
    
    
    
    
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    
    
    
    
    allocation and
    
    
    December 31,2006
    
    
    (disposals)
    
    
    Impairment
    
    
    other
    
    
    2007Cable
    
    $
    2,581.7
    
    
    $
    0.6
    
    
    $
    (5.4
    )
    
    $
    
    
    
    $
    2,576.9Newspapers
    
    
    1,002.5
    
    
    
    364.1
    
    
    
    
    
    
    
    
    
    
    
    1,366.6Broadcasting
    
    
    51.4
    
    
    
    0.1
    
    
    
    
    
    
    
    (0.1
    )
    
    
    51.4Leisure and Entertainment
    
    
    43.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43.4Interactive Technologies and Communications
    
    
    11.2
    
    
    
    3.1
    
    
    
    
    
    
    
    (1.8
    )
    
    
    12.5Internet/Portals
    
    
    30.9
    
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    
    
    30.5Total
    
    $
    3,721.1
    
    
    $
    367.5
    
    
    $
    (5.4
    )
    
    $
    (1.9
    )
    
    $
    4,081.3
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 13.
    
    GOODWILL (continued):
 2006Adjustment ofBalance as at
    
    
    Business
    
    
    
    
    
    
    purchase price
    
    
    Balance as atDecember 31,
    
    
    acquisitions
    
    
    
    
    
    
    allocation and
    
    
    December 31,2005
    
    
    (disposals)
    
    
    Impairment
    
    
    other
    
    
    2006Cable
    
    $
    2,581.8
    
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,581.7Newspapers
    
    
    1,002.0
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    1,002.5Broadcasting
    
    
    207.1
    
    
    
    
    
    
    
    (148.4
    )
    
    
    (7.3
    )
    
    
    51.4Leisure and Entertainment
    
    
    46.9
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (2.9
    )
    
    
    43.4Interactive Technologies and Communications
    
    
    3.6
    
    
    
    6.7
    
    
    
    
    
    
    
    0.9
    
    
    
    11.2Internet/Portals
    
    
    30.5
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    30.9Total
    
    $
    3,871.9
    
    
    $
    6.9
    
    
    $
    (148.4
    )
    
    $
    (9.3
    )
    
    $
    3,721.1
 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 of the business acquisition date. 14.
    
    ADDITIONAL AMOUNT PAYABLE:In July 2007, the Company exercised its rights to repay the Additional Amount payable in the
amount of $127.2 million. Until its repayment, the value of the Additional Amount payable,
resulting from the repurchase of the redeemable preferred shares of a subsidiary in 2003,
fluctuated based on a formula established as per the repurchase agreement. Changes in the amount
payable were recorded as financial expenses in the consolidated statements of income.
 F-35




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 15. LONG-TERM DEBT:
 Effective interestrate as ofDecember 31, 2007
    
    
    Year of maturity
    
    
    2007
    
    
    2006Quebecor Media Inc.:Bank credit facilities (i)
    
    
    7.07
    %
    
    
    2011-2013
    
    
    $
    439.1
    
    
    $
    520.6Other credit facility (ii)
    
    
    5.15
    %
    
    
    2015
    
    
    
    66.7
    
    
    
    59.2Senior Notes (iii)
    
    
    7.75
    %
    
    
    2016
    
    
    
    514.8
    
    
    
    611.8Senior Notes (iv)
    
    
    8.81
    %
    
    
    2016
    
    
    
    644.3
    
    
    
    1,664.9
    
    
    
    1,191.6Videotron Ltd. and its subsidiaries (v):Bank credit facility (vi)
    
    
    5.58
    %
    
    
    2009
    
    
    
    147.7
    
    
    
    49.0Senior Notes (vii)
    
    
    6.59
    %
    
    
    2014
    
    
    
    652.8
    
    
    
    769.1Senior Notes (viii)
    
    
    6.44
    %
    
    
    2015
    
    
    
    172.8
    
    
    
    203.1973.3
    
    
    
    1,021.2Sun Media Corporation and its subsidiaries (v):Bank credit facilities (ix)
    
    
    6.27
    %
    
    
    2012
    
    
    
    39.1
    
    
    
    250.8Senior Notes (x)
    
    
    7.88
    %
    
    
    2013
    
    
    
    198.9
    
    
    
    236.0238.0
    
    
    
    486.8Osprey Media Publishing Inc. (v):Bank credit facilities (xi)
    
    
    6.13
    %
    
    
    2011
    
    
    
    145.3
    
    
    
    TVA Group Inc. and its subsidiaries (v):Revolving credit facility (xii)
    
    
    5.48
    %
    
    
    2010
    
    
    
    56.3
    
    
    
    96.5Total long-term debt
    
    
    
    
    
    
    
    
    
    
    3,077.8
    
    
    
    2,796.1Change in fair value related to hedged interest rate risk
    
    
    
    
    
    
    
    
    
    
    (24.1
    )
    
    
    Adjustments related to embedded derivatives
    
    
    
    
    
    
    
    
    
    
    11.4
    
    
    
    Financing fees, net of amortization
    
    
    
    
    
    
    
    
    
    
    (37.6
    )
    
    
    (50.3
    )
    
    
    3,027.5
    
    
    
    2,796.1Less current portion:Quebecor Media Inc.
    
    
    
    
    
    
    
    
    
    
    24.7
    
    
    
    20.0Sun Media Corporation and its subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.124.7
    
    
    
    23.1$
    3,002.8
    
    
    $
    2,773.0
 F-36




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 15.
    
    LONG-TERM DEBT (continued):
 (i)
    
    The bank credit facilities are comprised of (i) a $125.0 million term loan A credit
facility, bearing interest at bankers acceptance rate, London Interbanking Offered Rate
(LIBOR) or Canadian prime rate, plus a premium determined by a leverage ratio, and
maturing in January 2011, (ii) a US$350.0 million term loan B credit facility, bearing
interest at U.S. prime rate, plus a premium of 1.0%, or at LIBOR, plus a premium of 2.0%,
and maturing in January 2013, and (iii) a $100.0 million revolving credit facility, bearing
interest at bankers acceptance rate, LIBOR or Canadian prime rate, plus a premium
determined by a leverage ratio, and maturing in January 2011. These new credit facilities
contain covenants concerning certain financial ratios and restricting the declaration and
payment of dividends and other distributions. They are collateralized by liens on all of
the movable property and assets of the Company (primarily shares of its subsidiaries), now
owned or hereafter acquired. As of December 31, 2007, the carrying value of the Companys
assets guaranteeing the credit facilities was $4,384.3 million ($3,640.2 million in 2006).
The Company shall repay the term loan A in quarterly repayments equal to 2.5% of the
principal amount during the first three years of the term, 5.0% in the fourth year and
12.5% in the fifth year of the term. It shall repay the principal amount of its term loan
B in quarterly repayments of 0.25% of the principal amount and the balance at the end of
the term. The Company has fully hedged the foreign currency risk associated with the term
loan by using cross-currency interest rate swaps, under which all payments have been set in
Canadian dollars. As of December 31, 2007 and 2006, no amount had been drawn on the
revolving credit facility, while $102.0 million ($115.6 million in 2006) and US$343.9
million (US$347.4 million in 2006) were drawn the term A and B credit facilities,
respectively.(ii)
    
    The long-term committed credit facility with Société Générale (Canada) for the Canadian
dollar equivalent of 59.4 million, bears interest at bankers acceptance rate, plus a
premium, and matures in 2015. The facility is secured by all the property and assets of the
Company, now owned and hereafter acquired. This facility mostly contains the same covenants
as the bank facilities described in (i).(iii)
    
    In January 2006, the Company issued Senior Notes of US$525.0 million in aggregate
principal amount for net proceeds of $609.0 million, before issuance fees of $9.0 million.
The notes bear interest at 7.75% and mature in March 2016. These notes contain certain
restrictions on the Company, including limitations on its ability to incur additional
indebtedness and pay dividends or make other distributions. The notes are unsecured and are
redeemable at the option of the Company at a decreasing premium, commencing on March 15,
2011. The Company has fully hedged the foreign currency risk associated with the new
Senior Notes by using cross-currency interest rate swaps, under which all payments have
been set in Canadian dollars.(iv)
    
    In October 2007, the Company issued Senior Notes of US$700.0 million in aggregate
principal amount at a discount price of 93.75% for net proceeds of $672.2 million,
including accrued interest of $16.6 million and before financing fees of $9.8 million. The
new senior notes bear interest at 7.75% for an effective interest rate of 8.81% and mature
in March 2016. These notes contain certain restrictions for the Company, including
limitations on its ability to incur additional indebtedness and pay dividends or make other
distributions. The notes are unsecured and are redeemable at the option of the Company at a
decreasing premium, commencing on March 15, 2011. The Company has fully hedged the foreign
currency risk associated with the new Senior Notes by using cross-currency interest rate
swaps, under which all payments have been set in Canadian dollars.(v)
    
    The debts of these subsidiaries are non-recourse to the parent company, Quebecor Media
Inc.
 F-37




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 15.
    
    LONG-TERM DEBT (continued):
 (vi)
    
    The credit facility of $450.0 million is a revolving credit facility maturing in
November 2009 and bears interest at bankers acceptance or Canadian prime rates, plus a
margin, depending on Videotron Ltd.s leverage ratio. The credit facility is secured by a
first ranking hypothec on the universality of all tangible and intangible assets, current
and future, of Videotron Ltd. and its subsidiaries. As of December 31, 2007, the carrying
value of assets guaranteeing the credit facility of Videotron Ltd. was $4,389.4 million
($4,253.5 million in 2006). The credit facility contains covenants such as maintaining
certain financial ratios and some restrictions on the payment of dividends and asset
acquisitions and dispositions.(vii)
    
    In October 2003, a first series of US$335.0 million in aggregate principal amount of
Senior Notes was issued at discount for net proceeds of $445.6 million, before issuance
fees of $7.6 million. In November 2004, a second series of US$315.0 million in aggregate
principal amount of Senior Notes was issued at premium for net proceeds of $405.1 million
including accrued interest of $8.9 million and before issuance fees of $7.4 million. These
notes bear interest at a rate of 6.875%, payable every six months on January 15 and July
15, and mature in January 2014. The notes contain certain restrictions on Videotron Ltd.,
including limitations on its ability to incur additional indebtedness, and are unsecured.
The Senior Notes are guaranteed by specific subsidiaries of Videotron Ltd. Videotron Ltd.
has fully hedged the foreign currency risk associated with the Senior Notes by using
cross-currency interest rate swaps, under which all payments were set in Canadian dollars.
The notes are redeemable at the option of the Company, in whole or in part, at any time on
or after January 15, 2009, at a decreasing premium.(viii)
    
    On September 16, 2005, US$175.0 million in aggregate principal amount of Senior Notes
were issued at discount for net proceeds of $205.2 million, before issuance fees of $3.8
million. These notes bear interest at a rate of 6.375% payable every six months on December
15 and June 15, and mature on December 15, 2015. The notes contain certain restrictions for
Videotron Ltd., including limitations on its ability to incur additional indebtedness, and
are unsecured. The Senior Notes are guaranteed by specific subsidiaries of Videotron Ltd.
Videotron Ltd. has fully hedged the foreign currency risk associated with the Senior Notes
by using cross-currency interest rate swaps, under which all payments were set in Canadian
dollars. The notes are redeemable at the option of the Company, in whole or in part, at any
time on or after December 15, 2010, at a decreasing premium.(ix)
    
    The bank credit facilities amended on October 31, 2007, are comprised of (i) a
revolving credit facility amounting to $70.0 million, maturing in 2012, and (ii) a term
loan C credit facility amounting to $40.0 million also maturing in 2012. The credit
facilities are collateralized by liens on all of the property and assets of Sun Media
Corporation and its operating subsidiaries, now owned or hereafter acquired. The bank
credit facilities contain covenants concerning certain financial ratios and restrictions on
the declaration and payment of dividends and other distributions. As of December 31, 2007,
the carrying value of assets guaranteeing the bank credit facilities was $1,984.3 million
($1,419.0 million in 2006). Any amount borrowed under the revolving credit facility bears
interest at Canadian bankers acceptance and/or Canadian prime rate plus an applicable
margin determined by financial ratios. Advances under the term C credit facility bear
interest at Canadian bankers acceptance rate plus a margin of 1.50% per annum or Canadian
prime rate plus a margin of 0.50% per annum. As of December 31, 2007 and 2006, no amount
had been drawn on the revolving credit facility, while $39.1 million ($39.3 million in
2006) were drawn down on the term loan C credit facilities. In 2006, US$181.4 million
were drawn down on the term loan B credit facility repaid on October 31, 2007 (note 4
(a)).
 F-38




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 15.
    
    LONG-TERM DEBT (continued):
 (x)
    
    The US$205.0 million in aggregate principal amount Senior Notes were issued in February
2003 at discount for net proceeds of $306.8 million, before issuance fees of $6.2 million.
These notes bear interest at a rate of 7.625% and mature in 2013. The notes contain certain
restrictions for Sun Media Corporation, including limitations on its ability to incur
additional indebtedness and to make other distributions, and are unsecured. The Senior
Notes are guaranteed by specific subsidiaries of Sun Media Corporation Inc. Sun Media
Corporation has fully hedged the foreign currency risk associated with the Senior Notes by
using cross-currency interest rate swaps and a foreign exchange forward contract, under
which all payments were set in Canadian dollars. The notes are redeemable at the option of
the Company, in whole or in part, at any time on or after February 15, 2008, at a
decreasing premium.(xi)
    
    The credit facilities are comprised of revolving credit facility in the amount of $65.0
million and a term facility in the amount of $133.3 million maturing in January 2011. The
credit facilities bear interest at Canadian prime rate or bankers acceptance rate plus an
applicable margin determined by financial ratios and they contain covenants concerning,
among other things, certain financial ratios and restrictions on the declaration and
payment of any distributions. The credit facilities are secured by liens on all assets of
Osprey Media Publishing Inc. and its subsidiaries. As of December 31, 2007, $13.4 million
was drawn on the revolver credit facility and $131.9 million was drawn on the term
facility.(xii)
    
    The revolving credit facility of a maximum of $160.0 million bears interest at the
prime rate of a Canadian chartered bank or bankers acceptances rates, plus a variable
margin determined by certain financial ratios. In 2005, the revolving credit facility
maturity was extended to June 15, 2010. The credit facility contains certain restrictions,
including the obligation to maintain certain financial ratios.
 On December 31, 2007, the Company and its subsidiaries were in compliance with all debt
covenants.Principal repayments of long-term debt over the next years are as follows:
 2008

    
    $
    24.72009
    
    
    181.82010
    
    
    121.62011
    
    
    171.92012
    
    
    49.32013 and thereafter
    
    
    2,528.5
 F-39




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 16.
    
    OTHER LIABILITIES:
 2007
    
    
    2006Accrued stock-based compensation 1
    
    $
    12.7
    
    
    $
    57.2Accrued pension and post-retirement benefits liability (note 25)
    
    
    48.3
    
    
    
    37.0Deferred revenues
    
    
    36.7
    
    
    
    24.0Other
    
    
    5.8
    
    
    
    7.0$
    103.5
    
    
    $
    125.2
 1
    
    A current portion of accrued stock-based compensation in the amount of $98.6
million is included in accounts payable and accrued charges (nil at December 31, 2006). 17.
    
    NON-CONTROLLING INTEREST:Non-controlling interest represents the interest of non-controlling shareholders in the
participating shares of the Companys subsidiaries. As of December 31, 2007, the most
significant non-controlling interests were as follows:
 Non-controlling interestSubsidiary
    
    Segment
    
    
    %voting

    
    %equityTVA Group Inc.
    
    Broadcasting
    
    
    0.08
    %
    
    
    54.76
    %Nurun Inc.
    
    Interactive Technologies and Communications
    
    
    42.51
    %
    
    
    42.51
    %
 18.
    
    CAPITAL STOCK:
 (a)
    
    Authorized capital stock:An unlimited number of Common Shares, without par value;An unlimited number of non-voting Cumulative First Preferred Shares, without par value; the
number of preferred shares in each series and the related characteristics, rights and
privileges are 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;
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 18.
    
    CAPITAL STOCK (continued):
 (a)
    
    Authorized capital stock (continued):
 
    
    An unlimited number of Cumulative First Preferred Shares, Series D (Preferred D
Shares), carrying an 11.00% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series F (Preferred F
Shares), carrying a 10.85% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
    
    An unlimited number of Cumulative First Preferred Shares, Series G (Preferred G
Shares), carrying a 10.85% annual fixed cumulative preferential dividend,
redeemable at the option of the holder and retractable at the option of the
Company;
 An unlimited number of non-voting Preferred Shares, Series E (Preferred E Shares),
carrying a non-cumulative dividend subsequent to the holders of Cumulative First Preferred
Shares, redeemable at the option of the holder and retractable at the option of the Company.(b)
    
    Issued capital stock:
 Common SharesNumber
    
    
        AmountBalance as of December 31, 2005
    
    
    123,602,807
    
    
    $
    1,773.7Reduction of paid-up capital
    
    
    
    
    
    
    (21.3
    )Balance as of December 31, 2006 and 2007
    
    
    123,602,807
    
    
    $
    1,752.4
 In 2006, the Company reduced its Common Share paid-up capital by $21.3 million in the form
of cash distributions to its shareholders.As of December 31, 2007, Sun Media Corporation and its subsidiaries, Newspaper segment,
owned 560,000 Preferred G Shares for a total amount of $560.0 million while as of December
31, 2006 Sun Media Corporation and its subsidiaries owned 235,000 Preferred A Shares and
320,000 Preferred F Shares for a total amount of $555.0 million. In addition, as of December
31, 2007, 9101-0835 Quebec Inc., owned 110,000 Preferred C Shares (275,000 Preferred C
Shares in 2006) for an amount of $110.0 million ($275.0 million in 2006), and 1,995,000
Preferred G Shares for an amount of $1,995.0 million (1,000,000 Preferred F Shares in 2006
which were converted in G Shares in 2007). These shares are eliminated on consolidation.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 18.
    
    CAPITAL STOCK (continued):
 (c)
    
    Transactions during the year:2007On January 3, 2007, the Company issued 1,000,000 Preferred F Shares to 9101-0835 Québec Inc.
which were converted in Preferred G Shares on January 12, 2007.On May 31, 2007, the Company issued 995,000 Preferred G Shares to 9101-0835 Quebec Inc. for
a total amount of $995.0 million.On July 13, 2007, the Company redeemed 235,000 Preferred A Shares, owned by Sun Media
Corporation and its subsidiaries, for an amount of $235.0 million. On December 20, 2007,
320,000 Preferred F Shares, owned by Sun Media Corporation and its subsidiaries, were
converted into 320,000 Preferred G Shares while on July 27, 2007, the Company issued 240,000
Preferred G Shares to Sun Media Corporation and its subsidiaries for an amount of $240.0
million.On November 1, 2007 and on December 20, 2007, the Company redeemed 165,000 Preferred C
Shares, owned by 9101-0835 Quebec Inc., for an amount of $165.0 million.2006On June 12 and December 28, 2006, the Company redeemed 255,000 and 500,000 Preferred A
Shares, respectively, owned by Sun Media Corporation and its subsidiaries, for a total
amount of $755.0 million. On the same respective days, the Company issued 120,000 Preferred
F shares for an amount of $120.0 million and redeemed 55,000 Preferred F shares for an
amount of $55.0 million to Sun Media Corporation and its subsidiaries.On April 25, April 30, June 9 and June 29, 2006, the Company issued 25,000, 44,000, 50,000
and 40,000 Preferred C Shares respectively, for a total amount of $159.0 million, to
9101-0835 Québec Inc. On October 12, 2006, the Company redeemed 31,950 Preferred C Shares
owned by 9101-0835 Quebec inc. for an amount of $32.0 million.2005On January 14, 2005, the Company redeemed 150,000 Preferred A Shares for an amount of $150.0
million from Sun Media Corporation and its subsidiaries and issued 255,000 Preferred F
Shares for an amount of $255.0 million to Sun Media Corporation and its subsidiaries.On March 9, 2005 and April 29, 2005, the Company issued a total of 61,950 Preferred C Shares
to 9101-0835 Quebec inc. for a total amount of $61.9 million. On August 2, 2005, the Company
redeemed 184,000 Preferred C Shares for an amount of $184.0 million.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 19.
    
    STOCK-BASED COMPENSATION PLANS:
 (a)
    
    Quebecor Media Inc. stock option plan:Under a stock option plan established by the Company, a number of Common Shares of the
Company are currently set aside for officers, senior employees, directors and other key
employees of the Company and its subsidiaries. In 2007, the stock option plan of the Company
was amended in order to increase, until December 31, 2008, the total number of shares
issuable under the plan from 6,185,714 to 8,034,000. After that date, the number of shares
issuable under the plan will automatically be re-established at a number of shares equal to
5% of the shares then issued and outstanding. Each option may be exercised within a maximum
period of 10 years following the date of grant at an exercise price not lower than, as the
case may be, the fair market value of the Common Shares of Quebecor Media Inc. at the date
of grant, as determined by its Board of Directors (if the Common Shares of Quebecor Media
Inc. are not listed on a stock exchange at the time of the grant) or the five-day weighted
average closing price ending on the day preceding the date of grant of the Common Shares of
the Company on the stock exchanges where such shares are listed at the time of grant. Unless
authorized by the Company Compensation Committee in the context of a change of control, no
options may be exercised by an optionee if the shares of the Company have not been listed on
a recognized stock exchange. Should the Common Shares of Quebecor Media Inc. have not been
so listed on March 1, 2008, optionees may exercise from March 1 to March 30, from June 1 to
June 29, from September 1 to September 29 and from December 1 to December 30 of each year,
starting March 1, 2008, their right to receive an amount in cash (equal to the difference
between the fair market value, as determined by the Companys Board of Directors, and the
exercise price of their vested options) or, subject to certain stated conditions, exercise
their options to purchase Common Shares of Quebecor Media Inc. at the exercise price. Except
under specific circumstances, and unless the Compensation Committee decides otherwise,
options vest over a five-year period in accordance with one of the following vesting
schedules as determined by the Compensation Committee at the time of grant: (i) equally over
five years with the first 20% vesting on the first anniversary of the date of the grant;
(ii) equally over four years with the first 25% vesting on the second anniversary of the
date of grant; and (iii) equally over three years with the first 33 1/3% vesting on the
third anniversary of the date of grant.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 19.
    
    STOCK-BASED COMPENSATION PLANS (continued):
 (a)
    
    Quebecor Media Inc. stock option plan (continued):The following table gives summary information on outstanding options granted as of December 31, 2007 and 2006:
 2007
    
    
    2006Weighted average
    
    
    
    
    
    
    Weighted averageOptions
    
    
    exercise price
    
    
    Options
    
    
    exercise priceBalance at beginning of year
    
    
    3,781,767
    
    
    $
    21.38
    
    
    
    3,228,321
    
    
    $
    18.90Granted
    
    
    3,359,563
    
    
    
    44.38
    
    
    
    795,393
    
    
    
    31.60Cancelled
    
    
    (111,473
    )
    
    
    29.49
    
    
    
    (241,947
    )
    
    
    21.86Balance at end of year
    
    
    7,029,857
    
    
    $
    32.25
    
    
    
    3,781,767
    
    
    $
    21.38Vested options at end of year
    
    
    2,517,181
    
    
    $
    18.42
    
    
    
    1,639,460
    
    
    $
    17.59
 The following table gives summary information on outstanding options as of December 31, 2007:
 Outstanding options
    
    
    
    
    
    
    Vested optionsWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    averageRange of
    
    
    
    
    
    average years
    
    
    exercise
    
    
    
    
    
    
    exerciseexercise price
    
    Number
    
    
    to maturity
    
    
    price
    
    
    Number
    
    
    price$15.19 to 21.77
    
    
    2,709,224
    
    
    
    5.00
    
    
    $
    17.97
    
    
    
    2,342,813
    
    
    $
    17.5822.98 to 33.41
    
    
    995,070
    
    
    
    8.04
    
    
    
    30.55
    
    
    
    174,368
    
    
    
    29.7437.82 to 47.29
    
    
    3,325,563
    
    
    
    9.60
    
    
    
    44.38
    
    
    
    
    
    
    
    $15.19 to 47.29
    
    
    7,029,857
    
    
    
    7.60
    
    
    $
    32.25
    
    
    
    2,517,181
    
    
    $
    18.42
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 19.
    
    STOCK-BASED COMPENSATION PLANS (continued):
 (b)
    
    TVA Group Inc. plans:
 (i)
    
    Stock option plan for senior executives and directorsUnder this stock option plan, 1,400,000 Class B shares of TVA Group Inc. have been set
aside for senior executives and directors of TVA Group Inc. and its subsidiaries. The
terms and the conditions of options granted are determined by TVA Group Inc.s
Compensation Committee. The subscription price of an option cannot be less than the
closing price of Class B shares on the Toronto Stock Exchange the day before the option
is granted. Except under specific circumstances, and unless the Compensation Committee
decides otherwise, options will vest over a five-year period in accordance with one of
the following vesting schedules as determined by the Compensation Committee at the time
of grant: (i) equally over five years with the first 20% vesting on the first anniversary
of the date of the grant; (ii) equally over four years with the first 25% vesting on the
second anniversary of the date of grant; and (iii) equally over three years with the
first 33 1/3% vesting on the third anniversary of the grant. The term of an option cannot
exceed 10 years. Holders of options under the plan have the choice, at the time of
exercising their options, to receive from TVA Group Inc. an amount in cash (equal to the
number of shares corresponding to the options exercised, multiplied by the difference
between the fair market value and the exercise price of the option) or, subject to
certain conditions, exercise their options to purchase Class B shares of TVA Group Inc.
at the exercise price. The fair market value is defined by the average closing market
price of the Class B share for the last five trading days preceeding the date on which
the option was exercised.The following table gives details on changes to outstanding options for the years ended December 31, 2007 and 2006:
 2007
    
    
    2006Weighted average
    
    
    
    
    
    
    Weighted averageOptions
    
    
    exercise price
    
    
    Options
    
    
    exercise priceBalance at beginning of year
    
    
    489,695
    
    
    $
    17.59
    
    
    
    310,177
    
    
    $
    20.27Granted
    
    
    561,875
    
    
    
    14.82
    
    
    
    503,684
    
    
    
    15.62Exercised
    
    
    
    
    
    
    
    
    
    
    (27,500
    )
    
    
    14.00Cancelled
    
    
    (67,877
    )
    
    
    15.52
    
    
    
    (296,666
    )
    
    
    17.36Balance at end of year
    
    
    983,693
    
    
    $
    16.16
    
    
    
    489,695
    
    
    $
    17.59Vested options at end of year
    
    
    84,082
    
    
    $
    20.61
    
    
    
    31,625
    
    
    $
    20.75
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 19.
    
    STOCK-BASED COMPENSATION PLANS (continued):
 (b)
    
    TVA Group Inc. plans (continued):
 (i)
    
    Stock option plan for senior executives and directors (continued)The following table gives summary information on outstanding options as of December 31, 2007:
 Outstanding options
    
    
    Vested optionsWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    average
    
    
    
    
    
    
    averageRange of
    
    
    
    
    
    average years
    
    
    exercise
    
    
    
    
    
    
    exerciseexercise price
    
    Number
    
    
    to maturity
    
    
    price
    
    
    Number
    
    
    price$14.50 to 16.40
    
    
    789,562
    
    
    
    9.4
    
    
    $
    14.99
    
    
    
    3,923
    
    
    $
    15.8116.41 to 21.38
    
    
    194,131
    
    
    
    6.7
    
    
    
    20.90
    
    
    
    80,159
    
    
    
    20.84$14.50 to 21.38
    
    
    983,693
    
    
    
    8.9
    
    
    $
    16.16
    
    
    
    84,082
    
    
    $
    20.61
 Had the vested options been exercised as of December 31, 2007, Quebecor Media Inc.s
interest in TVA Group Inc. would have decreased from 45.24% to 45.10% (45.24% to 45.23%
as of December 31, 2006).(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, 2007, 2006 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 of December 31, 2007, 2006 and 2005. The remaining balance
that may be issued under the share purchase plan for employees is 229,753 TVA Group Inc.
Class B shares as of December 31, 2007, 2006 and 2005.(iii)
    
    Deferred share unit planIn 2000, TVA Group Inc. introduced a long-term profit sharing plan for certain members of
senior management of TVA Group Inc., and its subsidiaries. The deferred share units
(DSUs) are redeemable only upon termination of the participants employment. The
redemption price is payable in cash or, at TVA Group Inc.s discretion, in Class B shares
of TVA Group Inc. or by a combination of cash and shares. Under this plan, a maximum of
25,000 Class B shares of TVA Group Inc. can be issued. No DSUs were issued under this
plan during the years ended December 31, 2007, 2006 and 2005.
 F-46




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 19.
    
    STOCK-BASED COMPENSATION PLANS (continued):
 (c)
    
    All Stock-based option plans:For the year ended December 31, 2007, a charge of $50.8 million related to all stock-based
option plans is included in income ($24.8 million in 2006 and $10.9 million in 2005).
 20.
    
    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
 Translation of netinvestments in
    
    
    Cash flowforeign operations
    
    
    hedges
    
    
    TotalBalance as of December 31, 2004
    
    $
    (1.0
    )
    
    $
    
    
    
    $
    (1.0
    )Other comprehensive loss, net of income taxes
    
    
    (1.3
    )
    
    
    
    
    
    
    (1.3
    )Balance as of December 31, 2005
    
    
    (2.3
    )
    
    
    
    
    
    
    (2.3
    )Other comprehensive income, net of income taxes
    
    
    1.2
    
    
    
    
    
    
    
    1.2Balance as of December 31, 2006
    
    
    (1.1
    )
    
    
    
    
    
    
    (1.1
    )Cumulative effect of changes in accounting policies (note 1(b))
    
    
    
    
    
    
    (35.5
    )
    
    
    (35.5
    )Other comprehensive income, net of income taxes
    
    
    (2.0
    )
    
    
    48.0
    
    
    
    46.0Balance as of December 31, 2007
    
    $
    (3.1
    )
    
    $
    12.5
    
    
    $
    9.4
 No significant amount is expected to be reclassified in income over the next 12 months in
connection with derivative financial instruments designated as cash flow hedges, while the
balance of accumulated other comprehensive loss is expected to be reversed over an 8-year
period.
 F-47




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 21.
    
    COMMITMENTS AND CONTINGENCIES:
 (a)
    
    Leases and purchasing agreements:The Company rents premises and equipment under operating leases and has entered into
long-term commitments to purchase services, capital equipment and distribution and
broadcasting rights that call for total future payments of $354.7 million. The minimum
payments for the coming years are as follows:
 OtherLeases
    
    
    commitments2008
    
    $
    47.6
    
    
    $
    143.52009
    
    
    33.1
    
    
    
    33.22010
    
    
    28.0
    
    
    
    7.32011
    
    
    18.7
    
    
    
    3.22012
    
    
    13.7
    
    
    
    0.52013 and thereafter
    
    
    25.9
    
    
    
    
 Operating lease expenses amounted to $46.1 million, $44.8 million and $42.4 million for the
years ended December 31, 2007, 2006 and 2005, respectively.(b)
    
    Other commitments:As part of the acquisition of Group TVA Inc. in 2001 and Sun TV in 2004, the Company was
committed, over a period ending in 2011, to invest $58.2 million in the Canadian TV industry
and in the Canadian communications industry to promote Canadian TV content and the
development of communications. As of December 31, 2007, $4.9 million remained to be
invested.(c)
    
    Contingencies:On July 20, 2007, a motion to certify a class action lawsuit
was filed in the Province of Québec against Videotron in
connection with an interruption of Internet service on July 18,
2007 and other sporadic interruptions of Internet service. The
plaintiff is claiming a credit for the portion of the fees paid for
the Internet service for the duration of the interruptions. The
plaintiff is also seeking punitive damages and damages for troubles
and inconveniences. The class certification hearing has not been
scheduled yet. Although it is not possible as of the date of these
financial statements to determine with a reasonable degree of certainty the
outcome of this legal proceeding, the Companys management believes
that  the suit is without merit and intends to vigorously defend its
position.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.
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 22.
    
    GUARANTEES:In the normal course of business, the Company enters into numerous agreements containing
guarantees, including the following:Operating leases:The Company has guaranteed a portion of the residual values of certain assets under operating
leases for the benefit of the lessor. Should the Company terminate these leases prior to term
(or at the end of these lease term) and should the fair value of the assets be less than the
guaranteed residual value, then the Company must, under certain conditions, compensate the
lessor for a portion of the shortfall. In addition, the Company has provided guarantees to the
lessor of certain premise leases, with expiry dates through 2015. Should the lessee default
under the agreement, the Company must, under certain conditions, compensate the lessor. As of
December 31, 2007, the maximum exposure with respect to these guarantees was $18.5 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 and since the Company was unable to
determine the fair value of these guarantees.Business and asset disposals:In the sale of all or part of a business or an asset, in addition to possible indemnification
relating to failure to perform covenants and breach of representations or warranties, the
Company may agree to indemnify against claims related to its past conduct of the business.
Typically, the term and amount of such indemnification will be limited by the agreement. The
nature of these indemnification agreements prevents the Company from estimating the maximum
potential liability it could be required to pay to guaranteed parties. The Company has not
accrued any amount in respect of these items in the consolidated balance sheet since the Company
was unable to determine the fair value of these guarantees.Outsourcing companies and suppliers:In the normal course of its operations, the Company enters into contractual agreements with
outsourcing companies and suppliers. In some cases, the Company agrees to provide
indemnifications in the event of legal procedures initiated against them. In other cases, the
Company provides indemnification to counterparties for damages resulting from the outsourcing
companies and suppliers. The nature of the indemnification agreements prevents the Company from
estimating the maximum potential liability it could be required to pay. No amount has been
accrued in the consolidated financial statements with respect to these indemnifications since
the Company was unable to determine the fair value of these guarantees.
 F-49




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 23.
    
    FINANCIAL INSTRUMENTS:The Company is exposed to risks relating to foreign exchange fluctuations and to risks relating
to interest rate fluctuations. In order to manage these risks, the Company and its subsidiaries
use derivative financial instruments (i) to achieve a targeted balance of fixed and variable
rate debts and (ii) to set in Canadian dollars all future payments on debts denominated in U.S.
dollars (interest and principal) and on certain capital or inventory expenditures denominated in
foreign currency. None of these instruments is held or issued for speculative purposes. The
Company designates its derivative financial instruments either as fair value hedges or cash flow
hedges.
 (a)
    
    Description of derivative financial instruments:
 (i)
    
    Foreign exchange forward contracts:
 Average
    
    
    NotionalCurrencies (sold/bought)
    
    Maturing
    
    exchange rate
    
    
    amountQuebecor Media Inc.$/Euro
    
    Less than 1 year
    
    
    1.4501
    
    
    $
    18.9$/CHF
    
    Less than 1 year
    
    
    0.8897
    
    
    
    6.0Sun Media Corporation$/ US$
    
    February 15, 2013
    
    
    1.5227
    
    
    
    312.2Videotron Ltd. and its subsidiaries:$/ US$
    
    Less than 1 year
    
    
    1.0511
    
    
    
    76.8
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 23.
    
    FINANCIAL INSTRUMENTS (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii) Cross-currency interest rate swaps:
 CDN dollarexchange rateAnnual
    
    
    Annual
    
    
    of interesteffective
    
    
    nominal
    
    
    and capitalPeriod
    
    
    Notional
    
    
    interest
    
    
    interest
    
    
    payments percovered
    
    
    amount
    
    
    rate
    
    
    rate
    
    
    one US dollarQuebecor Media Inc.:Senior Notes
    
    
    2007 to 2016
    
    
    US$
    700.0
    
    
    
    7.69
    %
    
    
    7.75
    %
    
    
    0.9990Senior Notes
    
    
    2006 to 2016
    
    
    US$
    525.0
    
    
    
    7.39
    %
    
    
    7.75
    %
    
    
    1.1600Term loan B credit
facilities
    
    
    2006 to 2009
    
    
    US$
    196.5
    
    
    
    6.27
    %
    
    LIBOR
    
    
    1.1625+2.00
    %Term loan B credit
facilities
    
    
    2009 to 2013
    
    
    US$
    196.5
    
    
    Bankers'
    
    LIBOR
    
    
    1.1625acceptances
    
    
    +2.00
    %3 months+2.22
    %Term loan B credit
facilities
    
    
    2006 to 2013
    
    
    US$
    147.4
    
    
    
    6.44
    %
    
    LIBOR
    
    
    1.1625+2.00
    %Videotron Ltd. and
its subsidiaries:Senior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    
    Bankers'
    
    
    6.875
    %
    
    
    1.2000acceptances3 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
    %
    
    
    1.3425acceptances3 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
    %
    
    
    1.1781
 F-51




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 23.
    
    FINANCIAL INSTRUMENTS (continued):
 (a)
    
    Description of derivative financial instruments (continued):
 (ii)
    
    Cross-currency interest rate swaps (continued):
 CDN dollarexchange rateAnnual
    
    
    Annual
    
    
    of interesteffective
    
    
    nominal
    
    
    and capitalPeriod
    
    
    Notional
    
    
    interest
    
    
    interest
    
    
    payments percovered
    
    
    amount
    
    
    rate
    
    
    rate
    
    
    one US dollarSun Media Corporation
and its subsidiaries:Senior Notes
    
    
    2003 to 2008
    
    
    US$
    155.0
    
    
    
    8.17
    %
    
    
    7.625
    %
    
    
    1.5227Senior Notes
    
    
    2008 to 2013
    
    
    US$
    155.0
    
    
    Bankers'
    
    
    7.625
    %
    
    
    1.5227acceptances3 months+3.70
    %Senior Notes
    
    
    2003 to 2013
    
    
    US$
    50.0
    
    
    Bankers'
    
    
    7.625
    %
    
    
    1.5227acceptances3 months+3.70
    %
 The cross-currency swap agreements settled as part of the refinancing of the Companys
debts on January 17, 2006, were subject to a floor limit on negative fair market value,
below which the Company was required to make prepayments to limit the exposure of the
counterparties. Such prepayments were offset by equal reductions in the Companys
commitments under the agreements. The Company was required to make prepayments of $75.9
million in 2005 under this provision.Also, certain cross-currency interest rate swaps entered into by the Company and its
subsidiaries include an option that allows each party to unwind the transaction on a
specific date at the then-market value.(iii)
    
    Interest rate swaps
 Notional
    
    
    Pay/
    
    
    Fixed
    
    
    FloatingMaturity
    
    amount
    
    
    receive
    
    
    rate
    
    
    rateOsprey Media Publishing Inc.April 2008
    
    $
    75.0
    
    
    Pay fixed/
    
    
    4.05
    %
    
    Bankers'receive floating
    
    
    
    
    
    acceptance3 months
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 23.
    
    FINANCIAL INSTRUMENTS (continued):
 (b)
    
    Fair value of financial instruments:The carrying amount of accounts receivable from external or related parties (classified as
loans and receivables), accounts payable and accrued charges to external or related parties
(classified as other liabilities) approximates their fair value since these items will be
realized or paid within one year or are due on demand.Carrying value and fair value of long-term debt and derivative financial instruments as of
December 31, 2007 and 2006 are as follows:
 2007
    
    
    2006Carrying
    
    
    
    
    
    
    Carryingvalue
    
    
    Fair value
    
    
    value
    
    
    Fair valueQuebecor Media Inc.Long-term debt 1
    
    $
    (1,664.9
    )
    
    $
    (1,646.6
    )
    
    $
    (1,191.6
    )
    
    $
    (1,206.3
    )Cross-currency interest rate swaps
    
    
    (159.8
    )
    
    
    (159.8
    )
    
    
    3.8
    
    
    
    (17.8
    )Foreign exchange forward contracts
    
    
    (0.3
    )
    
    
    (0.3
    )
    
    
    2.2
    
    
    
    2.2Videotron Ltd. and its subsidiariesLong-term debt 1
    
    
    (973.3
    )
    
    
    (938.2
    )
    
    
    (1,021.2
    )
    
    
    (1,010.6
    )Cross-currency interest rate swaps
    
    
    (241.3
    )
    
    
    (241.3
    )
    
    
    (71.8
    )
    
    
    (141.1
    )Foreign exchange forward contract
    
    
    (4.2
    )
    
    
    (4.2
    )
    
    
    
    
    
    
    2.1Sun Media Corporation and its subsidiariesLong-term debt 1
    
    
    (238.0
    )
    
    
    (234.1
    )
    
    
    (486.8
    )
    
    
    (492.9
    )Cross-currency interest rate swaps and
foreign exchange forward contract
    
    
    (133.1
    )
    
    
    (133.1
    )
    
    
    (148.8
    )
    
    
    (176.1
    )Osprey Media Publishing Inc.Long-term debt 1
    
    
    (145.3
    )
    
    
    (145.3
    )
    
    
    
    
    
    
    Interest rate swap
    
    
    0.2
    
    
    
    0.2
    
    
    
    
    
    
    
    TVA Group Inc. and its subsidiariesLong-term debt 1
    
    
    (56.3
    )
    
    
    (56.3
    )
    
    
    (96.5
    )
    
    
    (96.5
    )
 1
    
    The carrying value of long-term debt excludes adjustments to record changes in
fair value of long term debt related to hedged interest risk, embedded derivatives and
financing fees. The fair value of long-term debt is estimated based on 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.
 F-53




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 23.
    
    FINANCIAL INSTRUMENTS (continued):
 (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 (either foreign or
Canadian) must have at least credit ratings in accordance with the Companys credit risk
management policy 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 of December 31,
2007, no customer balance represented a significant portion of the Companys consolidated
trade receivables. The Company establishes an allowance for doubtful accounts based on the
specific credit risk of its customers and historical trends.The Company believes that its product-lines and the geographic diversity of its customer
base is instrumental in reducing its credit risk, as well as the impact of fluctuations in
product-line demand. The Company does not believe that it is exposed to an unusual level of
customer credit risk.
 24.
    
    RELATED PARTY TRANSACTIONS:Operating transactionsDuring the year, the Company made purchases and incurred rent charges from companies under
common control and from affiliated companies in the amount of $64.3 million ($89.6 million in
2006 and $91.0 million in 2005), included in the cost of sales and selling and administrative
expenses. The Company made sales to companies under common control and to an affiliated company
in the amount of $18.3 million ($18.1 million in 2006 and $21.7 million in 2005). These
transactions were concluded and accounted for at the exchange value.During the year ended December 31, 2007, Nurun Inc., Interactive Technologies and Communications
segment, received interest of $0.9 million ($0.9 million in 2006 and $0.8 million in 2005) from
Quebecor Inc. As of December 31, 2007, cash and cash equivalents totalling $19.3 million ($20.2
million as of December 31, 2006) have been invested on a revolving basis in Quebecor Inc. under
the terms of an agreement for the consolidation of bank operations. These advances on demand
bear interest at prime rate less 1.4%.In 2007, the Company signed a 10 years manufacturing agreement with Quebecor World Inc., a
company under common control, for the printing of directories in its Toronto and
Saint-Janvier-de-Mirabel printing facilities.Transfer of assetsIn October 2007, the Company increased its investment in Nurun Inc. by acquiring from Quebecor
World Inc., a company under common control, 500,000 common shares of Nurun Inc. for a cash
consideration of $1.7 million.On October 11, 2007, the Company acquired a property from Quebecor World Inc., a company under
common control, for a total net consideration of $62.5 million. Simultaneously, Quebecor World
Inc. entered into a long-term operating lease with the Company to rent a portion of the property
over a term of 17 years. The consideration for the two transactions was settled by the payment
to Quebecor World Inc. of a net amount $43.9 million as of the date of the transactions and the
assumption by the Company of a $7.0 million balance of sale, including interest, payable in
2013. The transactions were concluded and accounted at the exchange value.
 F-54




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 24.
    
    RELATED PARTY TRANSACTIONS (continued):Transfer of assets(continued)In 2005, the Company acquired certain assets from Quebecor World Inc., for a cash consideration
of $3.3 million. The transaction was recorded at the carrying value of the assets transferred.Management arrangementsQuebecor Inc. (the parent company) has entered into management arrangements with the Company.
Under these management arrangements, the parent company and the Company provide each other
management services on a cost reimbursement basis. The expenses subject to reimbursement
include the salaries of the Companys executive officers who also serve as executive officers of
the parent company. Also, in connection with the Companys previous credit facility, which was
secured by the Companys shareholders, an annual security fee equivalent to 1% of the credit
facility was charged to the Company by its shareholders. The current credit facilities, entered
into in January 2006, are not secured by the Companys shareholders. In 2007, the Company
received an amount of $3.0 million, which is included as a reduction in selling and
administrative expenses ($3.0 million in 2006 and 2005) and the Company has incurred management
fees of $1.1 million ($1.1 million in 2006 and in 2005) with the shareholders. In 2005, the
Company incurred security fees of $1.1 million with its shareholders.Tax transactionsDuring the year ended December 31, 2006, some of the Companys subsidiaries acquired tax
benefits amounting to $6.5 million from Quebecor World Inc., a company under common control,
that were recorded as income taxes receivable. These transactions allowed the Company to realize
a gain of $0.4 million (net of non-controlling interest) which was recorded as contributed
surplus.On December 14, 2005, the Company entered into a tax consolidation transaction by which the
Company has transferred to its parent company $192.0 million of capital losses for a cash
consideration of $15.9 million. In addition, in 2007 and 2006, the parent company transferred to
certain of the Companys subsidiaries $66.5 million and $74.2 million of non-capital losses,
respectively, in exchange of cash considerations of $14.9 million and $16.1 million. These
transactions were recorded at the exchange amounts. As a result, the Company has recorded
reductions of $7.7 million and $15.9 million, respectively, of its income tax expense in 2007
and 2005 and expects to reduce its income tax expense by $6.4 million in the future.
 F-55




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 25.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS:The Company maintains various flat-benefit plans, final-pay plans with indexation features from
none to 2%, and defined contribution plans. The Companys policy is to maintain its contribution
at a level sufficient to cover benefits. Actuarial valuations of the Companys numerous pension
plans were performed once at least in the last three years and the next required valuations will
be performed at least over the next three years.The Company provides postretirement benefits to eligible employees. The costs of these
benefits, which are principally health care, are accounted for during the employees active
service period.The following tables give a reconciliation of the changes in the plans benefit obligations and
the fair value of plan assets for the years ended December 31, 2007 and 2006, and a statement of
the funded status as of those dates:
 Pension benefits
    
    
    Postretirement benefits2007
    
    
    2006
    
    
    2007
    
    
    2006Change in benefit obligations:Benefit obligations at beginning of year
    
    $
    595.8
    
    
    $
    555.9
    
    
    $
    40.7
    
    
    $
    40.4Service costs
    
    
    24.9
    
    
    
    22.1
    
    
    
    1.4
    
    
    
    1.3Interest costs
    
    
    31.9
    
    
    
    29.0
    
    
    
    2.0
    
    
    
    1.9Plan participants contributions
    
    
    11.1
    
    
    
    11.7
    
    
    
    
    
    
    
    Actuarial (loss) gain
    
    
    (34.8
    )
    
    
    1.8
    
    
    
    (1.0
    )
    
    
    1.3Benefits and settlements paid
    
    
    (30.2
    )
    
    
    (25.6
    )
    
    
    (0.6
    )
    
    
    (1.7
    )Plan amendments
    
    
    5.0
    
    
    
    0.7
    
    
    
    
    
    
    
    (3.1
    )Curtailment gain
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    Acquisition
    
    
    32.4
    
    
    
    
    
    
    
    1.0
    
    
    
    Other
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.6Benefit obligations at end of year
    
    $
    635.6
    
    
    $
    595.8
    
    
    $
    43.5
    
    
    $
    40.7
 Pension benefits
    
    
    Postretirement benefits2007
    
    
    2006
    
    
    2007
    
    
    2006Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    560.4
    
    
    $
    480.8
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    5.4
    
    
    
    68.5
    
    
    
    
    
    
    
    Employer contributions
    
    
    25.0
    
    
    
    25.0
    
    
    
    0.6
    
    
    
    1.7Plan participants contributions
    
    
    11.1
    
    
    
    11.7
    
    
    
    
    
    
    
    Benefits and settlements paid
    
    
    (30.2
    )
    
    
    (25.6
    )
    
    
    (0.6
    )
    
    
    (1.7
    )Acquisition
    
    
    32.3
    
    
    
    
    
    
    
    
    
    
    
    Fair value of plan assets at end of year
    
    $
    604.0
    
    
    $
    560.4
    
    
    $
    
    
    
    $
    
 F-56




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 25.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):The plan assets are comprised of:
 2007
    
    
    2006Equity securities
    
    
    56.8
    %
    
    
    59.8
    %Debt securities
    
    
    38.2
    
    
    
    36.5Other
    
    
    5.0
    
    
    
    3.7100.0
    %
    
    
    100.0
    %
 As of December 31, 2007, plan assets included shares of the parent company and of a company
under common control representing an amount of $2.2 million ($2.5 million as of December 31,
2006).
 Pension benefits
    
    
    Postretirement benefits2007
    
    
    2006
    
    
    2007
    
    
    2006Reconciliation of funded status:Excess of benefit obligations over fair
value of plan assets at end of year
    
    $
    (31.6
    )
    
    $
    (35.4
    )
    
    $
    (43.5
    )
    
    $
    (40.7
    )Unrecognized actuarial loss
    
    
    47.7
    
    
    
    47.9
    
    
    
    11.5
    
    
    
    13.0Unrecognized net transition (asset) obligation
    
    
    (4.6
    )
    
    
    (5.2
    )
    
    
    0.4
    
    
    
    0.5Unrecognized prior service cost (benefit)
    
    
    19.9
    
    
    
    17.0
    
    
    
    (4.6
    )
    
    
    (5.1
    )Valuation allowance
    
    
    (22.8
    )
    
    
    (19.5
    )
    
    
    
    
    
    
    Net amount recognized
    
    $
    8.6
    
    
    $
    4.8
    
    
    $
    (36.2
    )
    
    $
    (32.3
    )
 Included in the above benefit obligations and fair value of plan assets at year-end are the
following amounts in respect of plans that are not fully funded:
 Pension benefits
    
    
    Postretirement benefits2007
    
    
    2006
    
    
    2007
    
    
    2006Benefit obligations
    
    $
    (457.8
    )
    
    $
    (585.5
    )
    
    $
    (43.5
    )
    
    $
    (40.7
    )Fair value of plan assets
    
    
    417.2
    
    
    
    548.8
    
    
    
    
    
    
    
    Funded status  plan deficit
    
    $
    (40.6
    )
    
    $
    (36.7
    )
    
    $
    (43.5
    )
    
    $
    (40.7
    )
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 25.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):Amounts recognized in the consolidated balance sheets are as follows:
 Pension benefits
    
    
    Postretirement benefits2007
    
    
    2006
    
    
    2007
    
    
    2006Deferred pension charge
    
    $
    20.7
    
    
    $
    9.5
    
    
    $
    
    
    
    $
    Accrued benefit liability
    
    
    (12.1
    )
    
    
    (4.7
    )
    
    
    (36.2
    )
    
    
    (32.3
    )Net amount recognized
    
    $
    8.6
    
    
    $
    4.8
    
    
    $
    (36.2
    )
    
    $
    (32.3
    )
 Components of the net benefit costs are as follows:
 Pension benefits
    
    
    Postretirement benefits2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Service costs
    
    $
    24.9
    
    
    $
    22.1
    
    
    $
    15.3
    
    
    $
    1.4
    
    
    $
    1.3
    
    
    $
    1.8Interest costs
    
    
    31.9
    
    
    
    29.0
    
    
    
    27.7
    
    
    
    2.0
    
    
    
    1.9
    
    
    
    2.2Actual return on plan assets
    
    
    (5.4
    )
    
    
    (68.5
    )
    
    
    (47.2
    )
    
    
    
    
    
    
    
    
    
    
    Current actuarial gain (loss)
    
    
    (34.8
    )
    
    
    1.8
    
    
    
    68.7
    
    
    
    (1.0
    )
    
    
    1.3
    
    
    
    4.5Current prior service costs (benefits)
    
    
    4.9
    
    
    
    0.7
    
    
    
    5.6
    
    
    
    
    
    
    
    (3.1
    )
    
    
    Curtailment gain and other
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.6
    )Elements of net benefit
costs before adjustments to
recognize the long-term nature
and valuation allowance
    
    
    21.0
    
    
    
    (14.9
    )
    
    
    70.1
    
    
    
    2.4
    
    
    
    1.4
    
    
    
    6.9Difference between actual and
expected return on plan assets
    
    
    (36.5
    )
    
    
    33.0
    
    
    
    15.1
    
    
    
    
    
    
    
    
    
    
    
    Deferral of amounts arising
during the period:Actuarial gain (loss)
    
    
    34.8
    
    
    
    (1.8
    )
    
    
    (68.7
    )
    
    
    1.0
    
    
    
    (1.3
    )
    
    
    (4.5
    )Prior service (costs) benefits
    
    
    (4.9
    )
    
    
    (0.7
    )
    
    
    (5.6
    )
    
    
    
    
    
    
    3.1
    
    
    
    Amortization of previously
deferred amounts:Actuarial gain (loss)
    
    
    1.9
    
    
    
    2.0
    
    
    
    (0.2
    )
    
    
    0.6
    
    
    
    0.6
    
    
    
    (0.1
    )Prior service (costs) benefits
    
    
    2.0
    
    
    
    1.8
    
    
    
    1.6
    
    
    
    (0.5
    )
    
    
    (0.7
    )
    
    
    (0.3
    )Transitional obligations
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    0.1Total adjustments to recognize the
long-term nature of benefit costs
    
    
    (3.2
    )
    
    
    33.8
    
    
    
    (58.3
    )
    
    
    1.1
    
    
    
    1.7
    
    
    
    (4.8
    )Valuation allowance
    
    
    3.3
    
    
    
    2.1
    
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    Net benefit costs
    
    $
    21.1
    
    
    $
    21.0
    
    
    $
    12.8
    
    
    $
    3.5
    
    
    $
    3.1
    
    
    $
    2.1
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 25.
    
    PENSION PLANS AND POSTRETIREMENT BENEFITS (continued):The expense related to defined contribution pension plans amounted to $11.1 million in 2007
($10.9 million in 2006 and $9.7 million in 2005).The total cash amount paid or payable for employee future benefits for all plans, consisting of
cash contributed by the Company to its funded pension plans, cash payment directly to
beneficiaries for its unfunded other benefit plans, and cash contributed to its defined
contribution plans, totalled $36.7 million for the year ended December 31, 2007 ($37.6 million
in 2006 and $29.0 million in 2005).The weighted average rates used in the measurement of the Companys benefit obligations as of
December 31, 2007, 2006 and 2005 and current periodic costs are as follows:
 Pension benefits
    
    
    Postretirement benefits2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Benefit obligationsRates as of year-end:Discount rate
    
    
    5.50
    %
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    5.50
    %
    
    
    5.00
    %
    
    
    5.00
    %Rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50Current periodic costsRates as of preceding year-end:Discount rate
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    6.00
    %
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    6.00
    %Expected return on plan assets 1
    
    
    7.25
    
    
    
    7.25
    
    
    
    7.50
    
    
    
    
    
    
    
    
    
    
    
    Rate of compensation increase
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
    
    
    
    3.50
 1
    
    After management and professional fees. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit
obligations was 9.0% at the end of 2007. The cost, as per an estimate, is expected to decrease
gradually for the next eight years to 5.0% and remain at that level thereafter. A
one-percentage point change in the assumed health care cost trend would have the following
effects:
 Postretirementbenefits1%
    
    
    1%Sensitivity analysis
    
    increase
    
    
    decreaseEffect on service and interest costs
    
    $
    0.6
    
    
    $
    (0.5
    )Effect on benefit obligations
    
    
    6.7
    
    
    
    (5.2
    )
 F-59




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 26.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES:The Companys consolidated financial statements are prepared in accordance with Canadian GAAP,
which differ in some respects from those applicable in the United States (U.S.). The following
tables set forth the impact of material differences between Canadian and U.S. GAAP on the
Companys consolidated financial statements:
 (a)
    
    Consolidated statements of income:
 2007
    
    
    2006
    
    
    2005Net income (loss), as reported in the consolidated
statements of income per Canadian GAAP
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5Adjustments:Development, pre-operating and start-up costs (i)
    
    
    1.9
    
    
    
    (0.7
    )
    
    
    (1.3
    )Pension and postretirement benefits (ii)
    
    
    0.8
    
    
    
    0.9
    
    
    
    2.1Change in fair value and ineffective portion
of derivative instruments (iii)
    
    
    11.0
    
    
    
    71.6
    
    
    
    (7.2
    )Stock-based compensation (iv)
    
    
    (6.9
    )
    
    
    (4.8
    )
    
    
    Income taxes (v), (vi)
    
    
    (21.0
    )
    
    
    (40.1
    )
    
    
    37.2Non-monetary transactions (vii)
    
    
    
    
    
    
    
    
    
    
    1.5(14.2
    )
    
    
    26.9
    
    
    
    32.3Net income (loss), as adjusted per U.S. GAAP
    
    $
    312.9
    
    
    $
    (142.8
    )
    
    $
    128.8
 (b)
    
    Consolidated statements of comprehensive income (loss):
 2007
    
    
    2006
    
    
    2005Comprehensive income (loss) as per Canadian GAAP
    
    $
    373.1
    
    
    $
    (168.5
    )
    
    $
    95.2Adjustments to net income (loss) as per (a) above
    
    
    (14.2
    )
    
    
    26.9
    
    
    
    32.3Adjustments to other comprehensive incomePension and post-retirement benefits (ii)
    
    
    (5.9
    )
    
    
    17.6
    
    
    
    (18.8
    )Derivative instruments (iii)
    
    
    3.0
    
    
    
    132.0
    
    
    
    (22.0
    )Income taxes (v), (vi)
    
    
    0.9
    
    
    
    (64.4
    )
    
    
    73.3(2.0
    )
    
    
    85.2
    
    
    
    32.5Comprehensive income (loss) as per U.S. GAAP
    
    $
    356.9
    
    
    $
    (56.4
    )
    
    $
    160.0
 F-60




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 26.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (b)
    
    Consolidated comprehensive income (loss) (continued):Accumulated other comprehensive loss as of December 31, 2007, 2006 and 2005 is as follows:
 2007
    
    
    2006
    
    
    2005Accumulated other comprehensive income (loss) as
per Canadian GAAP
    
    $
    9.4
    
    
    $
    (1.1
    )
    
    $
    (2.3
    )Adjustments:Pension and post-retirement benefits (ii)
    
    
    (58.2
    )
    
    
    (52.3
    )
    
    
    (30.2
    )Derivative instruments (iii)
    
    
    3.0
    
    
    
    (44.4
    )
    
    
    (176.4
    )Income taxes (ii), (v)
    
    
    17.8
    
    
    
    25.8
    
    
    
    77.8(37.4
    )
    
    
    (70.9
    )
    
    
    (128.8
    )Accumulated other comprehensive loss at end of year
    
    $
    (28.0
    )
    
    $
    (72.0
    )
    
    $
    (131.1
    )
 (c)
    
    Consolidated balance sheets:
 2007
    
    
    2006Canada
    
    
    United States
    
    
    Canada
    
    
    United StatesGoodwill
    
    $
    4,081.3
    
    
    $
    4,077.5
    
    
    $
    3,721.1
    
    
    $
    3,717.1Other assets
    
    
    422.0
    
    
    
    388.3
    
    
    
    243.6
    
    
    
    197.1Current liabilities
    
    
    (1,018.9
    )
    
    
    (1,053.2
    )
    
    
    (956.4
    )
    
    
    (945.9
    )Long-term debt
    
    
    (3,002.8
    )
    
    
    (2,991.4
    )
    
    
    (2,773.0
    )
    
    
    (2,743.2
    )Derivative financial instruments
    
    
    (538.7
    )
    
    
    (538.7
    )
    
    
    (231.3
    )
    
    
    (322.8
    )Other liabilities
    
    
    (103.5
    )
    
    
    (129.3
    )
    
    
    (125.2
    )
    
    
    (148.1
    )Future income tax liabilities
    
    
    (292.5
    )
    
    
    (252.9
    )
    
    
    (118.9
    )
    
    
    (81.0
    )Non-controlling interest
    
    
    (154.2
    )
    
    
    (150.0
    )
    
    
    (142.1
    )
    
    
    (137.1
    )Contributed surplus (vi), (viii)
    
    
    (3,217.2
    )
    
    
    (3,400.9
    )
    
    
    (3,217.2
    )
    
    
    (3,395.2
    )Deficit
    
    
    2,528.7
    
    
    
    2,717.4
    
    
    
    2,731.5
    
    
    
    2,920.3Accumulated other comprehensive loss
    
    
    (9.4
    )
    
    
    28.0
    
    
    
    1.1
    
    
    
    72.0
 (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-61




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 26.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c)
    
    Consolidated balance sheets (continued):
 (ii)
    
    Under GAAP in the United States, Statement No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans (SFAS 158) was issued in 2006
and requires the recognition in the balance sheet of the over or under funded positions
of defined benefit pension and other postretirement plans, along with a corresponding
non-cash adjustment, which will be recorded in the accumulated other comprehensive
loss. SFAS 158 was adopted prospectively on December 31, 2006 and did not have an
impact on the Companys consolidated statement of income.Under GAAP in the United States, for 2006 and prior years, if the accumulated benefit
obligation exceeded the fair value of a pension plans assets, the Company was required
to recognize a minimum accrued liability equal to the unfunded accumulated benefit
obligation, which was recorded in accumulated other comprehensive loss. The additional
minimum liability concept has been eliminated with the adoption of SFAS 158.On the adoption of SFAS 158, an adjustment of $27.3 million was recorded as a component
of the ending balance of accumulated other comprehensive loss as of December 31, 2006 to
reflect the unfunded status of benefit plans and the reversal of the minimum pension
liability that was recognized in accordance with SFAS 87. Adjustments were also recorded
to increase other liabilities by $54.2 million, decrease future income tax liabilities
by $12.4 million and to decrease non-controlling interest by $14.5 million.Under GAAP in Canada, a company is not required to recognize the over or under funded
positions or to recognize an additional minimum liability. However, when a defined
benefit plan gives rise to an accrued benefit asset, a company must recognize a
valuation allowance for the excess of the adjusted benefit asset over the expected
future benefit to be realized from the plan asset. GAAP in the United States does not
provide for a valuation allowance against pension assets.(iii)
    
    Prior to 2007, under GAAP in Canada, derivative financial instruments were
accounted for on an accrual basis. Realized and unrealized gains and losses were
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. Since January 1, 2007, standards for hedge accounting under Canadian GAAP
are now similar to those under U.S. GAAP, as established by the Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities.However, under Canadian GAAP, certain embedded derivatives, such as early settlement
options included in certain of the Companys borrowing agreements, do not meet the
criteria to be considered closely related to their host contracts and therefore must be
recorded at their fair value with changes in the consolidated statement of income. Under
U.S. GAAP, these embedded derivatives are considered closely related to their host
contract and do not have to be recorded at their fair value. Accordingly, measurement of
hedging relationships ineffectiveness recorded in the consolidated statement of income
under U.S. GAAP could differ from the measurement under Canadian GAAP.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.
 F-62




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 26.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c)
    
    Consolidated balance sheets (continued):
 (iv)
    
    Under U.S. GAAP, the Company adopted the new standards of FASB No. 123(R),
Share-Based Payment (SFAS 123(R)) in 2006. In accordance with SFAS 123(R), the
liability related to stock-based awards that call for settlement in cash or other
assets, must be measured at its fair value based on the fair value of stock options
awards, and shall be remeasured at the end of each reporting period through settlement.
Prior to 2006, the Company used the intrinsic value method for the liability related to
its stock option plan. Under Canadian GAAP, the liability is measured and remeasured
based on the intrinsic value of the stock options awards instead of the fair value.(v)
    
    Under U.S. GAAP, on January 1, 2007, the FASB issued interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN48), an interpretation of FASB Statement
No. 109. FIN48 clarifies the accounting for uncertainty in income taxes recognized in
an enterprises financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes, and prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. This interpretation also provides
guidance as to derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. As a result of the adoption of FIN48, the
Company recorded adjustments to increase its opening deficit under U.S. GAAP by $0.3
million, to increase future income tax assets by $4.8 million, to decrease future
income tax liabilities by $25.8 million, to increase other liabilities by $31.1 million
and to decrease non-controlling interest by $0.2 million.Under Canadian GAAP, there is no such interpretation and therefore, the reserve related
to income taxes contingencies is not based on the same level of likelihood as the new
rules of FIN48.Furthermore, under Canadian GAAP, income taxes are measured using substantially enacted
tax rates, while under U.S. GAAP, measurement is based on enacted tax rates.Other adjustments represent the tax impact of U.S. GAAP adjustments.(vi)
    
    The Company or its subsidiaries have entered into tax consolidation
transactions with the Companys parent company by which tax losses were transferred
between the parties. Under GAAP in Canada, these transactions were recorded in
accordance with CICA Handbook 3840, Related Party Transactions. It resulted in the
recognition of a deferred credit of $8.4 million in 2006 and $5.7 million in 2007 of
which $7.7 million was recognized in income in 2007, and in a reduction of $15.9
million of the Companys income tax expense in 2005. Under U.S. GAAP, since these
transactions related to asset transfers between a subsidiary and its parent company,
the difference between the carrying value of the tax benefits transferred and the cash
consideration received or paid would have been recognized in contributed surplus.
 F-63




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 26.
    
    SIGNIFICANT DIFFERENCES BETWEEN GAAP IN CANADA AND IN THE UNITED STATES (continued):
 (c)
    
    Consolidated balance sheets (continued):
 (vii)
    
    In April 2005, Sun Media Corporation, Newspaper segment, exchanged a community
publication for another community publication. Under U.S GAAP, this exchange of
businesses is recorded in accordance with FASB Statement No. 141, Business Combinations
and the cost of the purchase should be determined as the fair value of the
consideration given or the fair value of the net assets or equity interest received,
whichever is more reliably measurable. Under Canadian GAAP, since this exchange of
businesses is a non-monetary transaction, it is accounted for in accordance with CICA
Handbook 3830, Non-monetary Transactions, and recorded at the carrying value of the
asset or service given up in the exchange adjusted by any monetary consideration
received or given.Accordingly, under US GAAP, this transaction resulted in a gain on disposal of a
publication and also resulted in an increase of the purchase price of the publication
acquired.(viii)
    
    Under GAAP in Canada, in 2003, the Company recorded a gain on repurchase of
redeemable preferred shares of a subsidiary of $153.7 million in the statement income.
Under GAAP in the United States, this gain would have been recognized in contributed
surplus.(ix)
    
    The adjustments to comply with U.S. GAAP, with respect to the consolidated
statements of cash flows for the years ended December 31, 2007, 2006 and 2005 would
have no effect on cash provided by operations, cash used in investing activities and
cash provided by (used in) financing activities.
 F-64




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 27.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY:The Company has access to the cash flow generated by its subsidiaries by way of dividends
declared by its public subsidiaries and dividends and advances from its private subsidiaries.
However, some of the Companys subsidiaries have restrictions, based on contractual debt
obligations and corporate solvency tests, regarding the amounts of dividends and advances that
could be paid to the Company.The U.S Securities and Exchange Commission requires that the non-consolidated financial
statements of the parent company be presented when its subsidiaries have restrictions that may
limit the amount of cash that can be paid to the parent company. These non-consolidated and
condensed financial statements, as prepared under Canadian GAAP, are as follows:Non-consolidated and condensed statements of income and comprehensive income (loss)
 2007
    
    
    2006
    
    
    2005RevenuesManagement fees
    
    $
    65.4
    
    
    $
    41.8
    
    
    $
    30.0Interest on loan to subsidiaries
    
    
    3.4
    
    
    
    0.7
    
    
    
    6.9Other
    
    
    
    
    
    
    7.3
    
    
    
    28.068.8
    
    
    
    49.8
    
    
    
    64.9ExpensesGeneral and administrative
    
    
    (66.5
    )
    
    
    (49.1
    )
    
    
    (53.7
    )Depreciation and amortization
    
    
    (0.6
    )
    
    
    (0.8
    )
    
    
    (1.2
    )Financial
    
    
    (138.8
    )
    
    
    (106.4
    )
    
    
    (171.3
    )Loss before undernoted items
    
    
    (137.1
    )
    
    
    (106.5
    )
    
    
    (161.3
    )Gain on disposal of investments and other assets
    
    
    1.0
    
    
    
    0.1
    
    
    
    Loss on debt refinancing
    
    
    
    
    
    
    (342.1
    )
    
    
    (60.8
    )Loss before income taxes
    
    
    (136.1
    )
    
    
    (448.5
    )
    
    
    (222.1
    )Income taxes
    
    
    41.8
    
    
    
    (93.6
    )
    
    
    (24.9
    )(177.9
    )
    
    
    (354.9
    )
    
    
    (197.2
    )Equity income from subsidiaries
    
    
    505.0
    
    
    
    185.2
    
    
    
    293.7Net income (loss)
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5
 2007
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5Other comprehensive income, net of income taxes
    
    
    34.5
    
    
    
    
    
    
    
    Share of other comprehensive income (loss) from subsidiaries
    
    
    11.5
    
    
    
    1.2
    
    
    
    (1.3
    )46.0
    
    
    
    1.2
    
    
    
    (1.3
    )Comprehensive income (loss)
    
    $
    373.1
    
    
    $
    (168.5
    )
    
    $
    95.2
 F-65




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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 27.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):Non-consolidated and condensed statements of cash flows
 2007
    
    
    2006
    
    
    2005Cash flows related to operationsNet income (loss)
    
    $
    327.1
    
    
    $
    (169.7
    )
    
    $
    96.5Amortization of plant, property and equipment
    
    
    0.6
    
    
    
    0.8
    
    
    
    1.2Net loss on derivative instruments and on foreign currency
translation of financial instruments
    
    
    5.4
    
    
    
    
    
    
    
    Gain on disposal of investments and other assets
    
    
    (1.0
    )
    
    
    (0.1
    )
    
    
    Loss on debt refinancing
    
    
    
    
    
    
    342.1
    
    
    
    60.8Repayment of accrued interest on Senior Discount Notes
    
    
    
    
    
    
    (197.3
    )
    
    
    (3.0
    )Amortization of financing costs and of long term debt discount
    
    
    1.5
    
    
    
    4.8
    
    
    
    61.2Loss on revaluation of the Additional Amount payable
    
    
    5.1
    
    
    
    13.8
    
    
    
    Future income taxes
    
    
    41.8
    
    
    
    (93.3
    )
    
    
    (25.7
    )Excess of equity income over equity distributions
from subsidiaries
    
    
    (420.3
    )
    
    
    (86.3
    )
    
    
    (111.2
    )Net change in non-cash balances related to operations
    
    
    56.5
    
    
    
    21.2
    
    
    
    (29.7
    )Cash flows provided by (used in) operations
    
    
    16.7
    
    
    
    (164.0
    )
    
    
    50.1Cash flows related to investing activitiesNet acquisitions of investments in subsidiaries
    
    
    (484.9
    )
    
    
    (100.3
    )
    
    
    (39.9
    )Dividends received in excess of accumulated equity income
from subsidiaries
    
    
    
    
    
    
    10.0
    
    
    
    210.0Reduction to paid-up capital of subsidiaries
    
    
    299.6
    
    
    
    164.6
    
    
    
    Proceeds from disposal of a business to a subsidiary
    
    
    3.5
    
    
    
    7.7
    
    
    
    Proceeds from disposal of tax deductions to a subsidiary
    
    
    
    
    
    
    
    
    
    
    35.2Net decrease in temporary investments
    
    
    
    
    
    
    
    
    
    
    78.4Other
    
    
    1.2
    
    
    
    8.3
    
    
    
    (1.6
    )Cash flows (used in) provided by investing activities
    
    
    (180.6
    )
    
    
    90.3
    
    
    
    282.1Sub-total, balance carried forward
    
    $
    (163.9
    )
    
    $
    (73.7
    )
    
    $
    332.2
 F-66




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QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 27.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):Non-consolidated and condensed statements of cash flows (continued)
 2007
    
    
    2006
    
    
    2005Sub-total, balance brought forward
    
    $
    (163.9
    )
    
    $
    (73.7
    )
    
    $
    332.2Cash flows related to financing activitiesProceeds from issuance of redeemable preferred shares
    
    
    2,235.0
    
    
    
    279.0
    
    
    
    316.9Repurchases of redeemable preferred shares
    
    
    (400.0
    )
    
    
    (842.0
    )
    
    
    (334.0
    )Net increase in bank indebtedness
    
    
    (0.1
    )
    
    
    1.9
    
    
    
    Repayments of long-term debt and unwinding of
hedging contracts
    
    
    (20.7
    )
    
    
    (1,174.2
    )
    
    
    (212.7
    )Issuance of long-term debt, net of financing fees
    
    
    657.5
    
    
    
    1,186.5
    
    
    
    Repayment of the Additional Amount payable
    
    
    (127.2
    )
    
    
    
    
    
    
    Net decrease (increase) in prepayments under cross-currency
swap agreements
    
    
    
    
    
    
    21.6
    
    
    
    (34.1
    )Dividends and reduction of Common Shares paid-up capital
    
    
    (110.0
    )
    
    
    (105.0
    )
    
    
    (45.0
    )Net
(increase) decrease in convertible obligations, subordinated
loans and notes receivable  subsidiaries
    
    
    (2,072.5
    )
    
    
    563.0
    
    
    
    17.1Net
decrease (increase) in advances to or from subsidiaries
    
    
    2.1
    
    
    
    124.9
    
    
    
    (36.9
    )Cash flows provided by (used in) financing activities
    
    
    164.1
    
    
    
    55.7
    
    
    
    (328.7
    )Net increase (decrease) in cash and cash equivalents
    
    
    0.2
    
    
    
    (18.0
    )
    
    
    3.5Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    18.0
    
    
    
    14.5Cash and cash equivalents at end of year
    
    $
    0.2
    
    
    $
    
    
    
    $
    18.0
 Non-consolidated and condensed balance sheets
 2007
    
    
    2006AssetsCurrent assets
    
    $
    119.3
    
    
    $
    101.4Advances to subsidiaries
    
    
    38.7
    
    
    
    216.3Investments in subsidiaries
    
    
    4,005.6
    
    
    
    3,448.7Convertible
obligations, subordinated loans and notes receivable  subsidiaries
    
    
    2,902.5
    
    
    
    830.0Other assets
    
    
    40.2
    
    
    
    155.5$
    7,106.3
    
    
    $
    4,751.9
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##### Table of Contents



QUEBECOR MEDIA INC. AND ITS SUBSIDIARIES  otes to consolidated financial statements (continued)
 
 27.
    
    NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY (continued):Non-consolidated and condensed balance sheets (continued)
 2007
    
    
    2006Liabilities and Shareholders equityCurrent liabilities
    
    $
    119.9
    
    
    $
    199.4Long-term debt
    
    
    1,626.3
    
    
    
    1,171.4Advances from subsidiaries
    
    
    69.7
    
    
    
    245.3Other liabilities
    
    
    175.1
    
    
    
    68.8Redeemable preferred shares issued to subsidiaries
    
    
    2,665.0
    
    
    
    830.0Shareholders equity
    
    
    2,450.3
    
    
    
    2,237.0$
    7,106.3
    
    
    $
    4,751.9
 28.
    
    SUBSEQUENT EVENTSIn February 2008, the Company acquired all of the non-controlling interest in Nurun Inc.,
pursuant to its offer to purchase their shares at a price of $4.75 per common share for a total
cash consideration of $75.4 million. Common shares of Nurun Inc. were de-listed from the Toronto
Stock Exchange after this transaction.In January 2008, Quebecor World Inc., a company under common control, filed for creditor
protection under the Companies Creditors Arrangement Act. The Company does not expect any
significant impact on its operations in relation with this situation.
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