##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
OF 1934
 OR
 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
 OR
 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 033-51000
 VIDEOTRON LTD. / VIDÉOTRON LTÉE
  Province of Québec, Canada
 300 Viger Avenue East
Montréal, Québec, Canada H2X 3W4
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  None
  67/8% Senior Notes due January 15, 2014
63/8% Senior Notes due December 15, 2015
  2,515,276 Class A Common Shares
  o þ
  o þ
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if smaller reporting Company)
  þ o
  o þ




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##### 



TABLE OF CONTENTS
 PageExplanatory Notes
    
    
    1Industry and Market Data
    
    
    2Exchange Rate Information
    
    
    2Cautionary Statement Regarding Forward-Looking Statements
    
    
    3PART IItem 1 - Identity Of Directors, Senior Management And Advisers
    
    
    4Item 2 - Offer Statistics And Expected Timetable
    
    
    4Item 3 - Key Information
    
    
    4Item 4 - Information on the Company
    
    
    23Item 4A  Unresolved Staff Comments
    
    
    48Item 5 - Operating and Financial Review and Prospects
    
    
    49Item 6 - Directors, Senior Management and Employees
    
    
    64Item 7 - Major Shareholders and Related Party Transactions
    
    
    73Item 8 - Financial Information
    
    
    76Item 9 - The Offer and Listing
    
    
    77Item 10 - Additional Information
    
    
    78Item 11 - Quantitative And Qualitative Disclosures About Market Risk
    
    
    95Item 12 - Description of Securities other than Equity Securities
    
    
    97PART IIItem 13 - Defaults, Dividend Arrearages And Delinquencies
    
    
    98Item 14 - Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    98Item 15 - Controls And Procedures
    
    
    98Item 16 - [Reserved]
    
    
    99Item 16A  Audit Committee Financial Expert
    
    
    99Item 16B  Code of Ethics
    
    
    99Item 16C  Principal Accountant Fees and Services
    
    
    99Item 16D  Exemptions from the Listing Standards for Audit Committees
    
    
    100Item 16E  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    100PART IIIItem 17 - Financial Statements
    
    
    100Item 18 - Financial Statements
    
    
    100Item 19 - Exhibits
    
    
    100Signature
    
    
    105Index to Consolidated Financial Statements
    
    
    F-1Calculation of Ratio of Earnings to Fixed ChargesSubsidiaries of Videotron Ltd.Certification of Robert Depatie (S.302)Certification of Yvan Gingras (S.302)Certification of Robert Depatie (S.906)Certification of Yvan Gingras (S.906)




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##### Table of Contents



EXPLANATORY NOTES
  7 8 3 8
 PRESENTATION OF FINANCIAL INFORMATION
   
    
    although amortization is a non-cash charge, the assets being amortized will often
have to be replaced in the future, and operating income does not reflect cash
requirements for such capital expenditures;
    
    it does not reflect income tax expense or the cash necessary to pay income taxes;
and
    
    it does not reflect financial expenses or the cash necessary to pay financial
expenses.
   - 1 -




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INDUSTRY AND MARKET DATA
  
 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
    
    
    
    0.9788
    
    
    
    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. - 2 -




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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;
    
    variations in the cost, quality and variety of our television programming;
    
    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;
    
    exchange rate fluctuations that affect our ability to repay our U.S.
dollar-denominated debt; and
    
    interest rate fluctuations that affect a portion of our interest payment
requirements on long-term debt.
  - 3 -




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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
   Year Ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)(dollars in thousands)AMOUNTS UNDER CANADIAN GAAPConsolidated Statement of Income Data:Operating revenues:Cable television
    
    $
    558,887
    
    
    $
    576,825
    
    
    $
    618,346
    
    
    $
    677,273
    
    
    $
    735,832Internet
    
    
    183,268
    
    
    
    222,458
    
    
    
    270,791
    
    
    
    345,075
    
    
    
    422,448Telephony
    
    
    
    
    
    
    
    
    
    
    21,088
    
    
    
    108,565
    
    
    
    213,194Business solutions
    
    
    58,365
    
    
    
    66,117
    
    
    
    78,409
    
    
    
    74,352
    
    
    
    70,189Video stores
    
    
    38,450
    
    
    
    48,058
    
    
    
    55,146
    
    
    
    55,585
    
    
    
    59,956Other
    
    
    23,795
    
    
    
    24,274
    
    
    
    36,626
    
    
    
    48,745
    
    
    
    50,987Total operating revenues
    
    
    862,765
    
    
    
    937,732
    
    
    
    1,080,406
    
    
    
    1,309,595
    
    
    
    1,552,606Direct cost and operating expenses
    
    
    570,482
    
    
    
    573,943
    
    
    
    666,793
    
    
    
    796,887
    
    
    
    909,923Amortization
    
    
    159,012
    
    
    
    163,862
    
    
    
    166,292
    
    
    
    185,115
    
    
    
    206,083Financial expenses(2)(3)(4)
    
    
    91,540
    
    
    
    92,861
    
    
    
    74,737
    
    
    
    79,586
    
    
    
    67,052Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,425Other items
    
    
    1,113
    
    
    
    1,930
    
    
    
    
    
    
    
    
    
    
    
    Income taxes (recovery) expense
    
    
    (5,777
    )
    
    
    (6,661
    )
    
    
    69,791
    
    
    
    64,230
    
    
    
    38,258Non-controlling interest in a subsidiary
    
    
    49
    
    
    
    100
    
    
    
    102
    
    
    
    86
    
    
    
    173Net income
    
    $
    46,346
    
    
    $
    111,697
    
    
    $
    102,691
    
    
    $
    183,691
    
    
    $
    325,692
 - 4 -




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Year Ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)(dollars in thousands)Consolidated Balance Sheet Data (at period end):Cash and cash equivalents
    
    $
    29,724
    
    
    $
    32,411
    
    
    $
    26,699
    
    
    
    
    
    
    
    Total assets
    
    
    1,838,539
    
    
    
    1,895,433
    
    
    
    1,977,610
    
    
    $
    1,988,032
    
    
    $
    4,132,198Long-term debt, excluding QMI subordinated

loans(5)(6)(7)(8)
    
    
    961,175
    
    
    
    990,008
    
    
    
    971,697
    
    
    
    1,021,170
    
    
    
    950,988QMI subordinated loans(6)(7)(8)
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    
    
    
    
    1,995,000Share Capital(5)
    
    
    572,448
    
    
    
    388,593
    
    
    
    342,940
    
    
    
    345,727
    
    
    
    46,177Shareholders equity(5)
    
    
    297,078
    
    
    
    229,302
    
    
    
    76,363
    
    
    $
    249,581
    
    
    
    259,110Cash dividends declared and reductions of paid-up capital
    
    $
    19,956
    
    
    $
    205,233
    
    
    $
    255,653
    
    
    $
    118,749
    
    
    $
    299,550
 Year Ended December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(restated)(1)
    
    (restated)(1)
    
    (restated)(1)(dollars in thousands, except ARPU and ratio)Other Financial DataOperating income (unaudited)(9)
    
    $
    292,283
    
    
    $
    363,789
    
    
    $
    413,613
    
    
    $
    512,708
    
    
    $
    642,683Operating income margin (unaudited)(9)
    
    
    33.9
    %
    
    
    38.8
    %
    
    
    38.3
    %
    
    
    39.2
    %
    
    
    41.4
    %Cash flows from operating activities
    
    
    221,484
    
    
    
    329,433
    
    
    
    387,205
    
    
    
    440,619
    
    
    
    552,923Cash flows used in investing activities
    
    
    (291,903
    )
    
    
    (111,093
    )
    
    
    (274,977
    )
    
    
    (265,101
    )
    
    
    (2,338,164
    )Cash flows from (used in) financing activities
    
    
    52,745
    
    
    
    (215,652
    )
    
    
    (117,940
    )
    
    
    (202,217
    )
    
    
    1,785,241Capital expenditures(10)
    
    $
    108,117
    
    
    $
    144,453
    
    
    $
    219,865
    
    
    $
    302,629
    
    
    $
    330,075Operating Data (unaudited):Homes passed(11)
    
    
    2,351,344
    
    
    
    2,383,443
    
    
    
    2,419,335
    
    
    
    2,457,213
    
    
    
    2,497,403Basic cable customers(12)(13)
    
    
    1,424,144
    
    
    
    1,452,554
    
    
    
    1,506,113
    
    
    
    1,572,411
    
    
    
    1,638,097Basic cable penetration(13)(14)
    
    
    60.6
    %
    
    
    60.9
    %
    
    
    62.3
    %
    
    
    64.0
    %
    
    
    65.6
    %Digital customers
    
    
    240,863
    
    
    
    333,664
    
    
    
    474,629
    
    
    
    623,646
    
    
    
    768,211Digital penetration(15)
    
    
    16.9
    %
    
    
    23.0
    %
    
    
    31.5
    %
    
    
    39.7
    %
    
    
    46.9
    %Cable Internet customers
    
    
    406,277
    
    
    
    502,630
    
    
    
    637,971
    
    
    
    791,966
    
    
    
    932,989Cable Internet penetration(14)
    
    
    17.3
    %
    
    
    21.1
    %
    
    
    26.4
    %
    
    
    32.2
    %
    
    
    37.4
    %Cable telephony customers
    
    
    
    
    
    
    2,135
    
    
    
    162,979
    
    
    
    397,830
    
    
    
    636,666Cable telephony penetration(14)
    
    
    
    
    
    
    0.1
    %
    
    
    6.7
    %
    
    
    16.2
    %
    
    
    25.5
    %ARPU(13)(16)
    
    $
    43.68
    
    
    $
    46.50
    
    
    $
    51.86
    
    
    $
    61.43
    
    
    $
    71.52Ratio of earnings to fixed charges(17)
    
    
    1.4
    x
    
    
    2.6
    x
    
    
    3.8
    x
    
    
    3.9
    x
    
    
    5.8
    x
 - 5 -




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Year Ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(restated)(1)
    
    
    (restated)(1)
    
    
    (restated) (1)(dollars in thousands)AMOUNTS UNDER U.S. GAAPConsolidated Statement of Income Data:Operating revenues:Cable television
    
    $
    558,887
    
    
    $
    584,187
    
    
    $
    621,493
    
    
    $
    677,970
    
    
    $
    736,179Internet
    
    
    183,268
    
    
    
    224,450
    
    
    
    272,926
    
    
    
    345,112
    
    
    
    422,585Telephony
    
    
    
    
    
    
    
    
    
    
    21,983
    
    
    
    110,501
    
    
    
    213,304Business solutions
    
    
    58,365
    
    
    
    66,117
    
    
    
    78,409
    
    
    
    74,352
    
    
    
    70,189Video stores
    
    
    38,450
    
    
    
    48,058
    
    
    
    55,146
    
    
    
    55,585
    
    
    
    59,956Other
    
    
    23,795
    
    
    
    24,274
    
    
    
    36,626
    
    
    
    48,745
    
    
    
    50,987Total operating revenues
    
    
    862,765
    
    
    
    947,086
    
    
    
    1,086,583
    
    
    
    1,312,265
    
    
    
    1,553,200Direct cost and operating expenses
    
    
    567,502
    
    
    
    584,876
    
    
    
    674,798
    
    
    
    803,235
    
    
    
    912,811Amortization
    
    
    168,564
    
    
    
    175,743
    
    
    
    177,415
    
    
    
    196,335
    
    
    
    216,711Financial expenses(2)(3)(4)
    
    
    90,516
    
    
    
    85,172
    
    
    
    75,157
    
    
    
    87,771
    
    
    
    62,046Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,425Other items
    
    
    3,613
    
    
    
    1,930
    
    
    
    
    
    
    
    
    
    
    
    Income taxes (recovery) expenses
    
    
    (8,365
    )
    
    
    (1,208
    )
    
    
    60,408
    
    
    
    56,073
    
    
    
    32,317Non-controlling interest in a subsidiary
    
    
    49
    
    
    
    100
    
    
    
    102
    
    
    
    86
    
    
    
    173Net income
    
    $
    40,886
    
    
    $
    100,473
    
    
    $
    98,703
    
    
    $
    168,765
    
    
    $
    323,717
 2003
    
    2004
    
    2005
    
    2006
    
    2007(restated)(1)
    
    (restated)(1)
    
    (restated)(1)Balance Sheet Data (at period end):Cash and cash equivalents
    
    $
    29,724
    
    
    $
    32,411
    
    
    $
    26,699
    
    
    $
    
    
    
    $
    Total assets
    
    
    4,212,386
    
    
    
    4,162,179
    
    
    
    4,225,866
    
    
    
    4,222,810
    
    
    
    6,351,118Long-term debt, excluding QMI subordinated 
loans(5)(6)(7)(8)
    
    
    963,669
    
    
    
    991,280
    
    
    
    958,443
    
    
    
    1,007,557
    
    
    
    946,236QMI subordinated loans(6)(7)(8)
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    
    
    
    
    1,995,000Share Capital(5)
    
    
    572,448
    
    
    
    388,593
    
    
    
    342,940
    
    
    
    345,727
    
    
    
    46,177Shareholders equity(5)
    
    
    2,597,996
    
    
    
    2,437,970
    
    
    
    2,273,593
    
    
    
    2,429,137
    
    
    
    2,475,853Cash dividends declared and reductions of
paid-up capital
    
    $
    19,956
    
    
    $
    205,233
    
    
    $
    255,653
    
    
    $
    118,749
    
    
    $
    299,550
 Year Ended December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(restated)(1)
    
    (restated)(1)
    
    (restated)(1)(dollars in thousands, except ratio)Other Financial Data:Operating income (unaudited)(9)
    
    $
    295,263
    
    
    $
    362,210
    
    
    $
    411,785
    
    
    $
    509,030
    
    
    $
    640,389Operating income margin (unaudited)(9)
    
    
    34.2
    %
    
    
    38.2
    %
    
    
    37.9
    %
    
    
    38.8
    %
    
    
    41.2
    %Cash flows from operating activities
    
    
    221,284
    
    
    
    327,854
    
    
    
    385,377
    
    
    
    437,841
    
    
    
    552,529Cash flows used in investing activities
    
    
    (291,703
    )
    
    
    (109,514
    )
    
    
    (273,149
    )
    
    
    (262,323
    )
    
    
    (2,337,770
    )Cash flows from (used in) financing activities
    
    
    52,745
    
    
    
    (215,652
    )
    
    
    (117,940
    )
    
    
    (202,217
    )
    
    
    1,785,241Capital expenditures(10)
    
    
    108,117
    
    
    
    144,453
    
    
    
    219,865
    
    
    
    302,629
    
    
    
    330,075Ratio of earnings to fixed charges(17)
    
    
    1.3
    x
    
    
    2.7
    x
    
    
    3.6
    x
    
    
    3.4
    x
    
    
    6.0
    x
 
 (1)
    
    On January 1, 2006, a company under common control, Videotron Telecom Ltd., merged with the
Company. On July 1, 2006, the Company also merged with its parent, 9101-0827 Québec inc.
Those transactions have been accounted for using the continuity of interest method, and the
results of operations and financial position of Videotron Telecom Ltd. and 9101-0827 Québec
inc. have been included in these consolidated financial statements as if the three companies
had always been combined. Comparative figures have been restated from statements previously
presented. In respect of U.S. GAAP financial data, see also Note 20 Significant differences
between generally accepted accounting principles (GAAP) in Canada and the United States to
our consolidated financial statements included under Item 17 of this annual report.(2)
    
    In the first quarter of 2004, our wholly-owned subsidiary, Vidéotron (1998) ltée, entered
into a back-to-back transaction with Quebecor Media. With respect to this back-to-back
transaction, we made cash interest payments of $108.5 million to Quebecor Media in the year
ended December 31, 2004, but we received $111.1 million in dividends from Quebecor Media in
that same year. See Item 5. Operating - 6 -




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and Financial Review and Prospects  Liquidity and
Capital Resources  Purchase of Shares of Quebecor Media and Service of Subsidiary
Subordinated Loan.(3)
    
    On January 3 2007 and May 31, 2007, we entered into back-to-back transactions with Quebecor
Media and 9101-0835 Québec Inc., a subsidiary of Quebecor Média Inc. With respect to these
back-to-back transactions, we recorded an interest expense of $157.7 million in the year ended
December 31, 2007, but we recorded $162.9 million in dividends from Quebecor Media in that
same year. See Item 5. Operating and Financial Review and Prospects  Liquidity and Capital
Resources  Purchase of Shares of Quebecor Media and Service of Subsidiary Subordinated Loan.(4)
    
    On May 31 2007, CF Cable TV inc., a wholly-owned subsidiary of Videotron, entered into a
back-to-back transaction with Quebecor Media and 9101-0835 Québec Inc. With respect to this
back-to-back transaction, we recorded an interest expense of $7.7 million to Quebecor Media in
the year ended December 31, 2007, but we recorded $8.0 million in dividends in that same year.
See Item 5. Operating and Financial Review and Prospects  Liquidity and Capital Resources 
Purchase of Shares of Quebecor Media and Service of Subsidiary Subordinated Loan.(5)
    
    Long-term debt, excluding QMI subordinated loans, does not include the retractable preferred
shares held by Quebecor Media. The retraction price of the retractable preferred shares was
$332.5 million as of December 31, 2002. During the year ended December 31, 2003,
$332.5 million of the retractable preferred shares were converted into our common shares. The
excess of the retraction price of the preferred shares over the stated capital converted into
common shares was credited to our contributed surplus account in an amount of $301.2 million.
The outstanding $2.0 million of retractable preferred shares as of December 31, 2003 was
redeemed for an amount of $3.7 million in 2004. The excess of the consideration paid over the
preferred shares was charged to deficit in an amount of $1.7 million. No retractable preferred
share was outstanding as at December 31, 2005, December 31, 2006 or December 31, 2007.(6)
    
    For the years ended December 31 2003, 2004 and 2005, the term QMI subordinated loans refers
to the $150.0 million subordinated loan due 2015 we entered into in favor of Quebecor Media
and the $1.1 billion subordinated loan due 2019 by our subsidiary Vidéotron (1998) ltée, which
is a guarantor of our Senior Notes, entered into on January 16, 2004 in favor of Quebecor
Media. Interest on the $150.0 million subordinated loan throughout its term is payable in cash
at our option. The QMI subordinated loans have been excluded from long-term debt because under
the terms of our Senior Notes, all payments on the $150.0 million subordinated loan are
restricted payments treated in the same manner as dividends on our common shares, and the
proceeds of our $1.1 billion subordinated loan has been invested in retractable preferred
shares of Quebecor Media as part of a back-to-back transaction to reduce our income tax
obligations. On December 16, 2004, Quebecor Media redeemed its $1.1 billion of retractable
preferred shares, and we used the proceeds to repay our $1.1 billion subordinated loan. On
January 17, 2006, we reimbursed the $150.0 million subordinated loan due 2015 and all interest
owed at that date for a total consideration of $168.0 million.(7)
    
    For the year ended December 31 2007, the term QMI subordinated loans refers to the
$1.0 billion and $870.0 million subordinated loans due 2022 we entered into in 2007 in favor
of Quebecor Media and the $125 million subordinated loan due 2022 our subsidiary CF Cable TV
Inc., entered into in 2007 in favor of Quebecor Media. Interest on the subordinated loan
throughout its term is payable in cash at our option. The QMI subordinated loans are reflected
as long-term debt on our consolidated balance sheet. See Item 5. Operating and Financial
Review and Prospects  Operating Results  Liquidity and Capital Resources  Purchase of
Shares of Quebecor Media and Service of Subsidiary Subordinated Loan.(8)
    
    We believe that long-term debt, excluding QMI subordinated loans, is, from the perspective of
a holder of our issued and outstanding Senior Notes, a meaningful measure of our long-term
debt because the QMI subordinated loans are subordinated in right of payment to the prior
payment in full of our senior indebtedness, including our Senior Notes; all payments on the
QMI subordinated loans are restricted payments under the terms of respective indentures
governing our Senior Notes, and are restricted in the same manner as dividends on our common
shares; and the proceeds of our QMI subordinated loans were invested in retractable preferred
shares of Quebecor Media as part of back-to-back transactions to reduce our income tax
obligations. Consequently, we disclose long-term debt, excluding QMI subordinated loans, as a
supplemental measure of our indebtedness in this annual report. Long-term debt, excluding QMI
subordinated loans, is not intended to be, and should not be, regarded as an alternative to
other financial reporting measures, and it should not be considered in isolation as a
substitute for measures of liabilities prepared in accordance with Canadian GAAP or U.S. GAAP.
Long-term debt, excluding QMI subordinated loans, is calculated from and reconciled to
long-term debt as follows: At December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(restated)(1)
    
    (restated)(1)
    
    (restated)(1)(unaudited; dollars in millions)AMOUNTS UNDER CANADIAN GAAPLong-term debt
    
    $
    1,111.2
    
    
    $
    1,140.0
    
    
    $
    1,121.7
    
    
    $
    1,021.2
    
    
    $
    2,946.0QMI subordinated loans
    
    
    (150.0
    )
    
    
    (150.0
    )
    
    
    (150.0
    )
    
    
    
    
    
    
    (1,995.0
    )Long-term debt, excluding
QMI subordinated loans, as
defined
    
    $
    961.2
    
    
    $
    990.0
    
    
    $
    971.7
    
    
    $
    1,021.2
    
    
    $
    951.0
 - 7 -




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At December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(restated)(1)
    
    (restated)(1)
    
    (restated)(1)(unaudited; dollars in millions)AMOUNTS UNDER U.S. GAAPLong-term debt
    
    $
    1,113.7
    
    
    $
    1141.3
    
    
    $
    1,108.4
    
    
    $
    1,007.6
    
    
    $
    2,941.2QMI subordinated loans
    
    
    (150.0
    )
    
    
    (150.0
    )
    
    
    (150.0
    )
    
    
    
    
    
    
    (1,995.0
    )Long-term debt, excluding
QMI subordinated loans, as
defined
    
    $
    963.7
    
    
    $
    991.3
    
    
    $
    958.4
    
    
    $
    1,007.6
    
    
    $
    946.2
 
 (9)
    
    We use the supplemental financial measure operating income to assess our operating results
and financial performance. Operating income and ratios based on this measure are not required
by or recognized under Canadian GAAP or U.S. GAAP. We define operating income,
reconciled to net income under Canadian GAAP, as net income before amortization, financial
expenses, impairment of goodwill, other items (consisting of restructuring charges), income
taxes and non-controlling interest in a subsidiary. Operating income margin is operating
income as a percentage of operating revenues. Operating income, and ratios using this
measure, are 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. Operating
income is not intended to represent funds available for debt service, reinvestment,
distributions of dividends, or other discretionary uses, and should not be considered in
isolation from, or as a substitute for, our financial information reported under Canadian
GAAP and U.S. GAAP. We use operating income because we believe that it is a meaningful
measure of performance since operating income excludes, among other things, certain non-cash
items and items that are not readily comparable from year to year. Operating income is also
commonly used in the sector in which we operate, as well as by the investment community to
analyze and compare companies. You should note our definition of operating income may not be
identical to similarly titled measures reported by other companies, limiting its usefulness
as a comparative measure. Our operating income is calculated from and reconciled to net
income (loss) as follows: Year Ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(restated)(1)
    
    
    (restated)(1)
    
    
    (restated)(1)(dollars in millions)AMOUNTS UNDER CANADIAN GAAPNet income
    
    $
    46.3
    
    
    $
    111.7
    
    
    $
    102.7
    
    
    $
    183.7
    
    
    $
    325.7Amortization
    
    
    159.0
    
    
    
    163.9
    
    
    
    166.3
    
    
    
    185.1
    
    
    
    206.1Financial expenses
    
    
    91.5
    
    
    
    92.9
    
    
    
    74.7
    
    
    
    79.6
    
    
    
    67.1Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.4Other items
    
    
    1.1
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    Income taxes (recovery) expense
    
    
    (5.8
    )
    
    
    (6.7
    )
    
    
    69.8
    
    
    
    64.2
    
    
    
    38.3Non-controlling interest in a subsidiary
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.2Operating income as defined
    
    $
    292.3
    
    
    $
    363.8
    
    
    $
    413.6
    
    
    $
    512.7
    
    
    $
    642.8AMOUNTS UNDER U.S. GAAPNet income
    
    $
    40.9
    
    
    $
    100.5
    
    
    $
    98.7
    
    
    $
    168.8
    
    
    $
    323.7Amortization
    
    
    168.6
    
    
    
    175.7
    
    
    
    177.4
    
    
    
    196.3
    
    
    
    216.7Financial expenses
    
    
    90.5
    
    
    
    85.2
    
    
    
    75.2
    
    
    
    87.8
    
    
    
    62.0Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.4Other items
    
    
    3.6
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    Income taxes (recovery) expense
    
    
    (8.4
    )
    
    
    (1.2
    )
    
    
    60.4
    
    
    
    56.1
    
    
    
    32.3Non-controlling interest in a subsidiary
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.2Operating income as defined
    
    $
    295.3
    
    
    $
    362.2
    
    
    $
    411.8
    
    
    $
    509.1
    
    
    $
    640.3
 
 (10)
    
    Capital expenditures are comprised of acquisition of fixed assets.(11)
    
    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.(12)
    
    Basic cable customers are customers who receive basic cable television service, including
analog and digital customers.(13)
    
    The number of basic customers for 2003 was restated in order to permit such numbers to be
compared to the numbers of basic customers for the years 2004 through 2007, inclusive.(14)
    
    Represents customers as a percentage of total homes passed.(15)
    
    Represents customers as a percentage of basic customers.(16)
    
    Average monthly revenue per user, or ARPU, is an industry metric that we use to measure our
average cable, Internet and telephony revenues per month per basic cable customer. ARPU is not
a measurement that is required by or recognized under Canadian GAAP or U.S. GAAP, and our
definition and calculation of ARPU may not be the same as similarly titled measurements
reported by other companies. - 8 -




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We calculate ARPU by dividing our combined cable television,
Internet access and telephony revenues by the average number of our basic cable customers
during the applicable period, and then dividing that result by the number of months in the
applicable period.(17)
    
    For the purpose of calculating the ratio of earnings to fixed charges, (i) earnings consist
of net (loss) income plus non-controlling interest in a subsidiary, income taxes, fixed
charges, amortized capitalized interest, less interest capitalized, and (ii) fixed charges
consist of interest expensed and capitalized, excluding interest on QMI subordinated loans,
plus amortized premiums, discounts and capitalized expenses relating to indebtedness and an
estimate of the interest within rental expense. B- Capitalization and Indebtedness
  C- Reasons for the Offer and Use of Proceeds
  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 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 section Cautionary Statement Regarding Forward-Looking
Statements at the beginning of this annual report. 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 compete successfully could have a material adverse effect on our business, financial
condition and results of operations.
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Certain risks associated with Quebecor Medias participation in Canadas Auction for Spectrum
Licenses for Advanced Wireless Services and other Spectrum in the
2GHz range.
      - 10 -




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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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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.
  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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We provide our digital television, Internet access and telephony services through a single
clustered network, which may be more vulnerable to widespread disruption.
  We may be adversely affected by litigation and other claims.
  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.
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Malicious and abusive Internet practices could impair our cable data services.
  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 strikes and other labour protests.
   We depend on key personnel.
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Our indebtedness and significant interest payment requirements could adversely affect our
financial condition and therefore make it more difficult for us to fulfill our obligations,
including our obligations under our outstanding notes.
  
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations to
making interest and principal payments on our indebtedness, 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 business
and the industry 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.
  
    
    incur additional debt, including guarantees by our restricted subsidiaries;
    
    pay dividends and make other restricted payments;
    
    create or permit certain liens;
    
    use the proceeds from sales of assets and subsidiary stock;
    
    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;
    
    enter into sale and leaseback transactions; and
    
    enter into mergers, consolidations and transfers of all or substantially all of
our assets.
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We may not be able to finance an offer to purchase our Senior Notes following a change of
control as required by each of the indentures governing our Senior Notes because we may not have
sufficient funds at the time of the change of control or our credit facilities may not allow the
repurchases.
   We may be adversely affected by exchange rate fluctuations.
  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
 - 16 -




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Radiocommunication Act Competition Act
   Broadcasting Act
 Radiocommunication Act i.e. i.e. Radiocommunication Act
 - 17 -




---



##### Table of Contents



Telecommunications
Act
    The CRTC may not renew our existing distribution licenses or grant us new licenses on
acceptable terms, or at all.
    We are required to provide third-party Internet service providers with access to our cable
systems, which may result in increased competition.
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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.
  - 19 -




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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 and transfer of
our Senior Notes.
  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
 - 20 -




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Applicable statutes allow courts, under specific circumstances, to void the guarantees of our
Senior Notes provided by certain of our subsidiaries.
  
    
    a guarantor delivered its guarantee with the intent to defeat, hinder, delay or
defraud its existing or future creditors;
    
    the guarantor did not receive fair consideration for the delivery of the
guarantee; or
    
    the guarantor was insolvent at the time it delivered the guarantee.
   U.S. investors in our Senior Notes may have difficulties enforcing civil liabilities.
  - 21 -




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We are controlled by Quebecor Media.
   - 22 -




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ITEM 4   INFORMATION ON THE COMPANY
 A- History and Development of the Company
 Companies Act
 http://www. ideotron.com
   Companies Act Companies Act
  B- Business Overview
 Overview
   - 23 -




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Competitive Strengths
 Leading Market Positions.
 Single, Highly-Contiguous Cluster.
 - 24 -




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##### Table of Contents




    
    a higher quality and more reliable network;
    
    the ability to launch and deploy new products and services rapidly and
efficiently; and
    
    a lower cost structure through reduced maintenance and technical support costs.
 Differentiated, Bundled Service Offerings.
 Advanced Broadband Network.
 Strong, Market-Focused Management Team.
 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
    )%
 - 25 -




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##### Table of Contents



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
    - 26 -




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Products and Services
     Traditional Cable Television Services
  - 27 -




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##### Table of Contents




    
    Basic Service.All of our customers receive a package of basic programming,
consisting of local broadcast television stations, the four U.S. commercial networks
and PBS, selected Canadian specialty programming services, and local 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 capableof 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
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
    
    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, 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, our parent company, Quebecor Media, has 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 customersare 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.
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##### Table of Contents




    
    Other Products and Services.To maintain and enhance our market position, we are
focused on increasingpenetration of high-definition television and personal video
recorders, as well as other high-value products and services.
  As of December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007Homes passed(1)
    
    
    2,351,344
    
    
    
    2,383,443
    
    
    
    2,419,335
    
    
    
    2,457,213
    
    
    
    2,497,403CableBasic customers(2)
    
    
    1,424,144
    
    
    
    1,452,554
    
    
    
    1,506,113
    
    
    
    1,572,411
    
    
    
    1,638,097Penetration(3)
    
    
    60.6
    %
    
    
    60.9
    %
    
    
    62.3
    %
    
    
    64.0
    %
    
    
    65.6
    %Digital customers
    
    
    240,863
    
    
    
    333,664
    
    
    
    474,629
    
    
    
    623,646
    
    
    
    768,211Penetration(4)
    
    
    16.9
    %
    
    
    23.0
    %
    
    
    31.5
    %
    
    
    39.7
    %
    
    
    46.9
    %Number of digital set-top boxes
    
    
    257,350
    
    
    
    362,053
    
    
    
    537,364
    
    
    
    738,530
    
    
    
    953,393Dial-up Internet AccessDial-up customers
    
    
    28,821
    
    
    
    23,973
    
    
    
    18,034
    
    
    
    13,426
    
    
    
    9,052Cable Internet AccessCable modem customers
    
    
    406,277
    
    
    
    502,630
    
    
    
    637,971
    
    
    
    791,966
    
    
    
    932,989Penetration(3)
    
    
    17.3
    %
    
    
    21.1
    %
    
    
    26.4
    %
    
    
    32.2
    %
    
    
    37.4
    %Telephony ServicesCable telephony customers
    
    
    
    
    
    
    2,135
    
    
    
    162,979
    
    
    
    397,860
    
    
    
    636,666Penetration(3)
    
    
    
    
    
    
    0.1
    %
    
    
    6.7
    %
    
    
    16.2
    %
    
    
    25.5
    %Wireless telephony lines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,826
    
    
    
    45,682
 
 (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
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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
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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
    %
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##### Table of Contents



Marketing and Customer Care
  
    
    continue to rapidly deploy advanced products and services such as cable Internet
access, digital television, cable telephony and mobile wireless telephony services;
    
    design product offerings that provide greater opportunity for customer
entertainment and information choices;
    
    target marketing opportunities based on demographic data and past purchasing
behavior;
    
    develop targeted marketing programs to attract former customers, households that
have never subscribed to our services and customers of alternative or competitive
services;
    
    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 1-900service 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
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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
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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.
    
    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.
 C- REGULATION
 Foreign Ownership Restrictions Applicable under the Telecom Act and the Broadcasting Act
  - 35 -




---



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Afterword
 
    
    In the first phase, the Telecommunications Act should be amended to give the
federal Cabinet authority to waive the foreign ownership and control restrictions on
Canadian telecommunications common carriers when it deems a foreign investment or
class of investments to be in the public interest. During the first phase, there
should be a presumption that investments in any new start-up telecommunications
investment or in any telecommunications common carrier with less than 10% of the
revenues in any telecommunications service market are in the public interest. This
presumption could be rebutted by evidence related to a particular investor or
investment. The presumption should apply to all investments in fixed or mobile
wireless telephony markets as well as to investments in new entrants and smaller
players (i.e., those below the 10% limit). To encourage longer-term investment,
foreign investors should remain exempt from the foreign investment restrictions if
they are successful in growing the market share of their businesses beyond 10%.
    
    The second phase of liberalization should be undertaken after completion of the
review of broadcasting policy proposed by the Panel. At that time, there should be a
broader liberalization of the foreign investment rules in a manner that treats all
telecommunications common carriers including the cable telecommunications industry
in a fair and competitively neutral manner. The proposed liberalization should apply
to the carriage business of BDUs, and new broadcasting policies should focus any
necessary Canadian ownership restrictions on broadcasting content businesses. The
Cabinet should retain the authority to screen significant investments in the
Canadian telecommunications carriage business to ensure that they are consistent
with the public interest.
   Ownership and Control of Canadian Broadcast Undertakings
  - 36 -




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Ineligibility of Non-Canadians
 Broadcasting Act
 Diversity of Voices
 Diversity of Voices
 - 37 -




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Jurisdiction Over Canadian Broadcast Undertakings
 Broadcasting Act Broadcasting Act Radiocommunication Act
 Broadcasting Act
 Canadian Broadcast Distribution (Cable Television)
 Licensing of Canadian Broadcasting Distribution Undertakings
    - 38 -




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Le Réseau de linformation Avis de Recherche Avis de Recherche
   Distribution of Canadian Content
 Broadcasting Distribution Regulations Broadcasting Act
 - 39 -




---



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1998 Broadcasting Distribution Regulations
 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
 - 40 -




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identical programs by a U.S. station when both programs are exhibited at the same
time. These requirements are designed to protect the program rights that Canadian
broadcasters acquire for their respective local markets. The CRTC, however, has
suspended the application of these requirements to DTH satellite operators for a
period of time, so long as they undertake certain alternative measures, including
monetary compensation to a fund designed to help finance regional television
productions.
    
    Canadian Programming and Community Expression Financing Rules. All distributors,
except systems with less than 2,000 customers, are required to contribute at least
5% of their gross annual broadcast revenues to the creation and presentation of
Canadian programming including community programming. However, the allocation of
these contributions between broadcast and community programming can vary depending
on the type and size of the distribution system involved.
    
    Inside Wiring Rules.The CRTC determined that the inside wiring portion of cable
networks creates a bottleneck facility that could affect competition if open access
is not provided to other distributors. Incumbent cable companies may retain the
ownership of the inside wiring but must allow usage by competitive undertakings to
which the cable company may charge a just and reasonable fee for the use of the
inside wire. On September 3, 2002, the CRTC established a fee of $0.52 per customer
per month for the use of cable inside wire in MDUs.
 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.
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##### Table of Contents



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
 - 42 -




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Royalties for Pay Audio Services
      - 43 -




---



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Royalties for Ringtones
  Internet Service Provider Liability
 Copyright Act Copyright Act
 Canadian Telecommunications Services
 Jurisdiction
 Telecommunications Act Telecommunications Act
 Telecommunications Act Telecommunications Act Telecommunications Act
  Overview of the Telecommunications Competition Framework
 Review of Regulatory Framework Local Competition
 - 44 -




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Application of Canadian Telecommunications Regulation
 Telecommunications Act
 i.e.
      - 45 -




---



##### Table of Contents



Right to Access to Telecommunications and Hydro-Electric Support Structures
 Telecommunications Act Telecommunications Act
  Access by Third-Parties to Cable Networks
   - 46 -




---



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Policy For Mobile Spectrum Auction
  D- Organizational Structure
 Caisse de dépôt et
placement du Québec
 
 E- Property, Plants and Equipment
   - 47 -




---



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F- Intellectual Property
  G- Environment
   
 ITEM 4A  UNRESOLVED STAFF COMMENTS
  - 48 -




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##### Table of Contents



ITEM 5  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following operating and financial review provides information concerning our operating
results and financial condition. This discussion should be read in conjunction with our
consolidated financial statements and accompanying notes included under Item 17. Financial
Statements in this annual report. It also 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. See Forward-Looking Statements.
 General
      Overview
   - 49 -




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- 50 -




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Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Revenues
     - 51 -




---



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Direct Costs and Operating Expenses
 ultra vires
 Operating Income
  Amortization
  Financial Expenses
  - 52 -




---



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Income Taxes
  Net Income
  Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 Revenues
      - 53 -




---



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Direct Costs and Operating Expenses
  Operating Income
  Amortization
  Financial Expenses
 3 8
 - 54 -




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##### Table of Contents



Income Taxes
  Net Income
  Liquidity and Capital Resources
 Uses of Liquidity and Capital Resources
  
    
    capital expenditures to maintain and upgrade our network in order to support the
growth of our customer base and the launch and expansion of new or additional
services;
    
    the servicing and repayment of our debt; and
    
    distributions to our shareholder.
 Capital Expenditures.
 Fixed assets additions
    
    2006
    
    
    2007(in millions)Customer premises equipment
    
    $
    111.9
    
    
    $
    122.9Capacity infrastructure
    
    
    68.2
    
    
    
    76.8Line extensions
    
    
    25.7
    
    
    
    27.3Upgrade/Rebuild
    
    
    50.3
    
    
    
    53.0Support Capital
    
    
    46.5
    
    
    
    50.1Total fixed assets additions
    
    $
    302.6
    
    
    $
    330.1
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##### Table of Contents



Service and Repayment of Our Debt.
 Purchase of Shares of Quebecor Média and Service of Subsidiary Subordinated Loan
   Income tax transactions.
 - 56 -




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Distributions to our Shareholder
 Contractual Obligations and Other Commercial Commitments
 Payments Due by Periodas at December 31, 2007Total
    
    
    < 1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    > 5 years(in millions)Contractual obligations:67/8% Senior Notes due January 15, 2014
    
    $
    652.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    652.863/8% Senior Notes due December 15, 2015
    
    
    172.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172.8Cash Interest Expense(1)
    
    
    593.3
    
    
    
    84.8
    
    
    
    169.7
    
    
    
    169.7
    
    
    
    169.1Bank Credit Facility
    
    
    147.7
    
    
    
    
    
    
    
    147.7
    
    
    
    
    
    
    
    Lease and purchasing agreements
    
    
    72.6
    
    
    
    33.6
    
    
    
    22.1
    
    
    
    9.8
    
    
    
    7.1Total contractual cash obligations
    
    $
    1,639.2
    
    
    $
    118.4
    
    
    $
    339.5
    
    
    $
    179.5
    
    
    $
    1,001.8
 
 (1)
    
    Estimate of interest to be paid on long-term debt based on interest rates and foreign
exchange rates as at December 31, 2007.    - 57 -




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Sources of Liquidity and Capital Resources
  
    
    funds from operations;
    
    financing from related party transactions;
    
    capital markets debt financing; and
    
    our credit facilities.
 Funds from Operations.
  Credit Facilities 7 8 3 8
 Summary of Critical Accounting Policies and Estimates
  Revenue Recognition
   - 58 -




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Derivative financial instruments and hedge accounting
   
    
    The Company uses foreign exchange forward contracts to hedge the foreign currency
rate exposure on anticipated equipment or inventory purchases in a foreign currency.
These foreign exchange forward contracts are designated as cash flow hedges. Under
hedge accounting, foreign exchange translation gains and losses are recognized in
financial expenses as an adjustment to the cost of fixed assets or inventories when
the transaction is recorded.
    
    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
US 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 US 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.
 Long-Lived Assets
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Employee Future Benefits
 Pensions.
 Other Post-Retirement Benefits.
  Off-Balance Sheet Arrangements
 Operating Leases
  Guarantees under Lease Agreements
  Guarantees Related to our Outstanding Senior Notes
 7 8 3 8 7 8 3 8
 Outsourcing companies and suppliers
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Risks and Uncertainties
 Market Risk
    7 8 3 8
   3 8
  Contingencies
   - 61 -




---



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Regulation
 Broadcasting Act Telecommunications Act
  Changes in Accounting Policies
 , Comprehensive Income Financial Instruments 
Recognition and Measurement Hedges
 Recent Accounting Developments in Canada
 Capital Disclosures
 - 62 -




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Financial Instruments -
Disclosures Financial Instruments  Presentation
 Inventories
  Recent Accounting Developments in the United States
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Fair Value Measurements
 - 63 -




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ITEM 6  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 Directors and Executive Officers
  Name and Municipality of Residence
    
    Age
    
    PositionSerge Gouin
    
    64
    
    Director and Chairman of the BoardOutremont, 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, FCA
    
    57
    
    Director and Member of the Audit CommitteeBrossard, QuébecPierre Karl Péladeau
    
    46
    
    DirectorMontréal, QuébecRobert Dépatie
    
    49
    
    President and Chief Executive OfficerRosemère, QuébecYvan Gingras
    
    50
    
    Executive Vice President,
Finance and Operations, and Chief Financial OfficerMontréal, QuébecDonald Lizotte
    
    41
    
    President, Le SuperClub Vidéotron and Vice President, RetailKirkland, Québec
    
    
    
    Sales VideotronJean Novak
    
    44
    
    President, Videotron Business ServiceBeaconsfield, QuébecManon
BrouilletteOutremont, Québec
    
    39
    
    Senior Vice President, Marketing,
Content and New Product Development, Consumers DivisionDaniel Proulx
    
    49
    
    Senior Vice President, EngineeringMontréal, QuébecFrédéric Despars
    
    40
    
    Vice President, Legal AffairsCandiac, QuébecAndré Gascon
    
    46
    
    Vice President, Information TechnologiesLongueuil, QuébecMarie-Josée Marsan
    
    45
    
    Vice President, ControlMontréal, QuébecRoger Martel
    
    59
    
    Vice President, Internal AuditMontréal, QuébecLouis Morin
    
    50
    
    Vice PresidentKirkland, QuébecÉdouard G. Trépanier
    
    56
    
    Vice President, Regulatory AffairsBoucherville, QuébecNormand Vachon
    
    59
    
    Vice President, Human ResourcesRepentigny, QuébecJean-François Pruneau
    
    37
    
    TreasurerRepentigny, QuébecClaudine Tremblay
    
    54
    
    SecretaryNuns Island, QuébecChristian Marcoux
    
    33
    
    Assistant SecretaryLaval, QuébecDominique Poulin Gouin
    
    52
    
    Assistant SecretaryOutremont, Québec
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Serge Gouin
 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
 Pierre Karl Péladeau
 - 65 -




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Robert Dépatie
 Yvan Gingras
 Donald Lizotte Université
du Québec
 Jean Novak
 Manon Brouillette
 Daniel Proulx
 Frédéric Despars
 - 66 -




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André Gascon
 Marie-Josée Marsan
 Roger Martel
 Louis Morin
 Edouard G. Trépanier
 Normand Vachon ,
 - 67 -




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##### Table of Contents



Jean-François Pruneau
 Claudine Tremblay Chambre des notaires du Québec
 Christian Marcoux
 Dominique Poulin Gouin
 B- Board Practices
    Audit Committee
  - 68 -




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C- Compensation of Directors and Executive Officers
   Quebecor Medias Stock Option Plan
  - 69 -




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##### Table of Contents



Pension Benefits
  Income Tax Act Income Tax Act
 Income Tax Act Income Tax Act
  Years of ParticipationCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$116,666 or more
    
    $
    23,333
    
    
    $
    35,000
    
    
    $
    46,667
    
    
    $
    58,333
    
    
    $
    70,000
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Supplemental Retirement Benefit Plan for Designated Executives
  Income Tax Act
  Income Tax Act
   Years of Credited ServiceCompensation
    
    10
    
    15
    
    20
    
    25
    
    30$200,000
    
    $
    16,667
    
    
    $
    25,000
    
    
    $
    33,333
    
    
    $
    41,667
    
    
    $
    50,000$300,000
    
    $
    36,667
    
    
    $
    55,000
    
    
    $
    73,333
    
    
    $
    91,667
    
    
    $
    110,000$400,000
    
    $
    56,667
    
    
    $
    85,000
    
    
    $
    113,333
    
    
    $
    141,667
    
    
    $
    170,000$500,000
    
    $
    76,667
    
    
    $
    115,000
    
    
    $
    153,333
    
    
    $
    191,667
    
    
    $
    230,000$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
 Liability Insurance
  - 71 -




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D- Employees
  E- Share Ownership
  - 72 -




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##### Table of Contents



ITEM 7  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A- Major Shareholders
  Caisse de dépôt et placement du Québec
 B- Related Party Transactions
  Video-on-Demand Services
    Management Services and Others
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##### Table of Contents



Year Ended December 31,2006
    
    2007(dollars in millions)Revenues
    
    $
    25.3
    
    
    $
    22.3Purchases
    
    
    63.5
    
    
    
    64.1Accounts payable
    
    
    41.5
    
    
    
    54.7
  Income Tax Transactions
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##### Table of Contents



Quebecor World Outsourcing of Information Technology
 Companies Creditors Arrangement Act
  
    
    the initial purchase by Videotron of the information technology infrastructure
equipment of Quebecor World;
    
    the provision of consulting services by certain Quebecor World personnel to
Videotron for corporate information technology services; and
    
    the provision of information technology managed services by Videotron to Quebecor World in Canada.
  C- Interests of Experts and Counsel
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##### Table of Contents



ITEM 8  FINANCIAL INFORMATION
 A- Consolidated Statements and Other Financial Information
  B- Legal Proceedings
    C- Dividend Policy and Reductions of Paid-Up Capital
    D- Significant Changes
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ITEM 9  THE OFFER AND LISTING
 A- Offer and Listing Details
  B- Plan of Distribution
  C- Markets
 3 8 3 8 3 8
 7 8 7 8 7 8
  D- Selling Shareholders
  E- Dilution
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F- Expenses of the Issue
  
 ITEM 10  ADDITIONAL INFORMATION
 A- Share Capital
  B- Memorandum and Articles of Association
  1.
    
    On July 1, 2006, Vidéotron ltée and 9101-0827 Québec inc. amalgamated, under Part IA of the
Companies Act(Québec), into a single company using the name Videotron Ltd. (or Vidéotron
ltée in French) with the Designating Number 1163819882. The Articles provide no restrictions
on the purposes or activities that may be undertaken by Videotron.
 2.
    (a)
    
    Our by-laws provide that we may transact business with one or more of our directors or
with any company 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 must disclose his
or her interest to us and to the other directors before expressing a view of this transaction
and shall refrain from deliberating or voting on the transaction, except if his or her vote is
necessary to commit 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, our directors may authorize us, by simple resolution, to borrow
money and obtain advances upon the credit of our company when they consider it
appropriate. Our directors also may, by simple resolution, when they consider it
appropriate, (i) issue bonds or other securities of our company and give them in
guarantee or sell them for prices and amounts deemed appropriate; (ii) mortgage, pledge
or give as surety our present or future movable and immovable property to ensure the
payment of these bonds or other securities or give a part only of these guarantees for
the same purposes; and (iii) mortgage or pledge our real estate or give as security or
otherwise encumber with any charge our movables or give these various kinds of
securities to assure the payment of loans made other than by the issuance of bonds as
well as the payment or the execution of other debts, contracts and commitments of our
company.Neither the Articles nor our by-laws contain any provision with respect to (a) the
retirement or non-retirement of our directors under an age limit requirement or
(b) the number of shares, if any, required for the qualification of our directors.
 3.
    
    The rights, preferences and restrictions attaching to our
common shares and our preferred shares (consisting of our
Class A Common Shares and our authorized classes of preferred shares, comprised or our Class B Preferred Shares, Class C Preferred Shares, Class D
Preferred Shares, Class E Preferred Shares, Class F Preferred Shares and Class G
Preferred Shares) are set forth below:
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Common Shares
 Class A Common Shares
 (a)
    
    Dividend rights: Subject to the rights of the holders of our preferred shares
(including their redemption rights) and subject to applicable law, each Class A Common
Share is entitled to receive such dividends as our Board of Directors shall determine.(b)
    
    Voting rights: The holders of Class A Common Shares are entitled to vote at
each shareholders meeting with the exception of meetings at which only the holders of
another class of shares are entitled to vote. Each Class A Common Share entitles the
holder to one vote. The holders of the Class A Common Shares shall elect the
directors of Videotron at an annual or special meting of shareholders called for that
purpose, except that any vacancy occurring in the Board of Directors may be filled, for
the remainder of the term, by our Directors. At any meeting of shareholders called for
such purpose, directors are elected by a majority of the votes cast in respect of such
election.(c)
    
    Rights to share in our profits: Other than as described in paragraph (a) above
(whereby the holders of our Class A Common Shares are entitled to receive dividends as
determined by our Board of Directors subject to certain restrictions) and paragraph (d)
below (whereby the holders of our Class A Common Shares are entitled to participation
in the remaining property and assets of our company available for distribution in the
event of liquidation or dissolution), None.(d)
    
    Rights upon liquidation: In the event of our liquidation or dissolution 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 Class A Common
Shares shall be entitled, subject to the rights of the holders of our preferred shares,
to participate equally, share for share, in our residual 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 further capital calls by us: None, provided that our directors may
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 common shares: None.
 Preferred Shares
 Class B Preferred Shares
 (a)
    
    Dividend rights: When our Board of Directors declares a dividend, the holders of
our Class B Preferred Shares have the right to receive, in priority over the holders
of our Class A Common Shares, Class C Preferred Shares, Class D Preferred Shares,
Class E Preferred Shares and Class F Preferred Shares, but subordinated to the
holders of our Class G Preferred Shares, a preferential and non-cumulative dividend at
the fixed rate of 1% per month, calculated on the basis of the applicable redemption
value of our Class B Preferred Shares. A dividend may be declared and payable in
cash, in kind or through the issuance of fully paid shares of any class of our company.
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(b)
    
    Voting rights: Subject to applicable law and except as expressly otherwise
provided, the holders of our Class B Preferred Shares do not have the right to receive
notice of meetings of shareholders or to attend any such meeting or vote at any such
meeting.(c)
    
    Rights to share in our profits: Other than as described in paragraph (a) above
(whereby the holders of our Class B Preferred Shares are entitled to receive certain
dividends, if and when declared by our Board of Directors), paragraph (d) below (whereby
the holders of our Class B Preferred Shares are entitled to participate in the
distribution of the residual property and assets of Videotron available for distribution
in the event of our liquidation or winding-up) and paragraph (e) below (whereby the
holders of our Class B Preferred Shares have certain redemption rights): None.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or other
distribution of our assets among our shareholders for the purpose of winding-up our
affairs, whether voluntarily or involuntarily, the holders of the Class B Preferred
Shares shall be entitled to repayment of the amount paid for the Class B Preferred
Shares in the subdivision of the issued and paid-up share capital account relating to
the Class B Preferred Shares.In addition, in the event of our liquidation, dissolution or other distribution of our
assets among our shareholders for the purpose of winding-up our affairs, whether
voluntarily or involuntarily, the rights of holders of Class B Preferred Shares as
regards to payment of dividends and the right to participate in the distribution of
residual assets, shall rank in priority to the rights of the holders of our Class A
Common Shares, Class C Preferred Shares, Class D Preferred Shares, Class E
Preferred Shares and Class F Preferred Shares, but subordinated to the rights of
holders of our Class G Preferred Shares.(e)
    
    Redemption provisions: Subject to the provisions of the Companies Act(Québec),
the holders of our Class B Preferred Shares have, at any time, the right to require
Videotron to redeem (referred to as a retraction right) any or all of their Class B
Preferred Shares at a redemption price equal to the amount paid for such shares in the
subdivision of the issued and paid-up share capital account relating to such shares,
plus a specified premium, if applicable, plus the amount of any declared and unpaid
dividends.In addition, Videotron may, at its option, redeem any or all of the Class B
Preferred Shares outstanding at any time at an aggregate redemption price equal to the
consideration received by Videotron for these Class B Preferred Shares. Videotron
may also, when it deems it appropriate and without giving notice or taking into
account the other classes of shares, buy, pursuant to a private agreement, all or some
of the Class B Preferred Shares outstanding at a purchase price for any such Class
B Preferred Shares not exceeding the retraction right purchase price described above
or the book value of Videotrons net assets.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to further capital calls by us: None, provided that our directors may
make calls upon the shareholders in respect of any moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of our Class
B Preferred Shares as a result of such holder owning a substantial number of our Class
B Preferred Shares: None.
 Class C Preferred Shares
 (a)
    
    Dividend rights: When our Board of Directors declares a dividend, the holders of
our Class C Preferred Shares have the right to receive, in priority over the holders
of our Class A Common Shares, Class D Preferred Shares, Class E Preferred Shares
and Class F Preferred Shares, but subordinated to the holders of our Class B
Preferred Shares and Class G Preferred Shares, a preferential and non-
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cumulative
dividend at the fixed rate of 1% per month, calculated on the basis of the applicable
redemption value of our Class C Preferred Shares. A dividend may be declared and
payable in cash, in kind or through the issuance of fully paid shares of any class of
our company.(b)
    
    Voting rights: Subject to applicable law and except as expressly otherwise
provided, the holders of our Class C Preferred Shares do not have the right to receive
notice of meetings of shareholders or to attend any such meeting or vote at any such
meeting.(c)
    
    Rights to share in our profits: Other than as described in paragraph (a) above
(whereby the holders of our Class C Preferred Shares are entitled to receive certain
dividends, if and when declared by our Board of Directors), paragraph (d) below (whereby
the holders of our Class C Preferred Shares are entitled to participate in the
distribution of the residual property and assets of Videotron available for distribution
in
the event of our liquidation or winding-up) and paragraph (e) below (whereby the
holders of our Class C Preferred Shares have certain redemption rights), None.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or other
distribution of our assets among our shareholders for the purpose of winding-up our
affairs, whether voluntarily or involuntarily, the holders of the Class C Preferred
Shares shall be shall be entitled to repayment of the amount paid for the Class C
Preferred Shares in the subdivision of the issued and paid-up share capital account
relating to the Class C Preferred Shares.In addition, in the event of our liquidation, dissolution or other distribution of our
assets among our shareholders for the purpose of winding-up our affairs, whether
voluntarily or involuntarily, the rights of holders of Class C Preferred Shares as
regards to payment of dividends and the right to participate in the distribution of
residual assets, shall rank in priority to the rights of the holders of our Class A
Common Shares, Class D Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares, but subordinated to the rights of holders of our Class B Preferred
Shares and Class G Preferred Shares.(e)
    
    Redemption provisions: Subject to the provisions of the Companies Act(Québec),
the holders of our Class C Preferred Shares have, at any time, the right to require
Videotron to redeem (referred to as a retraction right) any or all of their Class C
Preferred Shares at a redemption price equal to the amount paid for such shares in the
subdivision of the issued and paid-up share capital account relating to such shares,
plus a specified premium, if applicable, plus the amount of any declared and unpaid
dividends.In addition, Videotron may, at its option, redeem any or all of the Class C
Preferred Shares outstanding at any time at an aggregate redemption price equal to the
consideration received by Videotron for these Class C Preferred Shares. Videotron
may also, when it deems it appropriate and without giving notice or taking into
account the other classes of shares, buy, pursuant to a private agreement, all or some
of the Class C Preferred Shares outstanding at a purchase price for any such Class
C Preferred Shares not exceeding the retraction right purchase price described above
or the book value of Videotrons net assets.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to further capital calls by us: None, provided that our directors may
make calls upon the shareholders in respect of any moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of our Class
C Preferred Shares as a result of such holder owning a substantial number of our Class
C Preferred Shares: None.
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Class D Preferred Shares
 (a)
    
    Dividend rights: When our Board of Directors declares a dividend, the holders of
our Class D Preferred Shares have the right to receive, in priority over the holders
of our Class A Common Shares, Class E Preferred Shares and Class F Preferred
Shares, but subordinated to the holders of our Class B Preferred Shares, Class C
Preferred Shares and Class G Preferred Shares, a preferential and non-cumulative
dividend at the fixed rate of 1% per month, calculated on the basis of the applicable
redemption value of our Class D Preferred Shares. A dividend may be declared and
payable in cash, in kind or through the issuance of fully paid shares of any class of
our company.(b)
    
    Voting rights: Subject to applicable law and except as expressly otherwise
provided, the holders of our Class D Preferred Shares do not have the right to receive
notice of meetings of shareholders or to attend any such meeting or vote at any such
meeting.(c)
    
    Rights to share in our profits: Other than as described in paragraph (a) above
(whereby the holders of our Class D Preferred Shares are entitled to receive certain
dividends, if and when declared by our Board of Directors), paragraph (d) below (whereby
the holders of our Class D Preferred Shares are entitled to participate in the
distribution of the residual property and assets of Videotron available for distribution
in the event of our liquidation or winding-up) and paragraph (e) below (whereby the
holders of our Class D Preferred Shares have certain redemption rights), None.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or other
distribution of our assets among our shareholders for the purpose of winding-up our
affairs, whether voluntarily or involuntarily, the holders of the Class D Preferred
Shares shall be shall be entitled to repayment of the amount paid for the Class D
Preferred Shares in the subdivision of the issued and paid-up share capital account
relating to the Class D Preferred Shares.In addition, in the event of our liquidation, dissolution or other distribution of our
assets among our shareholders for the purpose of winding-up our affairs, whether
voluntarily or involuntarily, the rights of holders of Class D Preferred Shares as
regards to payment of dividends and the right to participate in the distribution of
residual assets, shall rank in priority to the rights of the holders of our Class A
Common Shares, Class E Preferred Shares and Class F Preferred Shares, but
subordinated to the rights of holders of our Class B Preferred Shares, Class C
Preferred Shares and Class G Preferred Shares.(e)
    
    Redemption provisions: Subject to the provisions of the Companies Act(Québec),
the holders of our Class D Preferred Shares have, at any time, the right to require
Videotron to redeem (referred to as a retraction right) any or all of their Class D
Preferred Shares at a redemption price equal to the amount paid for such shares in the
subdivision of the issued and paid-up share capital account relating to such shares,
plus a specified premium, if applicable, plus the amount of any declared and unpaid
dividends.In addition, Videotron may, at its option, redeem any or all of the Class D
Preferred Shares outstanding at any time at an aggregate redemption price equal to the
consideration received by Videotron for these Class D Preferred Shares. Videotron
may also, when it deems it appropriate and without giving notice or taking into
account the other classes of shares, buy, pursuant to a private agreement, all or some
of the Class D Preferred Shares outstanding at a purchase price for any such Class
D Preferred Shares not exceeding the retraction right purchase price described above
or the book value of Videotrons net assets.(f)
    
    Sinking fund provisions: None.
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(g)
    
    Liability to further capital calls by us: None, provided that our directors may
make calls upon the shareholders in respect of any moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of our Class
D Preferred Shares as a result of such holder owning a substantial number of our Class
D Preferred Shares: None.
 Class E Preferred Shares
 (a)
    
    Dividend rights: When our Board of Directors declares a dividend, the holders of
our Class E Preferred Shares have the right to receive, in priority over the holders
of our Class A Common Shares and Class F Preferred Shares, but subordinated to the
holders of our Class G Preferred Shares, Class C Preferred Share and Class E
Preferred Shares, a preferential and non-cumulative dividend at the fixed rate of 1% per
month, calculated on the basis of the applicable redemption value of our Class E
Preferred Shares. A dividend may be declared and payable in cash, in kind or through the
issuance of fully paid shares of any class of our company.(b)
    
    Voting rights: Subject to applicable law and except as expressly otherwise
provided, the holders of our Class E Preferred Shares do not have the right to receive
notice of meetings of shareholders or to attend any such meeting or vote at any such
meeting.(c)
    
    Rights to share in our profits: Other than as described in paragraph (a) above
(whereby the holders of our Class E Preferred Shares are entitled to receive certain
dividends, if and when declared by our Board of Directors), paragraph (d) below (whereby
the holders of our Class E Preferred Shares are entitled to participate in the
distribution of the residual property and assets of Videotron available for distribution
in the event of our liquidation or winding-up) and paragraph (e) below (whereby the
holders of our Class E Preferred Shares have certain redemption rights), None.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or other
distribution of our assets among our shareholders for the purpose of winding-up our
affairs, whether voluntarily or involuntarily, the holders of the Class E Preferred
Shares shall be shall be entitled to repayment of the amount paid for the Class E
Preferred Shares in the subdivision of the issued and paid-up share capital account
relating to the Class E Preferred Shares.In addition, in the event of our liquidation, dissolution or other distribution of our
assets among our shareholders for the purpose of winding-up our affairs, whether
voluntarily or involuntarily, the rights of holders of Class E Preferred Shares as
regards to payment of dividends and the right to participate in the distribution of
residual assets, shall rank in priority to the rights of the holders of our Class A
Common Shares and Class F Preferred Shares, but subordinated to the rights of
holders of our Class B Preferred Shares, Class C Preferred Shares, Class D
Preferred Shares and Class G Preferred Shares.(e)
    
    Redemption provisions: Subject to the provisions of the Companies Act(Québec),
the holders of our Class E Preferred Shares have, at any time, the right to require
Videotron to redeem (referred to as a retraction right) any or all of their Class E
Preferred Shares at a redemption price equal to the amount paid for such shares in the
subdivision of the issued and paid-up share capital account relating to such shares,
plus a specified premium, if applicable, plus the amount of any declared and unpaid
dividends.In addition, Videotron may, at its option, redeem any or all of the Class E
Preferred Shares outstanding at any time at an aggregate redemption price equal to the
consideration received by Videotron for these Class E Preferred Shares. Videotron
may also, when it deems it appropriate and without giving notice or taking into
account the other classes of shares, buy, pursuant to a private agreement, all or some
of the
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Class E Preferred Shares outstanding at a purchase price for any such Class
E Preferred Shares not exceeding the retraction right purchase price described above
or the book value of Videotrons net assets.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to further capital calls by us: None, provided that our directors may
make calls upon the shareholders in respect of any moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of our Class
E Preferred Shares as a result of such holder owning a substantial number of our Class
E Preferred Shares: None.
 Class F Preferred Shares
 (a)
    
    Dividend rights: When our Board of Directors declares a dividend, the holders of
our Class F Preferred Shares have the right to receive, in priority over the holders
of our Class A Common Shares, but subordinated to the holders of our Class B
Preferred Shares, Class C Preferred Shares, Class D Preferred Shares, Class E
Preferred Shares and Class G Preferred Shares, a preferential and non-
cumulative dividend at the fixed rate of 1% per month, calculated on the basis of the
applicable redemption value of our Class F Preferred Shares. A dividend may be
declared and payable in cash, in kind or through the issuance of fully paid shares of
any class of our company.(b)
    
    Voting rights: Subject to applicable law and except as expressly otherwise
provided, the holders of our Class F Preferred Shares do not have the right to receive
notice of meetings of shareholders or to attend any such meeting or vote at any such
meeting.(c)
    
    Rights to share in our profits: Other than as described in paragraph (a) above
(whereby the holders of our Class F Preferred Shares are entitled to receive certain
dividends, if and when declared by our Board of Directors), paragraph (d) below (whereby
the holders of our Class F Preferred Shares are entitled to participate in the
distribution of the residual property and assets of Videotron available for distribution
in the event of our liquidation or winding-up) and paragraph (e) below (whereby the
holders of our Class F Preferred Shares have certain redemption rights), None.(d)
    
    Rights upon liquidation: In the event of our liquidation, dissolution or other
distribution of our assets among our shareholders for the purpose of winding-up our
affairs, whether voluntarily or involuntarily, the holders of the Class F Preferred
Shares shall be shall be entitled to repayment of the amount paid for the Class F
Preferred Shares in the subdivision of the issued and paid-up share capital account
relating to the Class F Preferred Shares.In addition, in the event of our liquidation, dissolution or other distribution of our
assets among our shareholders for the purpose of winding-up our affairs, whether
voluntarily or involuntarily, the rights of holders of Class F Preferred Shares as
regards to payment of dividends and the right to participate in the distribution of
residual assets, shall rank in priority to the rights of the holders of our Class A
Common Shares, but subordinated to the rights of holders of our Class B Preferred
Shares, Class C Preferred Shares, Class D Preferred Shares, Class E Preferred
Shares and Class G Preferred Shares.(e)
    
    Redemption provisions: Subject to the provisions of the Companies Act(Québec),
the holders of our Class F Preferred Shares have, at any time, the right to require
Videotron to redeem (referred to as a retraction right) any or all of their Class F
Preferred Shares at a redemption price equal to the amount paid for such shares in the
subdivision of the issued and paid-up share capital account relating to such shares,
plus a specified premium, if applicable, plus the amount of any declared and unpaid
dividends.
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In addition, Videotron may, at its option, redeem any or all of the Class F
Preferred Shares outstanding at any time at an aggregate redemption price equal to the
consideration received by Videotron for these Class F Preferred Shares. Videotron
may also, when it deems it appropriate and without giving notice or taking into
account the other classes of shares, buy, pursuant to a private agreement, all or some
of the Class F Preferred Shares outstanding at a purchase price for any such Class
F Preferred Shares not exceeding the retraction right purchase price described above
or the book value of Videotrons net assets.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to further capital calls by us: None, provided that our directors may
make calls upon the shareholders in respect of any moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of our Class
F Preferred Shares as a result of such holder owning a substantial number of our Class
F Preferred Shares: None.
 Class G Preferred Shares
 (a)
    
    Dividend rights: When our Board of Directors declares a dividend, the holders of
our Class G Preferred Shares have the right to receive, in priority over the holders
of our common shares and preferred shares of other series, a preferential and cumulative
dividend, payable semi-annually, at the fixed rate of 11.25% per year, calculated daily
on the basis of the applicable redemption value of our Class G Preferred Shares. No
dividends may be paid on any common shares or preferred shares of other series unless
all dividends which shall have become payable on the Class G Preferred Shares have
been paid or set aside for payment.(b)
    
    Voting rights: Subject to applicable law and except as expressly otherwise
provided, the holders of our Class G Preferred Shares do not have the right to receive
notice of meetings of shareholders or to attend any such meeting or vote at any such
meeting.However, in the event that we shall have failed to pay eight (8) half-yearly
dividends, whether or not consecutive, on the Class G Preferred Shares, and only for
so long as the dividend remains in arrears, the holders of Class G Preferred Shares
shall have the right to receive notice of meetings of shareholders and to attend and
vote at any such meetings, except meetings at which only holders of another specified
series or class of shares are entitled to vote. At each such meeting, each Class G
Preferred Share shall entitle the holder thereof to one vote.(c)
    
    Rights to share in our profits: Except as described in paragraph (a) above
(whereby the holders of our Class G Preferred Shares are entitled to receive a 11.25%
cumulative preferred dividend in preference to the holders of our common shares and
other series of our preferred shares), paragraph (d) below (whereby the holders of our
Class G Preferred Shares are entitled to receive, in preference to the holders of our
common shares and other series of our preferred shares, an amount equal to $1,000 per
Class G Preferred Share and any accumulated and unpaid dividends with respect thereto
in the event of our liquidation, winding-up or reorganization) and paragraph (e) below
(whereby the holders of our Class G Preferred Shares may require us to redeem the
Class G Preferred Shares at a redemption price of $1,000 per share plus any accrued
and unpaid dividends with respect thereto), 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 Class G Preferred Shares shall be entitled to receive in preference to the holders
of our common shares and our preferred shares of other series an amount equal to $1,000
per Class G Preferred Share and any accrued and unpaid dividends with respect thereto.
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Our Class G Preferred Shares have priority over our common shares and
our preferred shares of other series as to the order of priority of the
distribution of assets in case of the liquidation or dissolution of our company,
voluntary or involuntary, or of any other distribution of our assets to our
shareholders for the purpose of winding up our affairs.(e)
    
    Redemption provisions: Subject to the provisions of the Companies Act(Québec),
the holders our Class G Preferred Shares have, at any time, the right to require
Videotron to redeem any and all of their shares at a redemption price equal to $1,000
per share plus any accrued and unpaid dividends with respect thereto. In addition, we
may, at our option, redeem any and all Class G Preferred Shares at any time at a
redemption price equal to $1,000 per share plus any accrued and unpaid dividends with
respect thereto.(f)
    
    Sinking fund provisions: None.(g)
    
    Liability to further capital calls by us: None, provided that our directors may
make calls upon the shareholders in respect of any moneys unpaid upon their shares.(h)
    
    Provisions discriminating against existing or prospective holders of our Class
G Preferred Shares as a result of such holder owning a substantial number of our Class
G Preferred Shares: None.
 4.
    
    Under the Companies Act(Québec), (i) the Articles may only be amended by the affirmative
vote of the holders of two-thirds (2/3) of the votes cast by the
shareholders at a special meeting called for that purpose and (ii) our by-laws may be amended
by our directors and ratified by a majority of the votes cast by the shareholders at a meeting
called for such purpose In addition, pursuant to the Companies Act(Québec), we may not make
any amendments to the Articles that affect the rights, conditions, privileges or restrictions
attaching to issued shares of any series outstanding, other than an increase in the share
capital or the number of our authorized shares, without obtaining the consent of all the
shareholders concerned by the amendment, whether or not they are eligible to vote. The consent
of the shareholders of any classes outstanding with respect to the matters described in the
foregoing requires either (i) the formal authorization given by all the holders of the shares
of such class outstanding, or (ii) a resolution adopted by at least three-quarters
(3/4) of the votes cast holders of the shares of such class voting on
this resolution at a special general meeting held by order and under the supervision of a
judge of the Superior Court of Québec.5.
    
    Our by-laws provide that the annual meeting of our shareholders shall be held at such place,
on such date and at such time as our Board of Directors may determine from time to time.
Annual meetings of our shareholders may be called at any time by order of our Board of
Directors, our Chairman of the Board or, provided they are members of our Board of Directors,
the president or any vice-president of our company. Special general meetings of our
shareholders shall be held at such place, on such date and at such time as our Board of
Directors may determine from time to time or at any place where all our shareholders entitled
to vote are present in person or represented by proxy or at such other place as all our
shareholders shall approve in writing. Special general meetings of our shareholders may be
called at any time by order of our Board of Directors, our Chairman of the Board or, provided
they are members of our Board of Directors, the president or any vice-president of our
company.Our by-laws provide that notice specifying the place, date, time and purpose of any meeting
of our shareholders shall be given to all the shareholders entitled to this notice at least
21 days but not more than 50 days prior to the date fixed for the meeting. The notice may be
mailed, postage prepaid, to the shareholders at their respective addresses as they appear on
our books or delivered by hand or transmitted by any means of telecommunication.Our chairman of the board or, in his absence, our president, if he is a director or, in his
absence, one of our vice-presidents who is a director shall preside at all meetings of our
shareholders. If all of the aforesaid officers are
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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 30% of the outstanding shares of our
share capital carrying the right to vote at a shareholders 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 our other constituent
documents on the right of nonresidents or foreign owners to hold or vote shares, other than as
provided in the Investment Canada Act(Canada). The Investment Canada Act(Canada) requires
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 our directors shall refuse to issue (including on the occasion or
because of a conversion of shares or in shares), and to allow a transfer of, any share of our
capital stock if this issuance or transfer would, in the opinion of our directors, affect our
eligibility or of any other company or partnership in which we have or may have an interest,
to obtain, preserve or renew a license or authorization required for the operation or
continuation of its broadcasting company (as defined in the Broadcasting Act(Canada), as
amended) (or any part thereof) or of any other activity necessary for the continuation of our
company. See Item 4. Information on the Company  Business Overview  Regulation  Ownership
and Control of Canadian Broadcast Undertakings.8.
    
    Not applicable.9.
    
    Not applicable.10.
    
    Not applicable.
 C- MATERIAL CONTRACTS
  (a)
    
    Indenture relating to US$650,000,000 of our 67/8% Senior Notes due January 15,
2014, dated as of October 8, 2003, by and among Videotron, the guarantors party thereto
and Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National Association) as
trustee, as supplemented.On October 8, 2003, we issued US$335.0 million aggregate principal amount of our 67/8%
Senior Notes due January 15, 2014 and, on November 19, 2004, we issued an additional
US$315.0 million aggregate principal amount of these notes, pursuant to an Indenture,
dated as of October 8, 2003, by and among Videotron, the guarantors party thereto and
Wells Fargo Bank Minnesota, N.A. (now Wells Fargo Bank, National Association), as
trustee. These notes are unsecured and are due January 15, 2014. Interest on these
notes is payable semi-annually in arrears on January 15 and July 15 of each year,
beginning on July 15, 2004. These notes are guaranteed on a senior unsecured basis by
most, but not all, of our subsidiaries. These notes are redeemable, at our option,
under certain circumstances and at the redemption prices set forth in the indenture.
The indenture contains customary restrictive covenants with respect to us and certain
of our subsidiaries and customary events of default. If an event of default occurs and
is continuing (other than our
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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.(b)
    
    Indenture relating to US$175,000,000 of our 63/8% Senior Notes due December 15,
2015, dated as of September 16, 2005, by and among Videotron, the guarantors party
thereto, and Wells Fargo, National Association, as trustee.On September 16, 2005, we issued US$175,000,000
aggregate principal amount of our
63/8
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 our subsidiaries. These notes are
redeemable, at our option, under certain circumstances and at the redemption prices
set forth in the indenture. The indenture contains customary restrictive covenants
with respect to us and certain of our 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.(c)
    
    Amended and Restated Credit Agreement, dated as of November 19, 2004, by and
among Videotron, as borrower, the financial institutions party thereto from time to
time, as lenders, and Royal Bank of Canada, as administrative agent.On November 19, 2004, concurrently with the closing of the private placement of a new
series of our 67/8% Senior Notes due January 15, 2014, we amended and restated our
credit agreement, dated as of November 28, 2000, by executing and delivering the
seventh amending agreement to our credit agreement. Pursuant to this amendment, our
amended and restated credit agreement provides for a $450.0 million revolving credit
facility maturing in 2009. The proceeds of our revolving credit facility are to be
used for general corporate purposes, including for distributions to our shareholder in
certain circumstances.Borrowings under our amended and restated credit facility bear interest at the
Canadian prime rate, the bankers acceptance rate or LIBOR, plus, in each case an
applicable margin. Borrowings under this revolving credit facility are repayable in
full in November 2009.Borrowings under this amended and restated credit facility and under eligible
derivative instruments are secured by a first-ranking hypothec or security interest
(subject to certain permitted encumbrances) on all of our current and future assets,
as well as those of the guarantors party thereto, including most but not all of our
subsidiaries (the Vidéotron Group), guarantees of all the members of the Videotron
Group, pledges of the shares of Videotron and the members of the Vidéotron Group, and
other security.This amended and restated credit facility contains customary covenants that restrict
and limit the ability of Videotron and the members of the Vidéotron Group to, among
other things, enter into merger or amalgamation transactions, grant encumbrances, sell
assets, pay dividends or make other distributions, issue shares of capital stock,
incur indebtedness and enter into related party transactions. In addition, this
amended and restated credit facility contains customary financial covenants. It also
contains customary events of default including the non-payment of principal or
interest, the breach of any financial covenant, the failure to perform or observe any
other covenant, certain bankruptcy events relating to us and the members of the
Vidéotron Group, and the occurrence of a change of control.
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(d)
    Back-to-back transaction agreement, effective as of January 3, 2007, by and
between Quebecor Media and VideotronOn January 3, 2007, we entered in a back-to-back transaction by contracting a
subordinated loan of $1.0 billion from Quebecor Media and used the entire proceeds of
this borrowing to purchase 1,000,000 Preferred Shares, Series B of 9101-0835 Québec
inc., a subsidiary of Quebecor Media. The subordinated loan bears interest at a rate
of 10.5%, payable semi-annually, and matures on January 3, 2022. The Preferred Shares,
Series B carry the right to receive a cumulative annual dividend of 10.85% payable
semi-annually. See also Note 6 to our consolidated financial statements included under
Item 17. Financial Statements of this annual report.(e)
    Back-to-back transaction agreement, effective as of May 31, 2007, by and between
Quebecor Media and VideotronOn May 31, 2007, we entered in a back-to-back transaction by contracting a
subordinated loan of $870.0 million from Quebecor Media and used the entire proceeds
of this borrowing to purchase 870,000 Preferred Shares, Series B of 9101-0835 Québec
inc., a subsidiary of Quebecor Media. The subordinated loan bears interest at a rate
of 10.5%, payable semi-annually, and matures on May 31, 2022. The Preferred Shares,
Series B carry the right to receive a cumulative annual dividend of 10.85% payable
semi-annually. See also Note 6 to our consolidated financial statements included under
Item 17. Financial Statements of this annual report.(f)

    Back-to-back transaction agreement, effective as of May 31, 2007, by and between
Quebecor Media and CF Cable TV Inc., a wholly-owned subsidiary of VidéotronOn May 31, 2007, CF Cable TV inc., a wholly-owned subsidiary of the Company, entered
into a back-to-back transaction by contracting a subordinated loan of $125.0 million
from Quebecor Média Inc. and invested the $125 million into 125,000 preferred shares,
Series B, of 9101-0835 Québec Inc., a subsidiary of Quebecor Média Inc. The
subordinated loan bears interest at a rate of 10.5% payable every six months on June
20 and December 20, and matures on May 31, 2022. The preferred shares carry the right
to receive a cumulative annual dividend of 10.85%, payable semi-annually. See also
Note 6 to our consolidated financial statements included under Item 17. Financial
Statements of this annual report.(g)
    Back-to-back transaction agreement, effective as of January 4, 2008, by and
between Quebecor Media and VidéotronOn January 4, 2008, the Company contracted a subordinated loan of $415.0 million from
Quebecor Média Inc., bearing interest at a rate of 10.5%, payable every six months on
June 20 and December 20, and maturing on January 4, 2023. on the same day, the company
invested the total proceeds of $415.0 million into 415,000 preferred shares, Series B,
of 9101-0835 Québec inc., a subsidiary of Quebecor media Inc. These shares carry the
right to receive an annual dividend of 10.85%, payable semi-annually. See also Note 6
to our consolidated financial statements included under Item 17. Financial
Statements of this annual report.(h)
    Back-to-back transaction agreement, effective as of January 4, 2008, by and
between Quebecor Media and CF Cable TV Inc., a wholly-owned subsidiary of VideotronOn January 4, 2008, CF Cable TV inc., a wholly-owned subsidiary of Videotron,
contracted a subordinated loan of $170.0 million from Quebecor Media, bearing interest
at a rate of 10.5%, payable every six months on June 20 and December 20, and maturing
on January 4, 2023. On the same day, CF Cable TV Inc. invested the total proceeds of
$170.0 million into 170,000 preferred shares, Series B, of 9101-0835 Québec inc., a
subsidiary of Quebecor Media. These shares carry the right to receive an annual
dividend of 10.85%, payable semi-annually. See also Note 6 to our consolidated
financial statements included under Item 17. Financial Statements of this annual
report.
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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 8 3 8 7 8 7 8 7 8 7 8 7 8
  
    
    dealers in stocks, securities or currencies;
    
    securities traders that use a mark-to-market accounting method;
    
    banks and financial institutions;
    
    insurance companies;
    
    regulated investment companies;
    
    real estate investment trusts;
    
    tax-exempt organizations;
    
    persons holding notes as part of a hedging or conversion transaction or a
straddle;
    
    persons deemed to sell notes under the constructive sale provisions of the Code;
    
    persons who or that are, or may become, subject to the expatriation provisions of
the Code;
    
    persons whose functional currency is not the U.S. dollar; and
    
    direct, indirect or constructive owners of 10% or more of our outstanding voting
 shares.
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7 8 7 8 3 8
  
    
    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, you are hereby informed that the
United States tax advice contained herein: (i) is written in connection with the promotion or
marketing by Videotron 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
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3 8 7 8 de minimis de minimis de minimis
 Pre-issuance Accrued Interest in Respect of the Second 67/8% Senior Notes Issuance
 7 8
 Market Discount and Bond Premium
 de minimis
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7 8
  Sale, Exchange or Retirement of a Note
  
    
    the amount of cash and the fair market value of any property received (less any
portion allocable to the payment of accrued interest not previously included in income,
which amount will be taxable as ordinary interest income); and
    
    the U.S. Holders tax basis in the notes.
  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
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
    
    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
  Canadian Material Federal Income Tax Considerations for Residents of the United States
 Income Tax Act
  Interest Payments
  Dispositions
  The preceding discussions of federal income tax consequences is for general information only
and is not legal or tax advice. Accordingly, you should consult your own tax advisor as to
particular tax consequences of purchasing, holding, and disposing of the notes, including the
applicability and effect of any state, provincial, local or foreign tax laws, and of any proposed
changes in applicable laws.
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F- Dividends And Paying Agents
  G- Statement By Experts
  H- Documents on Display
  I- Subsidiary Information
  
 ITEM 11  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk
  Interest Rate Risk
 3 8 7 8
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Cross-Currency Interest Rate Swaps
 Exchange rateon interest andcapital paymentsAnnual
    
    per CDN dollarNotional
    
    Annual effective
    
    nominal
    
    for one USPeriod covered
    
    amount
    
    interest rate
    
    interest rate
    
    dollarSenior Notes
    
    2004 to 2014
    
    US$190.0
    
    Bankers acceptance
3 months plus 2.80%
    
    
    6.875
    %
    
    
    1.2000Senior Notes
    
    2004 to 2014
    
    US$125.0
    
    
    7.45
    %
    
    
    6.875
    %
    
    
    1.1950Senior Notes
    
    2003 to 2014
    
    US$200.0
    
    Bankers acceptance
3 months plus 2.73%
    
    
    6.875
    %
    
    
    1.3425Senior Notes
    
    2003 to 2014
    
    US$135.0
    
    
    7.66
    %
    
    
    6.875
    %
    
    
    1.3425Senior Notes
    
    2005 to 2015
    
    US$175.0
    
    
    5.98
    %
    
    
    6.375
    %
    
    
    1.1781
 Credit Risk
   Fair Value of Financial Instruments
  December 31, 2006
    
    December 31, 2007Carrying
    
    
    
    
    
    Carryingvalue
    
    Fair value
    
    value
    
    Fair value(in millions)Long-term debt
    
    $
    (1,021.2
    )
    
    $
    (1,010.6
    )
    
    $
    (973.4
    )
    
    $
    (938.2
    )Interest rate swaps
    
    
    0.0
    
    
    
    0.0
    
    
    
    
    
    
    
    Cross-currency interest rate swaps
    
    
    (71.8
    )
    
    
    (141.1
    )
    
    
    (241.3
    )
    
    
    (241.3
    )Foreign exchange forward contracts
    
    
    
    
    
    
    2.1
    
    
    
    (4.2
    )
    
    
    (4.2
    )
 Material Limitations
  Principal Repayments
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(in thousands ofYear ending December 31,
    
    dollars)2008
    
    $
    2009
    
    $
    147.72010
    
    $
    2011
    
    $
    2012
    
    $
    2013 and thereafter
    
    $
    825.6
 
 ITEM 12  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
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PART II
 
 ITEM 13  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 Material Modifications To The Rights Of Security Holders
  Use Of Proceeds
  
 ITEM 15  CONTROLS AND PROCEDURES
   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 de minimis
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Year EndedDecember 31,2006
    
    
    2007(in thousands)Audit Fees
    
    $
    544.5
    
    
    $
    590.3Audit-Related Fees (1)
    
    
    46.4
    
    
    
    56.6All Other Fees (2)
    
    
    
    
    
    
    327.4Total
    
    $
    590.9
    
    
    $
    974.3
 
 (1)
    
    Audit-Related Fees include fees for the audits of our employee pension plans, the
review of one subsidiarys financial statements and various reports to statutory
authorities.(2)
    
    All Other Fees include fees billed for assistance with respect to internal controls
over financial reporting and disclosure controls and procedures. 
 ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 PART III
 
 ITEM 17  FINANCIAL STATEMENTS
  
 ITEM 18  FINANCIAL STATEMENTS
  
 ITEM 19  EXHIBITS
 A- EXHIBITS
  1.1
    
    Articles of Amalgamation of Videotron Ltd. as of July 1, 2006
(translation) (incorporated by reference to Exhibit 1.1 to Videotron
Ltd.s Annual Report on Form 20-F for the fiscal year ended December
31, 2006, filed on March 30, 2007).
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1.2
    
    By-laws of Videotron Ltd. as of July 1, 2006 (incorporated by
reference to Exhibit 1.2 to Videotron Ltd.s Annual Report on Form
20-F for the fiscal year ended December 31, 2006, filed on March 30,
2007).1.3
    
    Articles of Incorporation of Le SuperClub Vidéotron ltée
(translation) (incorporated by reference to Exhibit 3.7 to Videotron
Ltd.s Amendment No. 1 to the Registration Statement on Form F-4
dated January 8, 2004, Registration Statement No. 333-110697).1.4
    
    By-laws of Le SuperClub Vidéotron ltée (incorporated by reference to
Exhibit 3.8 to Videotron Ltd.s Amendment No. 1 to the Registration
Statement on Form F-4 dated January 8, 2004, Registration Statement
No. 333-110697).1.5
    
    Articles of Incorporation of Groupe de Divertissement SuperClub inc.
(translation) (incorporated by reference to Exhibit 3.9 to Videotron
Ltd.s Amendment No. 1 to the Registration Statement on Form F-4
dated January 8, 2004, Registration Statement No. 333-110697).1.6
    
    Articles of Amendment dated January 16, 2004 to Articles of
Incorporation of Groupe de Divertissement SuperClub inc.
(translation) (incorporated by reference to Exhibit 3.14 to Videotron
Ltd.s Amendment No. 1 to the Registration Statement on Form F-4
dated January 14, 2005, Registration Statement No. 333-121032).1.7
    
    By-laws of Groupe de Divertissement SuperClub inc. (incorporated by
reference to Exhibit 3.10 to Videotron Ltd.s Amendment No. 1 to the
Registration Statement on Form F-4 dated January 8, 2004,
Registration Statement No. 333-110697).1.8
    
    By-law No. 2004-1 of Groupe de Divertissement SuperClub inc. adopted
January 16, 2004 (translation) (incorporated by reference to Exhibit
3.16 to Videotron Ltd.s Amendment No. 1 to the Registration
Statement on Form F-4 dated January 14, 2005, Registration Statement
No. 333-121032).1.9
    
    Articles of Incorporation of Le SuperClub Vidéotron Canada inc.
(translation) (incorporated by reference to Exhibit 3.17 to Videotron
Ltd.s Amendment No. 1 to the Registration Statement on Form F-4
dated January 14, 2005, Registration Statement No. 333-121032).1.10
    
    By-laws of Le SuperClub Vidéotron Canada inc. (translation)
(incorporated by reference to Exhibit 3.18 to Videotron Ltd.s
Amendment No. 1 to the Registration Statement on Form F-4 dated
January 14, 2005, Registration Statement No. 333-121032).1.11
    
    Articles of Incorporation of Les Propriétés SuperClub inc.
(translation) (incorporated by reference to Exhibit 3.19 to Videotron
Ltd.s Amendment No. 1 to the Registration Statement on Form F-4
dated January 14, 2005, Registration Statement No. 333-121032).1.12
    
    By-laws of Les Propriétés SuperClub inc. (translation) (incorporated
by reference to Exhibit 3.20 to Videotron Ltd.s Amendment No. 1 to
the Registration Statement on Form F-4 dated January 14, 2005,
Registration Statement No. 333-121032).1.13
    
    Articles of Amalgamation of CF Cable TV Inc. (translation)
(incorporated by reference to Exhibit 1.13 to Videotron Ltd.s Annual
Report on Form 20-F for the fiscal year ended December 31, 2005,
dated March 21, 2006).1.14
    
    By-Laws of CF Cable TV Inc. (incorporated by reference to Exhibit
1.14 to Videotron Ltd.s Annual Report on Form 20-F for the fiscal
year ended December 31, 2005, dated March 21, 2006).2.1
    
    Form of 67/8% Senior Notes due January 15, 2014 of Videotron Ltd.
registered pursuant to the Securities Act of 1933 (included as
Exhibit A to Exhibit 2.3 below).
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2.2
    
    Form of Notation of Guarantee by the subsidiary guarantors of the 67/8%
Senior Notes due January 15, 2014 of Videotron Ltd. (included as
Exhibit E to Exhibit 2.3 below).2.3
    
    Indenture, dated as of October 8, 2003, by and among Videotron Ltd.,
the subsidiary guarantors signatory thereto and Wells Fargo Bank
Minnesota, N.A. (now named Wells Fargo Bank, National Association),
as trustee (incorporated by reference to Exhibit 4.3 to Videotron
Ltd.s Registration Statement on Form F-4 dated November 24, 2003,
Registration Statement No. 333-110697).2.4
    
    First Supplemental Indenture dated as of July 12, 2004 by and among
Videotron Ltd., SuperClub Vidéotron Canada inc., Les Propriétés
SuperClub inc. and Wells Fargo Bank, National Association, as trustee
(incorporated by reference to Exhibit 4.4 to Videotron Ltd.s
Registration Statement on Form F-4 dated December 6, 2004,
Registration Statement No. 333-121032).2.5
    
    Form of 63/8% Senior Notes due December 15, 2015 of Vidéotron ltée
being registered pursuant to the Securities Act of 1933 (included as
Exhibit A to Exhibit 2.7 below).2.6
    
    Form of Notation of Guarantee by the subsidiary guarantors of the 63/8%
Senior Notes due December 15, 2015 of Vidéotron ltée (included as
Exhibit E to Exhibit 2.7 below).2.7
    
    Indenture, dated as of September 16, 2005, by and among Videotron
ltée, the subsidiary guarantors signatory thereto and Wells Fargo
Bank, National Association, as trustee (incorporated by reference to
Exhibit 4.3 to Videotron Ltd.s Registration Statement on Form F-4
dated October 14, 2005, Registration Statement No. 333-128998).4.1
    
    Sixth Amending Agreement, dated as of October 8, 2003, to the Credit
Agreement dated as of November 28, 2000, as amended by the First
Amending Agreement, dated as of January 5, 2001, a Second Amending
Agreement, dated as of June 29, 2001, a Third Amending Agreement,
dated December 12, 2001 and accepted by the Lenders as of
December 21, 2001, a Fourth Amending Agreement, dated as of
December 23, 2002 and a Fifth Amending Agreement, dated as of
March 24, 2003, among Videotron Ltd., 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
Videotron Ltd.s Registration Statement on Form F-4 dated November
24, 2003, Registration Statement No. 333-110697).4.2
    
    Seventh Amending Agreement, dated as of November 19, 2004, to the
Credit Agreement, dated as of November 28, 2000, as amended by the
First Amending Agreement, dated as of January 5, 2001, a Second
Amending Agreement, dated as of June 29, 2001, a Third Amending
Agreement, dated as of December 12, 2001, a Fourth Amending
Agreement, dated as of December 23, 2002, a Fifth Amending Agreement,
dated as of March 24, 2003 and a Sixth Amending Agreement dated as of
October 8, 2003 among Videotron Ltd., 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., Videotron
TUN 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 Videotron
Ltd.s Registration Statement on Form F-4 dated December 6, 2004,
Registration Statement No. 333-121032).
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4.3
    
    Form of Amended and Restated Credit Agreement (the Credit
Agreement) entered into as of November 28, 2000, as amended by a
First Amending Agreement, dated as of January 5, 2001, a Second
Amending Agreement, dated as of June 29, 2001, a Third Amending
Agreement, dated December 12, 2001 and accepted by the Lenders as of
December 21, 2001, a Fourth Amending Agreement, dated as of
December 23, 2002, a Fifth Amending Agreement, dated as of March 24,
2003, a Sixth Amending Agreement, dated as of October 8, 2003, among
Videotron Ltd., Royal Bank of Canada, as administrative agent, and
the financial institutions signatory thereto (included as Schedule 2
to Exhibit 4.2 above).4.4
    
    Form of Guarantee of the Guarantors of the Credit Agreement
(incorporated by reference to Schedule D of Exhibit 10.5 to Quebecor
Media Inc.s Registration Statement on Form F-4 dated September 5,
2001, Registration Statement No. 333-13792).4.5
    
    Form of Share Pledge of the shares of Videotron Ltd. and the
Guarantors of the Credit Agreement (incorporated by reference to
Schedule E of Exhibit 10.5 to Quebecor Media Inc.s Registration
Statement on Form F-4 dated September 5, 2001, Registration Statement
No. 333-13792).4.6
    
    Management Services Agreement, effective as of January 1, 2002,
between Quebecor Media Inc. and Videotron Ltd. (incorporated by
reference to Exhibit 10.5 to Videotron Ltd.s Registration Statement
on Form F-4 dated November 24, 2003, Registration Statement No.
333-110697).4.7
    
    Lease Agreement, dated, November 24, 1993, between Le Groupe
Vidéotron ltée and National Bank of Canada for the property located
at 300 Viger Street 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).4.8
    
    Form of Guarantee of the Guarantors under Videotrons Ltd.s Credit
Agreement (incorporated by reference to Schedule D of Exhibit 10.5 to
Quebecor Media Inc.s Registration Statement on Form F-4 dated
September 5, 2001, Registration Statement No. 333-13792).4.9
    
    Form of Share Pledge of the shares of Vidéotron ltée and the
Guarantors of the Credit Agreement (incorporated by reference to
Schedule E of Exhibit 10.5 to Quebecor Media Inc.s Registration
Statement on Form F-4 dated September 5, 2001, Registration Statement
No. 333-13792).7.1
    
    Statement regarding calculation of ratio of earnings to fixed charges.8.1
    
    Subsidiaries of Videotron Ltd.11.1
    
    Code of Ethics (incorporated by reference to Exhibit 11.1 to
Videotron Ltd.s Annual Report on Form 20-F for the fiscal year ended
December 31, 2003, filed on April 29, 2004).12.1
    
    Certification of Robert Dépatie, President and Chief Executive
Officer of Videotron Ltd., 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 Yvan Gingras, Executive Vice President, Finance and
Operations and Chief Financial Officer of Videotron Ltd., 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 Robert Dépatie, President and Chief Executive
Officer of Videotron Ltd., pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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13.2
    
    Certification of Yvan Gingras, Executive Vice President, Finance and
Operations and Chief Financial Officer of Videotron Ltd. pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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SIGNATURE
  VIDEOTRON LTD.By:
    /s/ Yvan GingrasName:
    Yvan GingrasTitle:
    Executive Vice President, Finance and Operations,
and Chief Financial Officer  - 105 -




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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Videotron Ltd.Annual Consolidated Financial Information as at December 31, 2007 and 2006 and for the Years Ended
December 31, 2007, 2006 
   and 2005Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Statements of Income for the years ended December 31, 2007, 2006 and 2005
    
    F-3Consolidated Statements of Comprehensive Income for the years ended December 31, 2007, 2006 and 2005
    
    F-4Consolidated Statements of Shareholders Equity (Deficiency in Assets) for the years ended
December 31, 2007, 2006 and 2005
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
    
    F-6Consolidated Balance Sheets as at December 31, 2007 and 2006
    
    F-8Notes to Consolidated Financial Statements for the years ended December 31, 2007, 2006 and 2005
    
    F-9
 F-1




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Report of Independent Registered Public Accounting Firm
 to the Board of Directors and to the shareholder of Videotron Ltd.
         F-2




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VIDEOTRON LTD.
 
  
 2007
        
    2006
        
    2005Operating revenues:Cable television
    
    $
    735,832
    
    
    $
    677,273
    
    
    $
    618,346Internet
    
    
    422,448
    
    
    
    345,075
    
    
    
    270,791Telephony
    
    
    213,194
    
    
    
    108,565
    
    
    
    21,088Business solution
    
    
    70,189
    
    
    
    74,352
    
    
    
    78,409Video stores
    
    
    59,956
    
    
    
    55,585
    
    
    
    55,146Other
    
    
    50,987
    
    
    
    48,745
    
    
    
    36,6261,552,606
    
    
    
    1,309,595
    
    
    
    1,080,406Direct costs and operating expenses
    
    
    909,923
    
    
    
    796,887
    
    
    
    666,793Amortization
    
    
    206,083
    
    
    
    185,115
    
    
    
    166,292Financial expenses (note 3)
    
    
    67,052
    
    
    
    79,586
    
    
    
    74,737Impairment of goodwill (note 1 (m))
    
    
    5,425
    
    
    
    
    
    
    
    Income before income taxes and
non-controlling interest
    
    
    364,123
    
    
    
    248,007
    
    
    
    172,584Income taxes (note 4):Current
    
    
    67
    
    
    
    (439
    )
    
    
    2,911Future
    
    
    38,191
    
    
    
    64,669
    
    
    
    66,88038,258
    
    
    
    64,230
    
    
    
    69,791325,865
    
    
    
    183,777
    
    
    
    102,793Non-controlling interest
    
    
    173
    
    
    
    86
    
    
    
    102Net income
    
    $
    325,692
    
    
    $
    183,691
    
    
    $
    102,691
  F-3




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VIDEOTRON LTD.
 
  
 2007
        
    2006
    
    
    2005Net income
    
    $
    325,692
    
    
    $
    183,691
    
    
    $
    102,691Other comprehensive income:Unrealized gain on derivative instruments
    
    
    17,172
    
    
    
    
    
    
    
    Income taxes
    
    
    (2,028
    )
    
    
    
    
    
    
    Comprehensive income
    
    $
    340,836
    
    
    $
    183,691
    
    
    $
    102,691
  F-4




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VIDEOTRON LTD.
 
  
 Accumulated
        
    TotalShare
    
    
    Contributed
    
    
    
    
    
    
    other compre-
    
    
    shareholderscapital
    
    
    surplus
    
    
    Deficit
    
    
    hensive loss
    
    
    equityBalance as at December 31, 2004
    
    $
    388,593
    
    
    $
    576,934
    
    
    $
    (736,225
    )
    
    $
    
    
    
    $
    229,302Transfer of
tax deductions from a company controlled by the ultimate parent
company(note 16)
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23Reduction of paid-up capital (note 11)
    
    
    (45,653
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,653
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    102,691
    
    
    
    
    
    
    
    102,691Dividend
    
    
    
    
    
    
    
    
    
    
    (210,000
    )
    
    
    
    
    
    
    (210,000
    )Balance as at December 31, 2005
    
    
    342,940
    
    
    
    576,957
    
    
    
    (843,534
    )
    
    
    
    
    
    
    76,363Transfer of tax deductions from a company
controlled by the ultimate parent company (note 16)
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22Issuance of shares (note 11)
    
    
    111,536
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,536Reduction of paid-up capital (note 11)
    
    
    (108,749
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108,749
    )Excess of consideration paid over the carrying value
of debt transferred to the parent company (note 9)
    
    
    
    
    
    
    
    
    
    
    (3,282
    )
    
    
    
    
    
    
    (3,282
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    183,691
    
    
    
    
    
    
    
    183,691Dividend
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    (10,000
    )Balance as at December 31, 2006, as previously
reported
    
    
    345,727
    
    
    
    576,979
    
    
    
    (673,125
    )
    
    
    
    
    
    
    249,581Cumulative effect of changes in accounting
policies (note 1)
    
    
    
    
    
    
    
    
    
    
    (9,311
    )
    
    
    (22,446
    )
    
    
    (31,757
    )Balance as at January 1, 2007, as restated
    
    
    345,727
    
    
    
    576,979
    
    
    
    (682,436
    )
    
    
    (22,446
    )
    
    
    217,824Reduction of paid-up capital (note 11)
    
    
    (299,550
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299,550
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    325,692
    
    
    
    
    
    
    
    325,692Other comprehensive income, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,144
    
    
    
    15,144Balance as at December 31, 2007
    
    $
    46,177
    
    
    $
    576,979
    
    
    $
    (356,744
    )
    
    $
    (7,302
    )
    
    $
    259,110
  F-5




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##### Table of Contents



VIDEOTRON LTD.
 
  
 2007

    
    2006

    
    2005Cash flows related to operating activities:Net income
    
    $
    325,692
    
    
    $
    183,691
    
    
    $
    102,691Adjustments for the following items:Amortization of fixed assets
    
    
    203,902
    
    
    
    183,619
    
    
    
    164,684Amortization of other assets
    
    
    21,435
    
    
    
    17,835
    
    
    
    11,705Amortization of financing costs and
debt premium or discount
    
    
    (945
    )
    
    
    432
    
    
    
    (352
    )Impairment of goodwill
    
    
    5,425
    
    
    
    
    
    
    
    Future income taxes
    
    
    38,191
    
    
    
    64,669
    
    
    
    66,880Loss (gain) on disposal of fixed assets
    
    
    3,245
    
    
    
    1,416
    
    
    
    (1,318
    )Non-controlling interest
    
    
    173
    
    
    
    86
    
    
    
    102(Gain) loss on revaluation of Additional
Amount payable
    
    
    
    
    
    
    (3,286
    )
    
    
    10,140Net (gain) loss on derivative instruments and on
foreign currency translation of financial
instruments (note 3)
    
    
    (9,124
    )
    
    
    (19
    )
    
    
    248Gain on repayment of long-term debt
    
    
    
    
    
    
    
    
    
    
    (312
    )Other
    
    
    1,142
    
    
    
    755
    
    
    
    (765
    )589,136
    
    
    
    449,198
    
    
    
    353,703Net change in non-cash balances related to operations:Accounts receivable
    
    
    (26,832
    )
    
    
    (22,187
    )
    
    
    (19,315
    )Amounts receivable from and payable to
affiliated companies
    
    
    3,715
    
    
    
    3,606
    
    
    
    24,131Inventories
    
    
    104
    
    
    
    (10,225
    )
    
    
    4,286Prepaid expenses
    
    
    (7,824
    )
    
    
    (1,363
    )
    
    
    967Accounts payable and accrued liabilities
    
    
    (1,044
    )
    
    
    19,015
    
    
    
    16,189Deferred revenue
    
    
    15,298
    
    
    
    19,013
    
    
    
    15,320Other assets
    
    
    (20,973
    )
    
    
    (18,902
    )
    
    
    (16,758
    )Other
    
    
    1,343
    
    
    
    2,464
    
    
    
    8,682(36,213
    )
    
    
    (8,579
    )
    
    
    33,502Cash flows provided by operating activities
    
    
    552,923
    
    
    
    440,619
    
    
    
    387,205Cash flows related to investing activities:Acquisition of fixed assets
    
    
    (330,075
    )
    
    
    (302,629
    )
    
    
    (219,865
    )Acquisition of shares of a company under
common control
    
    
    (1,995,000
    )
    
    
    
    
    
    
    Net decrease (increase) in temporary
investments
    
    
    987
    
    
    
    39,509
    
    
    
    (19,246
    )Payment of tax deductions to a parent company
    
    
    (14,863
    )
    
    
    
    
    
    
    (35,200
    )Other
    
    
    787
    
    
    
    (1,981
    )
    
    
    (666
    )Cash flows used in investing activities
    
    
    (2,338,164
    )
    
    
    (265,101
    )
    
    
    (274,977
    )Sub-total, balance carried forward
    
    
    (1,785,241
    )
    
    
    175,518
    
    
    
    112,228
 F-6




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##### Table of Contents



VIDEOTRON LTD.
 
 2007

    
    2006

    
    2005Sub-total, balance brought forward
    
    $
    (1,785,241
    )
    
    $
    175,518
    
    
    $
    112,228Cash flows related to financing activities:Net change in bank indebtedness
    
    
    (8,965
    )
    
    
    18,470
    
    
    
    Net borrowings under bank credit facility (note 10)
    
    
    98,721
    
    
    
    49,000
    
    
    
    Repayment of long-term debt
    
    
    
    
    
    
    
    
    
    
    (92,284
    )Settlement of derivative financial instruments
    
    
    35
    
    
    
    (938
    )
    
    
    (10,955
    )Issuance of long-term debt, net of financing costs
    
    
    
    
    
    
    
    
    
    
    200,185Subordinated loan from parent company
    
    
    1,995,000
    
    
    
    
    
    
    
    Issuance of shares
    
    
    
    
    
    
    111,536
    
    
    
    Transfer of Additional Amount payable to
parent company
    
    
    
    
    
    
    (111,536
    )
    
    
    Repayment of subordinated loan to parent
company
    
    
    
    
    
    
    (150,000
    )
    
    
    Reimbursement of advance to parent company
    
    
    
    
    
    
    
    
    
    
    40,893Dividends
    
    
    
    
    
    
    (10,000
    )
    
    
    (210,000
    )Reduction in paid-up capital
    
    
    (299,550
    )
    
    
    (108,749
    )
    
    
    (45,653
    )Other
    
    
    
    
    
    
    
    
    
    
    (126
    )Cash flows provided by (used in)
financing activities
    
    
    1,785,241
    
    
    
    (202,217
    )
    
    
    (117,940
    )Net change in cash and cash equivalents
    
    
    
    
    
    
    (26,699
    )
    
    
    (5,712
    )Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    26,699
    
    
    
    32,411Cash and cash equivalents at end of year
    
    $
    
    
    
    $
    
    
    
    $
    26,699Cash and cash equivalents are comprised of:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    26,699Non-cash financing and investing activities:Purchase of fixed assets financed by
accounts payable and accrued liabilities
    
    $
    33,868
    
    
    $
    35,778
    
    
    $
    16,569Cash interest payments (net of receipts)
    
    $
    80,143
    
    
    $
    80,514
    
    
    $
    62,765Cash interest payments to parent company
    
    
    159,078
    
    
    
    17,951
    
    
    
    Cash income tax payments (net of refunds)
    
    
    (206
    )
    
    
    988
    
    
    
    3,224
  F-7




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##### Table of Contents



VIDEOTRON LTD.
 
  
 2007

    
    2006AssetsCurrent assets:Temporary investments
    
    $
    
    
    
    $
    987Accounts receivable
    
    
    161,366
    
    
    
    134,677Amounts receivable from affiliated companies (note 16)
    
    
    12,266
    
    
    
    2,660Income taxes
    
    
    220
    
    
    
    310Inventories (note 5)
    
    
    39,445
    
    
    
    39,451Prepaid expenses
    
    
    16,316
    
    
    
    8,568Future income taxes (note 4)
    
    
    31,585
    
    
    
    24,728261,198
    
    
    
    211,381Investments (note 6)
    
    
    1,995,000
    
    
    
    Fixed assets (note 7)
    
    
    1,408,805
    
    
    
    1,289,429Future income taxes (note 4)
    
    
    2,970
    
    
    
    3,358Other assets (note 8)
    
    
    30,466
    
    
    
    45,282Goodwill
    
    
    433,759
    
    
    
    438,582$
    4,132,198
    
    
    $
    1,988,032Liabilities and Shareholders EquityCurrent liabilities:Bank indebtedness
    
    $
    9,505
    
    
    $
    18,470Accounts payable and accrued liabilities
    
    
    267,432
    
    
    
    263,290Amounts payable to affiliated companies (note 16)
    
    
    54,683
    
    
    
    41,529Deferred revenue
    
    
    151,928
    
    
    
    135,335Income taxes
    
    
    119
    
    
    
    81483,667
    
    
    
    458,705Long-term debt (note 10)
    
    
    950,988
    
    
    
    1,021,170Subordinated loan to parent company (note 6)
    
    
    1,995,000
    
    
    
    Derivative financial instruments (note 15)
    
    
    245,556
    
    
    
    71,828Deferred revenue
    
    
    21,112
    
    
    
    22,407Pension plan accrued liability
    
    
    9,656
    
    
    
    8,624Future income taxes (note 4)
    
    
    166,162
    
    
    
    154,943Non-controlling interest
    
    
    947
    
    
    
    7743,873,088
    
    
    
    1,738,451Shareholders equity:Share capital (note 11)
    
    
    46,177
    
    
    
    345,727Contributed surplus
    
    
    576,979
    
    
    
    576,979Deficit
    
    
    (356,744
    )
    
    
    (673,125
    )Accumulated other comprehensive loss (note 13)
    
    
    (7,302
    )
    
    
    259,110
    
    
    
    249,581$
    4,132,198
    
    
    $
    1,988,032
 
  F-8




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##### Table of Contents



VIDEOTRON LTD.
 
   Videotron Ltd. (the Company) is a cable service provider in the province of Québec for
pay-television services, Internet access and telephony services. It also provides business
telecommunication services, wireless communication services and operates a chain of video
stores.1.
    
    Summary of significant accounting policies:The accompanying consolidated financial statements of the Company have been prepared in
accordance with Canadian generally accepted accounting principles (GAAP). The significant
differences between generally accepted accounting principles in Canada and in the United States
are described in note 20.
 (a)
    
    Basis of presentation:These consolidated financial statements, expressed in Canadian dollars, include the
consolidated financial statements of Videotron Ltd. and its subsidiaries, CF Cable TV Inc.,
Le SuperClub Vidéotron Ltée, SETTE inc. and Videotron US inc., incorporated under the laws
of the State of Delaware, on September 20, 2007.Certain comparative figures for the years 2006 and 2005 have been reclassified to conform
to the financial presentation adopted for the year ended December 31, 2007.(b)
    
    Change in accounting policies:Effective January 1, 2007, the Company adopted the Canadian Institute of Chartered
Accountants (CICA) Handbook Section 1530, Comprehensive Income, Section 3855, Financial
Instruments  Recognition and Measurementand Section 3865, Hedges.Changes in accounting policies in conformity with these new accounting standards are as
follows:
 (i)
    
    Comprehensive income:Section 1530 introduces the concept of comprehensive income, which is calculated by
including other comprehensive income with net income. Other comprehensive income
represents changes in shareholders equity arising from transactions and other events
with non-owner sources, such as unrealized gains and losses on financial assets
classified as available-for-sale and changes in the fair value of the effective portion
of cash flow hedging instruments. With the adoption of this Section, the consolidated
financial statements now include a consolidated statement of comprehensive income.
 F-9




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##### Table of Contents



VIDEOTRON LTD.
   1.
    
    Summary of significant accounting policies (continued):
 (b)
    
    Change in accounting policies (continued):
 (ii)
    
    Financial instruments:Section 3855 establishes standards for recognizing and measuring financial assets,
financial liabilities and derivatives. Under this standard, financial instruments are
now classified as held for trading, available-for-sale, held-to-maturity, loans and
receivables, or other financial liabilities, and measurement in subsequent periods
depends on their classification. Transaction costs are expensed as incurred for
financial instruments classified as held for trading. For other financial instruments,
transaction costs are capitalized on initial recognition and presented as a reduction
of the underlying financial instruments.Financial assets and financial liabilities held for trading are measured at fair value
with changes recognized in income. Available-for-sale financial assets are measured at
fair value or at cost, in the case of financial assets that do not have a quoted market
price in an active market and changes in fair value recorded in comprehensive income.
Financial assets held-to-maturity, loans and receivables, and other financial
liabilities are measured at amortized cost using the effective interest method of
amortization. The Company has classified its cash and cash equivalents and temporary
investments as held for trading. Amounts receivable, amounts receivable from related
parties, loans and other long-term receivables have been classified as loans and
receivables. All investments were classified as available-for-sale. All of the
Companys financial liabilities were classified as other liabilities.Derivative instruments are recorded as financial assets or liabilities at fair value,
including those derivatives that are embedded in financial or non-financial contracts
that are not closely related to the host contracts. Changes in the fair values of
derivatives are recognized in financial expenses with the exception of derivatives
designated as a cash flow hedge, for which hedge accounting is used. In accordance with
the new standards, the Company selected January 1, 2003 as its transition date for
adopting the standard related to embedded derivatives.(iii)
    
    Hedges:Section 3865 specifies the criteria that must be satisfied in order for hedge
accounting to be applied and the accounting for each of the permitted hedging
strategies.
 F-10




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (b)
    
    Change in accounting policies (continued):
 (iii)
    
    Hedges (continued):Accordingly, for derivatives designated as fair value hedges, such as certain cross
currency interest rate swaps used by the Company, changes in the fair value of the
hedging derivative recorded in income are substantially offset by changes in the fair
value of the hedged item to the extent that the hedging relationship is effective. When
a fair value hedge is discontinued, the carrying value of the hedged item is no longer
adjusted and the cumulative fair value adjustments to the carrying value of the hedged
item are amortized to income over the remaining term of the original hedging
relationship.For derivative instruments designated as cash flow hedges, such as certain cross
currency interest rate swaps and forward exchange contracts used by the Company, the
effective portion of a hedge is reported in other comprehensive income until it is
recognized in income during the same period in which the hedged item affects income,
while the ineffective portion is immediately recognized in the consolidated statement
of income. When a cash flow hedge is discontinued, the amounts previously recognized in
accumulated other comprehensive income are reclassified to income when the variability
in the cash flows of the hedged item affects income.Upon 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 of prior years. Accordingly, the following adjustments were recorded in the
consolidated financial statements as at January 1, 2007:
 
    
    Decrease in other assets of $14.5 million;
    
    Increase in derivative financial instruments of $60.6 million;
    
    Decrease in long-term debt of $28.6 million;
    
    Decrease in future income tax liabilities of $14.8 million;
    
    Increase in deficit of $9.3 million;
    
    Increase in accumulated other comprehensive loss of $22.4 million.
 The adoption of the new standards resulted in an increase of $11.3 million in net
income during the year ended December 31, 2007.
 F-11




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (c)
    
    Foreign currency translation:
  (d)
    
    Use of estimates:
  (e)
    
    Impairment of long-lived assets:
  F-12




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (f)
    
    Revenue recognition:
   (g)
    
    Cash and cash equivalents:
  (h)
    
    Temporary investments:
  (i)
    
    Trade receivables:
  (j)
    
    Inventories:
  F-13




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (k)
    
    Income taxes:
   (l)
    
    Fixed assets:
   Asset
    
    Basis
    
    Period/rateReceiving and distribution networks
    
    Straight-line
    
    3 years to 20 yearsFurniture and equipment
    
    Declining balance
    
    20% to 33.3%and straight-line
    
    3 years to 7 yearsTerminals and operating system
    
    Straight-line
    
    5 years and 10 yearsBuildings
    
    Declining balance
    
    
    
    5%Coding and transmission material
    
    Declining balance
    
    
    
    20%
 F-14




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (l)
    
    Fixed assets (continued):
   (m)
    
    Goodwill and other intangible assets:
      F-15




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (n)
    
    Other assets:
  (o)
    
    Stock-based compensation:
  (p)
    
    Derivative financial instruments and hedge accounting:
  F-16




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (p)
    
    Derivative financial instruments and hedge accounting (continued):
  
    
    The Company uses foreign exchange forward contracts to hedge the foreign
currency rate exposure on anticipated equipment or inventory purchases in a foreign
currency. These foreign exchange forward contracts are designated as cash flow
hedges. Under hedge accounting, foreign exchange translation gains and losses are
recognized in financial expenses as an adjustment to the cost of fixed assets or
inventories when the transaction is recorded.
    
    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 US 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 US
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.
  
    
    For purchases hedged by foreign exchange forward contracts, foreign exchange
translation gains and losses were recognized as an adjustment to the cost of equipment
or inventory, when the transaction was recorded.
    
    For long-term debt in foreign currency hedged by 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 expense over the term of the agreement.
    
    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.
 F-17




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (p)
    
    Derivative financial instruments and hedge accounting (continued):
    (q)
    
    Pension plans and postretirement benefits:
 (i)
    
    Pension plans:
  
    
    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% of the greater of the accrued benefit obligation or fair
value of plan assets, over the expected average remaining service period of the
active employee group covered by the plans.
    F-18




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (q)
    
    Pension plans and postretirement benefits (continued):
 (ii)
    
    Postretirement benefits:
  (r)
    
    Rates subject to CTRC regulations:
 Broadcasting Act (Canada) Telecommunications
Act (Canada)
 (s)
    
    Future changes in accounting standards:
     F-19




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##### Table of Contents



VIDEOTRON LTD.
  1.
    
    Summary of significant accounting policies (continued):
 (s)
    
    Future changes in accounting standards (continued):
 Goodwill and Intangible Assets Goodwill and Other Intangible Assets Research and Development Costs Revenues and Expenditures During the Pre-operating Period Enterprises in the Development Stage
 2.
    
    Business combinations and reorganization:
    Videotron
    
    9101-0827
    
    Eliminated on
    
    TotalVideotron Ltd.
    
    Telecom Ltd.
    
    Quebec Inc.
    
    consolidation
    
    restated(in thousands of Canadian dollars)Consolidated net
income (loss) for the
year ended 
   
December 31,
2005
    
    $
    113,875
    
    
    $
    (167
    )
    
    $
    (15,730
    )
    
    $
    4,713
    
    
    $
    102,691
 F-20




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##### Table of Contents



VIDEOTRON LTD.
  3.
    
    Financial expenses:
 2007
    
    
    2006
    
    
    2005(in thousands of Canadian dollars)Third parties:Interest on long-term debt
    
    $
    81,218
    
    
    $
    81,316
    
    
    $
    61,207Amortization of financing costs and debt
premium or discount
    
    
    (945
    )
    
    
    432
    
    
    
    (352
    )(Gain) loss on revaluation of Additional
Amount payable
    
    
    
    
    
    
    (3,286
    )
    
    
    10,140Gain on repayment of long-term debt
    
    
    
    
    
    
    
    
    
    
    (312
    )Net (gain) loss on derivative instruments and
on foreign currency translation of financial
instruments (1) (2)
    
    
    (9,124
    )
    
    
    (19
    )
    
    
    248Loss (gain) on foreign currency translation of
short-term monetary items
    
    
    1,415
    
    
    
    1,113
    
    
    
    (1,447
    )Other
    
    
    63
    
    
    
    70
    
    
    
    54272,627
    
    
    
    79,626
    
    
    
    70,026Interest income
    
    
    (131
    )
    
    
    (512
    )
    
    
    (1,271
    )72,496
    
    
    
    79,114
    
    
    
    68,755Parent company:Interest expense (net of income)
    
    
    165,460
    
    
    
    472
    
    
    
    5,982Dividend income
    
    
    (170,904
    )
    
    
    
    
    
    
    (5,444
    )
    
    
    472
    
    
    
    5,982$
    67,052
    
    
    $
    79,586
    
    
    $
    74,737
 
 1)
    
    During the years ended December 31, 2007 and 2006, the Company recorded a loss of
$3.4 million and a gain of $0.02 million, respectively, on embedded derivatives not
closely related to their host contract and on derivative instruments for which hedge
accounting was not used.2)
    
    During the year ended December 31, 2007, the Company recorded a gain of $12.5
million for the ineffective portion of fair value hedges. F-21




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##### Table of Contents



VIDEOTRON LTD.
  4.
    
    Income taxes:
  2007
    
    
    2006
    
    
    2005(in thousands of Canadian dollars)Income taxes at domestic statutory tax rates
    
    $
    116,592
    
    
    $
    79,412
    
    
    $
    53,536Increase (reduction) resulting from:Federal large corporations tax
    
    
    
    
    
    
    
    
    
    
    2,156Non-taxable dividend from the parent
company
    
    
    (54,723
    )
    
    
    
    
    
    
    Settlement of notices of assessment
    
    
    
    
    
    
    
    
    
    
    1,080Non-deductible items deductible
at a lower rate or for which a
tax benefit was not recorded
    
    
    (4,207
    )
    
    
    (1,001
    )
    
    
    3,245(Reduction) increase in future enacted
tax rate
    
    
    (18,808
    )
    
    
    (14,914
    )
    
    
    10,661Other
    
    
    (596
    )
    
    
    733
    
    
    
    (887
    )Income taxes based on the effective
income tax rate
    
    $
    38,258
    
    
    $
    64,230
    
    
    $
    69,791
  2007
    
    
    2006(in thousands of Canadian dollars)Operating loss carryforwards
    
    $
    21,650
    
    
    $
    17,676Other provisions
    
    
    10,093
    
    
    
    8,384Derivative financial instruments
    
    
    13,614
    
    
    
    Fixed assets
    
    
    (165,808
    )
    
    
    (147,080
    )Other assets
    
    
    (11,156
    )
    
    
    (5,837
    )Net future income tax liability
    
    $
    (131,607
    )
    
    $
    (126,857
    )
 F-22




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##### Table of Contents



VIDEOTRON LTD.
  4.
    
    Income taxes (continued):
  2007
    
    
    2006(in thousands of Canadian dollars)Future income tax assets:Current
    
    $
    31,585
    
    
    $
    24,728Long-term
    
    
    2,970
    
    
    
    3,35834,555
    
    
    
    28,086Future income tax liability:Long-term
    
    
    (166,162
    )
    
    
    (154,943
    )Net future income tax liability
    
    $
    (131,607
    )
    
    $
    (126,857
    )
  5.
    
    Inventories:
 2007
    
    
    2006(in thousands of Canadian dollars)Subscribers equipment
    
    $
    20,855
    
    
    $
    23,345Video store materials
    
    
    5,658
    
    
    
    5,524Supplies and spare parts
    
    
    12,932
    
    
    
    10,582$
    39,445
    
    
    $
    39,451
 F-23




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##### Table of Contents



VIDEOTRON LTD.
  6.
    
    Subordinated loan to parent company:
 2007
        
        
    2006(in thousands of Canadian dollars)Subordinated loan  Quebecor Média Inc.
    
    $
    1,995,000
    
    
    $
    
    7.
    
    Fixed assets:
 2007Accumulated
    
    
    Net bookCost
        
        
    amortization
        
        
    value(in thousands of Canadian dollars)Receiving and distribution networks
    
    $
    2,512,273
    
    
    $
    1,345,774
    
    
    $
    1,166,499Furniture and equipment
    
    
    413,637
    
    
    
    291,776
    
    
    
    121,861Terminals and operating system
    
    
    138,583
    
    
    
    58,439
    
    
    
    80,144Coding and transmission material
    
    
    7,541
    
    
    
    3,004
    
    
    
    4,537Buildings
    
    
    50,140
    
    
    
    17,216
    
    
    
    32,924Land
    
    
    2,840
    
    
    
    
    
    
    
    2,840$
    3,125,014
    
    
    $
    1,716,209
    
    
    $
    1,408,805
 F-24




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##### Table of Contents



VIDEOTRON LTD.
  7.
    
    Fixed assets (continued):
 2006Accumulated
    
    
    Net bookCost
        
        
    amortization
        
        
    value(in thousands of Canadian dollars)Receiving and distribution networks
    
    $
    2,273,398
    
    
    $
    1,194,817
    
    
    $
    1,078,581Furniture and equipment
    
    
    365,533
    
    
    
    264,765
    
    
    
    100,768Terminals and operating system
    
    
    151,624
    
    
    
    79,429
    
    
    
    72,195Coding and transmission material
    
    
    8,047
    
    
    
    2,695
    
    
    
    5,352Buildings
    
    
    45,342
    
    
    
    15,649
    
    
    
    29,693Land
    
    
    2,840
    
    
    
    
    
    
    
    2,840$
    2,846,784
    
    
    $
    1,557,355
    
    
    $
    1,289,429
 8.
    
    Other assets:
 2007
        
        
    2006(in thousands of Canadian dollars)Deferred connection fees
    
    $
    18,794
    
    
    $
    18,201Development and pre-operating costs (ii)
    
    
    2,617
    
    
    
    4,227Financing costs (i)
    
    
    
    
    
    
    14,499Deferred pension charges (note 18)
    
    
    3,035
    
    
    
    3,113Video rental inventory
    
    
    4,562
    
    
    
    3,739Easements at cost (with indefinite life)
    
    
    994
    
    
    
    994Other
    
    
    464
    
    
    
    509$
    30,466
    
    
    $
    45,282
 
 (i)
    
    Net of accumulated amortization of $5.0 million in 2006.(ii)
    
    Net of accumulated amortization of $4.3 million in 2007 and $2.2 million in 2006.  F-25




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##### Table of Contents



VIDEOTRON LTD.
  9.
    
    Additional Amount payable:
   10.
    
    Long-term debt:
 Effectiveinterest rate as ofDecember 31,
    
    Year of2007
        
    maturity
        
    2007
        
    2006(in thousands of Canadian dollars)Bank credit facility (i)
    
    
    5.58
    %
    
    
    2009
    
    
    $
    147,721
    
    
    $
    49,000Senior Notes(1) (ii)
    
    
    6.59
    %
    
    
    2014
    
    
    
    652,816
    
    
    
    769,105Senior Notes(1) (iii)
    
    
    6.44
    %
    
    
    2015
    
    
    
    172,818
    
    
    
    203,065973,355
    
    
    
    1,021,170Change in fair value related to hedged interest rate risks
    
    
    (14,477
    )
    
    
    Adjustment related to embedded derivatives
    
    
    4,636
    
    
    
    Financing fees, net of amortization(2)
    
    
    
    
    
    
    (12,526
    )
    
    
    $
    950,988
    
    
    $
    1,021,170
 
 (1)
    
    Year-end exchange rates were used to translate debt issued in a foreign currency.(2)
    
    Net of accumulated amortization of $7.0 million. F-26




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VIDEOTRON LTD.
  10.
    
    Long-term debt (continued):
 (i)
    
    The credit facility of $450.0 million is a revolving credit facility maturing in
November 2009 and it bears interest at bankers acceptance or Canadian prime rates, plus a
margin, depending on the Company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 the Company and its subsidiaries. The credit facility contains covenants
such as maintaining certain financial ratios and some restrictions on the payment of
dividends and asset acquisitions and dispositions.(ii)
    
    In October 2003, a first series of US$335.0 million in aggregate principal amount of
Senior Notes was issued at a discount for net proceeds of US$331.9 million, before
issuance fees of US$5.7 million. In November 2004, a second series of US$315.0 million in
aggregate principal amount of Senior Notes was issued at a premium for total proceeds of
US$330.8 million, before issuance fees of US$4.1 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 the Company, including limitations on its
ability to incur additional indebtedness, and are unsecured. The Senior Notes are
guaranteed by specific subsidiaries of the Company. The Company 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.(iii)
    
    In September 2005, US$175.0 million in aggregate principal amount of Senior Notes
were issued at a discount for net proceeds of US$174.1 million, before issuance fees of
US$3.2 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 the Company, including limitations on its ability to incur additional
indebtedness, and are unsecured. The Senior Notes are guaranteed by specific subsidiaries
of the Company. The Company 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.(iv)
    
    The $150.0 million subordinated loan from the Companys parent company, bore interest
at the rate of 90-day Bankers Acceptance rates plus 1.5%. On January 17, 2006, the
Company reimbursed the principal amount of the subordinated loan and all interest owed at
that date to Quebecor Media Inc. for a total consideration of $168.0 million.(v)
    
    On July 15, 2005, the Company 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.
 F-27




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VIDEOTRON LTD.
  10.
    
    Long-term debt (continued):
  (in thousands of Canadian dollars)2008
    
    
    $
    2009
    
    
    
    147,7212010
    
    
    2011
    
    
    2012
    
    2013 and thereafter
    
    
    
    825,634
 11.
    
    Share capital:
     2007
        
        
    2006(in thousands of Canadian dollars)Issued and paid:2,515,276 common shares, Series A
    
    $
    46,177
    
    
    $
    345,727Nil preferred shares, Series G(65,000 as of December 31, 2006)
    
    
    
    
    
    
    $
    46,177
    
    
    $
    345,727
  F-28




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VIDEOTRON LTD.
   11.
    
    Share capital (continued):
         F-29




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VIDEOTRON LTD.
  12.
    
    Stock-based compensation plan:
 .
 F-30




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VIDEOTRON LTD.
  12.
    
    Stock-based compensation plan (continued):The following table gives summary information on outstanding options granted by the parent
company to the employees of the Company as at December 31, 2007 and 2006:
 2007
    
    
    
    
    
    
    2006Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exerciseOptions
    
    
    price
    
    
    Options
    
    
    priceBalance at beginning of year
    
    
    861,767
    
    
    $
    23.43
    
    
    
    588,257
    
    
    $
    19.34Granted
    
    
    1,255,000
    
    
    
    44.45
    
    
    
    291,782
    
    
    
    31.97Exercised
    
    
    (1,936
    )
    
    
    22.73
    
    
    
    (8,887
    )
    
    
    29.48Cancelled
    
    
    (13,605
    )
    
    
    28.74
    
    
    
    (9,385
    )
    
    
    27.17Balance at end of year
    
    
    2,101,226
    
    
    $
    35.95
    
    
    
    861,767
    
    
    $
    23.43Vested options at end of year
    
    
    558,096
    
    
    $
    19.44
    
    
    
    378,451
    
    
    $
    18.69
 The following table gives summary information on outstanding options as at December 31, 2007:
 Outstanding options
    
    
    
    
    
    
    Vested optionsWeighted
    
    
    Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    average
    
    
    
    
    
    
    averageyears to
    
    
    exercise
    
    
    
    
    
    
    exerciseRange of exercise price
    
    
    Number
    
    
    maturity
    
    
    price
    
    
    Number
    
    
    price$15.19 to 21.77
    
    
    
    
    
    
    524,869
    
    
    
    5.01
    
    
    $
    18.51
    
    
    
    510,519
    
    
    
    $  18.5022.98 to 33.41
    
    
    
    
    
    
    321,357
    
    
    
    8.33
    
    
    
    31.25
    
    
    
    47,577
    
    
    
    29.5533.42 to 44.45
    
    
    
    
    
    
    1,255,000
    
    
    
    9.59
    
    
    
    44.45
    
    
    
    
    
    
    
    $15.19 to 44.45
    
    
    
    
    
    
    2,101,226
    
    
    
    8.26
    
    
    $
    35.95
    
    
    
    558,096
    
    
    
    $  19.44
 For the year ended December 31, 2007, a charge of $11.6 million related to the plan was
recorded in the statement of income ($5.1 million for 2006).
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VIDEOTRON LTD.
  
 13.
    
    Accumulated other comprehensive loss:
 (in thousands of Canadian dollars)Balance as at January 1, 2007
    
    $
    Cumulative effect of changes in accounting policies (note 1 (b))
    
    
    (22,446
    )Other comprehensive income, net of income tax
    
    
    15,144Balance as at December 31, 2007
    
    $
    (7,302
    )
 No significant amount is expected to be reclassified to income over the next twelve months, in
connection with derivatives designated as cash flow hedges. The remaining accumulated other
comprehensive loss is expected to be reversed over an eight-year period.14.
    
    Commitments and guarantees:
 (a)
    
    Leases and purchasing agreements:Under the terms of operating leases or purchasing agreements, the Company is committed to
make the following minimum annual payments over the next years:
 (in thousands of Canadian dollars)Minimum
    
    
    Leases
    
    
    Minimum netannual committed
    
    
    assumed by
    
    
    annual committedpayments
    
    
    franchisees (c)
    
    
    payments2008
    
    
    $  35,766
    
    
    
    $  2,211
    
    
    
    $  33,5552009
    
    
    15,486
    
    
    
    1,845
    
    
    
    13,6412010
    
    
    9,923
    
    
    
    1,465
    
    
    
    8,4582011
    
    
    6,507
    
    
    
    964
    
    
    
    5,5432012
    
    
    4,984
    
    
    
    685
    
    
    
    4,2992013 and thereafter
    
    
    8,353
    
    
    
    1,273
    
    
    
    7,080
 The operating lease expense amounted to $20.8 million in 2007, $21.0 million in 2006 and
$21.3 million in 2005.
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##### Table of Contents



VIDEOTRON LTD.
  
 14.
    
    Commitments and guarantees (continued):
 (b)
    
    Management fee:The Company pays annual management fees to the parent company for services rendered to the
Company, including internal audit, legal and corporate, financial planning and treasury,
tax, real estate, human resources, risk management, public relations and other services.
Management fees amounted to $46.9 million in 2007, $23.4 million in 2006 and $13.3 million
in 2005. The agreement provides for an annual management fee to be agreed upon for the
year 2008. In addition, the parent company is entitled to the reimbursement of
out-of-pocket expenses incurred in connection with the services provided under the
agreement.(c)
    
    Disclosure of guarantees: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
operating leases prior to maturity and should the fair value of the leased assets be less
than the guaranteed residual value, the Company must, under certain conditions, compensate
the lessor for a portion of the shortfall. As at December 31, 2007, the maximum exposure
in respect of these guarantees is $7.2 million and no amount has been recorded in the
consolidated financial statements.Guarantees under lease agreements:A subsidiary of the Company has provided guarantees to the lessor under premise leases for
certain franchisees, with expiry dates through 2016. The Company must, under certain
conditions, compensate the lessor should the franchisee default. As at December 31, 2007,
the maximum exposure in respect of these guarantees is $8.4 million. No liability has been
recorded in the consolidated financial statements since the subsidiary does not expect to
make any payments pertaining to these guarantees. Recourse against the franchisee is also
available, up to the total amount due.Outsourcing companies and suppliers:In the normal course of its operations, the Company enters into contractual agreements with
outsourcing companies and suppliers. In some cases, the Company agrees to provide
indemnifications in the event of legal procedures initiated against them. In other cases,
the Company provides indemnification to counterparties for damages resulting from the
outsourcing companies and suppliers. The nature of the indemnification agreements prevents
the Company from estimating the maximum potential liability it could be required to pay. No
amount has been accrued in the consolidated financial statements with respect to these
indemnifications.
 F-33




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VIDEOTRON LTD.
  
 15.
    
    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 an optimal balance of fixed and variable
rate debts and (ii) to set in Canadian dollars all future payments on debts denominated in US
dollars (interest and principal) and on certain equipment or inventory expenditures denominated
in a 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
    
    
    amount$/ US$
    
    Less than 1 year
    
    
    
    1.0511
    
    
    
    76.8
 (ii)
    
    Cross-currency interest rate swaps:
 Exchange rateNotional
    
    
    Annual
    
    
    Annual
    
    
    of interest andamount
    
    
    effective
    
    
    nominal
    
    
    capital paymentsPeriod
    
    
    (in millions
    
    
    interest
    
    
    interest
    
    
    per CA dollar forcovered
    
    
    of dollars)
    
    
    rate
    
    
    rate
    
    
    one US dollarSenior Notes
    
    
    2004 to 2014
    
    
    US$
    190.0
    
    
    Bankers
    
    
    
    6.875
    %
    
    
    1.2000acceptances3 monthsplus 2.80%Senior Notes
    
    
    2004 to 2014
    
    
    US$
    125.0
    
    
    
    7.45
    %
    
    
    6.875
    %
    
    
    1.1950Senior Notes
    
    
    2003 to 2014
    
    
    US$
    200.0
    
    
    Bankers
    
    
    
    6.875
    %
    
    
    1.3425acceptances3 monthsplus 2.73%Senior Notes
    
    
    2003 to 2014
    
    
    US$
    135.0
    
    
    
    7.66
    %
    
    
    6.875
    %
    
    
    1.3425Senior Notes
    
    
    2005 to 2015
    
    
    US$
    175.0
    
    
    
    5.98
    %
    
    
    6.375
    %
    
    
    1.1781
 F-34




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VIDEOTRON LTD.
  15.
    
    Financial instruments (continued):
 (b)
    
    Fair value of financial instruments:The carrying amount of accounts receivable, accounts receivable from/payable to affiliated
companies, and accounts payable and accrued liabilities approximates their fair value as
these items will be realized or paid within one year.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
    
    
    Fair
    
    
    Carrying
    
    
    Fairvalue
    
    
    value
    
    
    value
    
    
    value(in thousands of Canadian dollars)Long-term debt
    
    $
    973,355
    
    
    $
    938,158
    
    
    $
    1,021,170
    
    
    $
    1,010,601Cross currency interest
rate swaps
    
    
    (241,320
    )
    
    
    (241,320
    )
    
    
    (71,828
    )
    
    
    (141,062
    )Forward foreign exchange
    
    
    (4,236
    )
    
    
    (4,236
    )
    
    
    
    
    
    
    2,083
 The carrying value of long-term debt excludes adjustments to record changes in fair value
of long-term debt related to hedged interest risk, the embedded derivatives and the
financing fees.The fair value of the 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.(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. The Company is exposed to a credit
risk towards its customers. However, credit risk concentration is minimized because of the
large number of customers.The Company does not believe that it is exposed to an unusual level of customer credit
risk.
 F-35




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VIDEOTRON LTD.
  16.
    
    Related party transactions:In addition to the transactions disclosed elsewhere in these financial statements, the Company
entered into the following transactions with affiliated companies. These transactions have
been recorded at the exchange value in the normal course of business, which is the amount
established and agreed to by the related parties:
 2007
    
    
    2006
    
    
    2005(in thousands of Canadian dollars)Parent company:Operating revenue
    
    $
    139
    
    
    $
    150
    
    
    $
    103Direct costs and operating expenses
    
    
    3,908
    
    
    
    4,110
    
    
    
    4,212Operating expenses recovered
    
    
    (23
    )
    
    
    (23
    )
    
    
    (155
    )Companies under common control:Operating revenue
    
    
    22,164
    
    
    
    25,146
    
    
    
    28,673Direct costs and operating expenses
    
    
    60,187
    
    
    
    59,384
    
    
    
    53,469Directors of the parent company:Direct costs and operating expenses
    
    
    403
    
    
    
    682
    
    
    
    768Acquisition of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    85
 Operating transactions:The Company entered into an affiliation agreement with Groupe Archambault Inc. (Archambault),
a company under common control, a subsidiary of Quebecor Media. This agreement provides that
the Company pay to Archambault 54% of all revenues generated from the fees paid by customers to
use Archambaults video-on-demand services. This agreement expires on August 31, 2008 and is
renewable.In connection with this affiliation agreement, the Company entered into a video-on-demand
services agreement with Archambault. Under this agreement, various technical services will be
provided to Archambault. In consideration of these services, Archambault will pay a fee of 8%
of all revenues generated from fees paid by customers to use Archambaults video-on-demand
services. The term of this agreement is the same as that of the affiliation agreement.
 F-36




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##### Table of Contents



VIDEOTRON LTD.
  
 16.
    
    Related party transactions (continued):Operating transactions (continued):Under the affiliation agreement, the Company paid fees to Archambault of $13.3 million,
$9.0 million and $6.7 million and received fees from Archambault of $2.6 million, $1.9 million
and $1.0 million for the years 2007, 2006 and 2005, respectively.On January 1, 2006, pursuant to the merger of Videotron Telecom, Videotron Ltd. became party to
the information technology outsourcing agreement between its affiliates, Quebecor World Inc.
and Videotron Telecom. Under this agreement, Quebecor World Inc. has retained Videotron Ltd.
to outsource Quebecor World Inc.s corporate information technology services.Tax transactions:During the years ended December 31, 2006 and 2005, the Company acquired from a company under
common control of the ultimate parent company income tax deductions of $0.3 million and $0.7
million, respectively, that were recorded as income taxes receivable or as future income tax
assets. These transactions allowed the Company to realize gains of $0.02 million in 2006 and
2005, which were credited to contributed surplus.On December 18 and 21, 2007, Videotrons ultimate parent company, Quebecor Inc., transferred to
the Company a total of $57.1 million of non-capital tax losses in exchange for net cash
consideration of $12.8 million. This transaction was recorded at the exchange amount. As a
result, the Company recorded an income tax asset of $17.7 million and the difference of $4.9
million, between the net cash consideration and the income tax asset, was recorded as a
deferred credit, included in accounts payable and accrued liabilities, which will reduce the
income tax expense in the future as these tax deductions are used.On December 21, 2007, Videotrons ultimate parent company, Quebecor Inc., transferred to CF
Cable TV Inc., a wholly-owned subsidiary of the Company, $9.4 million of non-capital tax losses
in exchange for a net cash consideration of $2.1 million. This transaction was recorded at the
exchange amount. As a result, CF Cable TV Inc. recorded an income tax asset of $2.9 million
and the difference of $0.8 million between the net cash consideration and the income tax asset
was recorded as a deferred credit, included in accounts payable and accrued liabilities, which
will reduce the income tax expense in the future as these tax deductions are used.
 F-37




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##### Table of Contents



VIDEOTRON LTD.
  17.
    
    Contingencies:
 (a)
    
    On July 20, 2007, a motion to certify a class action lawsuit was filed in the Province of Québec against the Company 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.In the normal course of business, the Company is a party to various claims and lawsuits.
Even though the outcome of these various pending cases as at December 31, 2007 cannot be
determined with certainty, management believes that their outcome will not have a material
adverse impact on its operating results or financial position.(b)
    
    In December 2006, the Federal Court of Canada ruled that the Part II license fees
charged by the CRTC were ultra vires(unconstitutional), in fact and in law, and thus the
CRTC could no longer charge Part II license fees. The judgment also established that the
Company would not be allowed to claim any amounts paid in previous years. The decision is
currently being appealed. However, on October 1, 2007, the CRTC officially confirmed its
intention not to collect the fees due on November 30, 2007 and subsequent years.Management is of the opinion that the Federal Court of Appeal will not reverse the judgment
of December 2006. Accordingly, during the third quarter of 2007, the Company reversed all
of its current Part II license fees accrual of $11.1 million.
 18.
    
    Pension plans and postretirement benefits:The Company and subsidiaries maintain various defined benefit plans 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 pension plans were performed on December 31,
2006. The next actuarial valuations will be performed during fiscal year 2010 as at December
31, 2009.The Company provides postretirement benefits to eligible employees. The costs of these
benefits are accounted for during the employees active service period.
 F-38




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##### Table of Contents



VIDEOTRON LTD.
  18.
    
    Pension plans and postretirement benefits (continued):The following tables provide a reconciliation of the changes in the plans benefit obligations
and fair value of plan assets for the years ended December 31, 2007 and 2006, and a statement
of funded status at these dates:
 2007
    
    
    
    
    
    
    
    
    
    
    2006Post-
    
    
    
    
    
    
    
    
    
    
    Post-Pension
    
    
    retirement
    
    
    
    
    
    
    Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total
    
    
    benefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Change in benefit obligations:Benefit obligations,
beginning of year
    
    $
    87,523
    
    
    $
    9,822
    
    
    $
    97,345
    
    
    $
    78,434
    
    
    $
    7,755
    
    
    $
    86,189Service costs
    
    
    6,217
    
    
    
    375
    
    
    
    6,592
    
    
    
    5,876
    
    
    
    355
    
    
    
    6,231Plan participants
contributions
    
    
    3,428
    
    
    
    
    
    
    
    3,428
    
    
    
    4,115
    
    
    
    
    
    
    
    4,115Interest costs
    
    
    4,730
    
    
    
    504
    
    
    
    5,234
    
    
    
    4,265
    
    
    
    403
    
    
    
    4,668Actuarial loss (gain)
    
    
    (6,574
    )
    
    
    (855
    )
    
    
    (7,429
    )
    
    
    (1,220
    )
    
    
    1,309
    
    
    
    89Benefits and settlement
paid
    
    
    (4,985
    )
    
    
    (108
    )
    
    
    (5,093
    )
    
    
    (3,947
    )
    
    
    
    
    
    
    (3,947
    )Other
    
    
    
    
    
    
    110
    
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    Benefit obligations,
end of year
    
    $
    90,339
    
    
    $
    9,848
    
    
    $
    100,187
    
    
    $
    87,523
    
    
    $
    9,822
    
    
    $
    97,345
 2007
    
    
    
    
    
    
    
    
    
    
    2006Post-
    
    
    
    
    
    
    
    
    
    
    Post-Pension
    
    
    retirement
    
    
    
    
    
    
    Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total
    
    
    benefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Change in plan assets:Fair value of plan
assets at beginning
of year
    
    $
    87,261
    
    
    $
    
    
    
    $
    87,261
    
    
    $
    70,781
    
    
    $
    
    
    
    $
    70,781Plan participants
contributions
    
    
    3,428
    
    
    
    
    
    
    
    3,428
    
    
    
    4,115
    
    
    
    
    
    
    
    4,115Actual return on
plan assets
    
    
    1,084
    
    
    
    
    
    
    
    1,084
    
    
    
    13,616
    
    
    
    
    
    
    
    13,616Employer contributions
    
    
    4,459
    
    
    
    108
    
    
    
    4,567
    
    
    
    2,696
    
    
    
    62
    
    
    
    2,758Benefits and settlement
paid
    
    
    (4,985
    )
    
    
    (108
    )
    
    
    (5,093
    )
    
    
    (3,947
    )
    
    
    (62
    )
    
    
    (4,009
    )Fair value of plan assets,
end of year
    
    $
    91,247
    
    
    $
    
    
    
    $
    91,247
    
    
    $
    87,261
    
    
    $
    
    
    
    $
    87,261
 F-39




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##### Table of Contents



VIDEOTRON LTD.
  18.
    
    Pension plans and postretirement benefits (continued):The defined benefit plan assets are comprised of:
 2007
    
    
    2006Equity securities
    
    
    61.7
    %
    
    
    68.1
    %Debt securities
    
    
    29.3
    %
    
    
    26.1
    %Other
    
    
    9.0
    %
    
    
    5.8
    %
 2007
    
    
    
    
    
    
    
    
    
    
    2006Post-
    
    
    
    
    
    
    
    
    
    
    Post-Pension
    
    
    retirement
    
    
    
    
    
    
    Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total
    
    
    benefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Reconciliation of funded status:Excess (deficit) of fair value
of plan assets over
benefit obligations,
end of year
    
    $
    908
    
    
    $
    (9,848
    )
    
    $
    (8,940
    )
    
    $
    (262
    )
    
    $
    (9,822
    )
    
    $
    (10,084
    )Past service cost gain
    
    
    
    
    
    
    (965
    )
    
    
    (965
    )
    
    
    
    
    
    
    (1,032
    )
    
    
    (1,032
    )Unrecognized
actuarial loss
    
    
    566
    
    
    
    2,718
    
    
    
    3,284
    
    
    
    1,891
    
    
    
    3,714
    
    
    
    5,605Net amount recognized in
balance sheet
    
    $
    1,474
    
    
    $
    (8,095
    )
    
    $
    (6,621
    )
    
    $
    1,629
    
    
    $
    (7,140
    )
    
    $
    (5,511
    )
 Amounts recognized in the consolidated balance sheets are as follows:
 2007
    
    
    
    
    
    
    
    
    
    
    2006Post-
    
    
    
    
    
    
    
    
    
    
    Post-Pension
    
    
    retirement
    
    
    
    
    
    
    Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total
    
    
    benefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Deferred pension charges
    
    $
    3,149
    
    
    $
    (114
    )
    
    $
    3,035
    
    
    $
    3,215
    
    
    $
    (102
    )
    
    $
    3,113Accrued benefit liability
    
    
    (1,675
    )
    
    
    (7,981
    )
    
    
    (9,656
    )
    
    
    (1,586
    )
    
    
    (7,038
    )
    
    
    (8,624
    )Net amount recognized
    
    $
    1,474
    
    
    $
    (8,095
    )
    
    $
    (6,621
    )
    
    $
    1,629
    
    
    $
    (7,140
    )
    
    $
    (5,511
    )
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VIDEOTRON LTD.
  18.
    
    Pension plans and postretirement benefits (continued):Components of the net benefit costs are as follows:
 2007Post-Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Service costs
    
    $
    6,217
    
    
    $
    375
    
    
    $
    6,592Interest costs
    
    
    4,730
    
    
    
    504
    
    
    
    5,234Actual return on plan assets
    
    
    (1,084
    )
    
    
    
    
    
    
    (1,084
    )Current actuarial gain
    
    
    (6,574
    )
    
    
    (855
    )
    
    
    (7,429
    )Elements of net benefit cost adjustments to recognize the
long-term nature and valuation allowance
    
    
    3,289
    
    
    
    24
    
    
    
    3,313Difference between actual and expected return on plan assets
    
    
    (5,311
    )
    
    
    
    
    
    
    (5,311
    )Deferral of current actuarial gain
    
    
    6,574
    
    
    
    855
    
    
    
    7,429Amortization of previously deferred actuarial loss
    
    
    62
    
    
    
    141
    
    
    
    203Other
    
    
    
    
    
    
    (67
    )
    
    
    (67
    )Total adjustments to recognize the long-term nature of benefit costs
    
    
    1,325
    
    
    
    929
    
    
    
    2,254Net benefit costs
    
    $
    4,614
    
    
    $
    953
    
    
    $
    5,567
 2006Post-Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Service costs
    
    $
    5,876
    
    
    $
    355
    
    
    $
    6,231Interest costs
    
    
    4,265
    
    
    
    403
    
    
    
    4,668Actual return on plan assets
    
    
    (13,616
    )
    
    
    
    
    
    
    (13,616
    )Current actuarial (gain) loss
    
    
    (1,220
    )
    
    
    1,309
    
    
    
    89Elements of net benefit cost adjustments to recognize the
long-term nature and valuation allowance
    
    
    (4,695
    )
    
    
    2,067
    
    
    
    (2,628
    )Difference between actual and expected return on plan assets
    
    
    8,388
    
    
    
    
    
    
    
    8,388Deferral of current actuarial gain (loss)
    
    
    1,220
    
    
    
    (1,309
    )
    
    
    (89
    )Amortization of previously deferred actuarial loss
    
    
    (676
    )
    
    
    135
    
    
    
    (541
    )Other
    
    
    
    
    
    
    (67
    )
    
    
    (67
    )Total adjustments to recognize the long-term nature of benefit costs
    
    
    8,932
    
    
    
    (1,241
    )
    
    
    7,691Net benefit costs
    
    $
    4,237
    
    
    $
    826
    
    
    $
    5,063
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VIDEOTRON LTD.
  18.
    
    Pension plans and postretirement benefits (continued):
 2005Post-Pension
    
    
    retirementbenefits
    
    
    benefits
    
    
    Total(in thousands of Canadian dollars)Service costs
    
    $
    3,695
    
    
    $
    247
    
    
    $
    3,942Interest costs
    
    
    3,458
    
    
    
    342
    
    
    
    3,800Actual return on plan assets
    
    
    (9,271
    )
    
    
    
    
    
    
    (9,271
    )Current actuarial loss
    
    
    18,072
    
    
    
    1,737
    
    
    
    19,809Elements of net benefit cost adjustments to recognize the
long-term nature and valuation allowance
    
    
    15,954
    
    
    
    2,326
    
    
    
    18,280Difference between actual and expected return on plan assets
    
    
    4,740
    
    
    
    
    
    
    
    4,740Deferral of current actuarial loss
    
    
    (18,011
    )
    
    
    (1,737
    )
    
    
    (19,748
    )Amortization of previously deferred actuarial loss
    
    
    
    
    
    
    20
    
    
    
    20Other
    
    
    
    
    
    
    (68
    )
    
    
    (68
    )Total adjustments to recognize the long-term nature of benefit costs
    
    
    (13,271
    )
    
    
    (1,785
    )
    
    
    (15,056
    )Net benefit costs
    
    $
    2,683
    
    
    $
    541
    
    
    $
    3,224
 As at December 31, 2007, defined contribution plan assets included shares of the parent company
and a company under common control at a market value of $1.0 million ($1.1 million in 2006).The expense related to defined contribution pension plans amounts to $5.2 million for the year
ended December 31, 2007 ($4.8 million in 2006 and $4.1 million in 2005).Also, 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 $9.8 million for the year ended December 31, 2007 ($7.5
million in 2006 and $5.7 million in 2005).
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VIDEOTRON LTD.
  18.
    
    Pension plans and postretirement benefits (continued):The weighted average rates used in the measurement of the Companys benefit obligations as at
December 31, 2007, 2006 and 2005 and current periodic costs are as follows:
 2007
    
    
    2006
    
    
    2005Benefit obligations:Rates at end of year:Discount rate
    
    
    5.50
    %
    
    
    5.00
    %
    
    
    5.00
    %Expected return on plan assets
    
    
    7.25
    %
    
    
    7.25
    %
    
    
    7.50
    %Rate of compensation increase
    
    
    3.75
    %
    
    
    3.50
    %
    
    
    3.50
    %Current periodic costs:Rates at beginning of year:Discount rate
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    6.00
    %Expected return on plan assets
    
    
    7.25
    %
    
    
    7.50
    %
    
    
    7.50
    %Rate of compensation increase
    
    
    3.50
    %
    
    
    3.50
    %
    
    
    3.50
    %
 The assumed health care cost trend rate used in measuring the accumulated postretirement
benefit obligations was 8.6% at the end of 2007. The cost is expected to decrease gradually to
5% over the next eight years and remain at that level thereafter. A one-percentage point
change in the assumed health care cost trend would have the following effects:
 PostretirementbenefitsIncrease
    
    
    DecreaseSensitivity analysis
    
    1%
    
    
    1%Effect on service and interest costs
    
    $
    1
    
    
    $
    (1
    )Effect on benefit obligations
    
    
    17
    
    
    
    (15
    )
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VIDEOTRON LTD.
  19.
    
    Subsequent events:
 (a)
    
    Share capital:In January and February 2008, the Company reduced the paid-up capital of its common shares
by total cash distributions of $120.0 million, of which $73.8 million was affected to
contributed surplus.(b)
    
    Subordinated loan to parent company:On January 4, 2008, the Company contracted a subordinated loan of $415.0 million from
Quebecor Média Inc., bearing interest at a rate of 10.5%, payable every six months on
June 20 and December 20, and maturing on January 4, 2023. On the same day, the Company
invested the total proceeds of $415.0 million into 415,000 preferred shares, Series B, of
9101-0835 Quebec Inc., a subsidiary of Quebecor Média Inc. These shares carry the right to
receive an annual dividend of 10.85%, payable semi-annually.On January 4, 2008, CF Cable TV Inc., a wholly-owned subsidiary of the Company, contracted
a subordinated loan of $170.0 million from Quebecor Média Inc., bearing interest at a rate
of 10.5%, payable every six months on June 20 and December 20, and maturing on January 4,
2023. On the same day, CF Cable TV Inc. invested the total proceeds of $170.0 million into
170,000 preferred shares, Series B, of 9101-0835 Quebec Inc., a subsidiary of Quebecor
Média Inc. These shares carry the right to receive an annual dividend of 10.85%, payable
semi-annually.The above transactions were carried out for tax consolidation purposes of Quebecor Média
Inc. and its subsidiaries.
 20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
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.
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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):
 (a)
    
    Consolidated Statements of Income
 2007
    
    
    2006
    
    
    2005(in thousands of Canadian dollars)Net income, as reported in consolidated
statements of income per
Canadian GAAP
    
    $
    325,692
    
    
    $
    183,691
    
    
    $
    102,691Adjustments:Push-down basis of accounting (i)
    
    
    (5,249
    )
    
    
    (6,253
    )
    
    
    (7,096
    )Development and pre-operating costs (iii)
    
    
    1,522
    
    
    
    (1,454
    )
    
    
    (795
    )Derivative instruments (iv)
    
    
    5,006
    
    
    
    (8,185
    )
    
    
    (1,058
    )Share-based payment (vii)
    
    
    (1,900
    )
    
    
    (900
    )
    
    
    Income taxes (v)
    
    
    (1,354
    )
    
    
    1,866
    
    
    
    4,961(1,975
    )
    
    
    (14,926
    )
    
    
    (3,988
    )Net income as adjusted per U.S. GAAP
    
    $
    323,717
    
    
    $
    168,765
    
    
    $
    98,703
 (b)
    
    Consolidated Statements of Comprehensive Income
 2007
    
    
    2006
    
    
    2005(in thousands of Canadian dollars)Comprehensive income as per Canadian
GAAP
    
    $
    340,836
    
    
    $
    183,691
    
    
    $
    102,691Adjustments to net income as per (a)
above
    
    
    (1,975
    )
    
    
    (14,926
    )
    
    
    (3,988
    )Adjustments to other comprehensive
income:Pension and postretirement benefits (vi)
    
    
    2,254
    
    
    
    153
    
    
    
    (61
    )Derivative instruments (iv)
    
    
    302
    
    
    
    1,963
    
    
    
    (18,271
    )Income taxes (v)
    
    
    (851
    )
    
    
    (1,704
    )
    
    
    10,8821,705
    
    
    
    412
    
    
    
    (7,450
    )Comprehensive income as per U.S. GAAP
    
    $
    340,566
    
    
    $
    169,177
    
    
    $
    91,253
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VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):
 (b)
    
    Consolidated Statements of Comprehensive Income (continued)Accumulated other comprehensive loss as at December 31, 2007, 2006 and 2005 is as follows:
 2007
    
    
    2006
    
    
    2005(in thousands of Canadian dollars)Accumulated comprehensive loss as per
Canadian GAAP
    
    $
    (7,302
    )
    
    $
    
    
    
    $
    Adjustments:Pension and postretirement benefits (vi)
    
    
    (2,239
    )
    
    
    (4,493
    )
    
    
    (153
    )Derivative instruments (iv)
    
    
    302
    
    
    
    (31,624
    )
    
    
    (33,587
    )Income taxes (v)
    
    
    482
    
    
    
    10,511
    
    
    
    10,882(1,455
    )
    
    
    (25,606
    )
    
    
    (22,858
    )Accumulated other comprehensive loss at
end of year
    
    $
    (8,757
    )
    
    $
    (25,606
    )
    
    $
    (22,858
    )
 (c)
    
    Consolidated Shareholders Equity
 2007
    
    
    2006(in thousands of Canadian dollars)Shareholders equity based on Canadian GAAP
    
    $
    259,110
    
    
    $
    249,581Cumulative adjustments:Push-down basis of accounting (i)
    
    
    4,487,655
    
    
    
    4,492,904Goodwill impairment (ii)
    
    
    (2,274,627
    )
    
    
    (2,274,627
    )Development and pre-operating costs (iii)
    
    
    (2,624
    )
    
    
    (4,146
    )Accounting for derivative instruments and
hedging activities (iv)
    
    
    4,952
    
    
    
    (47,108
    )Share-based payment (vii)
    
    
    (2,800
    )
    
    
    (900
    )Income taxes (v)
    
    
    6,426
    
    
    
    17,926Pension and postretirement benefits (vi)
    
    
    (2,239
    )
    
    
    (4,493
    )Shareholders equity based on U.S. GAAP
    
    $
    2,475,853
    
    
    $
    2,429,137
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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):
 (i)
    
    Push-down basis of accounting:The basis of accounting used in the preparation of this reconciliation of Canadian GAAP to
U.S. GAAP reflects the push-down resulting from the acquisition of the Company and its
subsidiaries on October 23, 2000 by Quebecor Media Inc. Under Canadian GAAP, each entity
has retained the historical carrying value basis of its assets and liabilities. The excess
of the purchase price over the value assigned to the net assets of the Company at the date
of acquisition has been allocated to goodwill and has been amortized, up to December 31,
2001, on the straight-line basis over 40 years.The principal adjustments, taking into account the final allocation of the purchase price
finalized in the fourth quarter of 2001, to the historical consolidated financial
statements of the Company to reflect Parents cost basis, were:
 (a)
    
    The carrying values of fixed assets were increased by $110.8 million;(b)
    
    The deferred charges related to financing fees and exchange losses on
long-term debt have been written off to reflect the fair value of the assumed
long-term debt, and further reduction in deferred charges was recorded for a total
amount of $22.6 million;(c)
    
    Accrued charges increased by $41.5 million;(d)
    
    Future income tax liability increased by $24.4 million; and(e)
    
    The $4,631.1 million excess of parents cost over the value assigned to the
net assets of the Company at the date of acquisition has been recorded as goodwill and
$4,653.4 million was credited to contributed surplus. In 2004, the Company and its
parent materialized income tax benefits in the amount of $84.3 million which had not
been recognized at the date of acquisition. Therefore, the goodwill has been reduced
by $84.3 million, contributed surplus has been reduced by $67.4 million and income tax
expense for U.S. GAAP purposes has been increased by $16.9 million.
 (ii)
    
    Goodwill impairment:The accounting requirements for goodwill under Canadian GAAP and U.S. GAAP are similar in
all material respects. However, in accordance with the transitional provisions contained
in Section 3062 of the CICA Handbook, an impairment loss recognized during the financial
year, in which the new recommendations are initially applied, is recognized as the effect
of a change in accounting policy and charged to opening retained earnings, without
restatement of prior periods. Under U.S. GAAP, an impairment loss recognized as a result
of transitional goodwill impairment test is recognized as the effect of a change in
accounting principles in the statement of operations above the caption net income.
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VIDEOTRON LTD.
  
 20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):
 (iii)
    
    Development and pre-operating costs:Under Canadian GAAP, certain development and pre-operating costs, which satisfy specified
criteria for recoverability, are deferred and amortized. Under U.S. GAAP, these costs are
expensed as incurred.(iv)
    
    Accounting for derivative instruments and hedging activities:Prior to 2007, under Canadian GAAP, 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 Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities.However, under Canadian GAAP, certain embedded derivatives, such as early settlement option
included in some of the Companys borrowing agreements, do not meet the criteria to be
considered closely related to their host contracts and, therefore, must be recorded at
their fair value. 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 ineffectiveness recorded in earnings for hedging relationships
can 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 instruments and
hedge accounting.(v)
    
    Income taxes:These adjustments represent the tax impact of the U.S. GAAP adjustments. Furthermore,
under Canadian GAAP, income taxes are measured using substantively enacted tax rates, while
under U.S. GAAP measurement is based on enacted tax rates.
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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):
 (v)
    
    Income taxes (continued):Under U.S. GAAP, on January 1, 2007, the FASB issued interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN 48), an interpretation of FASB Statement No. 109. FIN 48
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. The
adoption of FIN 48 had no impact on the Companys opening retained deficit under U.S. GAAP.In December 2007, the Company and a subsidiary entered into tax consolidation transactions
with a 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. These transactions resulted in the recognition of a deferred credit of
$5.7 million. Under U.S. GAAP, since these transactions related to asset transfers between
a subsidiary and a parent company, the difference between the carrying value of the tax
benefits transferred and the cash consideration received or paid is recognized in
contributed surplus.(vi)
    
    Pension and postretirement benefits:Under GAAP in the United States, Statement No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans(FAS 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. FAS158 was
effective prospectively for fiscal years ended after December 15, 2006 and the amounts
presented for prior periods have not been restated for this change. This change in
accounting policy resulted in an adjustment of $3,160 recorded in accumulated other
comprehensive loss and did not have an impact on the Companys consolidated statement of
operations.
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##### Table of Contents



VIDEOTRON LTD.
  
 20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):
 (vi)
    
    Pension and postretirement benefits (continued):Under GAAP in the United States, for 2005 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 from FAS 87 has been eliminated with the adoption of FAS158.Under GAAP in Canada, a company is not required to recognize the over or underfunded
positions or to recognize an additional minimum liability.(vii)
    
    Share-based payment:Under U.S. GAAP, the Company adopted the new standards of FASB No. 123(R), Share-Based
Payment (SFAS123(R)). 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 option awards, and shall be remeasured at the end of each
reporting period through settlement. Under Canadian GAAP, the liability is measured and
remeasured based on the intrinsic value of the stock option awards instead of the fair
value.(viii)
    
    Consolidated statements of cash flows: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 related to operations, cash related to investing activities and to financing
activities.(ix)
    
    Guaranteed debt:The consolidated information below has been presented in accordance with the requirements
of the Securities and Exchange Commission for guarantor financial statements.
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##### Table of Contents



VIDEOTRON LTD.
  
 20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):
 (ix)
    
    Guaranteed debt (continued):The Companys Senior Notes due 2014 and 2015 described in note 10 are guaranteed by
specific subsidiaries of the Company (the Subsidiary Guarantors). The accompanying
condensed consolidated financial information as at December 31, 2007 and 2006 and for the
years 2007, 2006 and 2005 has been prepared in accordance with U.S. GAAP. The information
under the column headed Consolidated Guarantors is for all the Subsidiary Guarantors.
Investments in the Subsidiary Guarantors are accounted for by the equity method in the
separate column headed Videotron Ltd.. Each Subsidiary Guarantor is wholly-owned by the
Company. All guarantees are full and unconditional, and joint and several (to the extent
permitted by applicable law).The main subsidiaries included under the column Subsidiary Guarantors are CF Cable TV
Inc. and Le SuperClub Vidéotron Ltée, and its subsidiary, Groupe de Divertissement
SuperClub Inc.The Non-Subsidiary Guarantors are SETTE inc. and Videotron US Inc.On July 15, 2005, CF Cable TV Inc. paid its senior secured first priority note and became a
guarantor of the senior notes issued by its parent company and Vidéotron (Régional) Ltée, a
wholly-owned subsidiary of CF Cable TV Inc., which also became a guarantor of the senior
notes of Videotron Ltd.
 F-51




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##### Table of Contents



VIDEOTRON LTD.
  
 20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Statement of IncomeIn accordance with United States GAAPFor the year ended December 31, 2007
 Non-
    
    
    AdjustmentsVideotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    
    Guarantors
    
    
    eliminations
    
    
    Consolidated(in thousands of Canadian dollars)Revenues
    
    $
    1,291,726
    
    
    $
    256,651
    
    
    $
    6,602
    
    
    $
    (1,779
    )
    
    $
    1,553,200Direct costs and operating expenses
    
    
    729,005
    
    
    
    181,435
    
    
    
    4,150
    
    
    
    (1,779
    )
    
    
    912,811Amortization
    
    
    187,372
    
    
    
    28,208
    
    
    
    1,164
    
    
    
    (33
    )
    
    
    216,711Financial expenses
    
    
    52,277
    
    
    
    9,769
    
    
    
    
    
    
    
    
    
    
    
    62,046Dividend income from related companies
    
    
    
    
    
    
    (7,092
    )
    
    
    
    
    
    
    7,092
    
    
    
    Impairment of goodwill
    
    
    
    
    
    
    5,425
    
    
    
    
    
    
    
    
    
    
    
    5,425Income (loss) before the undernoted
    
    
    323,072
    
    
    
    38,906
    
    
    
    1,288
    
    
    
    (7,059
    )
    
    
    356,207Income taxes
    
    
    29,220
    
    
    
    2,892
    
    
    
    205
    
    
    
    
    
    
    
    32,317293,852
    
    
    
    36,014
    
    
    
    1,083
    
    
    
    (7,059
    )
    
    
    323,890Share in the results of a company
subject to significant influence
    
    
    4,278
    
    
    
    241
    
    
    
    
    
    
    
    (4,519
    )
    
    
    Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (173
    )
    
    
    (173
    )Net income (loss)
    
    $
    298,130
    
    
    $
    36,255
    
    
    $
    1,083
    
    
    $
    (11,751
    )
    
    $
    323,717
 F-52




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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Statement of Cash FlowsIn accordance with United States GAAPFor the year ended December 31, 2007
 Non-
    
    
    AdjustmentsVideotron
    
    
    Subsidiary
    
    
    subsidiary-
    
    
    andLtd.
    
    
    Guarantors
    
    
    Guarantors
    
    
    eliminations
    
    
    Consolidated(in thousands of Canadian dollars)Cash flows related to operating activities:Net income (loss)
    
    $
    298,130
    
    
    $
    36,255
    
    
    $
    1,083
    
    
    $
    (11,751
    )
    
    $
    323,717Adjustments for the following items:Amortization of fixed assets
    
    
    185,368
    
    
    
    28,031
    
    
    
    1,164
    
    
    
    (33
    )
    
    
    214,530Amortization of other assets
    
    
    13,363
    
    
    
    8,072
    
    
    
    
    
    
    
    
    
    
    
    21,435Amortization financing costs and
debt premium or discount
    
    
    (945
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (945
    )Impairment of goodwill
    
    
    
    
    
    
    5,425
    
    
    
    
    
    
    
    
    
    
    
    5,425Future income taxes
    
    
    29,228
    
    
    
    2,932
    
    
    
    90
    
    
    
    
    
    
    
    32,250Other
    
    
    49,186
    
    
    
    2,896
    
    
    
    77
    
    
    
    4,692
    
    
    
    56,851Net change in non-cash balances
related to operations
    
    
    (92,654
    )
    
    
    (6,065
    )
    
    
    (98
    )
    
    
    (1,917
    )
    
    
    (100,734
    )481,676
    
    
    
    77,546
    
    
    
    2,316
    
    
    
    (9,009
    )
    
    
    552,529Cash flows related to investing activities:Acquisition of fixed assets
    
    
    (292,541
    )
    
    
    (36,419
    )
    
    
    (3,032
    )
    
    
    1,917
    
    
    
    (330,075
    )Acquisition of shares of a company
under common control
    
    
    (1,870,000
    )
    
    
    (125,000
    )
    
    
    
    
    
    
    
    
    
    
    (1,995,000
    )Net decrease in temporary
investments
    
    
    
    
    
    
    
    
    
    
    987
    
    
    
    
    
    
    
    987Payment of tax deductions to a parent
company
    
    
    (12,763
    )
    
    
    (2,100
    )
    
    
    
    
    
    
    
    
    
    
    (14,863
    )Net decrease in investment in a
subsidiary
    
    
    330,733
    
    
    
    
    
    
    
    
    
    
    
    (330,733
    )
    
    
    Dividends
    
    
    4,000
    
    
    
    (4,000
    )
    
    
    
    
    
    
    
    
    
    
    Advance from (to) an affiliated company
    
    
    65,000
    
    
    
    (65,000
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    2,125
    
    
    
    (945
    )
    
    
    1
    
    
    
    
    
    
    
    1,181(1,773,446
    )
    
    
    (233,464
    )
    
    
    (2,044
    )
    
    
    (328,816
    )
    
    
    (2,337,770
    )Cash flows related to financing activities:Net change in bank indebtedness
    
    
    (8,489
    )
    
    
    
    
    
    
    
    
    
    
    (476
    )
    
    
    (8,965
    )Net borrowings under bank credit facility
    
    
    98,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,721Settlement of derivative financial
instruments
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Subordinated loan from parent company
    
    
    1,870,000
    
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    1,995,000Repayment of subordinated loan to
parent company
    
    
    
    
    
    
    (25,969
    )
    
    
    
    
    
    
    25,969
    
    
    
    Reduction in paid-up capital
    
    
    (299,550
    )
    
    
    (145,816
    )
    
    
    
    
    
    
    145,816
    
    
    
    (299,550
    )Redemption of shares
    
    
    (65,000
    )
    
    
    65,000
    
    
    
    
    
    
    
    
    
    
    
    Dividends
    
    
    (7,092
    )
    
    
    (158,948
    )
    
    
    
    
    
    
    166,040
    
    
    
    Advance (to) from an affiliated company
    
    
    (296,855
    )
    
    
    296,855
    
    
    
    
    
    
    
    
    
    
    
    1,291,770
    
    
    
    156,122
    
    
    
    
    
    
    
    337,349
    
    
    
    1,785,241Net change in cash and cash equivalents
    
    
    
    
    
    
    204
    
    
    
    272
    
    
    
    (476
    )
    
    
    Cash and cash equivalents,
beginning of year
    
    
    
    
    
    
    110
    
    
    
    285
    
    
    
    (395
    )
    
    
    Cash and cash equivalents, end of year
    
    $
    
    
    
    $
    314
    
    
    $
    557
    
    
    $
    (871
    )
    
    $
    
 F-53




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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Balance SheetIn accordance with United States GAAPAs at December 31, 2007
 Non-
    
    
    AdjustmentsVideotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    
    Guarantors
    
    
    eliminations
    
    
    Consolidated(in thousands of Canadian dollars)AssetsCurrent assets:Cash and cash equivalents
    
    $
    493
    
    
    $
    315
    
    
    $
    583
    
    
    $
    (1,391
    )
    
    $
    Accounts receivable
    
    
    150,597
    
    
    
    9,234
    
    
    
    1,535
    
    
    
    
    
    
    
    161,366Amounts receivable from affiliated
companies
    
    
    18,575
    
    
    
    17,723
    
    
    
    138
    
    
    
    (24,170
    )
    
    
    12,266Income taxes
    
    
    199
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    220Inventories and prepaid expenses
    
    
    49,161
    
    
    
    6,579
    
    
    
    21
    
    
    
    
    
    
    
    55,761Future income taxes
    
    
    26,866
    
    
    
    5,599
    
    
    
    7
    
    
    
    
    
    
    
    32,472245,891
    
    
    
    39,471
    
    
    
    2,284
    
    
    
    (25,561
    )
    
    
    262,085Investments
    
    
    1,870,000
    
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    1,995,000Fixed assets
    
    
    1,246,995
    
    
    
    254,035
    
    
    
    5,658
    
    
    
    (325
    )
    
    
    1,506,363Future income taxes
    
    
    
    
    
    
    2,970
    
    
    
    
    
    
    
    
    
    
    
    2,970Other assets
    
    
    59,577
    
    
    
    7,383
    
    
    
    
    
    
    
    (59,844
    )
    
    
    7,116Goodwill
    
    
    1,903,756
    
    
    
    440,117
    
    
    
    
    
    
    
    233,711
    
    
    
    2,577,584$
    5,326,219
    
    
    $
    868,976
    
    
    $
    7,942
    
    
    $
    147,981
    
    
    $
    6,351,118Liabilities and Shareholders EquityCurrent liabilities:Bank indebtedness
    
    $
    10,869
    
    
    $
    1
    
    
    $
    26
    
    
    $
    (1,391
    )
    
    $
    9,505Accounts payable and accrued
liabilities
    
    
    490,727
    
    
    
    31,755
    
    
    
    653
    
    
    
    (126
    )
    
    
    523,009Amounts payable to affiliated companies
    
    
    71,951
    
    
    
    8,924
    
    
    
    649
    
    
    
    (24,041
    )
    
    
    57,483Deferred revenue
    
    
    113,510
    
    
    
    38,302
    
    
    
    116
    
    
    
    
    
    
    
    151,928Income taxes
    
    
    34
    
    
    
    (10
    )
    
    
    95
    
    
    
    
    
    
    
    119687,091
    
    
    
    78,972
    
    
    
    1,539
    
    
    
    (25,558
    )
    
    
    742,044Long-term debt
    
    
    946,236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    946,236Subordinated loan to parent company
    
    
    1,870,000
    
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    1,995,000Future income taxes
    
    
    139,857
    
    
    
    48,429
    
    
    
    435
    
    
    
    
    
    
    
    188,721Deferred revenue
    
    
    2,173
    
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    2,317Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    947
    
    
    
    9473,645,357
    
    
    
    252,545
    
    
    
    1,974
    
    
    
    (24,611
    )
    
    
    3,875,265Shareholders Equity:Share capital
    
    
    46,175
    
    
    
    232,817
    
    
    
    25
    
    
    
    (232,840
    )
    
    
    46,177Contributed surplus
    
    
    4,461,660
    
    
    
    792,495
    
    
    
    488
    
    
    
    (76,500
    )
    
    
    5,178,143(Deficit) retained earnings
    
    
    (2,819,634
    )
    
    
    (407,463
    )
    
    
    5,455
    
    
    
    481,932
    
    
    
    (2,739,710
    )Accumulated other comprehensive loss
    
    
    (7,339
    )
    
    
    (1,418
    )
    
    
    
    
    
    
    
    
    
    
    (8,757
    )1,680,862
    
    
    
    616,431
    
    
    
    5,968
    
    
    
    172,592
    
    
    
    2,475,853$
    5,326,219
    
    
    $
    868,976
    
    
    $
    7,942
    
    
    $
    147,981
    
    
    $
    6,351,118
 F-54




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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Statement of IncomeIn accordance with United States GAAPFor the year ended December 31, 2006
 Non-
    
    
    AdjustmentsVideotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    
    Guarantors
    
    
    eliminations
    
    
    Consolidated(in thousands of Canadian dollars)Revenues
    
    $
    1,066,286
    
    
    $
    241,527
    
    
    $
    5,610
    
    
    $
    (1,158
    )
    
    $
    1,312,265Direct costs and operating expenses
    
    
    631,230
    
    
    
    169,000
    
    
    
    4,163
    
    
    
    (1,158
    )
    
    
    803,235Amortization
    
    
    170,246
    
    
    
    25,448
    
    
    
    674
    
    
    
    (33
    )
    
    
    196,335Financial expenses
    
    
    67,965
    
    
    
    19,806
    
    
    
    
    
    
    
    
    
    
    
    87,771Dividend income from related companies
    
    
    
    
    
    
    (13,170
    )
    
    
    
    
    
    
    13,170
    
    
    
    Income (loss) before the undernoted
    
    
    196,845
    
    
    
    40,443
    
    
    
    773
    
    
    
    (13,137
    )
    
    
    224,924Income taxes
    
    
    51,350
    
    
    
    4,492
    
    
    
    231
    
    
    
    
    
    
    
    56,073145,495
    
    
    
    35,951
    
    
    
    542
    
    
    
    (13,137
    )
    
    
    168,851Share in the results of a company
subject to significant influence
    
    
    11,417
    
    
    
    119
    
    
    
    
    
    
    
    (11,536
    )
    
    
    Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86
    )
    
    
    (86
    )Net income (loss)
    
    $
    156,912
    
    
    $
    36,070
    
    
    $
    542
    
    
    $
    (24,759
    )
    
    $
    168,765
 F-55




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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Statement of Cash FlowsIn accordance with United States GAAPFor the year ended December 31, 2006
 Non-
    
    
    AdjustmentsVideotron
    
    
    Subsidiary
    
    
    subsidiary-
    
    
    andLtd.
    
    
    Guarantors
    
    
    Guarantors
    
    
    eliminations
    
    
    Consolidated(in thousands of Canadian dollars)Cash flows related to operating activities:Net income (loss)
    
    $
    156,912
    
    
    $
    36,070
    
    
    $
    542
    
    
    $
    (24,759
    )
    
    $
    168,765Adjustments for the following items:Amortization
    
    
    181,382
    
    
    
    32,617
    
    
    
    674
    
    
    
    (33
    )
    
    
    214,640Future income taxes
    
    
    51,997
    
    
    
    4,482
    
    
    
    33
    
    
    
    
    
    
    
    56,512Other
    
    
    (14,427
    )
    
    
    1,288
    
    
    
    549
    
    
    
    11,622
    
    
    
    (968
    )Net change in non-cash balances
related to operations
    
    
    (32,305
    )
    
    
    28,593
    
    
    
    95
    
    
    
    2,509
    
    
    
    (1,108
    )343,559
    
    
    
    103,050
    
    
    
    1,893
    
    
    
    (10,661
    )
    
    
    437,841Cash flows related to investing activities:Acquisition of fixed assets
    
    
    (260,720
    )
    
    
    (37,665
    )
    
    
    (1,793
    )
    
    
    (2,451
    )
    
    
    (302,629
    )Net decrease (increase ) in temporary
investments
    
    
    40,000
    
    
    
    
    
    
    
    (491
    )
    
    
    
    
    
    
    39,509Dividends
    
    
    19,000
    
    
    
    (19,000
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    514
    
    
    
    283
    
    
    
    
    
    
    
    
    
    
    
    797(201,206
    )
    
    
    (56,382
    )
    
    
    (2,284
    )
    
    
    (2,451
    )
    
    
    (262,323
    )Cash flows related to financing activities:Net change in bank indebtedness
    
    
    18,865
    
    
    
    
    
    
    
    
    
    
    
    (395
    )
    
    
    18,470Net change in bank credit facility
    
    
    49,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,000Settlement of derivative financial
instruments
    
    
    (938
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (938
    )Issuance of shares
    
    
    111,536
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,536Repayment of subordinated loan to
parent company
    
    
    (150,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150,000
    )Transfer of additional amount payable
to parent company
    
    
    (111,536
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111,536
    )Reduction in paid-up capital
    
    
    (108,749
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108,749
    )Dividends
    
    
    (23,170
    )
    
    
    
    
    
    
    
    
    
    
    13,170
    
    
    
    (10,000
    )Advance from (to) an affiliated company
    
    
    47,094
    
    
    
    (47,036
    )
    
    
    
    
    
    
    (58
    )
    
    
    (167,898
    )
    
    
    (47,036
    )
    
    
    
    
    
    
    12,717
    
    
    
    (202,217
    )Net change in cash and cash equivalents
    
    
    (25,545
    )
    
    
    (368
    )
    
    
    (391
    )
    
    
    (395
    )
    
    
    (26,699
    )Cash and cash equivalents,
beginning of year
    
    
    25,545
    
    
    
    478
    
    
    
    676
    
    
    
    
    
    
    
    26,699Cash and cash equivalents, end of year
    
    $
    
    
    
    $
    110
    
    
    $
    285
    
    
    $
    (395
    )
    
    $
    
 F-56




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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Balance SheetIn accordance with United States GAAPAs at December 31, 2006
 Non-
    
    
    AdjustmentsVideotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    
    Guarantors
    
    
    eliminations
    
    
    Consolidated(in thousands of Canadian dollars)AssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    110
    
    
    $
    285
    
    
    $
    (395
    )
    
    $
    Temporary investments
    
    
    
    
    
    
    
    
    
    
    987
    
    
    
    
    
    
    
    987Accounts receivable
    
    
    129,816
    
    
    
    8,758
    
    
    
    1,011
    
    
    
    
    
    
    
    139,585Amounts receivable from affiliated
companies
    
    
    89,478
    
    
    
    330,891
    
    
    
    141
    
    
    
    (417,850
    )
    
    
    2,660Income taxes
    
    
    136
    
    
    
    40
    
    
    
    134
    
    
    
    
    
    
    
    310Inventories and prepaid expenses
    
    
    41,406
    
    
    
    6,605
    
    
    
    8
    
    
    
    
    
    
    
    48,019Future income taxes
    
    
    16,281
    
    
    
    8,607
    
    
    
    140
    
    
    
    
    
    
    
    25,028277,117
    
    
    
    355,011
    
    
    
    2,706
    
    
    
    (418,245
    )
    
    
    216,589Fixed assets
    
    
    1,148,150
    
    
    
    245,547
    
    
    
    6,192
    
    
    
    (358
    )
    
    
    1,399,531Future income taxes
    
    
    
    
    
    
    3,358
    
    
    
    
    
    
    
    
    
    
    
    3,358Other assets
    
    
    404,639
    
    
    
    71,344
    
    
    
    
    
    
    
    (455,058
    )
    
    
    20,925Goodwill
    
    
    1,903,756
    
    
    
    444,940
    
    
    
    
    
    
    
    233,711
    
    
    
    2,582,407$
    3,733,662
    
    
    $
    1,120,200
    
    
    $
    8,898
    
    
    $
    (639,950
    )
    
    $
    4,222,810Liabilities and Shareholders EquityCurrent liabilities:Bank indebtedness
    
    $
    18,865
    
    
    $
    
    
    
    $
    
    
    
    $
    (395
    )
    
    $
    18,470Accounts payable and accrued
liabilities
    
    
    376,785
    
    
    
    34,675
    
    
    
    792
    
    
    
    (297
    )
    
    
    411,955Amounts payable to company under
common control
    
    
    370,735
    
    
    
    86,496
    
    
    
    2,748
    
    
    
    (417,550
    )
    
    
    42,429Deferred revenue
    
    
    101,212
    
    
    
    33,980
    
    
    
    143
    
    
    
    
    
    
    
    135,335Income taxes
    
    
    45
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    81867,642
    
    
    
    155,151
    
    
    
    3,719
    
    
    
    (418,242
    )
    
    
    608,270Long-term debt
    
    
    1,007,557
    
    
    
    25,969
    
    
    
    
    
    
    
    (25,969
    )
    
    
    1,007,557Deferred revenue
    
    
    3,423
    
    
    
    783
    
    
    
    
    
    
    
    
    
    
    
    4,206Future income taxes
    
    
    120,878
    
    
    
    51,694
    
    
    
    294
    
    
    
    
    
    
    
    172,866Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    774
    
    
    
    7741,999,500
    
    
    
    233,597
    
    
    
    4,013
    
    
    
    (443,437
    )
    
    
    1,793,673Shareholders equity:Share capital
    
    
    410,725
    
    
    
    378,633
    
    
    
    25
    
    
    
    (443,656
    )
    
    
    345,727Contributed surplus
    
    
    4,458,320
    
    
    
    790,135
    
    
    
    488
    
    
    
    (76,500
    )
    
    
    5,172,443(Deficit) retained earnings
    
    
    (3,110,672
    )
    
    
    (280,770
    )
    
    
    4,372
    
    
    
    323,643
    
    
    
    (3,063,427
    )Accumulated other comprehensive loss
    
    
    (24,211
    )
    
    
    (1,395
    )
    
    
    
    
    
    
    
    
    
    
    (25,606
    )1,734,162
    
    
    
    886,603
    
    
    
    4,885
    
    
    
    (196,513
    )
    
    
    2,429,137$
    3,733,662
    
    
    $
    1,120,200
    
    
    $
    8,898
    
    
    $
    (639,950
    )
    
    $
    4,222,810
 F-57




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##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Statement of IncomeIn accordance with United States GAAPFor the year ended December 31, 2005
 Non-
    
    
    AdjustmentsVidéotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    
    Guarantors
    
    
    eliminations
    
    
    Consolidated(in thousands of Canadian dollars)Revenues
    
    $
    855,709
    
    
    $
    227,393
    
    
    $
    4,886
    
    
    $
    (1,405
    )
    
    $
    1,086,583Direct costs and operating expenses
    
    
    521,556
    
    
    
    151,213
    
    
    
    3,432
    
    
    
    (1,403
    )
    
    
    674,798Amortization
    
    
    154,333
    
    
    
    22,593
    
    
    
    587
    
    
    
    (98
    )
    
    
    177,415Financial expenses
    
    
    51,068
    
    
    
    25,490
    
    
    
    
    
    
    
    (1,401
    )
    
    
    75,157Dividend income from related companies
    
    
    
    
    
    
    (17,920
    )
    
    
    
    
    
    
    17,920
    
    
    
    Income (loss) before the undernoted
    
    
    128,752
    
    
    
    46,017
    
    
    
    867
    
    
    
    (16,423
    )
    
    
    159,213Income taxes
    
    
    50,154
    
    
    
    9,764
    
    
    
    221
    
    
    
    269
    
    
    
    60,40878,598
    
    
    
    36,253
    
    
    
    646
    
    
    
    (16,692
    )
    
    
    98,805Share in the results of a company
subject to significant influence
    
    
    15,146
    
    
    
    142
    
    
    
    
    
    
    
    (15,288
    )
    
    
    Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102
    )
    
    
    (102
    )Net income (loss)
    
    $
    93,744
    
    
    $
    36,395
    
    
    $
    646
    
    
    $
    (32,082
    )
    
    $
    98,703
 F-58




---



##### Table of Contents



VIDEOTRON LTD.
  20.
    
    Significant differences between generally accepted accounting principles (GAAP) in Canada and
the United States (continued):Consolidated Statement of Cash FlowsIn accordance with United States GAAPFor the year ended December 31, 2005
 Non-
    
    
    AdjustmentsVidéotron
    
    
    Subsidiary
    
    
    subsidiary
    
    
    andLtd.
    
    
    Guarantors
    
    
    Guarantors
    
    
    eliminations
    
    
    Consolidated(in thousands of Canadian dollars)Cash flows related to operating activities:Net income (loss)
    
    $
    93,744
    
    
    $
    36,395
    
    
    $
    646
    
    
    $
    (32,082
    )
    
    $
    98,703Adjustments for the following items:Amortization
    
    
    161,215
    
    
    
    27,006
    
    
    
    587
    
    
    
    (98
    )
    
    
    188,710Future income taxes
    
    
    47,619
    
    
    
    9,454
    
    
    
    155
    
    
    
    269
    
    
    
    57,497Other
    
    
    (42,909
    )
    
    
    1,914
    
    
    
    105
    
    
    
    13,990
    
    
    
    (26,900
    )Net change in non-cash balances
related to operations
    
    
    102,821
    
    
    
    (34,640
    )
    
    
    (814
    )
    
    
    
    
    
    
    67,367362,490
    
    
    
    40,129
    
    
    
    679
    
    
    
    (17,921
    )
    
    
    385,377Cash flows related to investing activities:Acquisition of fixed assets
    
    
    (189,647
    )
    
    
    (29,019
    )
    
    
    (1,199
    )
    
    
    
    
    
    
    (219,865
    )Payment of tax deductions to the
parent company
    
    
    (25,800
    )
    
    
    (9,400
    )
    
    
    
    
    
    
    
    
    
    
    (35,200
    )Net increase (decrease) in
temporary investments
    
    
    (20,000
    )
    
    
    
    
    
    
    754
    
    
    
    
    
    
    
    (19,246
    )Dividends
    
    
    11,000
    
    
    
    (11,000
    )
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    357
    
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    1,162(224,090
    )
    
    
    (48,614
    )
    
    
    (445
    )
    
    
    
    
    
    
    (273,149
    )Cash flows related to financing activities:Repayment of long-term debt
    
    
    
    
    
    
    (92,284
    )
    
    
    
    
    
    
    
    
    
    
    (92,284
    )Issuance of long-term debt, net
of financing costs
    
    
    200,185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,185Settlement of derivative financial
instruments
    
    
    (3,588
    )
    
    
    (7,367
    )
    
    
    
    
    
    
    
    
    
    
    (10,955
    )Advance (to) from an affiliated
company
    
    
    (110,168
    )
    
    
    110,168
    
    
    
    
    
    
    
    
    
    
    
    Dividends
    
    
    (227,921
    )
    
    
    
    
    
    
    
    
    
    
    17,921
    
    
    
    (210,000
    )Reimbursement of advance to
parent company
    
    
    40,893
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,893Reduction in paid-up capital
    
    
    (45,653
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,653
    )Other
    
    
    497
    
    
    
    177
    
    
    
    (800
    )
    
    
    
    
    
    
    (126
    )(145,755
    )
    
    
    10,694
    
    
    
    (800
    )
    
    
    17,921
    
    
    
    (117,940
    )Net change in cash and cash equivalents
    
    
    (7,355
    )
    
    
    2,209
    
    
    
    (566
    )
    
    
    
    
    
    
    (5,712
    )Cash and cash equivalents,
beginning of year
    
    
    32,900
    
    
    
    (1,731
    )
    
    
    1,242
    
    
    
    
    
    
    
    32,411Cash and cash equivalents, end of year
    
    $
    25,545
    
    
    $
    478
    
    
    $
    676
    
    
    $
    
    
    
    $
    26,699
 F-59